Govinda Bhat, C.J.
1. This is a batch of 14 writ petitions arising under the Mysore Sales Tax Act, 1957, hereinafter called the Act. The question presented for decision is whether the making of an order levying penalty after affording an opportunity to a defaulting assessee is a prerequisite condition for initiation of proceedings for recovery of the penalty incurred under section 13(2) of the Act.
2. In order to appreciate the contentions urged on behalf of the petitioners, it is necessary to set out briefly the relevant facts. The petitioners are dealers under the Act. Assessments were made and demand notices were served on them on different dates. The petitioners did not pay the taxes demanded within the time allowed and, consequently, they become defaulters. The Commercial Tax Officer who had made the assessments wrote letters to the petitioners drawing their attention to the provisions of section 13(2) of the Act and to pay the penalty incurred. The letters further stated that if the penalty amounts were not paid within the dates specified, coercive steps will be taken for recovery of the penalty amounts. At that stage, the petitioners preferred the above writ petitions seeking relief under article 226 of the Constitution.
Section 13, which is the relevant provision, reads thus :
'13. Payment and recovery of tax. - (1) The tax under this Act shall be paid in such manner and in such instalments, if any, and within such time, as may be prescribed.
(2) If default is made in making payment in accordance with sub-section (1),
(i) the whole of the amount outstanding on the date of default shall become immediately due and shall be a charge on the properties of the person or persons liable to pay the tax under this Act; and
(ii) the person or persons liable to pay the tax under this Act shall pay a penalty equal to -
(a) one per cent of the amount of tax remaining unpaid for each month for the first three months, after the expiry of the time prescribed under sub-section (1) and
(b) two and one-half per cent of such amount for each month subsequent to the first three months as aforesaid.'
Explanation. - (Omitted as unnecessary.)
'(2A) Notwithstanding anything contained in sub-section (2), the State Government may, subject to such conditions as may be prescribed, remit the whole or any part of the penalty payable in respect of any period by any person or class of persons.' [Sub-sections (3) and (4) omitted as unnecessary.]
3. The argument of Sri K. Srinivasan, the learned counsel for the petitioners was that the respondent - Commercial tax Officer - did not pass any order imposing penalty under section 13(2) of the Act and that he did not grant to the petitioners any opportunity of being heard before demanding the penalty amounts. Therefore, the learned counsel urged that the respondent is not entitled to take coercive action for recovery of the penalty amounts.
4. The learned counsel conceded that there is no express provision made in the Act requiring the Commercial Tax Officer to make an order imposing penalty; but, he argued that by implication it has to be inferred that the Commercial Tax Officer is required to make an order and if he is required to make an order, the rules of natural justice require that the defaulting assessee should be heard. According to Sri Srinivasan, the decision of the Supreme Court in Hindustan Steel Limited v. The State of Orissa : 83ITR26(SC) lends support to his contention. That was a case which arose under the Orissa Sales Tax Act, which provided for levy of penalty on dealers for default in obtaining registration as dealers. In that case, the Supreme Court stated :
'Under the Act penalty may be imposed for failure to register as a dealer : section 9(1) read with section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of desecration of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.'
Section 9(1) and 25(1) of the Orissa Act with which the Supreme Court was concerned, read thus :
'9. Registration of dealers. - (1) No dealer shall, while being liable under section 4 to pay tax under this Act, carry on business as a dealer unless he has been registered under this Act and possesses a registration certificate.'
'25. Offenses and penalties. - (1) Whoever -
(a) carries on business as a dealer in contravention of sub-section (1) of section 9 ........... shall be punishable with imprisonment of either description which may extend to six months or with fine not exceeding one thousand rupees or with both ........'
5. It will be seen from the above provisions that the penalty has to be imposed by the court on conviction and further, discretion is given to the court to determine the quantum of fine or the term of imprisonment. The maximum fine and the maximum terms of imprisonment are provided by the statute. Where the discretion is given to an authority to fix the amount of fine, it necessarily follows that there should be an order imposing penalty and it also follows that before making such an order the alleged defaulter should be heard in the matter.
6. The Act gives no discretion to authorities under the Act to waive or reduce the penalty. Obligation is cast on the defaulting assessee to make payment of the penalty computed in the manner provided by sub-section (2) of section 13. When no discretion has been left to the respondent to waive or reduce the penalty, no purpose will be served by affording to the petitioners the opportunity of being heard. According to the argument of Sri Srinivasan, opportunity ought to be afforded to show that there was reasonable excuse for non-payment of the tax assessed and that penalty under section 13(2) is incurred only in case where non-payment of tax is without reasonable excuse. This argument has been met by Judge Cooley, in his Treatise on Taxation, Volume 3, page 2532, thus :
'Excuses for non-payment. - It is no excuse for non-payment that the owner is under personal disability. Thus, insanity is no excuse for non-payment. So it is no excuse for failure to pay a tax in full that the collector, without authority, and on his motion, has remitted a part of the tax, or that the person taxed is financially embarrassed, or that the proceeds of the tax are to be devoted to an unlawful purpose.'
7. The same learned author has stated at page 2535 that 'in tax laws penalties are imposed for mere delinquencies, in order to hasten payment, and they are also imposed as a punishment for frauds, evasions, and neglect of duty.'
8. If financial embarrassment or personal disability affords no excuse for non-payment where payment of penalty is fixed by the statute, it cannot be contended that the penalty is not incurred when reasonable excuse for non-payment is shown by the defaulter. To afford relief in heard cases like insanity, disability or financial embarrassment, etc., the statute has made express provision by sub-section (2A) empowering the State Government to waive or reduce the amount of penalty, but that power is not authority constituted under the Act.
9. Our view is also supported by the decision of this court in Sha Jayantilal v. Additional Commercial Tax Officer ((1966) 2 Mys. L.J. 614 at 616). There the contention on behalf of the assessee was that the default, if any, was not a wilful default and, therefore, the assessee had not incurred any liability to pay penalty. Hegde, J. (as he then was), who delivered the judgment of this court stated :
'What section 13(2) of the Act provides is that whenever an assessee makes default in making payment in accordance with sub-section (1), he is statutorily liable to pay the penalty prescribed therein. In a case like the one before us, the question whether the assessee had defaulted wilfully or not does not arise for consideration. What is relevant is the factum of the default and not the reason for the same.'
10. If the penalty incurred under section 13(2) of the Act is not paid, the authorities constituted under the Act have to take recovery proceedings in the manner provided under the Act. When such proceedings are initiated against the alleged defaulting assessee, it is open to him to contend that he is not a defaulter or that the amount of penalty sought to be recovered is excessive. If the assessee contends that he is not a defaulter or that the amount claimed is excessive, then the court of the Recovery Officer has to decide whether penalty has been incurred or that the amount claimed is correct. In that view, all the contentions urged by the learned counsel for the petitioners fail. Consequently, these writ petitions are dismissed with costs. Advocate's fee Rs. 100. One set.
11. Sri Chandrakantharaj Urs, the learned High Court Government Advocate, who appeared for the respondent is permitted to file his memo of appearance in W.P. Nos. 23 and 24 of 1973 within two weeks from today.
12. Petitions dismissed.