Facts of the Case

This batch of 22 connected writ petitions, led by Harbour Hotels, WP(C) No. 37726 of 2022, was filed before the Kerala High Court by hotels, resorts and bars holding FL3/FL11 liquor licences, arrayed against the State of Kerala and the State GST Department. During the COVID-19 lockdown, the State Government, by GO(MS) No. 41/2020/TD dated 18.05.2020, permitted these licensees to sell Indian-Made Foreign Liquor (IMFL) through parcel or home delivery, subject to turnover tax (ToT) at 5% under the Kerala General Sales Tax Act, 1963. The department subsequently raised interest demands for delayed remittance of ToT for the periods 22.05.2020 to 21.12.2020 and 15.06.2021 to 25.09.2021, spanning Financial Years 2020-21 and 2021-22, despite the Government's own SRO No. 297/2022 dated 26.03.2022 extending the compliance deadline without interest, prompting these petitions and consequent recovery notices.

Issues Involved

  1. Whether FL3/FL11 licensees are liable to pay interest on delayed remittance of turnover tax on IMFL parcel sales for the COVID-affected periods in Financial Years 2020-21 and 2021-22.
  2. Whether the relief granted under SRO No. 297/2022 dated 26.03.2022, following the Cabinet decision and Budget Speech of 2022, extinguishes interest liability for licensees who filed returns and paid ToT within the extended timelines.
  3. Whether the impugned assessment and recovery orders, which demanded interest without regard to these extended timelines, were legally sustainable.

Petitioner's Arguments

  • The petitioners, FL3/FL11 licensees, argued that parcel sale of IMFL was permitted only because of the Government's COVID-19 relief order, GO(MS) No. 41/2020/TD, and that any resulting delay in ToT compliance flowed from the pandemic and the State's own policy, not from any default on their part.
  • They contended that the Cabinet decision dated 23.02.2022, the Budget Speech dated 11.03.2022, and the consequent SRO No. 297/2022 dated 26.03.2022 extended the time for filing ToT returns and remitting the tax without interest, and that licensees who complied within these extended timelines could not lawfully be saddled with interest.
  • They submitted that the impugned assessment and recovery orders ignored this relief, mechanically levied interest, and proceeded to attach property, warranting quashing and remand.

Respondent's Arguments

  • The State GST Department defended the assessment and recovery orders as validly issued for delayed filing of ToT returns and delayed remittance of tax for the specified COVID periods.
  • It argued that interest under the statute is compensatory in nature and attaches automatically on delayed payment, irrespective of the reasons for the delay, unless expressly and specifically waived by the Government.
  • It maintained that SRO No. 297/2022 could not be read as a blanket waiver of interest for every licensee regardless of their actual compliance dates.

Court Order/Findings

  • The Court, adopting the reasoning of its judgment of even date in WP(C) No. 32408/2023 and connected matters, held that licensees who filed ToT returns by 31.03.2022 and cleared the tax by 30.04.2022 are not liable to pay interest for the delayed periods 22.05.2020 to 21.12.2020 and 15.06.2021 to 25.09.2021 in Financial Years 2020-21 and 2021-22.
  • It further held that licensees who neither filed returns by 31.03.2022 nor paid ToT at 5% by 30.04.2022 would remain liable to pay interest from 01.05.2022 till the date of actual payment, and also for the delay in filing returns.
  • Applying this conditional formula, the Court quashed the impugned orders in all 22 writ petitions and remitted the matters to the Assessing Authority to pass fresh assessment orders consistent with these findings, closing all pending interlocutory applications.

Important Clarification

  • The COVID-19 relief extended through SRO No. 297/2022 operates as a genuine, time-bound waiver of interest on turnover tax for FL3/FL11 licensees, available only where compliance is completed within the extended deadlines of 31.03.2022 for filing returns and 30.04.2022 for paying the tax.
  • Interest liability is therefore not blanket; it turns on the actual date of filing and payment by each individual licensee, requiring case-specific verification by the Assessing Authority rather than a uniform interest demand across the board.
  • Assessment or recovery orders that ignore this conditional relief and levy interest mechanically are liable to be quashed and remitted for fresh assessment applying the correct dates.

Sections Involved

  • Kerala General Sales Tax Act, 1963 – the legacy State enactment under which turnover tax (ToT) on the sale of liquor continues to be levied, since alcoholic liquor for human consumption remains outside the GST regime.
  • GO(MS) No. 41/2020/TD dated 18.05.2020 – the Government Order that permitted FL3/FL11 licensees to sell IMFL through parcel/home delivery during the COVID-19 lockdown, subject to ToT.
  • SRO No. 297/2022 (G.O.(P) No. 26/2022/Taxes) dated 26.03.2022 – the notification extending the time for filing ToT returns and remitting the tax without attracting interest.
  • Kerala State Goods and Services Tax Act, 2017 – the enactment under which the State GST Department, as the current administrator of legacy state levies such as ToT, issued the impugned assessment and recovery orders.

Decision – In Favour of

This batch order is best read as disposed of with directions rather than a clean win for either side. The Kerala High Court quashed the impugned interest demands and recovery notices raised against all 22 petitioners, which is procedurally favourable to the Assessees. However, the substantive relief is conditional: licensees who filed ToT returns by 31.03.2022 and paid the tax by 30.04.2022 stand fully absolved of interest for the COVID-affected periods, while those who did not meet these dates remain liable for interest from 01.05.2022 onward. The matters have been remitted to the Assessing Authority to pass fresh assessment orders applying this formula to each petitioner's actual compliance record.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: Kerala High Court at Ernakulam
  • Case No.: WP(C) No. 37726 of 2022 with 21 connected writ petitions – WP(C) Nos. 1639/2023, 1962/2023, 3870/2023, 12347/2023, 14486/2023, 15669/2023, 23851/2023, 23943/2023, 23966/2023, 23969/2023, 24022/2023, 31773/2022, 31900/2022, 32330/2022, 32895/2022, 35472/2022, 36959/2022, 42730/2022, 42733/2022, 42901/2022 and 42933/2022
  • CNR: Not available
  • Coram: Justice Dinesh Kumar Singh
  • Decision Date: 30 November 2023
  • Disposal Nature: Writ petitions allowed; impugned interest/assessment orders quashed and matters remitted to the Assessing Authority for fresh assessment, following the reasoning of the judgment of even date in WP(C) No. 32408/2023 and connected cases

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