IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN MONDAY, THE 6TH APRIL 2009 / 16TH CHAITHRA 1931 OP.No. 8019 of 1998(D) ---------------------- PETITIONER(S): --------------- M/S.McDOWELL & CO. LTD., SHERTALLAY, ALLEPPY DIST. REP. BY ITS VICE PRESIDENT, K.P.TOMY. BY ADV. SRI.ANIL D.NAIR RESPONDENT(S): --------------- 1. THE ASST. COMMISSIONER OF SALES TAX (ASSESSMENT), SPECIAL CIRCLE, ALLEPPEY. 2. THE MEMBER, BOARD OF REVENUE (TAXES), TRIVANDRUM. 3. STATE OF KERALA, REP. BY THE CHIEF SECRETARY, SECRETARIAT, TRIVANDRUM. GOVERNMENT PLEADER SHRI.K.P.PRADEEP THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 06/04/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: O.P.No. 8019/98. APPENDIX PETITIONER(S)' EXHIBITS P1. COPY OF THE COVERING LETTER DTD.19.4.86 TO R1. P2. -DO- DTD.19.5.86. P3. COPY OF THE REFUND ORDER DTD.2.5.86. P4. COPY OF THE REFUND ORDER DTD.3.5.86. P5. COPY OF THE REFUND ORDER DTD.5.5.86. P6. COPY OF THE REFUND ORDER DTD.6..86. P7. COPY OF THE PROVISIONAL DEMAND NOTICE DTD.26.5.86. P8. COPY OF THE -DO- DTD.25.6.86. P9. COPY OF THE DEMAND NOTICE DTD.2.1.87. P10. COPY OF THE ORDER DTD.2.6.92 BY THE DY. COMMR. OF AIT & ST. P11. COPY OF THE REVISION PETITION BEFORE BOARD OF REVENUE. P12. COPY OF THE REVISIONAL ORDER DTD.5.11.97 BY R1. Sdk+ ///True copy/// P.A. to Judge S.SIRI JAGAN, J. ================== O.P.No. 8019 of 1998 ================== Dated this the 6th day of April, 2009 J U D G M E N T This matter arises under the Kerala General Sales Tax Act. The petitioner is an assessee under that Act. For the assessment years 1976-77 to 79-80 assessments were completed and by invoking garnishee proceedings tax due was recovered. An amount of Rs.3,40,48,482.54 were so recovered from the petitioner. The petitioner filed appeals. In 1985 appeals were disposed of, as per which, money became refundable to the petitioner. The same was not so refunded. In March, 1986 the petitioner filed return for that month. However, along with the return the petitioner did not pay the admitted amount of tax. Instead, since refund amounts were due from the Department to the petitioner, the petitioner requested the assessing authority to adjust the refund amounts due to him against the admitted tax. Again for April 1986 also, the petitioner did not pay the admitted tax along with the return filed for the month. But they requested adjustment of refund against the same also. Since the petitioner did not pay tax admitted, Form 14D notice was issued to the petitioner directing him to pay tax, penal interest and surcharge. Immediately on receipt of Form 14 D notice, the petitioner paid off the tax and surcharge. While so, on 31.5.1986 the petitioner was served with refund vouchers for the years 1976-77 to 1979-80. Since, o.p.8019/98 2 according to the petitioner, as on the last date of filing returns large amounts were due to the petitioner as refund, the petitioner cannot be treated as a defaulter for the purpose of levying penal interest. Therefore, the petitioner filed representation which was rejected and a further petition was filed before the Board of Revenue, which was also rejected. According to the petitioner, as on the dates of filing returns in March, 1986 and April 1986 amounts were outstanding towards refund and therefore, the petitioner cannot be treated as a person in default for the purpose of Section 23(3) of the KGST Act and therefore, no penal interest is payable by the petitioner for non-payment of admitted tax for the months of March and April 1986. 2. A statement and an additional statement are filed by respondents 1 and 2, in which it is stated that after the orders in appeal, revised assessment orders were passed and refund vouchers dated 2.5.1986, 3.5.1986, 5.5.1986 and 6.6.1986 were issued to the petitioner. Those refund amounts were adjusted against prior dues from the petitioner by way of tax and the entire amounts of refund available as refund got exhausted by adjustment towards amounts due upto the assessment years 1984-85. After 1984-85, no refund amounts were found due to the petitioner. Therefore, in March, 1986 no refund amounts were outstanding which could be adjusted against the admitted tax payable by the petitioner for the months of March and o.p.8019/98 3 April 1986. Therefore, according to respondents 1 and 2, the petitioner is liable for payment of penal interest also for the months of March and April, 1986. 3. In answer to the same, the petitioner would contend that the refund orders and vouchers were issued only subsequent to the petitioner filing returns and in fact, according to the petitioner, the intimation regarding refund was communicated to the petitioner only on 31.5.1986. Therefore, according to the petitioner, as on March and April, 1986, the entire refund amounts were outstanding and therefore, the petitioner cannot be treated as a defaulter for those two months. Consequently, according to the petitioner, the petitioner is not liable to pay penal interest on the admitted tax. 4. I have considered the rival contentions in detail. 5. It is true that large amounts were outstanding as refunds due to the petitioner in view of the appellate orders for the years 1976-77 to 1979-80. Therefore, if such amounts were sufficient to cover the entire tax amounts due from the the petitioner for all these years upto March and April, 1986, the petitioner would have been correct. But, going by the statements submitted by the respondents, the entire amounts due by way of refund got themselves exhausted by adjustment for the amounts due by way of tax upto the assessment year 1984-85. Therefore, from 1.4.1985 onwards no amounts were o.p.8019/98 4 due to the petitioner by way of refund which could be adjusted thereafter. Consequently, for the months of March and April, 1986 also there was no refund amounts outstanding which could be adjusted against the admitted tax due from the petitioner for the months of March and April, 1986. Despite the assertion of the petitioner that since the petitioner was intimated about the adjustment of the refund only on 31.5.1986, as on the date when the petitioner filed returns for March and April 1986 he is not entitled to assume that the refund amounts would cover those months also when for the prior periods tax amounts were due from the petitioner, which had to be adjusted first, especially since the petitioner has not challenged the orders regarding the final refund adjusting the entire refund amounts towards amounts already due upto 1984-85 and since as on the date of filing returns for March and April 1986 no refund amounts were outstanding as due to the petitioner. Therefore, the petitioner cannot claim that for non payment of admitted tax, no penal interest, which is statutory, is payable by the petitioner for the months of March and April, 1986. Therefore, I do not find any merit in the original petition and accordingly, the same is dismissed. Sd/- sdk+ S.SIRI JAGAN, JUDGE ///True copy/// P.A. to Judge S.SIRI JAGAN, J. ================== O.P.No. 8019 of 1998-D ================== J U D G M E N T 6th April, 2009