MARUTI WIRE INDUSTRIES PVT. LTD. versus S.T.O.1ST CIRCLE, MATTANCHERRY AND ORS.

Citation: [2001] 2 S.C.R. 829 · Decided: 27-03-2001 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Case Allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

MAR UT! WIRE INDUSTRIES PVT. LTD. 
A 
" 
S.T.O., !st CIRCLE, MATTANCHERRY AND ORS. 
MARCH 27, 2001 
(S.P. BHARUCHA, R.C. LAHOTI AND Y.K. SABHARWAL, JJ.] 
B 
Sales Tax: 
Kerala General Sales Tax Act, 1963--Section 23(3)-Kerala General 
Sales Tax Rules, 1963-Rule 27(7-A)-Iiability of sales tax-Failure to file 
return of turnover-Held, assessee liable for other consequences but not penal 
interest under Section 23(3). 
The appellant entered into an agreement with Mis. Tata Oil Mills Co. 
Ltd., to supply imported inedible tallow to their factory at Ernakulam. The 
tallow was imported at the Cochin Port and delivered to the buyer. The 
appellant did not file a return of the turnover relating to the transaction. The 
Respondent finalised the assessment and raised a demand of sales tax where· 
after the tax was paid. The Respondent then raised demand for payment of 
penal interest under sob-section (3) of Section 23 of the Kerala General Sales 
Tax Act, 1963 for the period between 1983 and 1985. This demand was 
impugned hy the Appellant before the High Court. A Single Judge allowed 
the petition and quashed the said demand. The Respondent preferred a writ 
appeal which was allowed. 
The appellant contended that there was no order of assessment nor a 
return of turnover filed by way of self assessment in which case it should 
have been accompanied by proof of payment of tax as per self assessment 
and, therefore, it was not required to pay tax unless and until a demand 
based on an order of assessment was raised againstit; that the scheme of the 
Act as it stood at the relevant time contemplates a different penal action 
against a default, i.e. penalty uuder Section 45A of the Act for failure to 
submit the return of turnover which penalty can be as high as twice the 
amount of sales tax payable hut liability to pay penal interest cannot be cast 
on the assessee for such failure when the Act does not speci(tcally provide for 
levy of penal interest for failure to file return of turnover. 
The respondent contended that an assessee held liable to payment of 
sales tax and filing a return of turnover, cannot be placed on a higher 
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SUPREME COURT REPORTS 
[2001] 2 S.C.R. 
A 
pedestal than an assessee w:ho files a return and, therefore, a reasonable 
construction to be placed on sub-section (3) of Section 23 would be that an 
assessee not filing a return of turnover should be held liable to pay penal 
interest with effect from a date on which he should have filed a return of 
turnover accompanied by payment of tax even if such return was not 
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actually filed. 
Allowing the Appeal, the Court 
HELD : 1. 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 Rule 
27(7 A) of the Kerala General Sales Tax Rules, 1963 casts an obligation on 
assessees to file a return of total turnover and taxable turnover accompa-
nied by proof of payment of the amount of tax due within 20 days of the 
previous quarter hut such a return was not filed by the appellant. Failure 
to file return of taxable turnover may render the assessee liable for any 
other consequences of penal action as provided by law but cannot attract 
the liability for payment of penal interest under sub-section (3) of Section 
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 oayable on that date. [834-C-D] 
J.K Synthetics ud. v. C.T.O., (1994) 94 STC 422, followed. 
CIVIL APPELLXI'E JURISDICTION·: Civil Appeal No. 3009 of 1999. 
From the Judgment and Order dated 12.6.98 of the Kerala High Court 
in W.A. No. 886/94 O.P. No. 4095 of 1996. 
G.C. Sharma, Sudhir Kumar Gupta, J. Kathuria and R.K. Raghavan for 
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the Appellant. 
G 
G. Prakash for the Respondents. 
The Judgment of ihe Court was delivered by 
R.C. LAHOTI, J. Whether the appellant, an assessee, is liable to pay 
any penal interest on the assessed tax under Section 23(3) of the Kerala 
H 
General Sales Tax Act, 1963 (hereinafter 'the Act', for short), from the date 
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MARUTI WIRE INDUSTRIES CTD.v. S.T.O. !ST CIRCLE. MATIANCHERRY [R.C. LAHOTI, I.] 
831 
when return was due though neither a return was furnished nor any tax paid 
A 
on self-assessment basis, is the question arising for decision in this appeal. 
Briefly stated 

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