IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM THURSDAY, THE 4TH JUNE 2009 / 14TH JYAISHTA 1931 WP(C).No. 20698 of 2003(L) -------------------------- PETITIONER: --------------- C.P. NAZREENA, PROPRIETRIX, M/S. WOOD VENEERS, VALAPATTANAM, KANNUR DISTRICT. BY ADV. MR.V.P.SUKUMAR MR. JAIRAM.V.MENON RESPONDENTS: --------------- 1. THE ASSISTANT COMMISSIONER (ASSESSMENT) SPECIAL CIRCLE, COMMERCIAL TAXES, KANNUR. 2. THE DEPUTY COMMISSIONER, COMMERCIAL TAXES, KANNUR. 3. THE SPECIAL DEPUTY TAHSILDAR, REVENUE RECOVERY NO.1, KANNUR. 4. THE COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM. GOVERNMENT PLEADER MR.K.P.PRADEEP THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 04/06/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).20698/03 APPENDIX PETITIONER'S EXHIBITS:- EXT.P1:-TRUE COPY OF ORDER DT.24.7.98 ISSUED BY THE GENERAL MANAGER,DIC,KANNUR. EXT.P2:-TRUE COPY OF THE ASSESSMENT ORDER DT.28.12.01 FOR THE PERIOD FROM 1.12.97 TO 31.3.98 UNDER THE KGST ACT. EXT.P3:-TRUE COPY OF THE ASSESSMENT ORDER DT.28.12.01 FOR THE PERIOD -DO- -DO- EXT.P4:-TRUE COPY OF THE DEMAND NOTICE IN FORM 24 ISSUED BY R1 -DO- DO EXT.P5:-TRUE COPY OF THE DEMAND NOTICE -DO- DO EXT.P6:-TRUE COPY OF THE APPEAL DT.9.5.02 FILED BEFORE DY.COMMISSIONER (APPEALS), KOZHIKODE FOR THE PERIOD FORM 1.12.97 TO 31.3.98 EXT.P7:-TRUE COPY OF THE APPEAL DT.10.5.02 FILED BEFORE -DO- DO- EXT.P8:-TRUE COPY OF RR NOTICE DT.15.7.02 ISSUED BY R3 U/S 7 OF THE RR ACT UNDER THE KGST ACT. EXT.P9:-TRUE COPY OF RR NOTICE DT.15.7.02 BY R3 U/S 34 OF THE RR ACT UNDER KGST ACT EXT.P10:-TRUE COPY OF RR NOTICE DT.15.7.02 BY R3 U/S 7 OF THE RR ACT UNDER CST ACT EXT.P11:-TRUE COPY OF THE RR NOTICE DT.15.7.02 ISSUED BY R3 U/S 34 OF DO- EXT.P12:-TRUE COPY OF COMMON JUDGMEMT DT.22.7.02 IN OP.20410 AND 20432 OF 2002 EXT.P13:-TRUE COPY OF THE ORDER. DT.29.11.02 PASSED BY R2 EXT.P14:-TRUE COPY OF THE JUDGMENT OF THIS HON'BLE COURT DT.13.2.03 IN OP.5070/03 EXT.P15:-TRUE COPY OF THE ORDER DT.4.6.03 PASSED BY R4. RESPONDENT'S EXHIBITS:- NIL okb //True Copy// P.A. to Judge WP(C).20698/03 ORDER ON I.A. 7598OF 2003 IN WP(C). 20698OF 03 DISMISSED. SD/- C.K. ABDUL REHIM, JUDGE. 4.6.2009 okb /True copy/ P.A. to Judge C.K.ABDUL REHIM, J. --------------------------------- W.P.(C)No. 20698 of 2003 ---------------------------------- Dated this the 4th day of June, 2009. J U D G M E N T ---------------------- 1. The petitioner is a dealer engaged in the manufacture and sale of Plywood, Block Board, Flush Door, Veneer, Timber Board, etc. Being a registered Small Scale Industry, the petitioner was granted exemption from payment of sales tax on the sale of goods manufactured by her. The exemption was granted as per order dated 15.5.1996. The petitioner filed returns and claimed exemption on the entire turnover, on the basis of the above said order, for the years 1995-96 to 1997-98. Subsequently the sales tax exemption order was reviewed by the District Level Committee on the basis of a Government notification, SRO.404/94, in which it is made clear that exemption is not applicable to sale of plywood. Therefore the exemption granted to the petitioner was cancelled by virtue of Ext.P1 order dated 24.7.1998. In view of the cancellation of exemption, the first respondent completed assessments under the KGST Act and CST Act for the period from 1.12.1997 to 31.3.1998 as per Exts.P2 and P3 orders. Along with the assessments, demand notices were issued claiming tax amount WP(C).20698/03 2 and interest due thereon from the respective dates on which filing of returns were due. Against the demand for payment of interest the petitioner filed appeals before the Deputy Commissioner (Appeals). During pendency of the appeals, when recovery steps were initiated the petitioner approached this Court in O.P.20432/2002, which was disposed of as per Ext.P12 judgment. This Court found that the appeals filed challenging the demand for interest is not maintainable and the proper remedy is to file revision. The petitioner was permitted to file revisions. She was granted installment facility for payment of tax along with future interest. This Court granted stay against recovery of penal interest demanded till the disposal of the revision petition by the Deputy Commissioner. Thereafter the revision petition was disposed by the Deputy Commissioner as per Ext.P13 order. The petitioner contended before the revisional authority that in view of the decisions of the Hon'ble Supreme Court in Maruthi Wire Industries Pvt. Ltd. Vs. Sales Tax Officer ((2001) 122 STC 410) and in the decision reported in ((2002) 127 STC 322), levy of interest is not justified because there was no demand existed as on the relevant date and that there was no failure in payment of tax. But, WP(C).20698/03 3 observing that S.23 of the KGST Act has been amended inserting sub section 3A, the Deputy Commissioner found that interest will accrue on the date on which the tax became due on the turnover, and the assessee has failed to include the tax amount in her return and to pay tax thereon, which had escaped assessment. Therefore it is held that the assessee is liable to pay interest from 1.5.1998 onwards, which is the date on which filing of the return was due. 2. Aggrieved by the order of the first revisional authority the petitioner approached the 4th respondent in second revision. During the pendency of the second revision, she had approached this Court seeking stay of recovery proceedings. By Ext.P14 judgment this Court granted conditional stay till the disposal of the second revision. Ext.P15 is the order passed by the 4th respondent in the second revision. Concurring with the findings of the first revisional authority based on the amendment to S.23 of the Act, with effect from 1.4.1998, the petitioner was held as liable for payment of interest. Petitioner is challenging Ext.P15 order in this revision. 3. Heard the learned counsel appearing for the petitioner and the learned Government Pleader. Contention of WP(C).20698/03 4 the petitioner is that S.23(3A) is not applicable in this case since there was no failure on the part of the petitioner to include any turnover in the return filed or to include any turnover which has escaped assessment, because she was enjoying sales tax exemption during the relevant period. According to the petitioner, she had already paid interest due on the tax amount from the date of assessment onwards. Therefore the dispute remaining unsettled is only with respect to liability for payment of interest from the date on which the tax became due till the date of assessment. The contention of the petitioner is that during the time when she filed returns, she was not liable for payment of tax in view of the exemption enjoyed by her during that time. But it is clear that the exemption enjoyed by the petitioner was cancelled by virtue of Ext.P1 order dated 24.7.1998. At least from the date of Ext.P1 onwards it could not be said that tax on the turnover was not due. It is evident that the petitioner had not filed any revised return nor paid the tax even after cancellation of the exemption available. Therefore it cannot be said that interest will not accrue on the tax amount, at least from the date of cancellation of the exemption, i.e. from 24.7.1998 onwards. The amendment to S.23 by way of inserting WP(C).20698/03 5 Sub section 3A came into force on 1.4.1998. Therefore the decisions which were relied upon by the petitioner before the revisional authorities have no application in the matter. 4. The petitioner had pointed out the decision of this Court in P.K. Damodaran Vs. State of Kerala ((2004) 12 KTR 133 (Kerala)) to canvass the proposition that since there was no failure on the part of the petitioner to include any turnover of her business as taxable turnover, as on the date of filing of the return, she could not be made liable for interest under Section 23(3A). In this case it is clear that since there existed an order of exemption, which was subsequently withdrawn, the conceded turnover had escaped assessment. But the said turnover became taxable only when the exemption was cancelled by virtue of Ext.P1 order. Therefore it could not be said that interest will not accrue from the date on which the exemption was cancelled or in other words as on the date from which the turnover became taxable. Therefore I hold that there was failure on the part of the petitioner to make payment of tax due, from the date of cancellation of exemption and therefore she is liable for payment of interest on the tax amount due from that date onwards. WP(C).20698/03 6 5. Hence in the modification of the revisional orders, Exts.P13 and P15, it is made clear that the petitioner will be liable for payment of interest under S.23(3A), with respect to Exts.P2 and P3 assessments, only from the date of Ext.P1 order, i.e: from 24.7.1998 onwards. The assessing authority will issue modified demands in this regard. The amounts already paid by the petitioner towards the disputed interest shall be given credit while issuing the revised demands. The writ petition is disposed of accordingly. C.K.ABDUL REHIM, JUDGE okb