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2001 DIGILAW 182 (KER)

Narani Stores v. State of Kerala

2001-03-26

K.K.USHA, KURIAN JOSEPH

body2001
Judgment :- Kurian Joseph, J. Validity of S.23(3B) of the Kerala General Sales Tax Act, 1963 thereinafter referred to as the Act) is under challenge in all these cases. (Till the Finance Act, 1998 was introduced, sub-s.(3B) was numbered as (3A) and hence the petitioners and the learned Single Judge have referred to the provision as S.23(3A)). 2. Petitioners contended that S.23(3A) introduced by the Finance Act, 1994 (present sub-s.(3B)) is violative of Arts.14,19,20 and 21 of the Constitution of India. And in case it is found to be valid, it was contended that the same could operate only" prospectively. 3. In the common judgment giving rise to the Writ Appeals, a learned Single Judge held that S.23(3B) is valid and that it is retrospective in operation. 4. In all the Writ Appeals as also in O.P. No. 4927 of 1996, the issue centres round the sales tax collected but remitted belatedly whereas in O.P. No. 3778 of 1996 it is regarding belated payment of turnover tax. 5. S.23 of the Act which provides for payment and recovery of tax reads as follows: "23(3) If the tax or any other amount assessed ordue under this Act is not paid by any dealer or other person within the time prescribed therefor, in this Act or in any rule made thereunder and in other cases within the time specified therefor in the notice of demand, the dealer or other person shall pay, by way of interest, in the manner prescribed, in addition to the amount due, a sum equal to, (a) one percent of such amount for each month or part thereof for the first three months after the date specified for its payment; (b) two per cent of such amount for each month or part thereof subsequent to the first three months aforesaid." 6. The liability of the assessee to pay interest for the belated payment of the tax due is not under challenge in these cases. The dispute is on S.23(3B). The liability of the assessee to pay interest for the belated payment of the tax due is not under challenge in these cases. The dispute is on S.23(3B). The said subsection reads thus: "3B(i) Where, as a result of any order in appeal or revision or in any other proceedings, the tax or any other amount due under this Act is finally settled, the interest leviable under sub-s.(3) shall be on the amount as finally settled and the period during which the collection of tax or other amount is stayed by any court or any other authority shall not be excluded in computing the period for calculating interest under the said sub-section. (ii) For the removal of doubt it is hereby clarified that the provisions of Cl. (i) of this subsection shall apply to all tax and other amount pending payment as on the 1 st day of April, 1994." The policy of the Revenue to clothe the defaulters with liability to pay interest even during the period the collection of tax or other amount is stayed by any court or authority is the issue in dispute. It is to be noted that when S.23(3) was originally enacted, for belated payment of amount due, the expression used was that the assessee should pay the prescribed amount "by way of penalty". Subsequently the expression was amended as "by way of penal interest" in 1988. In 1993 by the Finance Act, 1993 the word 'penal' was omitted. In short, it is now declared and clarified that the amount prescribed for belated payment of amount due is "by way of interest" only. Going by the rate of interest, it can be seen that such rate is prescribed with a view to tighten up the machinery for collection of sales tax and as a deterrent measure so that the dealers may not evade or delay the payment of tax. 7. True, the statute itself provides for various remedies like appeals and revisions against the order of assessment. The appellate or revisional authorities are also vested with powers to pass interlocutory orders regarding payment of tax, pending final decision in the appeal or revision. 7. True, the statute itself provides for various remedies like appeals and revisions against the order of assessment. The appellate or revisional authorities are also vested with powers to pass interlocutory orders regarding payment of tax, pending final decision in the appeal or revision. However, for the reason that the tax assessed and recovery thereof was stayed for some time by the appellate of revisional authority and ultimately when the main case itself is dismissed or the liability refixed, can it be said that the assessee is not liable to pay the interest during the interregnum the recovery of the amount due was under stay? It is significant to note that under S.23(3) the liability to pay interest arises when a dealer or other person does not pay "the tax or any other amount assessed or due under this Act", "within the time prescribed therefor in this Act" or in any rule made thereunder and in other cases within the time specified therefor in the notice of demand. For the mere fact that the court or any other authority gave an interim relief of stay of recovery of such amount due and payable within a prescribed period, it cannot be said the assessee is not liable to pay interest during the said period of stay. The court or authority has no power to grant the relief of exemption from payment of interest. The liability to pay interest starts once the period prescribed under the statute expired. Thereafter, what is stayed is only the collection thereof and so long as statute does not empower any court or authority to waive interest, the assessee is liable to pay interest for the amount due after the prescribed period. 8. In Calcutta Jute Manufacturing Co. v. Commercial Tax Officer (AIR 1997 SC 2920), the Supreme Court considered this aspect and it was held at paragraph 16 as follows: "16. The tax amount which they should have paid as per S.6-B remained with the appellants during the entire period and they would have earned good profit with that amount. The State, to which the tax amount should necessarily have gone, was not able to utilise it for public purposes. The tax amount which they should have paid as per S.6-B remained with the appellants during the entire period and they would have earned good profit with that amount. The State, to which the tax amount should necessarily have gone, was not able to utilise it for public purposes. When appellants had the advantage of keeping the amount of tax without paying it to the State exchequer only because the High Court granted orders restraining the State from recovering that amount from the assessee, no act of the Court shall cause prejudice to any party. The pristine doctrine couched in the maxim "actus curiae reminem gravabit" has ever remained a salutary and guiding principle". 9. On the principle of restitution also the Apex Court has considered this issue in Kerala State Electricity Board v. M.R.F. Ltd. (1996) 1 SCC 597) and at paragraph 24 it is stated thus: "There is no manner of doubt it is an imperative duty of the Court to ensure that the party to the lis does not suffer any unmerited hardship on account of an order passed by the Court. The principle of restitution as enunciated by the Privy Council in Rodger case (1871) 3 PC 465 has been followed by the Privy Council in later decisions and such principle being in conformity to justice and fair play be followed. It should, however, be noted that in an action by way of restitution, no inflexible rule can be laid down. It will be the endeavour of the Court to ensure that a party who had suffered on account of decision of the court, since finally reversed, should be put back to the position, as far as practicable, in which he would have been if the decision of the Court adversely affecting him had not been passed. In giving full and complete relief in an action for restitution, the Court has not only power but also a duty to order for mesne profits, damages, costs, interest etc. as may deem expedient and fair conforming to justice to be done in the facts of the case". In giving full and complete relief in an action for restitution, the Court has not only power but also a duty to order for mesne profits, damages, costs, interest etc. as may deem expedient and fair conforming to justice to be done in the facts of the case". Applying the above quoted principle, the Apex Court in that case, after observing that "The Company is an on going business concern and must have utilised the money, saved on account of the decision of the High Court, gainfully in its commercial activities the Board had to suffer financial loss because of the said erroneous decisions of the High Court. In the aforesaid circumstances, it will be lawful, conforming to equity and well-established principle of restitution for the Board to claim interest at 18% on the unpaid portion of the Bill drawn on the basis of revised tariffs", held that during the period the collection of the amounts was stayed by the Court, the consumers had to pay interest at the rate of 18%. 10. In the instant case also, as already observed by us, the liability to pay interest for the delayed payment is not in dispute. The dispute is only that for the period the collection of the disputed amount was stayed by any court or authority and ultimately found due and payable, for such period of stay the assessee should not be made liable to pay interest. On going by the guidance of the Apex Court in such matters, we are of the view that if that period is excluded, it will be against public policy and public interest. Viewed from that angle, even de hors S.23(3B) of the Act, it has to be held that there is a liability on the assessee to pay interest on the delayed payment of the tax due even when the recovery was stayed by a Court. 11. It has also to be noted that what is found due from an assessee is the sales tax collected. The assessee has no right, to withhold that amount due to the State. The assessee is only a collecting agent. If there is delay in remitting the amount that is due to the State, necessarily the assessee has to be visited with the interest as prescribed under the statute. 12. The assessee has no right, to withhold that amount due to the State. The assessee is only a collecting agent. If there is delay in remitting the amount that is due to the State, necessarily the assessee has to be visited with the interest as prescribed under the statute. 12. On the contention regarding prospective operation, it may be seen that the amendment introduced in Finance Act, 1994 is only clarificatory in nature and hence it has to be taken to have retrospective operation. It is a well-settled canon of interpretation that an amending Act may be purely clarificatory to clear the meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of such a nature has always retrospective effect. 13. It is profitable in this context to refer to Justice G.P. Singh's 'Principles of Statutory Interpretation', Seventh Edn., (Chapter VI): "An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law when the constitution came into force, the amending Act also will be part of the existing law." In Mithilesh Kumari v. Prem Behari Kare (AIR 1989 SC 1427), the Apex Court was of the view that where a new law is made to cure an acknowledged evil, for the benefit of community as a whole, it has always to be understood to be operative retrospectively. In this case also once the tax due to the State was being used gainfully by the dealers, in public interest, it is only fair, proper and reasonable that the belated payments are to be made with the prescribed interest. In the case of the petitioner in O.P. No. 3778 of 1996 the only difference is that there the liability is on the turnover tax. Admittedly, the moment the turnover crosses the prescribed limit, the liability on the dealer to pay turnover tax accrues. That payment if delayed for whatever reason beyond the prescribed date, on the principles already stated above, has to be visited with the interest prescribed under the Act. 14. Sri. Admittedly, the moment the turnover crosses the prescribed limit, the liability on the dealer to pay turnover tax accrues. That payment if delayed for whatever reason beyond the prescribed date, on the principles already stated above, has to be visited with the interest prescribed under the Act. 14. Sri. E.R. Venkiteswaran, learned counsel appearing for appellants contended that S.23(3B) infringes upon the fundamental rights of the petitioners under Art.14,19(1)(g) and 20 of the Constitution and is also violative of Art.301 of the Constitution, so far as the said provision enabled the Revenue to collect penal interest from the appellants. The further contention of the learned counsel appearing for the appellants/ petitioners is that since S.23(3B) was enacted only by the Finance Act, 1994 their case cannot be covered by the said amendment since the assessment pertain to 1986-87 onwards and in any case prior to 1994. It is their contention that their cases are to be governed by the law that existed at the time of assessment, appeal or revision. We do hot find any basis in the said contention. Merely because prior to 1993 the provision for interest was qualified as penal, it does not cease to be interest. That provision is intended only to tighten up the machinery for collection of sales tax and as a deterrent measure to compel the dealers not to evade or delay the payment of tax and for the removal of doubts only it was clarified by the Finance Act, 1993 omitting the word 'penal' and retaining the word 'interest' alone, but at the same time maintaining the rate of interest as such. As already observed by us at paragraph 10 of this judgment, the liability to pay interest for the delayed payment was there in the statute even prior to 1994. It is significant to note that the liability to pay interest under S.23(3) read with sub-s.(3B) is only on the amount finally settled in appeal, revision or other proceedings. What is provided under S.23(3) and clarified under S.23(3B) is the interest that is leviable for the delay in making the payment after the prescribed date. It makes no difference and it does not assume any special sanctity if the payment or recovery is stayed by a court or any other authority for some time. What is provided under S.23(3) and clarified under S.23(3B) is the interest that is leviable for the delay in making the payment after the prescribed date. It makes no difference and it does not assume any special sanctity if the payment or recovery is stayed by a court or any other authority for some time. Whatever be the reason for delay, once there is delay, as provided under the statute, as assessee is bound to pay the tax with the prescribed interest. It cannot be said that it is arbitrary or unreasonable. We do not find any merit in the Writ Appeals as also in the Original Petitions. They are accordingly dismissed.