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Food Corporation of India Vs. Commissioner of Sales Tax - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 264 of 1980
Judge
Reported in[1983]54STC332(MP)
AppellantFood Corporation of India
RespondentCommissioner of Sales Tax
Appellant AdvocateB.L. Nema, Adv.
Respondent AdvocateM.V. Tamaskar, Adv.
Cases ReferredCommissioner of Sales Tax v. Kanpur Dal and Rice Mills
Excerpt:
.....lapse of five years from the date of assessment was bad in law. this clearly indicates that the appellate authority had wide jurisdiction and the whole process of assessment was open when the appeal was pending before the appellate authority. it was contended that even section 43 indicates that if during the proceedings of an appeal, the commissioner feels satisfied that the assessee has deliberately concealed his turnover or that the return is false, it confers jurisdiction on the appellate authority or the commissioner to impose a penalty. the language of section 43 indicates that this power could only be invoked by the commissioner or the appellate authority in the course of any proceedings under this act and therefore, if the appellate authority in the course of proceedings of the..........the assessment order, an appeal was preferred before the deputy commissioner of sales tax. the appellate authority maintained the order of assessment and penalty imposed under section 17(3). the deputy commissioner in this appeal further came to the conclusion that the total tax levied was rs. 13,44,682 out of which the corporation had deposited rs. 7,71,892 with the returns and thus rs. 5,68,790 had not been paid. the returns, therefore, were considered false and the corporation was noticed to show cause why penalty under section 43 should not be levied. the assessee-corporation represented that there was no mens tea on their part; that this was the second year of assessment of the appellant and the administrative set-up was not properly organised and that it was only after the.....
Judgment:

G.L. Oza, J.

1. This is a reference made by the President, Board of Revenue, Madhya Pradesh, for answering the following questions :

(1) Whether the power to confirm, reduce, enhance or annul the penalty in appeal as provided under Section 38(5) of the State Act includes the power to impose penalty, where it has not been imposed by the assessing authority ?

(2) Whether, under the facts and circumstances of the case, penalty imposed under Section 43(1) read with Section 9(2) of the Central Act was justified?

2. The facts stated in the statement of the case are that the assessee, M/s. Food Corporation of India, Bhopal, were assessed to tax under the Central Sales Tax Act, 1956, for the financial year starting from 1st April, 1967, to 31st March, 1968. Inter-State sales were determined as Rs. 6,38,14,360 and were assessed to tax amounting to Rs. 13,44,682. The first return was delayed by two months and 7 days and, therefore penalty of Rs. 4,000 was imposed by the assessing authority under Section 17(3) of the State Act read with Section 9(2) of the Central Act.

3. Against the assessment order, an appeal was preferred before the Deputy Commissioner of Sales Tax. The appellate authority maintained the order of assessment and penalty imposed under Section 17(3). The Deputy Commissioner in this appeal further came to the conclusion that the total tax levied was Rs. 13,44,682 out of which the Corporation had deposited Rs. 7,71,892 with the returns and thus Rs. 5,68,790 had not been paid. The returns, therefore, were considered false and the Corporation was noticed to show cause why penalty under Section 43 should not be levied. The assessee-Corporation represented that there was no mens tea on their part; that this was the second year of assessment of the appellant and the administrative set-up was not properly organised and that it was only after the accounts were finalised that the Corporation came to know of the short payment. It was also contended that the initiation of penal proceedings after the lapse of five years from the date of assessment was bad in law. The Deputy Commissioner held that under Section 38(5) of the State Act, the appellate authority had power to impose penalty and no time-limit was prescribed in this behalf. He further observed that the Corporation had a big organisation and it was desirable that they should have filed correct returns and credited the correct amount of tax. It was also observed that if there was any mistake in calculation, there was a provision to file revised return but that was not done. He, therefore, held that the Corporation had utilised this amount of Rs. 5,00,000 in their business and thereby saved interest for a period of six to eight years. Mens tea was therefore fully established. The Commissioner computing interest at 6 per cent, held that penalty should be Rs. 1,60,000. However, the Deputy Commissioner felt that an amount of Rs. 1,00,000 will meet the ends of justice and therefore, he imposed this penalty of Rs. 1,00,000 under Section 43 of the State Act read with Section 9(2) of the Central Act. Against this, a second appeal was filed before the Tribunal and the only point raised in the appeal was in respect of penalty of Rs. 1,00,000 imposed under Section 43 of the State Act.

4. It was contended before the Appellate Tribunal that it was the first assessment under the Central Act and as the Corporation was a Government of India undertaking, the rice stock was transferred to the Regional Directors in different States as per directions of the Government of India and the Corporation honestly believed that such transfer did not amount to sale. The Corporation did not recover any sales tax on these transactions and the matter was referred to the Ministry of Law, Government of India and finally they were advised that the transactions amounted to inter-State sales and when this advice was received, the Corporation was of the view that it did not amount to sale and therefore, the accounts were not made.

5. It was also contended before the Tribunal that under Section 38(5) of the State Act, the appellate authority could enhance the penalty but in this case, as no penalty was imposed by the assessing authority, there is no question of enhancement and therefore, jurisdiction under Section 38(5) could not be exercised. The Tribunal repelled the contentions advanced by the Corporation-assessee and dismissed the appeal and thereafter at the instance of the assessee, the Tribunal, i.e., the Board of Revenue, has made this reference for answering the questions mentioned above.

6. The learned counsel appearing for the assessee, Food Corporation of India, contended that under Section 38(5), the appellate authority had jurisdiction to enhance, annul or to reduce the assessment or the penalty but in the present case where no penalty was imposed by the assessing authority, in exercise of jurisdiction under Section 38(5), the appellate authority, i.e., the Deputy Commissioner, could not impose the penalty for the first time. It was, therefore, contended that he had no jurisdiction under Section 38(5) to impose the penalty.

7. It was also contended that under Section 43, the appellate authority could not impose penalty as penalty is part of the assessment itself and it ought to have been completed within 5 years as provided in Section 18(8) and it was, therefore, contended that in this view of the matter also, the answer to question No. (2) could be in favour of the assessee. It was also contended that in the circumstances which resulted in incorrect return submitted by the assessee, the Tribunal should have held that imposition of penalty is not justified. The learned counsel placed reliance on a decision reported in C. A. Abraham v. Income-tax Officer, Kottayam : [1961]41ITR425(SC) , A. Velayutha Raja v. Board of Revenue (C. T.), Madras [1970] 26 STC 176 and Commissioner of Sales Tax, U.P. v. Kanpur Dal and Rice Mills [1970] 25 STC 511.

8. It was also contended by the learned counsel for the assessee that although the Deputy Commissioner while exercising appellate jurisdiction stated in his order that notice was issued for imposition of penalty under Section 43 but the notice was issued in form No. XXVIII which purports to be a form of notice under Section 38 and it indicated that the Deputy Commissioner was purporting to act under Section 38(5).

9. The learned Government Advocate appearing for the State, on the other hand, contended that under Section 38(5), the appellate authority had jurisdiction to confirm, reduce, enhance or annul the assessment and Sub-clause (c) of Clause (5) of Section 38 confers jurisdiction on the appellate authority to pass such orders, as it may deem fit. This clearly indicates that the appellate authority had wide jurisdiction and the whole process of assessment was open when the appeal was pending before the appellate authority. It was contended that even Section 43 indicates that if during the proceedings of an appeal, the Commissioner feels satisfied that the assessee has deliberately concealed his turnover or that the return is false, it confers jurisdiction on the appellate authority or the Commissioner to impose a penalty. The language of Section 43 indicates that this power could only be invoked by the Commissioner or the appellate authority in the course of any proceedings under this Act and therefore, if the appellate authority in the course of proceedings of the appeal felt satisfied that the return was false he could exercise jurisdiction under Section 43 and impose a penalty. It was contended by the learned Government Advocate that when an appeal is pending before the appellate authority and in the proceedings of appeal if jurisdiction is exercised under Section 43, the question of limitation as provided in Section 18 will not be attracted as on appeal being preferred by the assessee, the assessment is open and it is in that process that the jurisdiction is exercised under Section 43. The learned counsel referred to a decision of this Court in Commissioner of Sales Tax, M.P., Indore v. Tansukhdas Madanlal, Rajnandgaon (M.C.C. No. 190 of 1980 decided on 26th February, 1983) [1983] 53 STC 349 and contended that the appellate jurisdiction is wide enough to confer power to impose a penalty.

10. It was also contended that even under Section 38(5) where jurisdiction is conferred on the appellate authority to enhance, confirm or reduce the penalty or the assessment, the jurisdiction to enhance also, in substance, amounts to jurisdiction to impose the penalty and it, was, therefore, contended that the penalty imposed could not be said to be bad in law.

11. Commissioner of Sales Tax, M.P., Indore v. Tansukhdas Madanlal, Rajnandgaon [1983] 53 STC 349 was a case where the question was as to whether the Tribunal was justified in refusing to enhance the penalty under Section 38(5) of the M.P. General Sales Tax Act. In that case, a Division Bench of this Court considered the scope of Section 38(5) and the scope of jurisdiction under Section 38(5)(a) has been considered but the question about enhancement in a case where no penalty at all was imposed by the assessing authority was not before the court and has not been examined and in that context, the decision is of no assistance so far as this case is concerned. The decision in C. A. Abraham v. Income-tax Officer : [1961]41ITR425(SC) on which reliance has been placed by the learned counsel for the assessee also is not directly on the point and is not of much help. The case reported in A. Velayutha Raja v. Board of Revenue (C.T.), Madras [1970] 26 STC 176 is a case where the question of limitation for assessment was considered by the Madras High Court in the context of the language of Section 16(1) of their Act. In this case, a question of limitation was considered in the context of proceedings started by the Board of Revenue under Section 34 of the Act and was not a case of any proceeding pending in appeal and therefore, this case also is of no assistance so far as the present case is concerned. The other case relied on is a decision of the Allahabad High Court reported in Commissioner of Sales Tax v. Kanpur Dal and Rice Mills [1970] 25 STC 511. In this decision, the scope of the appellate powers has been considered in the context of the language of that Act. But so far as the question of the case in hand is concerned, it also throws no light.

12. Section 38(5) of the M.P. General Sales Tax Act reads:

38. (5) Subject to such procedure as may be prescribed and after such further inquiry as it may think fit the appellate authority, in disposing of any appeal under Sub-section (1) or (2) may-

(a) confirm, reduce, enhance or annul the assessment or the penalty or both; or

(b) set aside the assessment or the penalty or both and direct the officer whose assessment order, has been appealed against to make a fresh assessment, after such further inquiry, as may be directed; or

(c) pass such orders, as it may think fit.

A perusal of the scheme of Section 38 indicates that this section confers jurisdiction on the appellate authority to entertain an appeal. Clause (5) of this section confers jurisdiction on the appellate authority, as provided in Sub-clause (a) of this clause, to confirm, reduce, enhance or annul the assessment or the penalty or both and it is only subject to the procedure as may be prescribed. It is, therefore, clear that in the case of penalty, Clause (5), Sub-clause (a), authorises the appellate authority either to confirm, reduce, enhance or annul the penalty imposed by the assessing authority. It was contended by the learned counsel for the department that the power to enhance impliedly confers powers on the appellate authority to impose penalty for the first time. But it is clear that it is not a case where the assessing authority found the assessee liable to penalty but imposed a nominal penalty or chose not to impose penalty at all. Admittedly, the assessing authority did not consider the case of penalty at all nor did he impose any penalty against the assessee and therefore, it could not be said that there was some penalty imposed which the appellate authority could enhance subject to the procedure that may be prescribed. If the word 'enhance' impliedly meant imposition of penalty itself, the legislature may not have used these precise terms 'confirm, reduce, enhance or annul'. The use of these terms clearly contemplates some order by the assessing authority in regard to the penalty so that the appellate authority either may confirm it, annul it, enhance it or reduce it and the plain reading of the section, therefore, indicates that the power to enhance does not contemplate the power to impose penalty for the first time.

13. The provisions contained in Section 43 further support this view as Section 43 provides:

43. Power of Commissioner or appellate authority to impose penalty.-If the Commissioner or the appellate authority in the course of any proceeding under this Act, is satisfied that a dealer has deliberately concealed his turnover in respect of any goods or furnished a false return, the Commissioner or the appellate authority, as the case may be, may after giving the dealer a reasonable opportunity of being heard, direct that the dealer shall, in addition to the tax payable by him, pay by way of penalty a sum not exceeding the amount of the tax which would have been avoided if the return furnished by the dealer had been accepted as correct.

That is, if the Commissioner or the appellate authority in the course of any proceeding before it under this Act is satisfied-

(1) that the dealer has deliberately concealed the turnover, or

(2) furnished a false return, the authority may after giving the dealer a reasonable opportunity of being heard, impose a penalty. This section empowers the Commissioner or the appellate authority and the powers conferred under the section can only be exercised when some proceedings in the nature of appeal or other proceedings are before the authority, either the Commissioner or the appellate authority. This, therefore, indicates that if the appellate authority during the hearing of the appeal comes to the conclusion on the two questions stated above, then it has jurisdiction to impose a penalty after giving the assessee an opportunity of being heard. If the jurisdiction to enhance penalty under Section 38(5) is interpreted to mean that the appellate authority could also impose a penalty for the first time, then the provisions contained in Section 43 pertaining to the jurisdiction of the appellate authority could be redundant and when the legislature enacted this section specifically it clearly shows that the words used in Section 38(5) were to be understood in the sense in which those words are understood in common parlance and therefore, it could not be contended that the word 'enhance' in Section 38(5) would even mean the imposition of penalty for the first time. In this view of the matter, therefore, our answer to the first question is in the negative.

14. About the second question about imposition of penalty under Section 43 read with Section 9(2) of the Central Act, it was contended on behalf of the assessee that it is not justified because-

(1) it is beyond the period of limitation provided in Section 18(8); and

(2) in the facts and circumstances of the case, there appears to be no justification for imposition of a penalty.

So far as the facts and circumstances are concerned, they have been considered by the authorities including the Board of Revenue and in our opinion, whether any particular facts and circumstances justify or do not justify imposition of penalty is ultimately not a question of law which could be referred to this Court.

15. As regard Clause (8) of Section 18 which provides for the limitation for purposes of assessment, it is clear that Section 18 provides for assesment of tax and Clause (8) provides :

(8) The assessment shall be made under this section-

(i) in respect of a registered dealer, within a period of five calendar years from the end of the period for which assessment is to be made; and

(ii) in respect of a dealer who has failed to apply for registration, within a period of five calendar years from the commencement of proceedings under Sub-section (6):

Provided that-

(a) where a fresh assessment has to be made to give effect, to any finding or direction contained in any order under Sections 38, 39 or 44, or to any order of the High Court or the Supreme Court such assessment shall be made within a period of three calendar years from the date of order containing such finding or direction or the order of the High Court or the Supreme Court, as the case may be ;

(b) where assessment proceedings are pending on the date of commencement of the Madhya Pradesh General Sales Tax (Amendment and Validation) Act, 1969, such assessment shall be made within a period of three calendar years from the date of such commencement or within the period within which such assessment is required to be made in accordance with any other provision of this section, whichever is later ; and

(c) nothing contained in this Sub-section shall apply to proceedings initiated under Section 19 or any proceeding other than assessment of tax that may be instituted under any other provisions of this Act.

This clause, therefore, provides that the assessment shall be made under this section within a period of 5 calendar years from the end of the period for which assessment is to be made. It is not disputed that these proceedings before the Deputy Commissioner were proceedings in appeal where the assessee has challenged the assessmeat and the language of Section 38 makes the whole assessment open before the appellate authority. It is not disputed that the appellate authority would annul or modify the assessment either by reduction or enhancement and to this power of the appellate authority under Section 38, it is not disputed that provisions contained in Clause (8) of Section 18 would not be attracted as appeal is a right conferred on the assessee to challenge the assessment. But it was contended by the learned counsel for the assessee that under Section 43 when proceedings for imposition of penalty are taken afresh, then the question of limitation will arise as imposition of penalty is also a part of assessment.

16. Section 43, as quoted above, contemplates two things :

(i) is the power with the Commissioner ; and

(ii) is the power with the appellate authority and it is also clear that this power under Section 43 could only be exercised when some proceeding under this Act is pending before the authority concerned. So far as the case in hand is concerned, it is clear that the appellate authority started proceedings for imposition of penalty by giving a notice as contemplated under Section 43 and this was done when the appeal was pending before the appellate authority. It is, therefore, plain that the jurisdiction exercised under Section 43 is exercised by the appellate authority during the pendency of the appeal from the order of assessment and while finally passing the order of assessment, as the appellate authority held that it was a fit case falling within the ambit of Section 43 that a notice for imposition of penalty was issued and after hearing the assessee, ultimately, passed the final order in appeal and in that order itself penalty was also imposed.

17. It is, therefore, plain that what has been done by the appellate authority is done under the jurisdiction conferred on the appellate authority while hearing the appeal and while hearing the appeal has modified the order of assessment and imposed the penalty. But before finally deciding the appeal, the appellate authority has issued a notice as contemplated under Section 43. Under these circumstances, therefore, it could not be disputed that the imposition of penalty is part of the appellate order and if the appellate order is an order of assessment, to this order, the provisions of Section 18(8) could not be attracted and therefore, this provision of Section 18(8) also could not be attracted to the order pertaining to penalty as it is a part of the order of assessment by the appellate authority.

18. It is not as if after the assessment is completed any fresh action was taken for imposition of penalty and in fact, Section 43 confers jurisdiction only to the Commissioner or the appellate authority when some proceeding under the Act is pending before them and in this case, it was the appellate authority when the appeal was pending before it that the appellate authority has exercised jurisdiction under Section 43 and therefore, the provisions contained in Clause (8) of Section 18 could not be invoked. Proviso (a) to this Clause also indicates that if in pursuance of an order under appeal under Section 38 or under other provisions of the Act a fresh assessment has to be made, then it can be made within 3 years from the date of such finding. This proviso also indicates that the assessments which are ultimately finalised by the appellate authority are not subject to the provisions of Section 18(8) and even if after the finding of the appellate authority if a fresh assessment has to be made by the assessing authority under Section 18 then also this proviso (a) has provided a further period. This is also clear from the scheme of Section 18 that this section contemplates assessment by the officer who is entitled to assess at the first stage and therefore the provisions contained in Clause (8) of Section 18 will not be operative when the appellate authority exercises jurisdiction under Section 38 or under Section 43 as indicated above. In this view of the matter, therefore, it could not be contended that the appellate authority exercising jurisdiction under Section 43 and Section 38 when finalised the assessment and also imposed the penalty, it could not be justified under Section 43 because it has been done beyond the period which is prescribed under Section 18(8).

19. It was also contended that although in the order, the appellate authority has indicated that jurisdiction under Section 43 is being exercised (sic). But it was contended by the learned counsel for the assessee that a notice as contemplated under Section 38(5) was issued to the assessee and it was, therefore, contended on the basis of the form of the notice that the authority purported to act under Section 38(5). In fact, in the order passed by the appellate authority it has been clearly stated that the authority was acting under Section 43, although it appears that the learned Tribunal took the view that the appellate authority also could impose penalty under Section 38(5). But it is clear from the order passed by the Deputy Commissioner exercising appellate jurisdiction that he was exercising jurisdiction under Section 43 of the M.P. General Sales Tax Act and merely because there was any error in issuing a notice in the proper form, it could not be said that the appellate authority was exercising jurisdiction under Section 38(5).

20. It was also contended that Section 43 contemplates a finding that a dealer has deliberately concealed his turnover or furnished a false return and as there is no such finding given by the Deputy Commissioner exercising appellate jurisdiction, the penalty could not be justified under Section 43. Although in the order passed by the appellate authority, there is no finding that the dealer has deliberately concealed his turnover but there is a positive finding that the assessee has furnished a false return. The finding having been given about the furnishing of a false return, it could not be said that the order is not justified under Section 43.

21. As regards scope of jurisdiction under Section 38(5), we have already come to a conclusion that the appellate authority exercising jurisdiction under Section 38(5) in the present case, could not have imposed a penalty but as discussed above, it is clear that the appellate authority had jurisdiction under Section 43 to impose penalty for the first time after giving an opportunity to the assessee of being heard and it is not disputed that that opportunity was afforded and notice was issued before the final orders were passed by the appellate authority.

22. In the light of the discussion above, therefore, our answer to the second question is in the affirmative that the penalty imposed under Section 43 read with Section 9(2) of the Central Act was justified. In the circumstances of the case, parties are directed to bear their own costs.


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