1. The facts which have given rise to this reference under section 61(1) of the Bombay Sales Tax Act, 1959, are that the respondents, Messrs. S. Gupta and Company, were carrying on business since a number of years without getting themselves registered as a dealer under the Bombay Sales Tax Act, 1953 (hereinafter referred to as 'the 1953 Act'), or, after the coming into force of the Bombay Sales Tax Act, 1959 (hereinafter referred to as 'the 1959 Act'), as a dealer under the 1959 Act. Upon coming to know of the said fact, the Sales Tax Officer (III), Enforcement Branch, Greater Bombay, issued two notices to the respondents dated 1st March, 1962, and 11th June, 1962, respectively. The notice dated 1st March, 1962, was in respect of the period 1st April, 1954, to 31st December, 1959, which period was covered by the 1953 Act, and the notice dated 11th June, 1962, was in respect of the period 1st January, 1960, to 12th December, 1961, which period was covered by the 1959 Act. It is unnecessary to refer to the contents of the notice in respect of the period 1st April, 1954, to 31st December, 1959 (which period is hereinafter referred to as 'the first period'), inasmuch as this reference is concerned only with the levy of penalty in respect of the period 1st January, 1960, to 12th December, 1961 (which period is hereinafter referred to as 'the second period').
2. It is common ground that the notice in respect of the second period was in form 27 to the Bombay Sales Tax Rules, 1959, made under the 1959 Act, and both the learned counsel have addressed to us arguments on the footing that this was the notice which was issued to the respondents and served upon them. Under the said notice the respondents were called upon to show cause why they should not be assessed in respect of the second period and further to show cause why a penalty under clause (a) of sub-section (2) of section 36 of the 1959 Act should not be imposed upon them.
3. On 14th May, 1963, the said Sales Tax Officer passed two assessment orders, one in respect of the first period and the other in respect of the second period. Under the first order the Sales Tax Officer imposed penalty upon the respondents under section 14(7) of the 1953 Act. No penalty was, however, imposed upon the respondents in the assessment order in respect of the second period. Thereafter the Sales Tax Officer who had passed the said orders of assessment was transferred and the charge of his office was taken by V. V. Dandekar. It appears that thereafter V. V. Dandekar wrote a letter dated 25th March, 1964, to the respondents in connection with the levy of penalty upon them and subsequently by his order dated 7th April, 1964, he held that he was satisfied that the respondents had, in contravention of section 22 of the 1959 Act, failed to apply for registration and had wilfully remained unregistered during the second period and that the explanation furnished by them by their letter dated 30th March, 1964, was not satisfactory and imposed upon the respondents a penalty in the sum of Rs. 2,000. Against the said order imposing penalty the respondents filed an appeal to the Assistant Commissioner of Sales Tax, which appeal was dismissed. Thereafter the respondents approached the Sales Tax Tribunal in second appeal. The Tribunal allowed the said appeal and set aside the order imposing penalty and directed the amount of penalty, if paid, to be refunded to the respondents.
4. Before the Tribunal three points were urged on behalf of the respondents. The first point was that an order of penalty could not be passed subsequent to the order of assessment but must be passed along with the order of assessment. This point was rejected by the Tribunal which relied upon the provisions of rule 36(2) of the Bombay Sales Tax Rules, 1959, which, inter alia, provides that an order imposing a penalty under sub-section (1), (2) or (4) of section 36 may be incorporated in the order of assessment relating to that period and held that the said sub-rule was directory and that under the said sub-rule the order imposing penalty might either be incorporated in the order of assessment or might be passed separately or subsequently. The next point argued before the Tribunal was that the order of penalty must be passed by the very same officer who had passed the order of assessment. This point found favour with the Tribunal. The third point argued before the Tribunal was that the Sales Tax Officer who had passed the order of assessment had elected not to impose a penalty upon the respondents but to prosecute them under section 63 of the 1959 Act and, therefore, it was not open either to him or to his successor-in-office thereafter to levy penalty upon the respondents. This point too found favour with the Tribunal.
5. Arising from the aforesaid judgment of the Tribunal, the following question has been referred to us :
'Whether, having regard to the facts and circumstances of the present case, the Tribunal was justified in law in coming to the conclusion that the officer succeeding the officer who passed the assessment order and who did not levy penalty under section 36(2)(a) of the Bombay Sales Tax Act, 1959, is not entitled to levy penalty under the aforesaid sub-section ?'
6. In order to appreciate the real nature of controversy between the parties it is necessary to set out the relevant provisions of the 1959 Act. The material provisions of section 36 of the 1959 Act, as in force at the relevant time, were as follows :
'36.(2) If, while assessing the amount of tax due from a dealer under section 33, it appears to the Commissioner that such dealer -
(a) has wilfully failed to apply for registration as required by section 22.........
the Commissioner may, after giving the dealer an opportunity of being heard, by order in writing, impose upon the dealer by way of penalty, in addition to any tax assessed under section 33, a sum not exceeding one and one-half times the amount of the tax.'
7. Sub-section (5) of section 36 of the 1959 Act provides as follows :
'36.(5) No prosecution for an offence under this Act shall be instituted in respect of the same facts on which a penalty has been imposed under this section.'
8. Section 63 of the 1959 Act is a section which provides for the offences which can be committed under the 1959 Act and the punishment in respect thereof. Clause (a) of sub-section (1) of section 63 makes it an offence to carry on business as a dealer without being registered in contravention of section 22. Under sub-section (1) of section 67 of the 1959 Act no court is to take cognizance of any offence punishable, inter alia, under section 63 except with the previous sanction of the Commissioner. Though the 1959 Act throughout uses the term 'the Commissioner' in respect of various acts to be done under the said Act, under section 20(6) of the 1959 Act the Commissioner has the power, subject to such conditions and restrictions as the State Government may by general or special order impose, by order in writing to delegate to Assistant Commissioners, Sales Tax Officers and other officers the exercise of the powers and the performance of the duties of the Commissioner under the said Act, or in respect of any particular matter or class of matters. By a Government notification in the Finance Department No. STA 1159(ii) published in the Bombay Government Gazette, Extraordinary, Part I, Central, Section, dated 1st January, 1960, the powers and duties of the Commissioner of Sales Tax, inter alia, under sections 33 and 36 of the 1959 Act were delegated to all Sales Tax Officers.
9. Turning now to the relevant provisions of sub-section (2) of section 36 of the 1959 Act, we are unable to find any provision in the said sub-section that an order of penalty must be imposed by the same officer who makes the order of assessment. Under the said sub-section if it appears to the Commissioner and, therefore, by virtue of the delegated powers mentioned above, to the Sales Tax Officer, while assessing the amount of tax due from a dealer, that such dealer has wilfully failed to apply for registration, he is required to give the dealer an opportunity of being heard. Thereafter under the said section the Commissioner (that is, by virtue of the delegated powers referred to above, the Sales Tax Officer), is to impose upon the dealer by way of penalty, in addition to any tax assessed under section 33, a sum not exceeding one and one-half times the amount of the tax. The reference in the said section to the Commissioner is to the particular office. It is not to a particular individual holding that office. Similarly, substituting the words 'Sales Tax Officer' for the word 'Commissioner' in the said sub-section, it would only refer to the office of the particular Sales Tax Officer having jurisdiction over the matter. It cannot and does not refer to the individual officer who has either issued the notice or assessed the amount of tax. Under the 1959 Act notices are to be given to a dealer for various purposes. For instance, a notice may be given to a dealer under sub-section (3) of section 33 where the Commissioner (that is, by virtue of the delegated powers referred to above, the Sales Tax Officer) is not satisfied that the returns furnished by a dealer in respect of any period are correct and complete and where the Sales Tax Officer thinks it necessary to require the presence of the dealer or the production of further evidence. Similarly, under sub-section (6) of section 33 if the Sales Tax Officer, exercising the powers of the Commissioner delegated to him under that sub-section, has reason to believe that a dealer is liable to pay tax in respect of any period but has failed to apply for registration within the prescribed time, the Sales Tax Officer is to issue a notice to the dealer, giving him a reasonable opportunity of being heard, and thereafter to assess, to the best of his judgment, the amount of tax, if any, due from such dealer in respect of such period and any period subsequent thereto. Were the argument that the same officer who made the assessment order must impose the penalty correct, by a logical extension thereof it would follow that the same officer who has given a reasonable opportunity to a dealer by issuing to him a notice to show cause why a best judgment assessment should not be made should himself complete the assessment and pass the assessment order. Such a construction, in our opinion, is unwarranted. If such a construction were correct, the results would be starting. If a Sales Tax Officer who has issued a notice giving a reasonable opportunity to a dealer to show cause why he should not be assessed were to be transferred or to die or were to retire, all assessment proceedings would come to an end. Similarly, in penalty proceedings if the matter why penalty should not be imposed on the dealer was being argued before the Sales Tax Officer who has made the assessment order and through some mischance that officer dies before the arguments are concluded, the result would be that the penalty proceedings would come to an end. The legislature could not have intended such absurd consequences. Realising that the construction which found favour with the Tribunal was wholly untenable, this point was not even sought to be argued before us by Mr. Sheth on behalf of the respondents who fairly conceded that he was not urging that an order imposing penalty cannot be passed by an officer who is the successor-in-office of the officer who has made the order of assessment. None the less, since the Tribunal has decided this point and has given its reasons for arriving at its decision that it must be the same officer who has made the assessment order who must levy the penalty, we have thought it necessary to set out our reasons why we consider the Tribunal to have been wrong in arriving at its decision rather than rest our decision on the concession of counsel.
10. The other point which found favour with the Tribunal, namely, that the Sales Tax Officer had exercised his discretion not to levy penalty, has again been decided on a misconception of the scheme of the Act. The admitted facts are that no penalty was levied in the assessment order in respect of the second period because the Sales Tax Officer felt that this was a case which justified a prosecution of the dealer. Accordingly he recommended to the Commissioner of Sales tax to grant a sanction for prosecution of the dealer. It appears that the Commissioner, however, felt that in this particular case sanction should not be granted. Had the Commissioner granted the sanction and a prosecution been initiated by reason of the provisions of section 36(5) and section 63(3) of the 1959 Act, no penalty could have been thereafter levied upon the dealer, but what these sub-sections refer to is the institution of a prosecution, not merely the desire of an officer, who has no power to institute a prosecution, to have a prosecution launched against a dealer. What happened, therefore, in this particular case was that the Sales Tax Officer came to the conclusion that the facts of the case were so gross that the mere levy of a penalty on the dealer was not sufficient punishment and, therefore, he should be subjected to the penalties of a criminal prosecution. He had, however, no power himself to institute or initiate any prosecution. He had to refer the matter to the Commissioner who was the authority to give the necessary sanction. If the Commissioner did not give the sanction, it cannot be said that one of the two alternatives open under section 36, namely, the levy of a penalty and the institution of a prosecution, had been availed of. Neither of the two remedies were at that time availed of. A notice to show cause why penalty should not have been imposed had been issued. It obviously had not been disposed of because of the absence of any reference to it in the assessment order taken in conjunction with the facts mentioned above. These facts clearly show that this notice was kept suspended until the Commissioner decided whether to give sanction to prosecute or not. The Commissioner having decided not to grant the sanction, it was open to the individual who was at that date holding office of the Sales Tax Officer (III), Enforcement Branch, Greater Bombay, to proceed to determine whether penalty should be levied on the dealer or not and if he came to the conclusion that penalty should be levied, to impose the penalty and decide what its quantum should be.
11. In the circumstances, we answer the question submitted to us in the negative and hold that it was competent to the officer succeeding the officer who passed the assessment order and, who did not levy any penalty in the said order, to levy penalty thereafter.
12. The respondents will pay to the applicant the costs of this reference.
13. Reference answered accordingly.