Judgment :- J.B. KOSHY, J. Petitioner was a dealer under the Kerala General Sales Tax Act, 1963 (hereinafter referred to as "the Act"). He was assessed by exhibit P1 and as per the above petitioner had to pay Rs. 34, 783 as balance tax and Rs. 3, 360.80 as surcharge. Petitioner filed an appeal. The appellate authority reduced the same by exhibit P2 order dated February 12, 1985. That was implemented by exhibit P3 and demand was issued reducing balance tax amount due as Rs. 3, 972 and surcharge as Rs. 1, 120. It is stated that that amount was paid. The Board took up the matter in appeal. The Tribunal, by exhibit P4 order, set aside the appellate order and restored exhibit P1 assessment order of the original authority. Consequentially, exhibit P5 demand was issued. While issuing the demand, penal interest under section 23(3) of the Act was also demanded. Section 23(3) of the Act is as follows : "(3) If the tax or any other amount assessed or due 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 per cent 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; Explanation. - Where the period of default is less than one month, interest shall be calculated for the actual number of days of default." In this connection, section 23(5) is also important which is as follows : "(5) Where, as a result of any order in appeal or revision or any rectification under section 43, any tax assessed or any other amount due from any dealer or other persons has been reduced, the interest levied for the non-payment of such tax or other amount shall be proportionately reduced, and if any amount of interest in excess of such reduced interest has been collected, such excess shall be refunded to the dealer or other person, as the case may be." Interest demanded under section 23(3) is penal in nature. It is not ordinary interest payable as held by the Supreme Court in Food Corporation of India v. State of Haryana I also refer to the decision of the Supreme Court in State of Kerala v. Joy Varghese 1997 5 KTR 372 (SC) and interpretation of section 23(3). The principle enunciated by the Constitutional Bench of the Supreme Court in J.K. Synthetics Ltd. v. Commercial Taxes Officer is also relevant here. The Supreme Court in Maruti Wire Industries Pvt. Ltd. v. Sales Tax Officer, First Circle, Mattancherry held that penal interest can be demanded under section 23(3) only when there was unpaid tax due or payable on the basis of a return as per self-assessment or by assessment order or appellate/revisional order. The Supreme Court in Income-tax Officer v. Seghu Buchiah Setty held that if an order of assessment is restored or replaced by the appellate order, then notice of demand and all other steps based upon the original order must be deemed to have become ineffective. While considering an identical matter, this Court held in K. Nachimuthu v. Sales Tax Officer as follows : "8. The consequence of an appellate order setting aside or modifying an order of assessment is to nullify the demand for the amount of tax in respect of which relief is granted. The amount ceases to be payable. No doubt the demand revives when the appellate order itself is set aside in further proceedings by way of appeal or revision; but in the interregnum, the amount is not payable by virtue of an order passed by a statutory authority. The amount ceases to be payable. No doubt the demand revives when the appellate order itself is set aside in further proceedings by way of appeal or revision; but in the interregnum, the amount is not payable by virtue of an order passed by a statutory authority. In my opinion, no penal interest could therefore accrue during this period. 9. This view, which accords with sub-sections (3), (4) and (5) of section 23, also subserves the ends of justice. Sub-section (3), inter alia, provides that penal interest runs after the expiry of the period of time allowed for payment of the tax by any appellate or revisional authority; and sub-sections (4) and (5) provide for cancellation of the levy of penal interest, or for proportional reduction therein accordingly as the liability for tax is cancelled or reduced in appeal or revision. ............" Of course, the matter would have been different if appellate order was stayed and the appeal was dismissed thereafter in view of section 23(3B) of the Act. I respectfully agree with the view expressed by T. L. Viswanatha Iyer, J. in paragraph 8 of the above decision. Here, in this case, the original demand as per exhibit P1 was set aside by exhibit P2. Therefore, interest as contemplated under section 23(3) of the Act is payable for the entire amount as demanded in exhibit P1 from the date of exhibit P1 original assessment till exhibit P2 appellate order, that is, February 12, 1985, The above appellate order was in force till exhibit P4 order was passed on April 3, 1993. Till exhibit P4 was passed only demand payable was exhibit P3 demand consequent of exhibit P2 appellate order. There was no other valid demand over and above exhibit P3 after exhibit P2. Therefore, for that period, no penal interest is payable if amount demanded in exhibit P3 is paid as demanded. From the date of exhibit P4, the actual tax payable by the assessee was the amount mentioned in exhibit P3 till exhibit P4 and if that amount is not paid, penal interest is payable on that amount till exhibit P4. But, for the period after exhibit P4 is passed, petitioner is liable to pay penal interest on the basis of the entire balance tax payable till it is paid. But, for the period after exhibit P4 is passed, petitioner is liable to pay penal interest on the basis of the entire balance tax payable till it is paid. In the above circumstances, exhibit P5 is set aside and the Sales Tax Officer is directed to make fresh demand on the basis of the principles mentioned above. Order on C.M.P. No. 4011 of 1995 in O.P. No. 2211 of 1995 dismissed. Petition allowed.