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G. Lakshminarayana Vs. Commercial Tax Officer and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Petition No. 6149 of 1970
Judge
Reported in[1974]33STC558(AP)
AppellantG. Lakshminarayana
RespondentCommercial Tax Officer and anr.
Appellant AdvocateR.V. Vidya Sagar, Adv.
Respondent AdvocateA. Mahadev, Adv. for Fifth Government Pleader
DispositionPetition allowed
Excerpt:
- .....case for fresh disposal after setting aside the assessment order. no action had been taken by the assessing authority. after a lapse of four years the first respondent issued a notice dated 6th october, 1966, asking the petitioner to produce his account books for the year 1959-60 so as to enable him to make the assessment. the demand of the assessing authority calling upon the firm to produce the account books being illegal and untenable, the petitioner filed a writ petition no. 1969 of 1966 on the file of this court. when this writ petition came up for hearing before a bench consisting of jaganmohan reddy and kumarayya, jj. (as they then were), on 6th february, 1967, the government pleader represented to the court that the proceedings had been closed and there was no question of any.....
Judgment:

Vaidya, J.

1. The firm M/s. Lakshminarayana Rice Mill, Shamsergunj, Hyderabad, was carrying on business of rice milling and the petitioner and one Raja Reddy were partners. The firm was dissolved in the year 1959 and the sales tax authorities, with whom the firm was registered, were informed accordingly. For the year 1959-60, the firm was assessed as per order No. 1008/59/60 dated 30th March, 1962. The turnover was determined at Rs. 3,46,992.14 and the total tax was fixed at Rs. 13,879.12. By the time of the assessment an advance tax of Rs. 6,512.57 was paid by the assessee as demanded by the sales tax authorities. The petitioner aggrieved by the assessment order, filed an appeal to the appellate authority being Appeal No. 267 of 1962-63. The appellate authority by its order dated 14th September, 1962, allowed the appeal and remanded the case for fresh disposal after setting aside the assessment order. No action had been taken by the assessing authority. After a lapse of four years the first respondent Issued a notice dated 6th October, 1966, asking the petitioner to produce his account books for the year 1959-60 so as to enable him to make the assessment. The demand of the assessing authority calling upon the firm to produce the account books being illegal and untenable, the petitioner filed a Writ Petition No. 1969 of 1966 on the file of this court. When this writ petition came up for hearing before a Bench consisting of Jaganmohan Reddy and Kumarayya, JJ. (as they then were), on 6th February, 1967, the Government Pleader represented to the court that the proceedings had been closed and there was no question of any assessment. On that assurance the court dismissed the writ petition. The petitioner avers that as the assessment proceedings were dropped by the authorities concerned, there was no tax leviable for the year 1959-60. The petitioner sent a notice to the second respondent, Commissioner of Commercial Taxes, asking him to pay back the amount illegally detained by him without any power or authority whatsoever. The second respondent had not complied with the notice. In this writ petition, the petitioner seeks a writ of mandamus directing the respondents to give complete effect to the course of the assessment proceedings by refunding the amount of Rs. 6,512.57 levied and collected from him. 2. The Commercial Tax Officer, 1st Circle, Hyderabad, which is the first respondent herein, has filed a counter-affidavit stating that in the appeal preferred by the petitioner, the Assistant Commissioner, Commercial Taxes, considered the question of levy of tax on a turnover of Rs. 68,641.09 relating to the sales of rice. The appeal was allowed and the matter was remanded by the Assistant Commissioner for fresh disposal on 14th September, 1962. It is thus averred that the assessment relating only to Rs. 68,641.09 was set aside in appeal and not the entire assessment. After giving deduction of the tax allowed in appeal, the petitioner was still liable to pay a sum of Rs. 8,350.56. The petitioner paid a sum of Rs. 8,642.79 and thus the petitioner is only entitled to a refund of Rs. 292.93.

3. From the counter filed by the respondents, the first question to be considered is whether by the appellate order, the assessment order made by the first respondent had been set aside only in part or in full. To determine that it is necessary to refer to the appellate order. Before the Assistant Commissioner of Commercial Taxes the appellant had raised two contentions: (1) against the levy of tax on Rs. 68,641.09 and (2) against the rate of tax at 4 per cent on Rs. 3,46,992-14-8 for the year 1959-60. Both these contentions were considered by the appellate authority. As regards the first contention, the appellate authority directed the assessing authority to verify the transactions and conduct inquiries in the matter and pass fresh orders pursuant to the results thereof. The second contention was that the entire turnover of Rs. 3,46,992-14-8 could not be assessed to tax at 4 per cent as the rice and paddy were sold for consumption inside the State and they were fully covered by bills. In terms of G.O. Ms. No. 27 Revenue, dated 4th January, 1959, the tax on the aforesaid turnover was leviable at the reduced rate of three naye paise in a rupee under clause (b) of Sub-section (3) of Section 5 of the Andhra Pradesh General Sales Tax Act. The appellate authority observed: 'It does not appear that any verification of the sale bills was made to ascertain the compliance of the above-said G.O. The substance of justice lies in finding out on the basis of the evidence produced, if rice sold was consumed inside the State. The Deputy Commercial Tax Officer shall now verify and pass fresh orders fixing their liability at the reduced rate of 3 per cent to the extent the dealer's transactions are within the terms of the G.O. Ms. No. 27 Revenue, dated 4th January, 1959. So far as these two disputed items are concerned, the matter is remitted back to the assessing authority for fresh disposal according to law in the light of the observations made above.

4. From the aforesaid extract, it is very clear that the order of the first respondent was completely set aside by the appellate authority and a direction was given to the assessing authority in regard to the tax on Rs. 68,641.09 to verify the transactions and conduct inquiry into the matter and pass fresh orders pursuant to the result thereof. In regard to the levy of tax at 3 per cent as claimed by the petitioner it was ordered that the assessing authority will verify whether the aforesaid transactions are within the terms of G.O. Ms. No. 27 Revenue, dated 4th January, 1959, and then fix liability at the reduced rate of 3 per cent. The last portion of the order Is very clear that the matter is remitted back to the assessing authority for fresh disposal according to law. From this order it cannot be argued that the assessment made by the assessing authority was set aside by the appellate authority only to the extent of Rs. 68,641.09 and the assessment to the extent of Rs. 3,46,992-14-8 at the rate of 3 per cent was upheld. In my opinion, the assessment order passed by the assessing authority was set aside and the assessing authority was directed to pass a fresh assessment order. It is admitted that the assessing authority did not pass any assessment order. After the notice dated 6th October, 1966, was given to the petitioner to produce his account books, the petitioner filed Writ Petition No. 1969 of 1966 and this court passed the following order:

In view of the statement of the learned Government Pleader that the proceedings have been closed, the writ petition becomes infructuous. It is ordered that this writ petition be and hereby is dismissed.

5. This order also shows that the assessment proceedings against the petitioner had been closed as far back as 6th February, 1967, and that there was no assessment order against the petitioner.

6. The Government Pleader then advanced the argument that in view of the provisions of Section 5 read with Section 33 of the Andhra Pradesh General Sales Tax Act, the liability to pay tax arises as soon as the taxable event occurs and as the petitioner had admitted that he had sold rice of the value of Rs. 2,78,351 (Rs. 3,46,992 minus Rs. 68,641.09) and as he had admitted that these sales were within the State he became liable to pay tax at the rate of 3 per cent. As such, he is not entitled to claim any refund. In reply, the learned counsel for the petitioner argued that no doubt the liability to pay tax arises on the happening of the taxable event; but for purpose of refund the tax will have to be assessed and quantified and as there is no tax assessed and quantified the petitioner is entitled to the whole of the amount of advance tax paid by him.

7. In order to appreciate the argument advanced, it is necessary to refer to the provisions of Section 5 of the A.P.G.S.T. Act, which reads:

5. Levy of tax on sales or purchases of goods. -- (1) Every dealer (other than a casual trader and an agent of a non-resident dealer) whose total turnover for a year is not less than Rs. 15,000 and every agent of a nonresident dealer whatever be his turnover for the year, shall pay a tax for each year at the rate of three paise on every rupee of his turnover. Every casual trader shall pay a tax at the rate of three paise on every rupee of his turnover:

Provided that if and to the extent to which such turnover relates to articles of food or drink....

(4) The taxes under this section shall be assessed, levied and collected in such manner, as may be prescribed;....

Section 33 relates to refunds; it reads:

33. Refunds. -- The assessing authority or the licensing authority, as the case may be, shall refund the tax or the licence fees, if any, paid provisionally by an assessee or licensee for any particular period, if it is found to be in excess of the tax or the licence fees payable by him for the said period, or, at the option of the assessee or licensee, adjust such excess towards any tax or licence fees due in respect of any other period:

Provided that the assessing or the licensing authority, as the case may be, may first apply the excess paid in respect of any period towards the recovery of any amount in respect of which a notice of demand may have been issued, and shall then refund the balance, if any.

8. The learned Government Pleader relying on the wording of Section 5 contended that the liability to pay tax does not depend upon assessment; it arises as soon as the taxable event on the happening of which the tax is payable occurs. Once the assessee became liable to pay tax while considering the question of refund, that liability has to be worked out and it is not necessary that there should be an assessment order for the purpose. It is true that the liability of a trader to pay sales tax arises on the happening of the taxable event. Under Section 15 of the Sales Tax Act a provisional assessment can be made and the tax paid thereon. The amount of tax payable is ascertained or quantified only on the passing of the assessment order. It is pertinent to note that under Section 33 the excess amount paid provisionally by an assessee, if it exceeds the amount payable by him, is directed to be refunded. The expression used in Section 33 is 'tax payable' and not 'tax leviable'. The word 'payable' connotes 'a legally enforceable payment'. A distinction will have to be drawn between the word 'liable' and the word 'payable'. The Legislature has not advisedly used the word 'liable'. They used the word 'payable'. This shows that for purposes of refund the amount which is due has to be quantified and an order made in that behalf. Mere liability to pay tax will not deprive the person of his right to refund unless the assessment order is made and that liability is quantified.

9. The learned counsel for the petitioner relied upon a decision of the Supreme Court in support of his contention that for purposes of refund whether a certain amount is lawfully due or not must be determined by the assessing authority. In the case before the Supreme Court, State of Madhya Pradesh (now Maharashtra) v. Haji Hasan Dada A.I.R. 1966 S.C. 905, the respondent was assessed by the Assistant Commissioner of Sales Tax, Nagpur Region, to pay tax under the Central Provinces and Berar Sales Tax Act (21 of 1947) on the turnover from his business in yarn for the period 13th November, 1947, to 1st November, 1948. Thereafter relying upon Section 13 of the C.P. and Berar Sales Tax Act, 1947, he applied on 20th November, 1952, to the Assistant Commissioner of Sales Tax for an order refunding Rs. 873-10 0 on the plea that in the turnover of his business were included dyeing charges which were not taxable under the Act, and, which since the order of assessment were held by the Board of Revenue to be not taxable. The Assistant Commissioner rejected the application and the order was confirmed in appeal. The Board of Revenue, Madhya Pradesh, set aside the order. During the pendency of the proceedings before the taxing authorities Section 13 of the Act was amended with retrospective effect taking away the right to refund and the State of Madhya Pradesh moved the Board for a reference to the High Court. The High Court answered the question against the State which preferred the appeal before the Supreme Court. Section 13 of the Madhya Pradesh Sales Tax Act reads thus:

The Commissioner shall, in the prescribed manner and either by cash payment or, at the option of the dealer, by deduction of such excess from the amount of tax due in respect of any other period, refund to a registered dealer applying in this behalf any amount of tax or penalty paid by such dealer in excess of the amount due from him under this Act:

Provided that no claim for refund shall be allowed unless it is made within twelve months from the date on which the order of assessment with or without penalty was passed or within six months from the date on which the final order is passed on appeal, revision, review or reference in respect of the order of assessment with or without penalty.

10. Their Lordships in relation to the aforesaid section observed:

Section 13 in terms authorised the Commissioner to grant refund to a registered dealer applying in that behalf, of any amount of tax or penalty paid by such dealer in excess of the amount due from him under the Act. The section implies that refund may be granted only of the amount which is not lawfully due, and whether a certain amount is lawfully due or not, must be determined by the Assistant Commissioner in making the order of assessment or reassessment. The order of the Assistant Commissioner is undoubtedly not final; it is liable to be set aside in appeal or modified in a revision application under the provisions of the Act. But so long as the order passed by the Assistant Commissioner is not so set aside or modified, a dealer cannot call upon him to ignore the previous order, and grant refund contrary to the plain direction of the order.

11. The provisions of Section 13 of the M.P. Act are in pan materia with the provisions of Section 33 of the A.P.G.S.T. Act. The Supreme Court has held that refund may be granted only of the amount which is not lawfully due and whether a certain amount is lawfully due or not, must be determined by the Assistant Commissioner in making the order of assessment or reassessment. In view of this decision the contention of the learned Government Pleader does not survive.

12. The learned Government Pleader relied upon certain decisions in support of his contention that the liability is not determined by assessment and the assessment only quantifies the liability. The first of such cases is Chatturam and Ors. v. Commissioner of Income-tax, Bihar [1947] 15 I.T.R. 302 (F.C.). The question for consideration before the Federal Court was whether the assessment proceedings initiated before the passing of Regulation I of 1941 making the Indian Income-tax Act applicable to the Chota Nagpur Division were invalid. In dealing with this question, the learned Judges observed that the liability to pay the tax is founded on sections 3 and 4 of the Income-tax Act, which are the charging sections. The learned Judges then referred to Whitney v. Commissioners of Inland Revenue [1926] A.C. 37, and extracted the following passage from that decision:

Now, there are three stages in the imposition of a tax. There is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment, that ex hypothesi had already been fixed. But assessment particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery if the person taxed does not voluntarily pay.

13. In Kedarnath Jute Mfg. Co. Ltd. v. Commissioner of Income-tax (Central), Calcutta [1971] 28 S.T.C. 672 (S.C.), the Supreme Court observed that although that liability cannot be enforced till the quantification is effected, the liability for payment of tax is independent of the assessment. In the two aforesaid cases, the question for determination was not whether, for purposes of refund of tax, mere liability to pay is sufficient and whether quantification of tax is not necessary. In the two cases, the assessment orders had been made and the tax was quantified and the learned Judges were not called upon to decide the question of refund.

14. In State of Madhya Pradesh and Ors. v. Shyama Charan Shukla [1872] 29 S.T.C. 215 (S.C.), the Supreme Court was considering the ambit of the expression 'arrears' occurring in Section 78 of the States Reorganisation Act which provides 'the right to recover arrears of any tax or duty on property, including arrears of land revenue, shall belong to the successor State in which the property is situated, and the right to recover arrears of any other tax or duty shall belong to the successor State in whose territories the place of assessment of that tax or duty is included'. While dealing with the question their Lordships observed that the High Court has given a narrow meaning to the word 'arrears' in Section 78, that the words 'arrears of tax' can refer only to that amount which has been quantified after proper assessment.

If the view of the High Court is to be accepted, 'arrears of tax' can refer to only that amount of tax which has been quantified after a proper assessment. This would lead to the result that where there has been no quantification or assessment order, the position would be wholly uncertain and it would not be possible to say which State would be entitled to realise those taxes or duties. In other words, in the present case, since the tax liability had not been determined or quantified, there would be no arrears of tax and Section 78 will be inapplicable. In our judgment, arrears should be given their proper meaning as understood in the ordinary sense of that word.... It is apart of the general scheme of all sales tax laws that taxes become due the moment a dealer makes either purchases or sales which are subject to taxation and the obligation to pay the tax arises. Although the tax liability which comes into existence cannot be enforced till the quantification is effected by assessment proceedings, the liability for payment of tax is independent of the assessment: [see Kedarnath Jute Mfg. Co. Ltd. v. Commissioner of Income-tax (Central), Calcutta [1971] 28 S.T.C. 672 (S.C.).]. We have no doubt that the word 'arrears' in respect of tax has been used in the sense of dues or what has become due by way of tax and that does not depend on assessment proceedings or quantification of the amount.

15. The learned Government Pleader relied upon the observation that though the tax liability cannot be enforced till the quantification is effected, the liability for payment of tax is not dependent upon the assessment. The learned Judges were called upon to decide the ambit of the word 'arrears' in Section 78 of the States Reorganisation Act. They were not dealing with the question of refund of tax. The decision relied upon by the respondents is evidently not applicable to the case before me.

16. In the result, as there is no assessment order against the petitioner, there is no amount of tax payable by him and he is therefore entitled to claim the whole of the advance tax paid by him by way of refund. The writ petition is therefore allowed with costs and the respondents are directed to refund the amount claimed by the petitioner. Advocate's fee Rs. 100.


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