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Central India Motors Vs. C.L. Sharma, Assistant Commissioner of Sales Tax, Indore Region and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax;Constitution
CourtMadhya Pradesh High Court
Decided On
Case Number Miscellaneous Petition No. 495 of 1971
Judge
Reported in1980MPLJ525; [1980]46STC379(MP)
AppellantCentral India Motors
RespondentC.L. Sharma, Assistant Commissioner of Sales Tax, Indore Region and anr.
Appellant Advocate G.M. Chaphekar, Adv.
Respondent Advocate S.L. Garg, Adv.-General and ; M.V. Tamaskar, Government Adv.
DispositionPetition dismissed
Cases ReferredBhopal v. Ramchand
Excerpt:
.....on him to prove his innocence. conviction of appellant is liable to be set aside. - for this reason, there is no dispute that in case retrospective effect can be given to the amendment made in section 17, in the manner provided in the amending act, so as to treat the amended section 17 as forming part of the principal act from the commencement thereof, the petitioner would clearly be liable to imposition of penalty. this decision clearly shows that article 20 applies only to offences properly so called, i. a heavier penalty for failure to pay tax would not have attracted the application of the corresponding article of the constitution of the united states :see banker's trust co. , clearly stated at the outset that imposition of penalty under the income-tax act is not a punishment..........indicates that it contains a prohibition only against retrospective criminal law since the word 'offence' used therein is significant. the word 'penalty' also used later in clause (1) of article 20 has to be read along with the word 'offence' occurring therein. in short, the prohibition contained in clause (1) of article 20 is against making ex post facto criminal law, i.e., making an act a crime for the first time and then making that law retrospective and the infliction of penalty greater than that which was provided under the law which was in force when the offence was committed. this provision does not suggest that imposition of a penalty for an act or omission which does not amount to an offence also attracts the prohibition contained therein. the real question) therefore,.....
Judgment:

J.S. Verma, J.

1. The petitioner, a partnership firm, carries on business in automobiles, spare parts and other goods at Indore and is a registered dealer under the M. P. General Sales Tax Act, 1958 (hereinafter called the Act). For the period 1st April, 1967, to 31st March, 1968, the petitioner-firm filed four quarterly returns; but all these returns were admittedly filed late. The petitioner was accordingly given a notice (annexure A) dated 25th September, 1970, requiring the petitioner, inter alia, to show cause why penalty under Sub-section (3) of Section 17 of the Act should not be imposed on the petitioner. The petitioner then filed a reply (annexure B) showing cause against imposition of penalty, in which it was stated, relying on the decision of this Court in Pyarelal v. State of M.P. 1971 M.P.L.J. 249, that mere late filing of return did not render the dealer liable for penalty under Section 17(3) of the Act. The assessment order in the present case was passed on 31st March, 1971, in which there was no decision relating to imposition of penalty.

2. In the meantime, on 6th May, 1971, the M. P. General Sales Tax (Amendment and Validation) Act, 1971 (No. 13 of 1971), hereinafter called the amending Act, came into force by which Section 17 of the principal Act was amended by addition of Sub-section (1-A) and substitution of a new Sub-section (3) therein. This amending Act was given retrospective effect and it was expressly stated that Section 17, amended in this manner, was to be deemed to have formed part of the principal Act from the commencement thereof. Obviously, the amendment of Section 17 by the amending Act in this manner was made to counteract the decision of this Court in the Pyarelal's case 1971 M.P.L.J. 249. There is no dispute that by virtue of the amended Section 17 a dealer is liable for imposition of penalty for mere late filing of the return. For this reason, there is no dispute that in case retrospective effect can be given to the amendment made in Section 17, in the manner provided in the amending Act, so as to treat the amended Section 17 as forming part of the principal Act from the commencement thereof, the petitioner would clearly be liable to imposition of penalty.

3. Acting on the basis of the aforesaid amendment in Section 17 of the principal Act, the Assistant Commissioner of Sales Tax (respondent No. 1) passed an order (annexure C) dated 29th July, 1971, imposing a total penalty of Rs. 56,225 under Section 17(3) of the Act on the petitioner.

4. By this petition under Article 226 of the Constitution the petitioner challenges the imposition of penalty on it by the impugned order (annexure C) dated 29th July, 1971, and seeks a writ to quash the same.

5. The only contention of Shri G. M. Chaphekar, the learned counsel for the petitioner, is that the amendment made in the above manner in Section 17 of the principal Act by the Amending Act No. 13 of 1971 is ultra vires Article 20 of the Constitution. The argument is that this retrospective amendment in the principal Act violates Article 20(1) of the Constitution by providing a penalty for an act which did not attract penalty when it was done. The question before us is whether this contention alone advanced in support of this petition is tenable.

6. Article 20(1) of the Constitution with which alone we are concerned reads as under :

20. (1) No person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.

A plain reading of the above constitutional provision indicates that it contains a prohibition only against retrospective criminal law since the word 'offence' used therein is significant. The word 'penalty' also used later in Clause (1) of Article 20 has to be read along with the word 'offence' occurring therein. In short, the prohibition contained in Clause (1) of Article 20 is against making ex post facto criminal law, i.e., making an act a crime for the first time and then making that law retrospective and the infliction of penalty greater than that which was provided under the law which was in force when the offence was committed. This provision does not suggest that imposition of a penalty for an act or omission which does not amount to an offence also attracts the prohibition contained therein. The real question) therefore, is whether the imposition of penalty under a fiscal law with which we are concerned is hit by the prohibition contained in Article 20(1) of the Constitution.

7. The word 'offence' not having been defined in the Constitution, the definition of that word given in Section 3(38) of the General Clauses Act has to be applied in order to find out its meaning occurring in Clause (1) of Article 20 of the Constitution. The General Clauses Act defines 'offence' to mean 'any act or omission made punishable by any law for the time being in force'. The word 'offence' is similarly defined in Section 2(n) of the Code of Criminal Procedure. In Jawala Ram v. State of Pepsu A.I.R. 1962 S.C. 1246, it was held that the unauthorised use of canal water is not an 'offence' and the imposition of enhanced water charge under the statutory rules is not a 'penalty' for such an 'offence', since there is no law forbidding the unauthorised user of water. Dealing with the applicability of Article 20 of the Constitution in that context, it was held that the word 'offence' in the several clauses of Article 20 must be understood to convey the meaning given to it in the definition contained in the General Clauses Act. This decision clearly shows that Article 20 applies only to offences properly so called, i.e., criminal offences and not to imposition of any penalty or an extra charge for any unauthorised act which is not forbidden by any law for the time being in force. The imposition of penalty under a fiscal law requiring payment of an extra sum of money is in reality a requirement of an additional tax imposed upon a person in view of his dishonesty and contumacious conduct: see C. A. Abraham v. Income-tax Officer [1961] 41 I.T.R. 425 at 430 (S.C.) and Commissioner of Income-tax v. Bhikaji Dadabhai & Co. [1961] 42 I.T.R. 123 at 128 (S.C.) The nature of penalty which is in reality only the requirement to pay additional tax under a fiscal law, as indicated by the Supreme Court itself, shows that the retrospective operation of a statutory provision imposing penalty under a fiscal law cannot attract the prohibition contained in Clause (1) of Article 20 of the Constitution.

8. In P. Ummali Umma v. Inspecting Assistant Commissioner of Income-tax [1967] 64 I.T.R. 669, K. K. Mathew, J. (as he then was), negatived a similar argument of violation of Article 20(1) of the Constitution with reference to the amendment made in Section 271 of the Income-tax Act, 1961, providing for imposition of penalty under that Act. While repelling the contention, Mathew, J., observed as follows: ;

No conviction for any offence is involved in the imposition of a penalty. Article 20(1) of the Constitution will have application only when a person is subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence. This would indicate that commission of an offence and a conviction thereof are necessary in order that the provisions of the article may be attracted. A question has been raised in some cases as to whether the prohibition extends to penalties other than punishments awarded in judicial proceedings. No such question will arise if the word 'penalty' is read with the word 'convicted' in the earlier part of the clause. While the first part of the article bars a conviction, the second part relates to the punishment or sentence that may be inflicted upon such conviction. A penalty, therefore, would come within the purview of Article 20(1) only if the earlier part of the clause is attracted, i.e., there must have been a conviction for an offence. Unless there is a conviction, no question of the latter part of the article applying will arise. Although the concealment of the particulars of the income was made an offence under Section 52 of the repealed Act and is also made an offence under Section 277 of the Act, I cannot say that the penalty imposed under Section 28 of the repealed Act or under Section 271 of the Act was or is imposed on the basis that it was or is an offence. For the offence punishment was or is prescribed such as imprisonment, fine or both. The imposition of penalty on the basis of an act or omission by an assessee is not because the act or omission constitutes an offence, but because that act or omission would constitute an attempt at evasion. Therefore penalty is exacted not because an act or omission is an offence but because it is an attempt at evasion of tax on the part of the assessee. Article 20(1) of the Constitution can have no application to a case where a penalty is imposed not as punishment for an offence but for some other collateral purpose. A heavier penalty for failure to pay tax would not have attracted the application of the corresponding article of the Constitution of the United States : see Banker's Trust Co. v. Blodgett 260 U.S. 647. In that case, in answer to the contention that to reach into the past and provide greater punishment than what the law did when the crime was committed incurred the constitutional prohibition of an ex post facto law, the court said :

'The penalty of the statute was not in punishment of a crime, and it is only to such that the constitutional prohibition applies.'So, I take the view that, even assuming that the penalty has been enhanced under the Act, that would not attract the constitutional inhibition of Article 20(1) because the penalty is imposed not as punishment for the commission of an offence, even though the act for which the penalty is imposed is an offence liable to be punished. I, therefore, overrule this contention of the learned Advocate-General.

Similar was the view taken by a Full Bench of the Allahabad High Court in Raghunandan Prasad Mohan Lal v. Income-tax Appellate Tribunal [1970] 75 I.T.R. 741 (F.B.), with respect to penalty proceedings under the Income-tax Act, 1961, and it was held that Article 20 of the Constitution contemplates proceedings of the nature of criminal proceedings and the prosecution in this context means an initiation of proceedings of a criminal nature; and that the penalties imposed under the Income-tax Act cannot be regarded as punishment awarded for an offence. No decision of any court taking the contrary view and holding that Article 20 6f the Constitution is attracted to a provision providing for imposition of penalty under a fiscal law has been cited before us. With respect, we concur with the view taken by the Kerala and Allahabad High Courts which finds support from the above-quoted decision of the Supreme Court pointing out that imposition of penalty under a fiscal law is of the nature of recovery of additional tax only.

9. Shri Chaphekar placed before us certain observations made by a Division Bench of this Court in Commissioner of Income-tax, Bhopal v. Ramchand 1973 M.P.L.J. 806. These observations were made while dealing with an amendment made in Section 271 of the Income-tax Act, 1961, relating to imposition of penalty for concealment of income. The relevant observations are contained in paras 9 and 10 of that decision. The relevant extract therefrom is as under :

Although imposition of penalty under the Income-tax Act is not a punishment for any offence so as to attract Article 20 of the Constitution, in our view, the principle underlying Article 20 would be applicable to this case, in the absence of any express provision to the contrary.

The above extract itself shows that the Division Bench, speaking through Raina, J., clearly stated at the outset that imposition of penalty under the Income-tax Act is not a punishment for any offence so as to attract Article 20 of the Constitution. However, Raina, J., then proceeded to say that the principle underlying Article 20 would be applicable to the case in the absence of any express provision to the contrary. In our opinion, these observations of Raina, J., cannot be construed as holding that Article 20 of the Constitution is attracted to a provision imposing penalty under a fiscal law, since the above extract itself commences with an observation to the contrary. The following observation which appears to have been made casually, cannot, therefore, mean that a contrary view was expressed thereafter. At any rate, the last part of the observations contained in the above extract, which are relied on by Shri Chaphekar in support of his contention, were made without examining the question at length in the light of the true nature of penalty being merely an additional tax, even though the Supreme Court decision in the C. A. Abraham's case [1961] 41 I.T.R. 425 (S.C.) was referred by Raina, J., in that decision. We are satisfied that a stray sentence in the conflicting observations made by Raina, J., did not form part of the ratio decidendi of the decision given by the Division Bench so as to bind us. As earlier Stated, neither any principle nor any authority to support this casual observation made at the end of the extract by Raina, J., and relied on by Shri Chaphekar, has been placed before us. As we read the final outcome of Justice Raina's observations, the learned Judge himself had negatived the applicability of Article 20 to such a situation.

10. It follows necessarily that Article 20(1) of the Constitution is not attracted to a provision providing for imposition of penalty in a fiscal law and, therefore, no question arises of its violation by the amending Act (M. P. Act No. 13 of 1971) by which Section 17 of the M. P. General Sales Tax Act, 1958, was amended in the manner aforesaid. The only argument advanced in support of this petition to challenge the vires of the amendment made in Section 17 of the principal Act therefore fails and is rejected.

11. Consequently the petition fails and is dismissed but without any order as to costs. The security amount shall be refunded to the petitioner.


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