Skip to content


Shyama Charan Shukla Vs. the State of Madhya Pradesh and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax;Limitation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Petition No. 178 of 1966
Judge
Reported in1974MPLJ691; [1974]34STC504(MP)
AppellantShyama Charan Shukla
RespondentThe State of Madhya Pradesh and ors.
Appellant AdvocateK.A. Chitaley, Adv.
Respondent AdvocateR.S. Dabir and ;O.P. Namdeo, Advs.
DispositionPetition allowed
Cases ReferredAnandji Haridas & Co. v. S.P. Kushare A.I.R.
Excerpt:
- - ). the division bench referred the petition to a fail bench as the contentions raised before it required reconsideration of the construction placed on section 11(5) of the central provinces sales tax act by another division bench (dixit, c. the words 'such period' in the definition of taxable turnover clearly refer to 'the prescribed period' in the definition of turnover. 11. (1) if the commissioner is satisfied that the returns furnished by a dealer in respect of any period are correct and complete, he shall assess the dealer on them. (2) if the commissioner is not so satisfied he shall serve the dealer with a notice appointing a place and day and directing him--(i) to appear in person or by an agent entitled to appear in accordance with the provisions of section 11-b; (4) if a.....orderr.k. tankha, j. 1. the petitioner by this petition under article 226 of the constitution seeks to challenge an order of assessment of sales tax passed by the sales tax officer, chhindwara circle, on 23rd april, 1960. the period for which the tax was assessed by this order is from 1st october, 1953, to 26th december, 1968. the sales assessed relate to manganese ore raised from the mines of the petitioner which are situated in balaghat district of madhya pradesh and nagpur district of maharashtra. but as regards sales of manganese ore raised from the mines in nagpur district, the period covered is up to 31st october, 1956, i.e., the sales subsequent to this date of manganese ore raised from the mines of nagpur district have not been included in the assessment. the sales tax officer.....
Judgment:
ORDER

R.K. Tankha, J.

1. The petitioner by this petition under Article 226 of the Constitution seeks to challenge an order of assessment of sales tax passed by the Sales Tax Officer, Chhindwara Circle, on 23rd April, 1960. The period for which the tax was assessed by this order is from 1st October, 1953, to 26th December, 1968. The sales assessed relate to manganese ore raised from the mines of the petitioner which are situated in Balaghat District of Madhya Pradesh and Nagpur District of Maharashtra. But as regards sales of manganese ore raised from the mines in Nagpur District, the period covered is up to 31st October, 1956, i.e., the sales subsequent to this date of manganese ore raised from the mines of Nagpur District have not been included in the assessment. The Sales Tax Officer determined the turnover in a lump sum at Rs. 10,42,153.75. On this turnover the petitioner was assessed to Rs. 31,580 as tax and a sum of Rs. 5,000 was imposed as penalty for failing to apply for registration. The petitioner filed appeals against the order of assessment which were dismissed inlimine, because tax was not deposited as required by the Rules. Thereafter, the present petition was filed for challenging the assessment.

2. Before 1st November, 1956, Balaghat and Nagpur Districts were both in the erstwhile State of Madhya Pradesh. The new States of Madhya Pradesh and Bombay (now Maharashtra) were constituted by the States Reorganisation Act, 1956, which came into force on 1st November, 1956. Nagpur District is now included in the State of Maharashtra, whereas Balaghat District is in the State of Madhya Pradesh. The relevant sales tax law for the entire period of assessment is the Central Provinces and Berar Sales Tax Act, 1947. The petitioner did not register himself as a dealer before 1958. He was not assessed to any tax before the coming into force of the States Reorganisation Act. The petitioner applied for registration as a dealer sometime in 1958 and was registered as a dealer on 27th December, 1958, by the Sales Tax Officer, Chhindwara, exercising jurisdiction over Balaghat, and Chhindwara Districts. His principal place of business in the application for registration as a dealer was shown to be Katangjhiri in Balaghat District. Katangjhiri is probably the place where the mines of the petitioner in Balaghat District are situated. The State of Madhya Pradesh claimed to assess and recover the tax for a period prior to 1st November, 1956, under Section 78 of the States Reorganisation Act. The assessment for the entire period from 1st October, 1953, to 26th December, 1958, was made under Section 11(5) of the Central Provinces Sales Tax Act, for which notice was issued to the petitioner on 18th July, 1959.

3. When the petition first came up before this court (Dixit, C.J., and Bhave, J.), one of the contentions raised was that Section 78 of the States Reorganisation Act was not applicable in the present case. It was argued that Section 78 conferred jurisdiction to recover tax of a period prior to its commencement only when the tax due could be called arrears of tax and as sales tax becomes due and can be said to be in arrears only when an assessment is made, there were no arrears against the petitioner on 1st November, 1956, to which Section 78 could apply, as no assessment of tax had till then been made. This argument was accepted by this court and, as the assessment made by the Sales Tax Officer was a composite assessment covering periods prior to and subsequent to the States Reorganisation Act, the entire assessment was quashed by an order passed on 12th September, 1967. The State of Madhya Pradesh went up in appeal to the Supreme Court against this order. The Supreme Court did not agree with this court on the meaning of the word 'arrears' in Section 78 and it was held that under the scheme of sales tax laws taxes become due the moment a dealer makes either purchases or sales which are subject to taxation, although the tax liability cannot be enforced till the quantification is effected by assessment proceedings. In this view of the matter, the order of 12th September, 1967, was set aside and the petition was remanded for redeciding the same.

4. After remand, the petition first came up for hearing before a Division Bench of this Court (Singh and Malik, JJ.). The Division Bench referred the petition to a Fail Bench as the contentions raised before it required reconsideration of the construction placed on Section 11(5) of the Central Provinces Sales Tax Act by another Division Bench (Dixit, C. J., and Pandey, J ) in Battulal v. Commissioner of Sales Tax 1962 M.P.L.J. 915. This is how the petition came up before us.

5. The first contention raised by the learned counsel for the petitioner before us is that the Sales Tax Officer, Chbindwara, had no jurisdiction to assess the tax for a period prior to the coming into force of the States Reorganisation Act, i.e., 1st November, 1P56. It is argued that the right to recover arrears for a period prior to 1st November, 1956, is given under Section 78 of this Act to the successor State in whose territories the place of assessment of tax is included. Reference in this connection was made to Rule 2(c) of the Central Provinces and Berar Sales Tax Rules, 1947, which defines 'appropriate Sales Tax Officer' to mean the Sales Tax Officer of the circle in which the dealer's place of business is situated, or if the dealer has more than one place of business in the State, the Sales Tax Officer of the circle in which his head office or principal place of business is situated. It is farther argued that the petitioner's principal place of business before 1st November, 1956, was situated at Nagpur and the Sales Tax Officer, Nagpur, was then the appropriate Sales Tax Officer for him and, therefore, the place of assessment within the meaning of Section 78 of the States Reorganisation Act must be held to be Nagpur and the State of Maharashtra mast be held to be the successor State under that section having jurisdiction to assess and recover the sales tax due for any period prior to 1st November, 1956.

6. Section 78 of the States Reorganisation Act reads as follows:

'Arrears of taxes.--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.

7. As held by the Supreme Court in this case, Section 78 not only deals with the right to recover arrears of sales tax assessed prior to 1st November, 1956, but also arrears of tax due in respect of sales taking place before that date even though no assessment of tax had till then been made. The right to recover all arrears of sales tax under this section belongs to the successor State in whose territories the place of assessment is included. There is no difficulty in locating the place of assessment when arrears relate to the tax already assessed. But what is the place of assessment when the arrears relate to sales tax which was yet to be assessed on 1st November, 1956, when the States Reorganisation Act came into force? In our opinion, place of assessment in such a case must refer to the place where the tax could have been assessed on 31st October, 1956, and the successor State in whose territories that place is included on 1st November, 1956, will have the right to recover the arrears. It also appears to us that if a dealer has more than one place of business, the appropriate Sales Tax Officer for him for assessment of sales tax under the Central Provinces Sales Tax Act will be the Sales Tax Officer of the circle where his head office or principal place of business is situated and, therefore, the place of head office or principal place of business will be the piace of assessment for such a dealer. But the difficulty lies in accepting the contention that at the relevant time the petitioner's principal place of business was situated at Nagpur. The petitioner did not challenge the jurisdiction of the Sales Tax Officer, Chhindwara, in the assessment proceedings and, therefore, no inquiry was made and no finding was recorded by the Sales Tax Officer on the question of location of me principal place of business of the petitioner on 31st October, 1956. Even in the petition filed, before us there is only a general statement that the principal place of business of the petitioner is situated at Nagpur in the State of Maharashtra and there is no specific allegation that this was the position on 31st October, 1956. No material has been placed before us to show that the petitioner's head office or principal piace of business before 1st November, 1956, was at Nagpur. As the petitioner did not challenge the jurisdiction of the Sales Tax Officer, Cohmdwara, in the proceedings for assessment and as lite objection to jurisdiction depends upon an inquiry regarding the question of fact as to where the petitioner's principal place of business was located at the relevant time, the burden in these proceedings under Article 226 must lots on him to allege and prove the necessary facts which will lead us to hold that the order of assessment was without jurisdiction. There is neither any clear allegation in the petition nor any proof whatsoever mat me petitioner's head office or principal place of business at the relevant time was in a place which is included in the State of Maharashtra. We are, therefore, unable to hold that the State of Maharashtra and not the State of Madhya Pradesh is the successor State as regards the petitioner under Section 78 of the States Reorganisation Act for recovery of arrears of sales tax. The petitioner's challenge to the jurisdiction of the Sales Tax Officer, Chhindwara, based on the above provision, thus fails.

8. It is next contended that by the Madhya Pradesh Adaptation of Laws (State and Concurrent Subjects) (Second Amendment) Order, 1957, made by the Government of Madhya Pradesh, which was deemed to come into force on 1st November, 1956, a new Section 11-C was inserted in the Central Provinces Sales Tax Act which limited the jurisdiction of the State of Madhya Pradesh to assess the amount of tax due from a dealer for any period prior to 1st day of November, 1956, 'to the sales or purchases made by such dealer within the Mahakoshal region during such period' and, therefore, tax in respect of sales taking place in Nagpur District prior to 1st November, 1950, could not be assessed by the State of Madhya Pradesh. It is pointed out that a similar amendment was made by the State of Maharashtra in the Central Provinces Sales Tax Act by a similar Adaptation Order.

9. As a result of the States Reorganisation Act, the then existing State of Madhya Pradesh was divided into two parts. Broadly speaking, the Vidarbha region of the. State was included in the new State of Bombay (now State of Maharashtra) and the Mahakoshal region was included in the new State of Madhya Pradesh. The Nagpur District, which was in Vidarbha, is now in the State of Maharashtra. Apportionment of assets and liabilities of the defunct State of Madhya Pradesh was dealt with in Part VII of the Act in which occurs Section 78 (earlier quoted by us) which deals with apportionment of arrears of taxes. As already seen, the right to recover arrears of sales tax under this section is given to the successor State in whose territories the place of assessment is included. Section 120 of the States Reorganisation Act conferred power on the appropriate Governments to adapt laws. This section reads as follows:

Power to adapt laws.--For the purpose of facilitating the application of any law in relation to any of the States or Union territories formed or territorially altered by the provisions of Part II, the appropriate Government may, before the expiration, of one year from the appointed day, by order make such adaptations and modifications of the law, whether by way of repeal or amendment, as may be necessary or expedient, and thereupon every such law shall have effect subject to the adaptations and modifications so made until altered, repealed or amended by a competent legislature or other competent authority.

Explanation.--...

In exercise of the power conferred by this section, the Government of Madhya Pradesh inserted in the Central Provinces Sales Tax Act a new Section 11-C as follows:

Power of Commissioner to assess tax due prior to 1st November, 1956.--Where the amount of the tax due from a dealer for any period prior to the 1st day of November, 1956, has not been assessed or any turnover has escaped assessment then notwithstanding the reorganisation of States under the States Reorganisation Act, 1956, it shall be competent to the Commissioner to assess or reassess the amount of tax due in accordance wish the relevant provisions of this Act, in respect of the sales or purchases made by such dealer within the Mahakoshal region during such period.

Similarly, the Government of Bombay, by an Adaptation Order, inserted in the Central provinces Sales Tax Act a new Section 13-A, which is as under:

Where the amount of the tax due from a dealer for any period prior to the 1st day of November, 1956, has not been assessed or any turnover has escaped assessment then notwithstanding the reorganisation of States under the States Reorganisation Act, 1956, it shall be competent to the Commissioner to assess or reassess the amount of tax due in accordance with the relevant provisions of this Act, in respect of the sales or purchases made by such dealer within the Vidarbha region during such period.

10. The power conferred by Section 120 of the States Reorganisation Act is a power of adaptation 'for the purpose of facilitating the application, of any law'. The object behind the section is to enable the appropriate Governments to bring the existing laws in line with the changes brought about by the reorganisation of States. The power of adaptation cannot be construed to enable any Government to make a change in any law which may go against any specific provision made in the States Reorganisation Act. In other words, the power of adaptation has to be construed and exercised consistent with the provisions of the States Reorganisation Act. Therefore, it was not open either to the State of Madhya Pradesh or the State of Bombay to make such adaptations in the Central Provinces Sales Tax Act which may go against the provisions of Section 78 of the States Reorganisation Act. Section 11-C inserted by the Government of Madhya Pradesh and the corresponding Section 13-A inserted by the Government of Bombay in the Central Provinces Sales Tax Act must, therefore, be construed consistent with the right of a successor State to recover arrears of tax conferred by Section 78 of the States Reorganisation Act. In this view of the matter, the argument of the learned counsel for the petitioner that because of Section 11-C the State of Madhya Pradesh cannot recover arrears of sales tax of a period prior to 1st November, 1956, in respect of sales taking place in Nagpur District, even though it be the successor State under Section 78 of the States Reorganisation Act, must be rejected.

11. Lastly, it is contended that assessment of tax for a part of the period was barred by limitation under Section 11(5) of the Central Provinces Sales Tax Act, and that as the assessment was a composite assessment, the entire assessment must be quashed. The notice calling upon the petitioner to show cause as to why be should not be assessed for the period from 1st October, 1953, to 26th December, 1958, was issued on 18th July, 1959. The argument of the learned counsel is that power under Section 11(5) can be invoked only for the quarter or quarters which are within three years from the date of the notice issued to the petitioner and that limitation is to be reckoned for each quarter separately. The learned counsel challenged the correctness of the contrary view taken in Battulal v. Commissioner of Sales Tax 1962 M.P.L.J. 995.

12. Under the scheme of the Central Provinces Sales Tax Act incidence of tax falls on all sales effected after the commencement of the Act by a dealer whose turnover during the year or period specified in Sub-sections (1) and (2) of Section 4 exceeds the limit specified in Sub-section (5) of that section. Tax is, however, levied on a dealer's 'taxable turnover' at the rate or rates specified in Section 5, 'Turnover' is defined by Section 2(j) to mean 'the aggregate of the amounts of sale prices received or receivable by a dealer in respect of the sale or supply of goods or in respect of the sale or supply of goods in the carrying out of any contract, effected or made during the prescribed period'. 'Taxable turnover' is defined by the same provision to mean that part of a dealer's turnover 'during such period' which remains after making therefrom certain deductions. The words 'such period' in the definition of taxable turnover clearly refer to 'the prescribed period' in the definition of turnover. The word 'prescribed' as defined by Section 2(e) means prescribed by the Rules made under the Act. Therefore, turnover of a dealer on which tax is levied by Section 5 refers to turnover for a period which is prescribed by the Rules. In other words, it is the period prescribed by the Rules for the definition of turnover which is the unit of assessment under the Act. Before turning to the Rules for finding out what is the period prescribed, it will be convenient to refer first to the other relevant provisions of the Act. Section 8 of the Act requires that no dealer shall, while being liable to pay tax under the Act, carry on business as a dealer unless he has been registered as such and possesses a registration certificate. Section 10 provides that every dealer who may be required by the Commissioner by notice served in the prescribed manner and every registered dealer shall furnish such returns by such dates and to such authority as may be prescribed. Section 11 of the Act deals with assessment of tax and Section 11-A with assessment of turnover escaping assessment. These Sections read as follows:

11. (1) If the Commissioner is satisfied that the returns furnished by a dealer in respect of any period are correct and complete, he shall assess the dealer on them.

(2) If the Commissioner is not so satisfied he shall serve the dealer with a notice appointing a place and day and directing him---

(i) to appear in person or by an agent entitled to appear in accordance with the provisions of Section 11-B;

(ii) to produce evidence or have it produced in support of the returns; or

(iii) to produce or cause to be produced any accounts, registers, cash memoranda or other documents as may be considered necessary by the Commissioner for the purpose.

(3) After hearing the dealer or his agent and examining the evidence produced in compliance with the requirements of Clause (ii) or Clause (iii) of Sub-section (2) and such further evidence as the Commissioner may require, the Commissioner shall assess him to tax.

(4) If a registered dealer--

(a) does not furnish returns in respect of any period by the prescribed date, or

(b) having furnished such returns fails to comply with any of the terms of a notice issued under Sub-section (2), or

(c) has not regularly employed any method of accounting, or if the method employed is such that, in the opinion of the Commissioner, assessment cannot properly be made on the basis thereof, the Commissioner shall in the prescribed manner assess the dealer to the best of his judgment:

Provided that he shall not so assess him in respect of the default specified in Clause (a) unless the dealer has been first given a reasonable opportunity of being heard.

(5) If upon information which has come into his possession, the Commissioner is satisfied that any dealer has been liable to pay tax under this Act in respect of any period and has nevertheless wilfully failed to apply for registration, the Commissioner shall, at any time within three calendar years from the expiry of such period, after giving the dealer a reasonable opportunity of being heard, proceed in such manner as may be prescribed to assess to the best of his judgment the amount of tax due from the dealer in respect, of such period and all subsequent periods; and the Commissioner may direct that the dealer shall pay by way of penalty in addition to the amount of tax so assessed a sum not exceeding one and a half times that amount.... 11-A. (1) If in consequence of any information which has come into his possession, the Commissioner is satisfied that any turnover of a dealer during any period has been under-assessed or has escaped assessment or assessed at a lower rate or any deduction has been wrongly made therefrom, the Commissioner may, at any time within three calendar years from the expiry of such period, after giving the dealer a reasonable opportunity of being heard and after making such enquiry as he considers necessary, proceed in such manner as may be prescribed to reassess or assess, as the case may be, the tax payable on any such turnover; and the Commissioner may direct that the dealer shall pay, by way of penalty in addition to the amount of tax so assessed, a sum not exceeding that amount.

(2) The assessment or reassessment made under Sub-section (1) shall be at the rate at which it would have been made, had there been no underassessment or escapement.

13. Now, coming to the Rules, Rule 19 requires every registered dealer to furnish quarterly returns in form IV within one calendar month from the expiry of the quarter. In form IV the quarter for which return is filed has to be specified. A dealer other than a registered dealer can be required by a notice under Rule 22 in form VI to furnish a return or returns 'in respect of such period or periods as may be specified in the notice'. Notice in form VI calls upon an unregistered dealer to submit a return in form IV for the quarter or quarters specified in the notice. It is clear by reading Rule 22 and the form of notice and return, i.e., forms VI and IV, that the words 'such period or periods' In the said rule refer to quarter or quarters specified in the notice. Rule 32 then deals with assessment, reassessment and imposition of penalty. It provides that when a dealer being liable to tax has wilfully failed to apply for registration or where the turnover of a dealer during any period has escaped assessment, a notice in form XII will be issued by the assessing authority. A look at form XII shows that this notice has to specify the period or periods for which default has been made, Rule 34 requires that an assessment, order shall be in form XIV.

14. A perusal of the relevant rules shows that they do not in terms provide as to what is 'the prescribed period' for the definition of turnover. However, the provisions made in the rules that a registered dealer has to furnish returns of the turnover for each quarter and an unregistered dealer can be similarly called upon to furnish returns for a quarter or quarters go to show that quarter is the period prescribed by the rules by necessary implication for the definition of 'turnover' in the Act. The words 'prescribed period' and 'such period' occurring in the definitions of 'turnover' and 'taxable turnover' respectively thus mean a quarter. As tax is levied by Section 5 on a dealer's taxable turnover and as 'taxable turnover' means taxable turnover for a quarter, it is quite clear that a quarter is a unit of assessment under the Act,

15. Let, us now revert to Section 11 of the Act. Section .11(1) provides that if the Commissioner is satisfied that the returns furnished by a dealer in respect of 'any period' are correct and complete he shall assess the dealer on them. We have already seen that a registered dealer has to furnish quarterly returns and an unregistered deafer can be called upon by notice to furnish returns for a quarter or quarters. Section 11(1) applies to any dealer, whether registered or unregistered, and it is quite clear that the words 'any period' occurring therein must mean a quarter. Section 11(4) deals with a case where a registered dealer has not furnished returns in respect of 'any period'. The words 'any period' here must also mean a quarter, for a registered dealer has to famish returns for each quarter.

16. Then comes Section 11(5). It refers to the case of a dealer who has been liable to pay tax under the Act in respect of 'any period' and has nevertheless wilfully failed to apply for registration. What is the meaning of 'any period' in Section 11(5)? A dealer is liable to pay tax if his turnover daring the year specified in Section 4(1) and (2) exceeds the maximum prescribed by Section 4(5), If the prescribed maximum is exceeded, liability under Section 4(1) arises from the commencement of the Act and under Section 4(2) after expiry of two months. On a dealer liable to pay tax under Section 4, tax is levied by Section 5 on his taxable turnover, which, as already seen, means taxable turnover for a quarter. The words 'liable to pay tax under this Act in respect of any period' must, therefore, refer to any quarter for which the dealer has to pay the tax under Section 5. Further, the period of limitation prescribed by the words 'within three calendar years from the expiry of such period' in Section 11(5) must mean within three calendar years from the expiry of such quarter for which the dealer is liable to pay tax, for the words 'such period' here clearly refer to 'any period' occurring earlier. Again, as in the legislative enactments words in the singular include the plural, the word 'period' in Section 11(5) will mean period or periods, i. e., quarter or quarters. The limitation o! three years prescribed by Section 11 (5) for assessing a dealer who, though liable to pay tax in respect of any period, has failed to apply for registration, has, therefore, to be computed for each quarter separately and not for the entire period for which he has been liable to pay tax taken as a whole.

17. The above construction of Section 11(5) is strongly supported by the case of Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax [1964] 51 I.T.R. 557 (S.C.), where the Supreme Court construed similar words in Section 11-A. This section authorises the Commissioner, if he is satisfied that any turnover of a dealer during 'any period' has been under-assessed or has escaped assessment, etc., to proceed to reassess or assess the dealer at any time 'within three calendar years from the expiry of such period'. In construing this section in Ghanshyamdas's case1 the Supreme Court said:

As the unit of assessment is a quarter, the period in Section 11-A can only mean a quarter.

Ghanshyamdas's case [1964] 51 I.T.R. 557 (S.C.) was no doubt a case of a registered dealer, but Section 11-A makes no distinction between a registered dealer and an unregistered dealer on the question of limitation for assessing turnover escaping assessment. Further, we have already noticed that quarter is a unit of assessment for all dealers, whether they be registered or unregistered. Therefore, the fact that Ghanshyamdas's case [1964] 51 I.T.R. 557 (S.C.) was a case of a registered dealer is not a relevant distinction for the matter under consideration. The view taken in Ghanshyamdas's case [1964] 51 I.T.R. 557 (S.C.) was reaffirmed in Anandji Haridas & Co. v. S.P. Kushare A.I.R. 1968 S.C. 505. These cases indicate that the word 'period' occurring in the context of assessment refers to a quarter which is the unit of assessment under the Act and, therefore, they support the contention adopted by us of Section 11(5) that the words 'any period' occurring therein mean a quarter for which the dealer has been liable to pay tax.

18. There is yet another consideration in support of this construction. If a dealer who though liable to pay tax wilfully fails to apply for registration and does not file any return, his turnover for the period for which he is liable to pay tax escapes assessment. The case of such a dealer can, therefore, fall both under Section 11(5) and Section 11-A. If the word 'period' in Section 11(5) is construed to mean the whole period during which the dealer has been liable to pay tax and not a quarter or quarters taken separately, longer period of limitation would be available if action is taken under this provision, and a shorter period if action is taken under Section 11-A. This will give rise to the vice of discrimination and will make Section 11(5) invalid on the same reasoning on which the Supreme Court in Anandji Haridas & Co. v. S.P. Kushare A.I.R. 1968 S.C. 565 held Section 11(4)(a) to be invalid after the Bombay Sales Tax Laws (Validating Provisions and Amendment) Act, 1959, which made the period of limitation provided in Section 11-A inapplicable to an assessment under Section 11(4)(a). The minority judgment in the case of Anandji Haridas & Co. A.I.R. 1968 S.C. 565 holds that Section 11-A applies only to unregistered dealers; the majority judgment holds that it applies to both registered and unregistered dealers. There can be no doubt, therefore, that Section 11-A applies to unregistered dealers. To avoid any discrimination between the dealers who are proceeded against under Section 10(5) and the dealers proceeded under Section 11-A the words 'any period' occurring in these Sections must be given the same meaning so that the same period of limitation may be available for assessment, whether the action be taken under Section 10(5) or under Section 11-A. As already seen, the meaning of the words 'any period' in Section 11-A has been settled by the Supreme Court in the cases of Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax [1964] 51 I.T.R. 557 (S.C.) and Anandji Haridas & Co. v. S.P. Kushare A.I.R. 1968 S.C. 565, where it has been held that these words mean a quarter on the reasoning that a quarter is a unit of assessment and this meaning must also be adopted for construing these words in Section 10(5).

19. In Battulal v. Commissioner of Sales Tax 1962 M.P.L.J. 915, it was held that 'period' in Section 10(5) meant the whole period during which a dealer being liable to pay tax had wilfully failed to apply for registration and that it did not refer to a quarter. The learned Judges observed that recourse to the Rules could not be taken for construing the word 'period' which was not defined by the Act. It was also observed that the Act nowhere provided any fixed period as unit of assessment. Support was also taken from the decision of the Supreme Court in State of Orissa v. Chakobhai Ghelabhai & Co. [1960] U S.T.C. 716 (S.C.) Battulal's case M.P.L.J. 915 was followed in L.J. Patel & Co. v. Commissioner of Sales Tax, M.P. 1963 M.P.L.J. 802 and Ghanshyamdas v. Sales Tax Officer, Durg [1964] 15 S.T.C. 128. Attention of the learned Judges was not drawn in Battulal's case 1962 M.P.L.J. 915 to the definitions of turnover and taxable turnover and Section 5 of the Act, which show that the tax is levied on a dealer on his taxable turnover which means the turnover calculated after making certain deductions for a 'prescribed period', i.e., a period prescribed by the Rules. Reference to the Rules is, therefore, inevitable in construing for what period a person is liable to pay tax. The legal position that 'quarter' is a unit of assessment under the Act has been settled by the Supreme Court in Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax [1964] 61 I.T.R. 557 (S.C.). We have carefully gone through the case of State of Orissa v. Chakobhai Ghelabhai & Co. A.I.R. 1961 S.C. 284, and we do not find anything in it which may support the conclusion reached in Battulal's case8. In Chakobhai Ghelabhai & Co.'s case A.I.R. 1961 S.C. 284, a notice under Section 12(5) of the Orissa Act [corresponding to Section 11(5) of our Act] was issued for several quarters and assessment was made for each quarter separately and it was argued that this was illegal. In rejecting this contention their Lordships observed:

We are unable to accept this contention as correct. Section 12(5) talks of a period, and the period may consist of more than, one quarter. The return has, however, to be submitted in form IV which read with Rule 20 of the Orissa Sales Tax Rules, 1947, requires the assessee to furnish details of his turnover for each quarter. The assessment must, therefore, be made on the taxable turnover of each quarter.

All that these observations mean is that 'period' referred to in Section 12(5) of the Orissa Act may be a quarter or quarters and a single notice under that provision may be issued for several quarters, but. assessment has to be made for each quarter separately. These observations do not support the view that the period consisting of several quarters has to be taken as a continuous whole for reckoning limitation. Since singular includes plural, the word 'period' must mean 'period' or 'periods' and, therefore, quarter or quarters and this is what, is meant by the observations of the Supreme Court that 'the period may consist of more than one quarter'. Properly understood, these observations do not support the conclusion reached in Battulal's case 1962 M.P.L.J. 915, rather they support the conclusion reached by us. Further, in Battulal's case 1962 M.P.L.J. 915 it was not noticed that if the words 'any period' in Section 11(5) are construed to mean a continuous period and not a quarter or quarters taken separately it will give rise to discrimination between unregistered dealers proceeded against under this section and those proceeded under Section 11-A. in our opinion, Battulal's case 1962 M.P.L.J. 915 and the other cases in which it was followed were wrongly decided. The conclusion reached by us is in accord with the view taken in Commercial Credit Corporation Ltd. v. State (1965) 67 Bom.L.R. 138, where a Division Bench of the Bombay High Court, dissenting from the view taken in Battulal's case 1962 M.P.L.J. 915, held that the provisions of Section 11(5) can be invoked only for the period or periods of a quarter or quarters which are within three years from the date of the notice issued under this section.

20. We were also referred to the case of State of Orissa v. Kundanlal 1974 Tax, L.R. 1603, a case decided by a Division Bench of the Orissa High Court on the construction of Section 12(8) of the Orissa Act, which corresponds to Section 11-A of our Act. The learned Judges seem to proceed on the view that the Supreme Court in Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax [1964] 51 I.T.R. 557 (S.C.) did not hold that period in Section 11-A of our Act means a quarter and that limitation for each quarter has to be reckoned separately. We respectfully differ. Not only in Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax2, but also in Anandji Haridas & Co. v. S.P. Kushare A.I.R. 1968 S.C. 565, the Supreme Court clearly held that as the unit of assessment under the Central Provinces Sales Tax Act is a quarter, the period in Section 11-A can only mean a quarter, and that limitation of three years has to be computed for each quarter separately.

21. We have already stated that the notice under Section 11(5) was issued on 18th July, 1969, and the period covered by the assessment order is from 1st October, 1953, to 26th December, 1958. The Sales Tax Officer acted in excess of Ms authority in assessing the tax for the quarters beyond three years from the date of issue o! notice. As the assessment is a composite assessment covering quarters within and beyond three years from the issue of notice without showing separately assessment of tax for each quarto, the entire assessment has to be quashed leaving it to the respondents to make the assessment separately for the quarters not barred under Section 11(5). This was the course adopted by the Supreme Court in Ghanshyamdas's case [1964] 51 I.T.R. 557 (S.C.).

22. There are some other points which the petitioner has raised in his petition for challenging the assessment, but as they have been given up before us, we need not say anything on those points.

23. The petition is allowed. The assessment order is quashed. The respondents will be at liberty to assess the tax separately for the quarters not barred under Section 11(5). There shall be no order as to costs of this petition. The security deposit shall be refunded to the petitioner.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //