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M.G. Automobiles Vs. Commercial Tax Officer, Bellary and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKarnataka High Court
Decided On
Case NumberWrit Petition No. 1232 to 1235 of 1972
Judge
Reported in(1973)2MysLJ285; [1973]32STC336(Kar)
ActsMysore Sales Tax Act, 1957 -Sections 5, 13, 13(1), 13(2) and 13(2A); Mysore Sales Rules - Rules 13, 21(2) and 21(4); Constitution of India - Article 226
AppellantM.G. Automobiles
RespondentCommercial Tax Officer, Bellary and anr.
Appellant AdvocateK. Srinivasan, Adv.
Respondent AdvocateM.P. Chandrakantharaj Urs, Government Adv.
Excerpt:
.....of his failure to pay the tax due on the due dates, viz. if the assessee does not make payment along with his return of turnover he does not become a defaulter and, therefore, does not incur any penalty under section 13(2). the amendment of the rule stating that the penalty shall be computed from the due date of the returns and that such penalty amount shall be paid along with the tax due is clearly repugnant to section 13 of the act......of some quarters and no notices were issued in respect of the other quarters. in the cases where demand notices had been served, payments were made within the dates specified in form 3 notices; in the other cases also payments were made on different dates although there were no demand notices. 4. the first respondent made the demand for the payment of rs. 50,132.05 as penalty incurred under section 13(2) of the act in respect of the aforesaid four quarters. the petitioner made representations to the state government for waiver of penalty in exercise of the powers under section 13(2a); but the government turned down the request. thereafter the first respondent issued a memo dated 6th september, 1971, directing the petitioner to pay the said sum of rs. 50,132.05 towards the penalty.....
Judgment:
ORDER

Govinda Bhat, C.J.

1. These are four writ petitions preferred by an assessee under the Mysore Sales Tax Act, 1957 (hereinafter called the Act). The petitioner has challenged the right of the Commercial Tax Officer, Bellary (respondent No. 1), to collect penalty for belated payment of tax due for the years 1962-63, 1964-65, 1965-66 and 1966-67. The total amount of penalty claimed by the first respondent is Rs. 50,132.05. The sole contention of the petitioner is that he is not a defaulter in order to attract the penalty contemplated under sub-section (2) of section 13 of the Act. In order to appreciate the said contention, the relevant facts may be stated briefly and it is sufficient if we state the facts of the case in W.P. No. 1232 of 1972, which relates to the period from 1st April, 1965, to 31st January, 1966.

2. The petitioner assesses opted under the Act for filing quarterly returns. The quarterly returns are due within one month from the end of each quarter. For the first quarter ending on 30th June, 1965, the petitioner submitted his return on 30th July, 1965, and the tax computed on the turnover amounted to Rs. 36,939.18. The said amount of tax was paid on 3rd September, 1965. Before the payment of the tax on 3rd September, 1965, the first respondent who is the assessing authority issued a notice of demand in form No. 3 on 26th August, 1965. Under the said notice the payment was demanded within 21 days from the date of receipt of the notice. The payment made on 3rd September, 1965, for the first quarter of the year was within the time specified in form 3 notice.

3. For the remaining three quarters, returns were filed within the due dates but, along with the returns the tax computed on the admitted turnovers was not paid. Form 3 notices were issued in respect of some quarters and no notices were issued in respect of the other quarters. In the cases where demand notices had been served, payments were made within the dates specified in form 3 notices; in the other cases also payments were made on different dates although there were no demand notices.

4. The first respondent made the demand for the payment of Rs. 50,132.05 as penalty incurred under section 13(2) of the Act in respect of the aforesaid four quarters. The petitioner made representations to the State Government for waiver of penalty in exercise of the powers under section 13(2A); but the Government turned down the request. Thereafter the first respondent issued a memo dated 6th September, 1971, directing the petitioner to pay the said sum of Rs. 50,132.05 towards the penalty worked out under section 13(2) of the Act. The said memo further stated that necessary proceedings to recover the penalty will be taken if the petitioner failed to pay the penalty amount within seven days from the date of receipt of the memo. Aggrieved by the action of the first respondent, the petitioner has preferred the above writ petitions for relief under article 226 of the Constitution.

5. The question for decision is whether the petitioner became a defaulter within the meaning of the term under section 13(2) of the Act.

6. Section 13 of the Act provides for payment and recovery of tax. Sub-section (1) of section 13 states that the tax under the Act shall be paid in such manner and in such instalments, if any, and within such time, as may be prescribed. Sub-section (2) provides that if default is made in making payment in accordance with sub-section (1), the dealer is liable to pay penalty calculated in the manner provided in the said sub-section. It is clear from the language of sub-section (2) of section 13 that a dealer under the Act becomes liable to pay penalty only if default is made in making payment in accordance with sub-section (1). As already stated, the tax has to be paid in such manner and in such instalments, if any, and within such time, as may be prescribed. The rules made under the Act prescribe the manner in which the tax shall be paid. The relevant rules then in force is sub-rule (2) and sub-rule (4b) of rule 21, which read thus :

'Rule 21(2) : Subject to the provisions of sub-rule (1) the dealer shall submit, so as to reach the assessing authority within 30 days after the close of the quarter, a return in form 4 showing the total and taxable turnovers for the preceding quarter and the amount actually collected by him by way of tax during that quarter. Along with the return, he shall also submit a receipt from a Government treasury, or a receipt from the bill collector of the Commercial Tax Department for a sum not exceeding one hundred rupees or crossed cheque, crossed demand draft, or crossed postal order in favour of the assessing authority for the full amount of the tax payable for the quarter to which the return relates under section 5.

Rule 21(4b) : If the return in respect of any quarter is submitted without a receipt, crossed cheque, crossed demand draft or crossed postal order for the full amount of the tax payable, the assessing authority shall serve upon the dealer a notice in form 3 and the dealer shall pay the sum demanded together with the penalty due under sub-section (2) of section 13 calculated on the said sum from the day immediately following the date on which the return was due within the time and in the manner specified in the notice.'

7. Sub-rule (2) of rule 21 provides that a dealer shall submit his return so as to reach the assessing authority within 30 days after the close of the quarter showing the total and taxable turnovers for the preceding quarter and the amount actually collected by him by way of tax during that quarter. It further provides that a dealer shall along with the return submit a receipt from a Government treasury or a receipt from the bill collector of the department or crossed cheque or crossed demand draft or crossed postal order in favour of the assessing authority for the full amount of the tax payable for the quarter to which the return relates under section 5. In other words, the dealer is required to pay the admitted tax along with the return. Sub-rule (4b) provides that if the return is not accompanied by payment of the admitted tax, the assessing authority shall serve upon the dealer a notice in form 3 and that the dealer shall pay the sum demanded together with the penalty due under sub-section (2) of section 13 calculated on the said sum from the day immediately following the date on which the return was due within the time and in the manner specified in the notice. The demand of penalty amount in these writ petitions was made relying on the provisions of sub-rule (4b) of rule 21.

8. The contention of Sri K. Srinivasan, learned counsel for the petitioner, was that the provision is sub-rule (4b) to demand penalty together with the taxed amount calculated on the said sum from the date immediately following the date on which the return was due is ultra vires of the Act.

9. The question as to whether an assessee becomes a defaulter if he does not make payment of tax along with the return arose for decision before this court in Aswathiah & Brothers v. Commercial Tax Officer, VII Circle, Bangalore ([1963] 14 S.T.C. 467). In the said case, the assessee duly submitted his returns in time but they were not accompanied by payment of the admitted tax. Following rule 18 which is in pari materia with rule 21, notices of demand were served on the assessee on 17th November, 1960, requiring him to pay the balance tax due within 21 days from the date of service of the demand notices. The tax demanded was paid on 13th December, 1960. On 17th December, 1960, the Commercial Tax Officer called upon the assessee to pay the penalty said to have been incurred as a result of his failure to pay the tax due on the due dates, viz., the dates on which the returns were due. This court held that reading rule 18 as a whole, an option was given to the assessee to pay the tax admittedly due from him either along with the returns or within the time specified in the notices of demand. It was further held that notice under rule 18 is mandatory and not directory and that the assessee becomes a defaulter only if he does not comply with the terms of that notice. In other words, an assessee does not become a defaulter if he does not make payment of the tax on the due dates of the returns but, becomes a defaulter only when he does not make payment within the time allowed by the notice contemplated under rule 18. After the said judgment was rendered, rule 13 which related to yearly returns and rule 21 which relates to quarterly returns were amended. Rule 21(4b), as amended, has been already set out in the earlier part of this judgment. It is relevant to state that there has been no amendment of section 13(1) or 13(2) of the Act after the said decision.

10. According to the ratio of the decision in Aswathiah's case ([1963] 14 S.T.C. 467) notice in form 3 under rule 21 is mandatory and a dealer becomes a defaulter only where he does not comply with the terms of that notice. If the assessee does not make payment along with his return of turnover he does not become a defaulter and, therefore, does not incur any penalty under section 13(2). The amendment of the rule stating that the penalty shall be computed from the due date of the returns and that such penalty amount shall be paid along with the tax due is clearly repugnant to section 13 of the Act. When no penalty is incurred under the Act, the rule made under the Act cannot levy the penalty. It is not disputed that the petitioner has paid the tax demanded within the time specified in form 3 notices and, therefore, he did not become a defaulter. In respect of the quarters for which no demand notices were issued in form 3, the petitioner did not become a defaulter. When the petitioner was not a defaulter at all he does not incur penalty under sub-section (2) of section 13 of the Act notwithstanding the provisions under rule 21(4b) empowering the exaction of such penalty. In our opinion, the words 'together with the penalty due under sub-section (2) of section 13 calculated on the said sum from the day immediately following the date on which the return was due' in rule 21(4b) are ultra vires of the Act. Since the said rule has now been repealed, it is not necessary to strike down that portion of the rule.

11. For the reasons stated above, the petitioner is entitled to succeed in these writ petitions and, accordingly, we issue a writ in the nature of mandamus directing the first respondent to forbear from enforcing payment of the penalty claimed as per exhibit 3 dated 6th September, 1971. It is ordered accordingly.

12. The petitioner is entitled to his costs. Advocate's fee Rs. 100 (one set).

13. Ordered accordingly.


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