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J.K. Oil Mills Co. Ltd. Vs. Commissioner of Sales Tax - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAllahabad High Court
Decided On
Case NumberSales Tax Reference No. 501 of 1971
Judge
Reported in[1973]30STC264(All)
AppellantJ.K. Oil Mills Co. Ltd.
RespondentCommissioner of Sales Tax
Appellant Advocate U.S. Awasthi, Adv.
Respondent Advocate The Standing Counsel
Excerpt:
.....cause, failed to pay, within the time allowed the tax assessed on him, he may direct that such dealer shall pay, by way of penalty. it is not suggested that the date mentioned in the notice such on which the assessee or its agent could not have reasonably appeared before the authority and to say whatever it liked against the proposed order. surely, this was mentioned in the notice with the object that if the assessee so liked it could appear before the sales tax officer on 2nd july, 1963, and to say whatever it liked in this connection. 11. learned counsel for the petitioner placed strong reliance on a division bench decision of this court in sales tax reference no. 502, decided on 7th july, 1971. in this case the notice issued under section 15-a ran thus :whereas you have failed to pay..........a sum of rs. 12,839.40. hence, a demand for the balance amounting to rs. 48,355.44 was raised. the sales tax officer served a notice of demand upon the assessee along with the copy of the assessment order on 28th march, 1963, requiring the payment of the amount due within a certain time. the assessee did not pay the tax demanded within the time allowed. the sales tax officer, therefore, initiated proceedings for imposing penalty under section 15-a(1)(c) of the act. a notice was served on the assessee informing him that he was in default and that he should show cause on 2nd july, 1963, why penalty be not imposed upon it. neither the assessee, nor any one else appeared on its behalf before the sales tax officer on 2nd july, 1963. on behalf of the assessee an application dated 25th july,.....
Judgment:

R.L. Gulati, J.

1. Additional Judge (Revisions), Sales Tax, has made this H reference under Section 11 of the U.P. Sales Tax Act, at the instance of the assessee, Messrs. J.K. Oil Mills Co. Ltd., Kanpur.

2. For the assessment year 1958-59, the assessee was assessed to sales tax amounting to Rs. 61,274. The assessee had already deposited a sum of Rs. 12,839.40. Hence, a demand for the balance amounting to Rs. 48,355.44 was raised. The Sales Tax Officer served a notice of demand upon the assessee along with the copy of the assessment order on 28th March, 1963, requiring the payment of the amount due within a certain time. The assessee did not pay the tax demanded within the time allowed. The Sales Tax Officer, therefore, initiated proceedings for imposing penalty under Section 15-A(1)(c) of the Act. A notice was served on the assessee informing him that he was in default and that he should show cause on 2nd July, 1963, why penalty be not imposed upon it. Neither the assessee, nor any one else appeared on its behalf before the Sales Tax Officer on 2nd July, 1963. On behalf of the assessee an application dated 25th July, 1963, was moved before the Sales Tax Officer stating that because the assessee had challenged the rate of tax, there had been an accumulation of tax liability. The assessee was not in a position to meet the entire liability by making payment in one lump sum. It was requested that in the circumstances no penalty be imposed upon it. The Sales Tax Officer did not accept the explanation given on behalf of the assessee and after obtaining approval of the Commissioner of Sales Tax, he made an order on 29th August, 1963, imposing a penalty of Rs. 24,000. The assessee preferred an appeal against the order dated 29th August, 1963. The Assistant Commissioner (Judicial), Sales Tax, allowed the appeal and set aside the order on 29th August, 1963, mainly on the ground that before imposing penalty the Sales Tax Officer did not comply with the procedure prescribed under Section 15-A(3) of the Act. The defect pointed out by the Assistant Commissioner (Judicial) was that the Sales Tax Officer did not afford an opportunity to the assessee for being heard in support of its explanation dated 25th July, 1963.

3. The department then went up in revision. The Additional Judge (Revisions), however, took a different view and came to the conclusion that the requirement of law had been fully complied with when a notice was given to the assessee requiring it to show cause on 2nd July, 1963, why penalty be not imposed. He, accordingly, set aside the appellate order and held that the order dated 29th August, 1963, imposing penalty was quite justified, but in the circumstances, the Sales Tax Officer should not impose a penalty exceeding Rs. 21,763.35. In the result, he reduced the penalty imposed by the Sales Tax Officer from Rs. 24,000 to Rs. 21,763.

4. At the instance of 'the assessee, the Additional Judge (Revisions), Sales Tax, U.P., has referred the following three questions for the opinion of this court:

(1) Whether on the facts and in the circumstances of the case, without giving a further opportunity to be heard and only on the written explanation sent by the dealer in compliance with the show cause notice under the first proviso of Section 15-A, the assessing authority could be said to be 'satisfied' judicially that the dealer had failed to pay the tax assessed 'without reasonable cause' in order to give him jurisdiction to impose penalty ?

(2) Whether in view of the facts and circumstances, the provisions of Sub-section (3) of Section 15-A were complied with in view of the fact that the notice to show cause had already been issued earlier and a date fixed for the same ?

(3) Whether on the facts and in the circumstances of the case, the revisional court was justified in upholding the penalty order though reducing the amount and whether the order of penalty imposed by the assessing authority was void ab initio and liable to be quashed?

5. A perusal of the statement of the case, orders passed by the sales tax authorities and the three questions which have been referred to this court, shows that the real controversy raised in the case was whether in the circumstances of the case penalty had been properly imposed after affording an opportunity to the petitioner for being heard as required by Section 15-A(3) of the U.P. Sales Tax Act. The three questions framed by the Additional Judge (Revisions), Sales Tax, are in fact different facets of the same question. Accordingly, we reframe the three questions into the following question and proceed to answer the same.

Whether on the facts and in the circumstances of the case, the dealer was given an opportunity of being heard before imposing penalty as provided in Section 15-A(3) of the U.P. Sales Tax Act?

6. Relevant portion of Section 15-A reads thus:

(1) If the assessing authority is satisfied that any dealer... (c) has without reasonable cause, failed to pay, within the time allowed the tax assessed on him, he may direct that such dealer shall pay, by way of penalty....

Provided that no penalty shall be imposed under the foregoing clause-

(i) except after notice to the dealer, and...

(3) No order shall be made under Sub-section (1) unless the dealer has been heard or has been given a reasonable opportunity of being heard...

7. A perusal of this section shows that before a penalty under it. can be imposed a notice for the purpose has to be given to the dealer and he has also to be afforded a reasonable opportunity of being heard. The question that arises for consideration, therefore, is whether in this case a notice for the purpose was given and the dealer has been afforded a reasonable opportunity of being heard.

8. The notice issued to the dealer which has been referred to in the various orders of the sales tax authorities reads thus :

for the assessment year 1958-59 you were assessed under Section 21, Rule 41(6), to a tax of Rs. 61,274. You had deposited Rs. 12,939.04. A demand notice for Rs. 48,385.74 together with a copy of the assessment order was served upon you on 28th March, 1963, asking you to deposit the amount within 16 days of the aforesaid date. Rs. 48,355.41 are still due from you. You have thus made yourself liable for imposition of penalty under Section 15-A(1)(c) of the U.P. Sales Tax Act.

Please show cause on 2nd July, 1963, as to why penalty should not be imposed against you.

9. A perusal of this notice shows that the notice as required by Section 15-A(1)(c) has been given to the petitioner informing him that he has defaulted in payment of sales tax assessed on him and that he has become liable to pay penalty. Second paragraph of this notice required the assessee to show cause on 2nd July, 1963, as to why penalty be not imposed against it. The assessee had ample opportunity to appear before the Sales Tax Officer on 2nd July, 1963, and to say whatever he wanted to say against the proposed penalty. It is not suggested that the date mentioned in the notice such on which the assessee or its agent could not have reasonably appeared before the authority and to say whatever it liked against the proposed order. In the circumstances, it cannot be denied that the assessee was given a reasonable opportunity of being heard as required by Section 15-A(3).

10. Learned counsel for the assessee argued that the notice issued by the Sales Tax Officer was merely a notice as required by the proviso to Section 15-A(1) and not a notice affording an opportunity to the assessee for being heard as required by Section 15-A(3) of the Act. We are unable to accept this contention. Sub-section (1) to Section 15-A merely requires that no penalty is to be imposed except after notice to the dealer. This means that before imposing penalty the Sales Tax Officer must give a notice to the dealer that he is going to impose penalty as the assessee has defaulted in paying the tax. Undoubtedly, the notice issued in this case not only complies with this requirement of law, but it goes further and requires the assessee to show cause on 2nd July, 1963, why penalty be not imposed upon it. Surely, this was mentioned in the notice with the object that if the assessee so liked it could appear before the Sales Tax Officer on 2nd July, 1963, and to say whatever it liked in this connection. In other words, the notice afforded an opportunity to the assessee for being heard on 2nd July, 1963. So far as we know there is no law which requires that separate notices should be issued to a dealer at different times, one under Section 15-A(1) and the other for affording an opportunity to the assessee for being heard. In our opinion, the notice informing the petitioner that he had committed default and that it was proposed to impose a penalty as also fixing a date on which the assessee could be heard, could be conveyed to the assessee at one and the same time.

11. Learned counsel for the petitioner placed strong reliance on a Division Bench decision of this Court in Sales Tax Reference No. 269 of 1970, Swadeshi Cotton Mills Co. Ltd., Kanpur v. Commissioner of Sales Tax [1972] 29 S.T.C. 502, decided on 7th July, 1971. In this case the notice issued under Section 15-A ran thus :

Whereas you have failed to pay within the time allowed without any reasonable cause the tax amounting to Rs. 12,28,764.57 you should show cause within eight days as to why a penalty under Section 15-A should not be imposed upon you.

12. This court took the view that as the notice did not fix any particular date on which the assessee was to appear personally or send his written explanation to the Sales Tax Officer, it could not be said that the assessee was allowed an opportunity of being heard. The Bench pointed out that had the notice fixed a date, it could be argued that on the specific date it was open to the assessee to have appeared before the Sales Tax Officer and to be heard orally, if he so wanted. In the absence of a particular date, it is not possible to say that the assessee could appear before the Sales Tax Officer and make an oral submission. In the case before us, we find that the Sales Tax Officer had fixed 2nd July, 1963 as the specific date on which the assessee was required to show cause. The assessee could appear and have his say in the matter on that date. The case relied upon by the learned counsel for the dealer, therefore, is clearly distinguishable on facts, but the observations made in that case support the view which we are taking in this case.

13. We are, therefore, of the opinion that the provisions of Section 15-A(3) had been fully complied with in this case and the assessee was given sufficient opportunity of being heard.

14. Our answer to the question as reframed by us is that on the facts and in the circumstances of the case, the dealer was given an opportunity of being heard before imposing penalty as provided in Section 15-A(3) of the U.P. Sales Tax Act. In the circumstances of the case, we direct the parties to bear their own costs of this reference.


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