Retrospective interest liability rejected where Section 10(2) could not apply before its commencement.

Section 10(2) of the Kerala Tax on Luxuries Act, 1976 was held not to operate retrospectively because it came into force only on 01.04.2009 and there was no clear statutory basis to apply it to an earlier assessment year. Interest could not therefore be levied for a period anterior to commencement, and the demand for the prior period was unsustainable. The settled view that such liability cannot be imposed retrospectively was treated as final, so the assessee succeeded.

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Issues: Whether Section 10(2) of the Kerala Tax on Luxuries Act, 1976 operates retrospectively so as to authorise levy of interest for periods prior to its commencement.

Analysis: The Court noted that Section 10(2) came into force only on 01.04.2009, while the demand related to an earlier assessment year. It accepted the assessee's contention that the provision could not be applied to an earlier period. The Court relied on the earlier decision which had held that interest under Section 10(2) could not be demanded for a period prior to its commencement, and treated that view as having attained finality.

Conclusion: Section 10(2) was held not to operate retrospectively. The demand of interest for the prior period was unsustainable, and the answer was in favour of the assessee.

Final Conclusion: The appeal failed since the impugned demand could not be sustained in view of the settled position on the commencement and operation of Section 10(2).

Ratio Decidendi: A provision creating liability to interest cannot be applied to periods anterior to its commencement unless retrospective operation is clearly provided for by the statute.

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