1. In this petition, the petitioner challenges the validity of the penalty levied on him under section 13 of the Mysore Sales Tax Act, 1957.
2. The petitioner is a dealer under the Mysore Sales Tax Act, 1957. For our present purpose we are concerned with the assessments due for the financial years 1958-59 and 1959-60. Though the assessee duly submitted his returns in time, the assessment orders in respect of the above two years were made only on 8th October, 1960. The demand notices were served on the assessee on 7th November, 1960, requiring him to pay the balance tax due from him within 21 days from the date of the service of the demand notices, which means he was required to pay the balance amount due from him on or before the 28th November, 1960. The amount demanded was paid on 13th December, 1960. Thereafter, on 17th December, 1960, the respondent purporting to act under section 13, called upon the assessee to pay the penalty said to have accrued as a result of his failure to pay the tax due on the due dates. At this stage, it may be mentioned that the petitioner had sent certain sums of money to the Commercial Tax Officer even before he submitted his returns. The amounts so sent were not sufficient to cover tax on admitted turnover. The petitioner's returns have been accepted by the respondent. He was only asked to make up the balance tax due according to his own returns. But the question is whether the petitioner has incurred any penalty under section 13 before 28th November, 1960. Section 13 reads as follows :
'(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 ......'
3. If the default is considered to have taken place only on 28th November, 1960, then undoubtedly the petitioner is not liable to pay any penalty till that date. As mentioned earlier, the order of assessment in this case was made on 8th October, 1960, and as per the demand notices the petitioner was required to pay the balance tax due on or before 28th November, 1960. But the learned Government Pleader contends that the petitioner became a defaulter within the meaning of the expression in section 13 in view of the requirements laid down in the second proviso to rule 18, which reads :
'Provided further that every dealer liable to submit a return in Form 4 under this sub-rule or the preceding proviso shall submit along with the return a receipt from a Government Treasury, or a receipt from a bill-collector of the Commercial Taxes 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 tax due for the year on the basis of the return after deducting therefrom the provisional tax, if any, paid already for the year, failing which the assessing authority shall serve upon the dealer a notice in Form 6 and the dealer shall pay the sum demanded within the time and in the manner specified therein.'
4. Admittedly, no notice in Form 6 had been served on the petitioner. But the contention of the learned Government Pleader is that this proviso provides for two due dates, the first of them being the date of the submission of the returns and the second being the date prescribed in the notice in Form 6. But according to Sri V. Krishnamurthy, the learned counsel for the petitioner, this rule should be read as a whole and so read an option is given to the assessee to pay the assessment admittedly due from him either along with his returns or within the time specified in the notice in Form 6; it is only if the assessee fails to pay the tax due in response to the notice in question and in accordance with its terms, he becomes a defaulter and not otherwise.
5. In understanding the scope of this rule, it is necessary to bear in mind the fact that if an assessee underestimates his turnover, no penalty can be levied on him till the final assessment is made. The assessee is only required to pay the admitted tax. Under rule 18 a notice in Form 6 is mandatory and not directory. If that rule is read as a whole, in our judgment, it is clear that the assessee becomes a defaulter only if he does not comply with the terms of that notice.
6. For the reasons mentioned above, we are in agreement with the contention advanced on behalf of the assessee that the penalty demanded from him (which was calculated only upto November, 1960) is opposed to law. Therefore the order demanding penalty has to be quashed and the same is hereby quashed. The respondent shall pay the costs of the petitioner. Advocate's fee Rs. 100. If the petitioner had already paid the petitioner demanded from him, the same shall be refunded to him.
7. Petition allowed.