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Guldas Narasappa Thimmiah Oil Mills Vs. Commercial Tax Officer, Raichur - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKarnataka High Court
Decided On
Case NumberS.T.R.P. No. 22 of 1969 and Writ Petition No. 345 of 1970
Judge
Reported in(1970)1MysLJ451; [1970]25STC489(Kar)
ActsCentral Sales Tax Act, 1956 - Sections 9(2) and 9(3)
AppellantGuldas Narasappa Thimmiah Oil Mills
RespondentCommercial Tax Officer, Raichur
Appellant AdvocateK. Srinivasan, Adv.
Respondent AdvocateP.K. Shyam Sundar, High Court Government Pleader
Excerpt:
.....of assessment, collection and enforcement of penalty, which is payable by a dealer under the central sales tax act. unless, therefore, a penalty can be levied under the provisions of the central sales tax act, like the tax on turnover under that act, there will be no liability to penalty only by reason of the provisions of the madras general sales tax act, 1959. in other words, section 12(3) of the madras general sales tax act is not adopted for purposes of sub-section (3) of section 9 .11. it will be seen that this enunciation is concerned with the provisions of section 9(3) of the central act unamended. 12. the next case, on which strong reliance was placed on behalf of the tate, is the one rendered by this court in k. 587). in our view this case is clearly distinguishable. ' 13...........year 1964-65, a tax of rs. 14,332.80 was determined as payable by the petitioner under the central sales tax act, 1956, hereinafter referred to as the central act. on 20th june, 1968, the commercial tax officer, raichur, issued a notice to the petitioner demanding the said tax together with a penalty of rs. 10,104.36 for default in payment of the said tax. the penalty, according to the officer, had accrued under section 13(2)(b) of the mysore sales tax act, 1957, hereinafter referred to as the state act. the petitioner paid only the tax and did not pay the penalty demanded. because of non-payment of the penalty, the commercial tax officer filed an application under section 13(3)(b) of the state act before the munsiff magistrate at raichur, for the recovery of the sum due as.....
Judgment:
ORDER

Venkataswami, J.

1. Both the writ petition and the sales tax revision petition referred to above can be disposed of together. The few facts necessary for the purpose are as follows :

For the assessment year 1964-65, a tax of Rs. 14,332.80 was determined as payable by the petitioner under the Central Sales Tax Act, 1956, hereinafter referred to as the Central Act. On 20th June, 1968, the Commercial Tax Officer, Raichur, issued a notice to the petitioner demanding the said tax together with a penalty of Rs. 10,104.36 for default in payment of the said tax. The penalty, according to the officer, had accrued under section 13(2)(b) of the Mysore Sales Tax Act, 1957, hereinafter referred to as the state Act. The petitioner paid only the tax and did not pay the penalty demanded. Because of non-payment of the penalty, the Commercial Tax Officer filed an application under section 13(3)(b) of the state Act before the Munsiff Magistrate at Raichur, for the recovery of the sum due as penalty, as if it were a fine imposed by the court. The case in question is Criminal Case No. 264/iv/1969. The court issued a distress warrant for the recovery of the said sum. Aggrieved by that the petitioner approached this court under section 13(4) of the state Act, in S.T.R.P. No. 22 of 1969, on 28th May, 1969. Subsequently, on 23rd January, 1970, in respect of the same matter, he has preferred Writ Petition No. 345 of 1970, as it was felt that the question of constitutional validity of the recovery proceedings had arisen. After the writ petition was entertained, it was submitted on behalf of the petitioner that S.T.R.P. No. 22 of 1969 might be dismissed as not pressed.

2. Before advertising to the contentions on merits advanced on behalf of the papers, it is convenient to dispose of a preliminary objection taken on behalf of the respondent. The argument is that the writ petition has been filed nearly 1 1/2 years after the impugned notice of demand dated 20th June, 1968, was served on the petitioner and as such the petition suffered from inordinate delay. Consequently, it was not a fit case for interference under article 226 of the Constitution of India. We are not inclined to accept this contention. It is to be seen that the recovery proceedings are still pending. The petitioner had approached this court in S.T.R.P. No. 22 of 1969 well in time. During the pendency of the said revision petition he has preferred the writ petition raising an additional ground regarding the validity of the recovery which would be otherwise unavailable to him if he pursued the revision petition. In these circumstances, the writ petition in a sense is a petition in continuation of the proceedings earlier instituted. For all these reasons, we do not think that the writ petition should be rejected on the ground of inordinate delay.

3. In order to appreciate the contentions urged, it is necessary to set out the relevant provisions of the Central and the state Acts. The Central Act was amended in certain respects with retrospective effect by the Central Sales Tax (Amendment) Ordinance, 1969 (Ordinance No. 4 of 1969). This Ordinance was subsequently replaced by the Central Sales Tax (Amendment) Act, 1969 (Act No. 28 of 1969). The relevant portion of section 9(3) of the Central Act prior to amendment is :

'The authorities for the time being empowered to assess, collect and enforce payment of any tax under the general sales tax law of the appropriate state shall, on behalf of the Government of India and subject to any rules made under this Act, assess, collect and enforce payment of any tax, including any penalty, payable by a dealer under this Act in the same manner as the tax on the sale or purchase of goods under the general sales tax law of the state is assessed, paid and collected; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, appeals, reviews, revisions, references, penalties and compounding of offences, shall apply accordingly ......'

4. Section 9(2) of the Act as amended by Act No. 28 of 1969 takes effect retrospectively and reads thus :

'Subject to the other provisions of this Act and the rules made thereunder, the authorities for the time being empowered to assess, reassess, collect and enforce payment of any tax under the general sales tax law of the appropriate state shall, on behalf of the Government of India, assess, reassess, collect and enforce payment of tax, including any penalty, payable by a dealer under this Act as if the tax or penalty payable by such a dealer under this Act is a tax or penalty payable under the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, penalties, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly ...............'

5. The relevant portions of section 13 of the state Act read thus :

'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.

* * * (3) Any tax assessed, or any other amount due under this Act from a dealer, may without prejudice to any other mode of collection, be recovered -

(a) as if it were an arrear of land revenue, or

(b) on application to any Magistrate, by such Magistrate as if it were a fine imposed by him ....................'

6. The contention of Sri K. Srinivasan, the learned counsel appearing in support of the petition, is that no penalty is leviable under section 13(2) of the state Act in regard to assessments made under the Central Act. In particular, the argument is that the provisions relating to penalty under the state Act are not adopted by section 9(2) of the Central Act as amended by Act No. 28 of 1969. His further contention is that the levy of penalty is part of the substantive law, and, therefore, it cannot be said to be involved either expressly or impliedly in the procedural provisions relating to recovery of tax.

7. On behalf of the State, the learned Government Advocate submits that the statutory provisions under section 13(2) of the state Act really relate to the mode of recovery of the tax and as such form part of the procedure which is expressly adopted by section 9(2) of the Central Act as amended. It is further his contention that under section 9(2) of the Central Act, sales tax due and payable thereunder is liable to be enforced as if it is a state tax. That being so, the rule of strict liability indicated in section 13(2) of the state Act is automatically attracted.

8. In support of the above propositions, Sri K. Srinivasan placed reliance on two decisions reported in D. H. Shah and Co. v. state of Madras ([1967] 20 S.T.C. 146) and M. M. Mathew v. Second Additional Income-tax Officer, Kottayam ([1956] 29 I.T.R. 456). He also invited reference to certain unreported decisions of the Supreme Court, which will be referred to later. On behalf of the State, strong reliance was placed on a decision of this court reported in K. V. Adinarayana Setty v. Commercial Tax Officer, Kolar Circle, Kolar ([1963] 14 S.T.C. 587).

9. In the case of M. M. Mathew v. Second Additional Income-tax Officer, Kottayam ([1956] 29 I.T.R. 456), a Single Judge of the Kerala High Court, while dealing with the question of levy of penalty imposed under section 29(1)(c) of the Income-tax Act, 1922, and the recovery thereof under the Travancore-Cochin Revenue Recovery Act (7 of 1951), observed thus :

'It is impossible to consider that the imposition of penalty is also a mode of recovery of tax.'

10. In observing thus, no reasons have been assigned by the court for that proposition.

In the case of D. H. Shah and Co. v. The state of Madras ([1967] 20 S.T.C. 146), the question that arose for consideration was whether a penalty levied under section 9(3) of the Central Act unamended read with section 12(3) of the Madras General Sales Tax Act, was justified. The court observed thus in that connection :

'...... Sub-section (3) of section 9 adopts the procedure for assessment, collection and enforcement of tax obtaining under the state Act to assessment, collection and enforcement of tax under the Central Act. The sub-section states that adoption of the state procedure includes 'any penalty payable by a dealer under this Act'. That clearly means that what the sub-section intends is that the local procedure is applied to recovery of assessment, collection and enforcement of penalty, which is payable by a dealer under the Central Sales Tax Act. Unless, therefore, a penalty can be levied under the provisions of the Central Sales Tax Act, like the tax on turnover under that Act, there will be no liability to penalty only by reason of the provisions of the Madras General Sales Tax Act, 1959. In other words, section 12(3) of the Madras General Sales Tax Act is not adopted for purposes of sub-section (3) of section 9 ..........'

11. It will be seen that this enunciation is concerned with the provisions of section 9(3) of the Central Act unamended. We are at present concerned with section 9(2) of the Central Act as amended which has made a somewhat radical departure from the corresponding previous provisions. Therefore, this is not of much assistance to the petitioner.

12. The next case, on which strong reliance was placed on behalf of the tate, is the one rendered by this court in K. V. Adinarayana Setty v. Commercial Tax Officer, Kolar Circle, Kolar ([1963] 14 S.T.C. 587). In our view this case is clearly distinguishable. For one thing, this is also a judgment rendered on the basis of the provisions of section 9(3) of the Central Act unamended. It is no doubt true that the question raised therein was that the assessee was not legally liable to pay any amount claimed as penalty under section 13(2) of the state Act as a result of the default in payment of the tax due under the Central Act. No argument was advanced therein on the basis of an adoption of appropriate state law by the Central Act. The court came to the conclusion that when it is required by section 9(3) of the Central Act that the tax payable under that Act shall be paid and collected in accordance with the general sales tax law of the State, the provisions of section 13(2) of the state Act must also be applicable for payment and collection of that tax as it was incidental to and part of the process of such payments and collections. But, the contention advanced on behalf of the state in the present case is that the levy of penalty under section 13(2) of the state Act was a part of the procedure for the recovery of tax. For this proposition, this decision cannot be of any assistance to the respondent, as this question did not arise for consideration in that case. In this connection it is observed thus :

'........ The said observation is in no way useful in the present case, as it is no contended that the penalty under section 13(2) of the Mysore Act is a mode of recovery of tax.'

13. For these reasons, this case is clearly of no assistance to the respondent.

14. In our judgment, the provisions relating to penalty in a taxing statute are substantive in character. In this view such provisions cannot be reasonably accepted as forming part of the procedural law. Unless such penal provisions in the state law are expressly adopted by the provisions of section 9(2) of the Central Act, they cannot be relied upon for the purpose of recovery of tax due under the Central Act. Further, section 9(2) of the Central Act as amended by Act No. 28 of 1969, has effected changes so as to exclude any idea of adoption of substantive provisions of a state Act relating to assessment and recovery of tax and penalty. But the argument advanced on behalf of the state is that notwithstanding the changes effected by this amending provision of the Central Act, the sales tax can be collected and enforced as if it is a tax under the state law. The argument is that in such an event, the rule of strict liability set out in section 13(2) of the state Act would be automatically attracted. But, this argument overlooks the fact that what has to be collected is the sales tax and penalty as assessed and levied under the Central Act, as clearly enjoined by section 9(2) of the Act. A provision relating to penalty similar to the one specified in section 13(2) of the state Act is nowhere to be found in the Central Act. Therefore, unless the provision is specifically adopted by express words or by necessary implication, section 13(2) will not be attracted for the purpose of levy of penalty on the basis of a default committed in connection with the payment of sales tax levied under the Central Act. Even the phrase 'as if the tax or penalty payable by such a dealer under this Act is a tax or penalty payable under the general sales tax law of the State', occurring in section 9(2) of the Central Act, in our opinion, is relatable to the tax and penalty leviable under the Central Act. As observed by us already, there is no provision in the Central Act for the levy of such a penalty. We are, therefore, clearly of the opinion that the penalty levied in the present case under section 13(2) of the state Act for default committed in connection with the payment of the tax assessed under the Central Act is without the authority of law.

15. The view we have taken in this matter finds support in two decisions of the Supreme Court wherein section 9(2) of the Central Act as amended by Ordinance No. 4 of 1969 came up for consideration. It may be mentioned, the subsequent Amendment Act 28 of 1969 which replaced the said Ordinance has not made any changes in regard to the provisions section 9(2) of the Ordinance. The cases are : The Deputy Commissioner of Agricultural Income-tax and Sales Tax v. Aluminum Industries Ltd. (Reported at p. 476 supra), (Civil Appeals Nos. 1230-1231 of 1969) and The state of Kerala v. P. P. Joseph and Co. and Joseph Elias (Reported at p. 483 supra) (Civil Appeals Nos. 1228 and 1229 of 1969). In Civil Appeals Nos. 1228 and 1229 of 1969, the Supreme Court had occasion to examine the scope and nature of section 9(2) of the Central Act as amended by the Ordinance. Shah, Ag. C.J., speaking for the Bench states the position thus :

'The effect of the Ordinance is to supersede the judgment of this court in Yaddalam Lakshminarasimhiah Setty's case : [1965]2SCR129 . It is now made clear that even if no tax was leviable under the general sales tax law of the state in respect of intra-state transactions of sale, tax will be leviable on sale of goods effected by a dealer in the course of inter-state trade according to the sales tax law of the appropriate State. By section 9(2) of the Central Sales Tax Act as modified it is enacted that the authorities empowered to assess, reassess collect and enforce payment of any tax under the general sales tax law of the state shall be entitled, on behalf of the Government of India, to assess, reassess, collect and enforce payment of tax by a dealer under the Act as if the tax payable by such a dealer under the Act was tax payable under the general sales tax law of the State, and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State. Thereby the procedural law prescribed by the general sales tax law of the state applies in the matter of assessment, reassessment, collection and enforcement of payment of tax under the Central Sales Tax Act, but the liability to pay its determined by the provisions of the Central Sales Tax Act.'

16. It is clear from the above enunciation that the liability to pay the tax or penalty has to be determined with reference to the provisions of the Central Act. It follows, therefore, that the provisions of section 13(2) of the state Act cannot be invoked to levy penalty for the non-payment of the tax due under the Central Act.

17. For the above reasons, we hold that the writ petition should succeed, and it is accordingly allowed. In view of this conclusion, we consider it unnecessary to make any orders on S.T.R.P. No. 22 of 1969. It is, therefore, disposed of accordingly.

18. Therefore, although the petitioner has sought for the relief in the nature of a direction to forbear the respondent from proceeding to recover the penalty, we think it necessary to quash the impugned notice of demand dated 20th June, 1968, in so far as it relates to the levy of penalty under section 13(2)(b) of the state Act for the non-payment of the tax assessed under the Central Act. It follows, therefore, that the proceedings taken by the respondent subsequent to the issue of such notice demanding penalty, should also be quashed. They are quashed accordingly.

19. In the special circumstances of the case, we make no order as to costs.

20. Writ Petition allowed.


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