M.P.Abdullakutty, Arecanut Dealer, Changaramkulam V. Assistant Commissioner (Assmt.), Salestax Office, Special Circle, Malappuram and Deputy Commissioner Agricultural Income Tax and Sales Tax, Palakkad and Commissioner of Commercial Taxes, Thiruvananthapuram

OP/23192/1999

AI Insights

The case involves M.P. Abdullakutty, an arecanut dealer, who contested the levying of penal interest on his sales tax assessment for the year 1990-91. The initial assessment by the Assistant Commissioner included penal interest, which was later confirmed by the Deputy Commissioner and the Commissioner of Commercial Taxes. Abdullakutty challenged these decisions in the High Court of Kerala, which ultimately set aside the penal interest charges based on a Supreme Court decision that reversed the legal precedent previously relied upon by the lower authorities.

• Counselvise Citation: [2007] 140 COUNSELVISE.COM (IT) 818886 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 31-07-2007
• Assessment Year: misc
• Other Referred Cases: Sales Tax Officer v. Maruthi Wire Industries Pvt. Ltd. [1998 (2) KLT 248], Maruti Wire Industries (P) Ltd. v. Sales Tax Officer [2001 (2) KLT 100 (SC)]
• Laws Referred To: Kerala General Sales Tax Act, 1963
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MUHAMMED RAFIQ
• Assessee Lawyers: M MATHAI; JOHN RAMESH
• Keywords: Assessment; Commercial Taxes; Penal interest; Revision petition; Sales Tax
• Section: 36; 23(3)

Judgement Text

" IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE K.T.SANKARAN TUESDAY, THE 31ST JULY 2007 / 9TH SRAVANA 1929 O.P.No.23192 of 1999(J) --------------------------------- PETITIONER:- -------------------- M.P.ABDULLAKKUTTY, ARECANUT DEALER, CHANGARAMKULAM. BY ADV. SRI.M.PATHROSE MATHAI (SR.) SRI.JOHN RAMESH RESPONDENTS:- ------------------------ 1. ASSISTANT COMMISSIONER (ASSMT.), SALESTAX OFFICE, SPECIAL CIRCLE, MALAPPURAM. 2. DEPUTY COMMISSIONER AGRICULTURAL INCOME TAX AND SALES TAX, PALAKKAD. 3. COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ. THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 31/07/2007, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:- O.P.NO.23192 OF 1999-J APPENDIX PETITIONER'S EXHIBITS:- ------------------------------------ EXT.P1 - TRUE COPY OF THE PROCEEDINGS DATED 11.7.1994 LEVYING PENAL INTEREST ON THE PETITIONER FOR ASSMT. YEAR 1990-91. EXT.P2 - TRUE COPY OF LETTER NO.3208/0093/90-91 SENT BY THE ASST. COMMR.(ASSMT.) SALES TAX DATED 16.7.94. EXT.P3 - TRUE COPY OF THE ORDER NO.P2-7783/94/K.DIS OF THE 2ND RESPONDENT DATED 19.1.1995. EXT.P4 - TRUE COPY OF THE ORDER OF THE 3RD RESPONDENT DATED 6.4.1999. - TRUE COPY - H.L.Dattu, C.J. & K.T.Sankaran, J. -------------------------------------------------------- O.P.No.23192 of 1999-J -------------------------------------------------------- Dated, this the 31st day of July, 2007 JUDGMENT H.L.Dattu, C.J. The assessee is a registered dealer on the files of the Assistant Commissioner (Assessment), Malappuram. He is carrying on the business of purchase and sale of arecanut. The petitioner has filed his return for the assessment year 1990-91 and had paid sales tax on the basis of the return filed by him. (2) The assessing authority has completed the assessment and also levied penal interest as per its order dated 11.7.1994. Thereafter the mistake which crept in while computing the penal interest was rectified by the assessing authority as per its order dated 16.7.1994. Aggrieved by that portion of the order levying penal interest, the assessee has carried the matter by way of revision petition under Section 36 of the Act before the Deputy Commissioner of Commercial Taxes, Palakkad, who, by his order dated 19.1.1995, had confirmed the penal interest levied by the assessing authority. (3) Aggrieved by the aforesaid orders, the petitioner was before the Commissioner of Commercial Taxes, Thiruvananthapuram. The second revisional authority by its order dated 6.4.1999 has confirmed the orders passed by the assessing authority as well as the first revisional authority relying upon the decision of this Court in the case of Sales Tax Officer v. Maruthi Wire Industries Pvt. Ltd. [1998 (2) KLT 248]. (4) Being aggrieved by the orders passed by the authorities under the Act in levying penal interest even before issuing the demand notice O.P.No.23192 of 1999-J 2 for payment of the assessed tax, the assessee is before us in this Original Petition. (5) At the time of hearing of the Original Petition, Sri.Pathros Mattai, learned Senior Counsel appearing for the petitioner would submit that the view expressed by this Court in the case of Sales Tax Officer v. Maruthi Wire Industries Pvt. Ltd. [1998 (2) KLT 248] is now reversed by the Supreme Court in the case of Maruti Wire Industries (P) Ltd. v. Sales Tax Officer [2001 (2) KLT 100 (SC)]. In the said decision, the Court has observed as under: “If the assessee fails to file a return, he exposes himself to penalty for such default; the Legislature could never have intended that the assessee should be liable, on pain of imposition of penalty, to deposit an amount which is yet to be ascertained through assessment. The provision by which the authority is empowered to levy and collect interest, even if construed as forming part of the machinery provisions is a substantive law, not adjectival law, and interest cannot be recovered by way of damages for wrongful detention of the amount. This Court further held that the “tax payable” or “tax due” is that amount which becomes due ex hypothesis on the turnover and taxable turnover shown in or based on the return or as to which an order of assessment has been made. The liability of the assessee appellant to pay sales tax could have arisen either on return of turnover being filed by way of self-assessment or else on an order of assessment being made. No doubt R.27(7A) of the Kerala General Sales Tax Rules, 1963 casts an obligation on assessees to file a return of total turnover and taxable turnover accompanied by proof of payment of the amount of tax due within 20 days of the previous quarter but such a return was not filed by the appellant. A failure to file return of taxable turnover may render the assessee liable for any other consequences or penal action as provided by law but cannot attract the liability for payment of penal interest under sub-s.(3) of S.23 of the Act. On the parity of reasoning that if a return of turnover would have been filed on the due date then the tax as per return would have become due and payable on that date”. (6) In view of the law declared by the apex Court, in our opinion, we cannot sustain the orders passed by the assessing authority as well as the first and second revisional authorities. Accordingly, the following: O.P.No.23192 of 1999-J 3 Order (i) The Original Petition is allowed. (ii) The orders passed by the assessing authority dated 11.7.1994 and 16.7.1994, first revisional authority dated 19.1.1995 and the second revisional authority dated 6.4.1999 in so far as levying and demanding penal interest is set aside and in all other respects, the orders passed by the authorities under the Act are confirmed. (iii) Consequently, C.M.P.No.38616 of 1999 is dismissed. Ordered accordingly. H.L.Dattu Chief Justice K.T.Sankaran Judge vku/- "