Chandrakantaraj Urs, J.
1. The petitioner is a dealer in betel-nuts at Sirsi, Uttara Kannada District. He obtained refund of Central sales tax in the sum of Rs. 57,286.00 on account of the decision of the Supreme Court in the Yaddalam's case : 2SCR129 . However, in 1969, the Central Sales Tax Act came to be amended with retrospective effect resulting in tax being levied on betel-nuts. The petitioner was, therefore, bound to return the refunded tax. He made an application on 3rd February, 1975, that he may be permitted to pay back the refunded tax in instalments. The tax related to the assessment years 1957-58 to 1964-65. The Commissioner by his order dated 8th September, 1975, sanctioned instalments at Rs. 5,000.00 per month for the first 10 months and the balance being paid in a lump sum as the 11th and final instalment. The petitioner paid back this amount as ordered by the Commissioner within the period stipulated in the order of the Commissioner, a copy of which is at annexure A to the petition. The first instalment fell due from the commencement of the month of September in 1975. The petitioner, accordingly, has paid back the refunded tax in the sum of Rs. 57,286.00.
2. On account of the representation of the Chamber of Commerce and Merchants' Association and on the instruction of the State Government, the Commissioner of Commercial Taxes, the 2nd respondent herein, issued a circular dated 7th December, 1976, by which the Government clarified that no penalty should be imposed for tax which was due prior to 1st September, 1976. Thus, being aggrieved by the demand notice of the 1st respondent bearing the date 17th December, 1979, calling upon him to pay a sum of Rs. 10,613.19 as penalty under section 13(2) of the Karnataka Sales Tax Act (hereinafter referred to as 'the Act') which is produced as 'annexure C' to the petition, the petitioner has approached this Court under article 226 of the Constitution of India, inter alia, contending that the same is liable to be quashed as being without the authority of law and as illegal.
3. The facts are not in dispute. The learned counsel appearing for the respondents has merely asserted that the Commissioner had no authority under the law to order repayment of tax in instalments and, therefore, the 1st respondent was not bound by it. This submission is stated only to be rejected. There are two reasons to reject the same. First, it must be stated that a similar question came up for consideration before a Division Bench of this Court in the case of Abdul Shakur Umar Sahigara & Co. v. Commercial Tax officer, Additional Circle, Mangalore ( 21 S.T.C. 77; (1968) 1 Mys. L.J. 449.). Their Lordships in that decision held that under section 13 of the Karnataka Sales Tax Act the dealer became a defaulter only when he neglected to make payment of tax when it became due and not otherwise. They also held having regard to section 3-A of the Act, that a direction by the Government to pay tax in instalments would absolve the assessee from being penalised under section 13(2) of the Act unless he made default in the payment of instalments. I do not see any reason why the ratio of that decision should not be applied to the facts of this case.
4. Next, it must be noticed that under the circular issued by the Commissioner of Commercial Taxes as a result of the representation made by the Merchants' Association and the Chamber of Commerce to the Government, no penalty was intended to be levied on tax arrears due prior to 1st September, 1976.
5. In the instant case the 11th instalment fell due in July, 1976, as the 1st instalment commenced on 1st September, 1975. If it is not disputed that the assessee has paid all the instalments in accordance with the Commissioner's order in his favour, then on 1st September, 1976, there were no tax arrears due by the petitioner. Section 3-A of the Act not only enjoins that the subordinate officers should obey the instructions of the Government but also that of the Commissioner.
6. In this view of the matter, I have no hesitation to hold that the impugned demand notice at annexure C is without the authority of law and therefore liable to be quashed.
7. In the result, the rule is made absolute and the impugned demand notice at annexure C is hereby quashed.
8. There will be no order as to costs.
9. Rule made absolute.