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Automotive Refrigeration Co. Vs. the State of Maharashtra - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMumbai High Court
Decided On
Case NumberSales Tax Reference No. 62 of 1979 in Reference Application No. 118 of 1977
Judge
Reported in[1985]60STC59(Bom)
Acts Bombay Sales Tax Act, 1959 - Sections 32, 33, 33(3), 36, 36(2), 38 and 61(1)
AppellantAutomotive Refrigeration Co.
RespondentThe State of Maharashtra
Excerpt:
.....but before passing of assessment order can be included in expression 'the total amount of tax paid by dealer for any year' used in explanation to section 36 (2) (c) - only point of time to which reference has been made in explanation of section 36 (2) (c) is the point of time when tax is assessed or reassessed or found due in appeal or revision - held, phrase mean total amount of tax paid till order of assessment of made. - - , whose knowledge in the field of taxation was well recognised, stated in cape brandy syndicate v. inland revenue commissioners [1921] 1 kb 64 at follows :in a taxing act one has to look merely at what is clearly said. this is a well-accepted rule of construction recognised by this court in several of its decisions. jetly fairly stated that he had no..........ltd. : [1973]88itr192(sc) . according to him, however, the interpretation put by him upon the phrase 'total amount of tax paid' was the only reasonable interpretation which could be given to that phrase in the said explanation. we are unable to accept this contention. in our view, on a plain reading of the language of the said explanation, the only meaning which can be given to the said phrase is 'the total amount of tax paid till the date of assessment or reassessment or order in appeal or revision, as the case may be'. to interpret the said phrase as suggested by mr. jetly, would be to read after the word 'paid' in the said phrase the words 'within the time permitted by the bombay sales tax act, 1959, and the bombay sales tax rules, 1959', and it is surely not permissible for us.....
Judgment:

Kania, J.

1. This is a reference on a case stated by the Sales Tax Tribunal under section 61(1) of the Bombay Sales Tax Act, 1959 (referred to hereinafter as 'the said Act'). The question submitted to us for determination in this reference is as follows :

'Whether on the facts and in the circumstances of the case the Tribunal was correct in holding that the expression 'the total amount of tax paid by the dealer for any year' used in the explanation to section 36(2)(c) of the Bombay Sales Tax Act, 1959 did not include any amount paid by an assessee after filing of the returns but before passing of the assessment order ?'

2. The facts giving rise to the said question are as follows :

The applicant-firm, a registered dealer under the said Act, while filing its returns for the period 1st April, 1970 to 31st March, 1971 had claimed resales to the extent of Rs. 3,99,227. No tax was paid along with the returns. In the registers kept by the dealer, the resale quantum was shown at Rs. 2,93,268. After the commencement of the assessment proceedings, but before the passing of the order of assessment by the Sales Tax Officer, the Applicant-assessee paid an amount of Rs. 5,934.25 towards sales tax for the aforesaid period. The payment of this amount was made on 4th July, 1973. As per the order of assessment which was passed on 17th July, 1973 taxes due were determined at Rs. 6,034 and after giving credit for the aforesaid amount of Rs. 5,934.25 paid on 4th July, 1973 the balance tax due was determined at Rs. 99.77 (this is admitted by both counsel as the correct figure, although there is a slight error in this connection in the statement of facts). The Sales Tax Officer issued a notice dated 10th August, 1973 under section 36(2)(c) of the Act calling upon the dealer to show cause why a penalty under the explanation to the said section should not be imposed and after hearing the dealer, the Sales Tax Officer imposed a penalty of Rs. 2,604 under the explanation to section 36(2)(c) of the Act by his order dated 16th September, 1974. The appeal preferred by the dealer to the Assistant Commissioner against the order imposing penalty was dismissed. The dealer then preferred a second appeal to the Sales Tax Tribunal. The contention of the dealer before the Tribunal was that the amount of Rs. 5,934.25 paid on 4th July, 1973 formed part of the total amount of tax paid by the dealer for the period in question, and if that amount was taken into consideration, the difference between the tax assessed and the tax paid would be less than 20 per cent. and the first explanation to section 36(2)(c) of the said Act was not attracted. It may be mentioned here that the penalty was imposed on the basis of the presumption provided for under the said explanation which we propose to discuss a little later. This contention was rejected by the Tribunal. The question set out above arises from this decision of the Tribunal.

3. Before going into the contention of the respective counsel, it would not be out of place to refer to the relevant provisions of the said Act as they stood at the material time. Section 32 of the said Act deals with the filing of returns and provides that every registered dealer shall furnish returns for such period by such date and to such authority as may be prescribed. Section 33 deals with assessment. Section 38 of the said Act provides for payment to tax, deferred payment of tax and so on. Sub-section (2) of section 38 provides inter alia that a registered dealer furnishing returns as required by sub-section (1) of section 32, shall first pay into a Government treasury, in the manner prescribed, the whole of the amount of tax due from him according to such return. Rule 22 of the Bombay Sales Tax Rules, 1959 provides for the submission of returns and the form in which the returns have to be furnished. The form in which the returns had to be submitted in Form N-18, and it is common ground that a chalan showing the payment of the tax as per the return had to be submitted along with the return. Rule 29 provides for the time for payment of taxes and the manner in which the payment has to be made. Section 36 of the said Act deals with the imposition of penalty in certain cases and bar to prosecution. The relevant portion of sub-section (2) of section 36, as it stood at the material time provided as follows :

'If, while assessing or reassessing the amount of tax due from a dealer under any provisions of this Act or while passing any order in any appeal or revision proceedings, it appears to the Commissioner that such dealer -

(a) ............

(b) ............

(c) had concealed the particulars of any transaction or knowingly furnished inaccurate particulars of any transaction liable to tax,

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 or reassessed or found due in the appeal or revision proceeding, as the case may be, a sum not exceeding one and one-half times the amount of the tax.

Explanation. - (1) Where a dealer furnishing returns has been assessed by the Commissioner under sub-section (3) or (4) of section 33 ........ and the total amount of tax paid by the dealer for any year is found to be less than eighty per cent. of the amount of tax as so assessed or reassessed or found due in appeal or revision, then, for the purpose of clause (c), he shall be deemed to have concealed the turnover, or knowingly furnished inaccurate turnover liable to tax, unless he process to the satisfaction of the Commissioner that the payment of a lesser amount of tax was not due to gross or wilful neglect on his part.'

(Rest of the section is not material for the purpose of this case).

In the case before us, the dealer had admittedly not paid any amount of tax with the return for the relevant period. The submission of Mr. Gaitonde, learned counsel for the dealer, is that, although no tax was paid along with the return, the amount of Rs. 5,934.25 was paid on account of tax on 4th July, 1973 before the order of assessment under section 33(3) of the Act was made, on 17th July, 1973 and hence, in calculating the difference between the amount of tax assessed and the amount of tax paid, this payment must be taken into account. If this payment is taken into account, the result is that the amount of tax paid by the dealer for the relevant period is not less than eighty per cent. of the amount of tax assessed by the Sales Tax Officer and the presumption raised by exemption (1) would not come into effect. It was submitted by him that the phrase 'the total amount of tax paid by the dealer' used in explanation (1) denotes the aggregate amount paid as tax or on account of tax by the dealer up to the time when the order of assessment is made. It was on the other hand submitted by Mr. Jetly, learned counsel for the State, that by the phrase 'the total amount of tax paid' used in the explanation what was meant was the total amount of tax paid in accordance with the said Act meaning thereby the total amount paid as tax or on account of tax within the time provided by that Act. It was urged by him that if this phrase were interpreted in the manner suggested by Mr. Gaitonde, an assessed who had not paid any tax along with his return or paid less than eighty per cent. of the tax assessed might escape the penalty under sub-section (2) of section 36 by making payment of a further amount before the order for assessment was passed. It was urged by him that a dealer would normally know as to what was the amount of tax which the Sales Tax Officer would assess, and before the actual order for assessment was made, he could make a payment of an appropriate amount on account of tax so as to prevent the tax paid by him being found less than eighty per cent. of the tax assessed. This, it was urged, would render explanation (1) to section 36(2)(c) meaningless. It is the correctness of these contentions which we have to examine.

4. In determining the question raised, a few considerations have to be borne in mind. The first is that we are dealing with a taxing statute. The second is that section 36 does not deal with the assessment of tax, but with the levy of penalty. Explanation (1) with which we are primarily concerned does not by itself directly deal with the levy of penalty, but merely raises a presumption in certain circumstances. The expression in the said explanation which we have to consider is 'the total amount of tax paid'. On a plain and grammatical reading of the said phrase in the context in which it is used, it would mean the total amount of tax paid up to a certain of time. The only point of time to which reference has been made in the said explanation (1) is the point of time when tax is assessed or reassessed or found due in appeal or revision. The phrase must then mean the total amount of tax paid till that time. Thus, in the present case, that phrase would mean the total amount of tax paid by the dealer up to the time when the order for assessment was made. It is true, as suggested by Mr. Jetly that in some cases, a dealer, in the course of assessment proceedings, might realise that he was likely to be assessed in a particular amount and make a payment of some amount as tax before the order for assessment is made with a view to avoid the presumption, as provided under explanation (1) being raised. The question is whether, to prevent such a dealer from escaping the consequences of the presumption being raised against him, it would be proper to stretch the plain words of the said explanation. In this regard, we may refer to some of the decisions cited before us.

5. The late Rowlatt, J., whose knowledge in the field of taxation was well recognised, stated in Cape Brandy Syndicate v. Inland Revenue Commissioners [1921] 1 KB 64 at follows :

'In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.'

This definition has been quoted with approval in cases too innumerable to be mentioned, including decisions of the Supreme Court and various High Courts. Just to mention one such decision, the said dictum was quoted with approval by a Division Bench of this Court in Pokhardas Meghraj v. State of Bombay [1957] 8 STC 758.

6. In Commissioner of Income-tax, West Bengal v. Vegetable Products Ltd. : [1973]88ITR192(SC) a Bench of the Supreme Court comprising three learned Judges observed, in connection with section 271(1)(a)(i) of the Income-tax Act, 1961 as follows :

'There is no doubt that the acceptance of one or the other interpretation sought to be placed on section 271(1)(a)(i) by the parties would lead to some inconvenient result, but the duty of the Court is to read the section, understand its language and give effect to the same. If the language is plain, the fact that the consequence of giving effect to it may lead to some absurd result is not a factor to be taken into account in interpreting a provision. It is for the legislature to step in and remove the absurdity.'

The Supreme Court has gone on to observe as follows :

'........ On the other hand, if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. This is a well-accepted rule of construction recognised by this Court in several of its decisions. Hence, all that we have to see is, what is the true effect of the language employed in section 27(1)(a)(i). If we find that language to be ambiguous or capable of more meanings than one, then we have to adopt that interpretation which favours the assessee, more particularly so because the provision relates to imposition of penalty.'

7. Mr. Jetly fairly stated that he had no quarrel with the well-accepted principles reproduced by the Supreme Court in the case of Commissioner of Income-tax, West Bengal v. Vegetable Products Ltd. : [1973]88ITR192(SC) . According to him, however, the interpretation put by him upon the phrase 'total amount of tax paid' was the only reasonable interpretation which could be given to that phrase in the said explanation. We are unable to accept this contention. In our view, on a plain reading of the language of the said explanation, the only meaning which can be given to the said phrase is 'the total amount of tax paid till the date of assessment or reassessment or order in appeal or revision, as the case may be'. To interpret the said phrase as suggested by Mr. Jetly, would be to read after the word 'paid' in the said phrase the words 'within the time permitted by the Bombay Sales Tax Act, 1959, and the Bombay Sales Tax Rules, 1959', and it is surely not permissible for us to do so in a case like this. We fail to see how if we interpret the explanation as we have put out earlier and as warranted by its plain language, the explanation would become meaningless. The presumption provided in the explanation would still be raised where a dealer up to the date of assessment fails to pay a sum or sums as tax amounting to eighty per cent. of the tax assessed. Really speaking, what Mr. Jetly wants us to do is to stretch the meaning of the said phrase in the explanation so as to bring within the net of the explanation the case of a clever dealer who anticipates as to what would be the tax assessed and makes payment of some tax before the order of assessment is passed with a view to avoid the raising of the presumption. This, surely we are not entitled to do. It must also be appreciated that, if the said phrase is interpreted as indicated by us, it is not as if a dealer who makes a payment of tax after the time provided under the Act but before the order of assessment will altogether escape the penalty. All that would happen is that no presumption would be raised against him as set out in the said explanation. It would still be open to the department to prove that the dealer had concealed particulars of his taxable turnover or knowingly furnished inaccurate particulars of his turnover liable to tax and on this being established, the dealer would be liable to levy of penalty. We must observe that it is curious that a presumption of concealment is sought to be raised, not on the basis of the difference between the turnover disclosed in the return and the turnover actually determined on assessment, but on the difference between the tax paid before assessment and the tax assessed.

8. We may now refer to one or two other cases which were cited before us. In Commissioner of Sales Tax v. Empico Traders [1981] 47 STC 426 a Division Bench of this Court held that, for the purpose of levying penalty under section 36(2)(c) of the Bombay Sales Tax Act, 1959 the expression 'tax paid' appearing in explanation (1) to that section could not be restricted to only the amount of tax paid by the dealer into the Government treasury but would also include the amount of set-off granted to the dealer under rule 43 of the Bombay Sales Tax Rules, 1959. It is true that the amount of set-off would represent an amount paid by the registered dealer to the person from whom he had purchased goods during the period under assessment, but nevertheless the fact remains, the expression 'tax paid' has been interpreted by the Division Bench so as to include therein the amount of set-off granted to the dealer. This might suggest that the phrase 'the total amount of tax paid' cannot be restricted to the amount of tax paid to the Government treasury within the prescribed time, altogether the question before the Division Bench was deferent from the question with which we are concerned. We may clarify that as the question in that case was different, we have not relied on this decision in coming to our conclusion in this case. In the abovesaid judgment, the Division Bench has pointed out what the explanation does is to raise a presumption against the dealer and throws upon him the burden of satisfying the assessing authority that the payment of lesser amount of tax by him was not due to gross or wilful neglect on his part.

9. We may next refer to a decision of a Division Bench of the Gujarat High Court in State of Gujarat v. Sakurbhai Abedbhai [1975] 35 STC 57. The provision which came up for interpretation in that case was sub-section (3A) of section 36 of the Bombay Sales Tax Act, 1959 as amended by Gujarat Act IX of 1967. In that case, it was held that the penalty contemplated by the third category of cases covered by sub-section (3A) of section 36 of the Bombay Sales Tax Act, 1969 as amended by Gujarat Act IX of 1967 was attracted only if the assessee failed to make the required payment prior to the actual assessment of his total turnover. In that case, the provisions of sub-section (3A) of section 36, as amended, were quite clear and not identical with the provisions of the explanation before us. The relevant phrase used in the said sub-section was 'exceeds the sum already paid by the dealer in respect of such period prior to such assessment or reassessment by more than twenty per cent .........'. In view of this, we do not propose to discuss this case in any detail.

10. In the premises, the question referred to us is answered in the negative and in favour of the dealer.

11. The respondent to pay to the applicant the costs of the reference. The amount of Rs. 100 deposited by the applicant with the Sales Tax Tribunal to be refunded to the applicant.


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