Smt. Sujata V. Manohar, J.
1. M/s. Toshniwal Brothers Private Limited, who are the assessees are holders of a registration certificate under the Bombay Sales Tax Act, 1959 as also under the Central Sales Tax Act, 1956. For the calendar year 1963, they were assessed to Central sales tax. As per the assessment order they were required to pay an additional amount of Rs. 30,637.88. In respect of this additional amount of sales tax a demand notice was served on the assessees under section 9, sub-section (2), of the Central Sales Tax Act read with section 38(4) of the Bombay Sales Tax Act. The petitioners preferred an appeal from this order. The Assistant Commissioner of Sales Tax by his order dated 24th December, 1983 admitted the appeal on part payment of Rs. 6,700 instead of payment of the full amount of additional tax. He also granted stay of recovery proceedings in respect of the said sales tax dues. The said order was to be operative till the date of the decision of the appeal petition or the date on which the order was vacated, whichever was earlier. A copy of the said order was also forwarded to the Collector of Bombay with a request to stay the recovery proceedings.
2. For the calendar year 1964 an assessment order was made in respect of the assessees under the Central Sales Tax Act, 1956. By virtue of this order the assessees were held entitled to a refund of Rs. 20,038. The Sales Tax Officer by his order dated 17th July, 1972 passed under section 9(2) of the Central Sales Tax act read with section 43 of the Bombay Sales Tax Act, 1959 directed that the refund of Rs. 20,038 arising out of the assessment for the calendar year 1964 should be adjusted against the demand for the additional tax of Rs. 30,637.88 for the calendar year 1963 for which a demand notice was already served.
3. This order is the subject-matter of challenge here. The assessees filed a first appeal against the adjustment order which was dismissed by the Assistant Commissioner of Sales Tax by his order dated 11th January, 1974. A second appeal was filed by the assessee before the Tribunal. The Tribunal held that the order of adjustment was not justified in law and set aside the said order.
4. In respect of the order passed by the Tribunal the following two questions have been referred to us for the determination under section 61(1) of the Bombay Sales Tax Act, 1959 :
'(a) Whether the Tribunal was correct in law in holding that the admission memo cum stay order passed by the Appellate Assistant Commissioner was an order passed under the proviso to section 38(4) and not the one passed in exercise of the powers under section 55(5) of the Bombay Sales Tax Act, 1959 ?
(b) Whether the Tribunal was correct in law in holding that the amount of tax covered by stay order was not 'amount due' within the meaning of the proviso to section 43 of the Bombay Sales Tax Act, 1959 ?'
5. In order to answer these questions it is necessary to look at the provisions of section 55, section 38 and section 43 of the Bombay Sales Tax Act, 1959 as they were in force at the relevant time. Section 55(5) of the Bombay Sales Tax Act, 1959 deals with appeals. The relevant provisions of section 55(5) at the relevant time were as follows :
'No appeal, against an order of assessment with or without penalty ........... shall ordinarily be entertained by an appellate authority, unless such appeal is accompanied by satisfactory proof of the payment of the tax with or without penalty .......... in respect of which the appeal has been preferred :
Provided that, an appellate authority may if it thinks fit, for reasons to be recorded in writing, entertain an appeal again such order -
(a) without payment of the tax .............. on the appellant furnishing in the prescribed manner security for such amount as it may direct, or
(b) on proof of payment of such smaller sum, with or without security for such amount of tax, penalty or sum forfeited which remains unpaid, as it may direct.'
Section 55, sub-section (6), at the relevant time was as follows :
'55. (6) Subject to such rules of procedure as may be prescribed, an appellate authority may pass such order on appeal as it deems just and proper.'
Section 38 provides for payment of tax and deferred payment of tax. The relevant portions of section 38(1) and (4) at the material time were as follows :
'38. (1) Tax shall be paid in the manner herein provided, and at such intervals as may be prescribed.
(4)(a) The amount of tax -
(ii) assessed or reassessed for any period under section 33 or section 35 less any sum already paid by the dealer in respect of such period ............
shall be paid by the dealer or the person liable therefor into a Government treasury, by such date as may be specified in a notice issued by the Commissioner for this purpose, being a date not earlier than thirty days from the date of service of the notice :
Provided that, the Commissioner or an appellate authority in an appeal under section 55 may, in respect of any particular dealer or person, and for reasons to be recorded in writing, extend the date of payment, or allow him to pay the tax or penalty (if any) or the sum forfeited, by instalments.'
Section 43 deals with refund of excess payments. Section 43 of the relevant time was as follows :
'The Commissioner shall refund to a person the amount of tax and penalty (if any) paid by such person in excess of the amount due from him. The refund may be either by case payment or, at the option of the person by deduction of such excess from the amount of tax and penalty due in respect of any other period :
Provided that, the Commissioner shall first apply such excess towards the recovery of any amount due in respect of which a notice under sub-section (4) of section 38 has been issued, and shall then refund the balance (if any).'
6. The provision with which we are directly concerned is the provision for refund under section 43. The proviso to section 43 requires the Commissioner to adjust the excess amount of tax toward the recovery of an amount of tax for which a notice is issued under section 38. In view of the language used in the proviso to section 43 it is clear that such adjustment is towards recovery of an amount of tax due. We are not therefore required to consider whether an adjustment of this nature can be considered as a mode of recovery or not. This section in terms states that such adjustment is by way of recovery of tax. If this is so, then such adjustment cannot be made when recovery of tax is stayed. The order of stay dated 24th December, 1968 requires the authorities to stay the recovery proceedings in respect of the sales tax dues of the assessees for the calendar year 1963. It was submitted by Mr. Jetly, learned counsel for the department, that stay of recovery proceedings only refers to stay of any coercive steps taken by the department for the recovery of tax from the assessee. The order does not prevent the department from withholding a refund. This submission cannot be accepted because there is nothing in the stay order which would indicate that only 'coercive' proceedings for recovery are to be stayed. Presumably by 'coercive' proceedings, Mr. Jetly is referring to proceedings taken by the Collector of Bombay for the recovery of tax. This is only one method of recovering tax. Under section 43 tax can also be recovered by withholding any refund of excess payment made by the assessee. When recovery proceedings are stayed, such withholding of refund, which is by way of recovery of tax, is also prevented. The order of adjustment, therefore, in the present case is bad and the Tribunal was correct in allowing the appeal of the assessee.
7. It is not the contention of the department that the stay order is without jurisdiction. But there is a dispute about the section under which the stay order is passed. The appellate authority has the power, under section 55(5) to entertain an appeal without payment of the disputed tax or on a lesser payment. Under section 55(6) it can pass such orders on appeal as it deems just and proper. Under the proviso to section 38(4), the appellate authority may extend the date for payment of tax. Now, under the proviso to section 43, a refund of tax can be adjusted against tax due, for which a notice for payment is issued under section 38(4). The department therefore contends that an order counter-mending payment must be made under the proviso to section 38(4). This alone will prevent the department from adjusting the refund as enjoined under the proviso to section 43.
8. This entire submission loses its force because of the view we have taken of the provisions of section 43. Looking to the language of section 43 it is immaterial whether the said order is to be considered as an order under section 55, sub-section (5), or under section 38, sub-section (4). Once the recovery is stayed, adjustment cannot be made under section 43. Anyway, section 55, sub-section (5), does not deal with the power to grant a stay of recovery. Hence the portion of the order which grants a stay is no under section 55(5). The portion, however, of the order permitting the assessee to file an appeal on payment of Rs. 6,700 is under section 55(5). Section 55, sub-section (6), on the other hand however, (as it then stood) gives to an appellate authority power to pass such orders on appeal as it deems just and proper. There is no reason to restrict this power, which is conferred in very wide terms, to only final orders. And it is therefore possible to view the stay order as an order passed under section 55(6).
9. Under section 38, sub-section (4), however, the appellate authority has an express power to extend the date of payment of tax or allow the assessee to pay the tax by instalments. By staying the recovery of tax due till the disposal of the appeal, the appellate authority has, in effect, extended the date of payment of tax. Hence the stay order is an order under section 38(4). It is conceded by Mr. Jetly that had the order of stay been an order under section 38(4), then the power of adjustment under section 43 could not have been exercised by the department. In any view of the matter, where the stay order is concerned, whether it is an order under section 55 or under section 38, the effect of the order remains the same, viz., that recovery of tax dues for the calendar year 1963 has been stayed. In view of the stay of recovery it is not possible for the department to adjust the excess payment of tax for the calendar year 1964 towards the recovery of tax dues for 1963.
10. It is also submitted by Mr. Jetly that the amount of tax which is recovery by the said order is an 'amount due' within the meaning of the proviso to section 43 of the Bombay Sales Tax Act, 1959 and hence an adjustment can be made of the excess tax for 1964 against the tax amount due in respect of the calendar year 1963. Mr. Jetly is right when he contends that the amount of tax for 1963 remains an amount due although its recovery is stayed under the stay order. The liability to pay the amount is not affected by virtue of the stay order and hence it remains as an amount due. Nevertheless since the recovery has been stayed the department cannot resort to adjustment under section 43.
11. The questions as framed do not bring out the true nature of the controversy between the parties. In view of what we have held earlier the questions are answered as follows :
Question No. 1 :
The order of stay can be looked upon as an order passed under section 38, sub-section (4).
Question No. 2 :
We need not answer this question in view of our finding that even if the tax dues for 1963 are looked upon as an 'amount due', they cannot be adjusted against the refund for 1964 under the proviso to section 43 in view of the stay of recovery proceedings.
12. In the result the assessee succeeds in the reference. The applicants will pay to the respondents costs of the reference.