R.N. Misra, J.
1. The petitioner has been assessed under the Central Sales Tax Act (hereinafter referred to as the 'Act') for the quarters ending 30th June, 1966, 31st December, 1966, 31st March, 1967, for the year 1967-68 and for the year 1968-69 by the Sales Tax Officer, Koraput II Circle, at Rayagada (opposite party No. 2). The assessments are challenged in appeals which are still pending disposal. For non-payment of tax demanded from the petitioner, penalty proceedings were initiated under Rule 16(2) of the Central Sales Tax (Orissa) Rules (hereinafter called the 'Rules') and for all the periods referred to above, penalties have been imposed. In this writ application, the petitioner disputes the authority of the Sales Tax Officer to impose penalty.
2. It is contended for the petitioner that in the absence of a clear provision in the Act, there could be no levy of penalty in terms of the Rules. On the other hand, learned counsel for the revenue has contended that Rule 16(2) of the Rules is very clear and since it is a rule infra vires the Act, the dispute raised by the petitioner is without merit.
3. The only question for decision, therefore, is as to whether the opposite party No. 2 had jurisdiction to levy penalty for non-payment of tax demanded under the Act.
4. It is necessary to extract the provisions in the Act and the relevant Rules before examining the merit of the respective contentions raised by the parties.
Section 9 of the Act provides:
(1) The tax payable by any dealer under this Act on sales of goods effected by him in the course of inter-State trade or commerce, whether such sales fall within Clause (a) or Clause (b) of Section 3, shall be levied by the Government of India and the tax so levied shall be collected by that Government in accordance with the provisions of Sub-section (2), in the State from which the movement of the goods commenced:
(2) Subject to the other provisions of this Act and the Rules made thereunder, the authorities for the time being empowered to assess, reassess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, reassess, collect and enforce payment of tax, including any penalty, payable by a dealer under this Act as if the tax or penalty payable by such a dealer under this Act is a tax or penalty payable under the general sales tax law of the State....
5. Section 10 of the Act deals with penalties. But it is conceded that there is no provision made for imposition of penalty for non-payment of demanded tax. Section 10A deals with imposition of penalty in lieu of prosecution. There is thus no provision in the Act dealing with imposition of penalty for default in satisfying the demand of tax.
6. Section 13 provides for rule-making. Sub-section (1) authorises the Central Government to make rules. Sub-section (3) authorises the State Government to make rules not inconsistent with the provisions of the Act or the rules made under Sub-section (1) of Section 13 (i. e., by the Central Government) to carry out the purposes of the Act. Sub-section (4) in particular and without prejudice to the powers conferred by Sub-section (3) makes provision for rule-making for purposes as indicated therein. Those are:
(a) The publication of lists of registered dealers, of the amendments made in such lists from time to time, and the particulars to be contained in such lists;
(b) the form and manner in which accounts relating to sales in the course of inter-State trade or commerce shall be kept by registered dealers;
(c) the furnishing of any information relating to the stocks of goods of, purchases, sales and deliveries of goods by, any dealer or any other information relating to his business as may be necessary for the purposes of this Act;
(d) the inspection of any books, accounts or documents required to be kept under this Act, the entry into any premises at all reasonable times for the purposes of searching for any such books, accounts or documents kept or suspected to be kept in such premises and the seizure of such books, accounts or documents;
(e) the authority from whom, the conditions subject to which and the fees subject to payment of which any form of declaration prescribed under Sub-section (4) of Section 8 may be obtained, the manner in which the form shall be kept in custody and records relating thereto maintained, the manner in which any such form may be used and any such declaration may be furnished;
(f) in the case of an undivided Hindu family, association, club, society, firm or company or in the case of a person who carries on business as a guardian or trustee or otherwise on behalf of another person, the furnishing of a declaration stating the name of the person, who shall be deemed to be the manager in relation to the business of the dealer in the State and the form in which such declaration may be given;
(g) the time within which, the manner in which and the authority to whom any change in the ownership of any business or in the name, place or nature of any business carried on by any dealer shall be furnished.
(The amendments made by Central Act 61 of 1972 have not been taken note of as they were not relevant for this writ petition.)
8. Rule 16 of the Rules makes provision for the notice of demand. Sub-Rule (2) thereof provides:
If, on the date fixed under Sub-rule (1) the dealer has not paid the amount due or has failed to produce evidence of payment by the date fixed in the notice in form VII the Commissioner may impose a penalty not exceeding one-half of the total amount due and serve a notice in form VIII directing the dealer to pay the penalty together with sums previously due by a date to be fixed in the notice and to produce the receipted chalan in proof of payment of such amount by a date also to be specified in the said notice:
Provided that in cases of continuing default, the penalty may be levied in instalments from time to time so however as not to exceed one-half of the total amount of tax due:
Provided further if collection of the sum specified in the notice of demand in form VII or any part thereof has been stayed on appeal or revision, penalty may be levied if the sum is not paid and proof of such payment is not produced before the Sales Tax Officer within a fortnight after the expiry of the stay period.
9. Penalty in this case has been imposed on the petitioner in exercise of power conferred by Rule 16(2) of the Rules. It is the case of the petitioner that the State Government of Orissa had no authority to make a rule providing for imposition of penalty because, according to the petitioner, there is no provision in the Act authorising such a rule to be made.
10. As we have already stated, there is no provision in the statute for the levy of penalty in such a contingency. Rule 16 of the Rules derives its authority from the rule-making power vested in the State Government under Section 13, Sub-sections (3) and (4) of the Act. Sub-section (3) does not make any clear mention of a rule relating to levy of penalty in such circumstances. Various clauses appearing in Sub-section (4) of Section 13 also nowhere clearly provide for the making of a provision as contained in Rule 16(2) of the Rules.
11. Mr. Lenka for the petitioner in support of the contention that the rule is ultra vires the Act, places reliance upon a Bench decision of the Mysore High Court in the case of Guldas Narasappa Thimmiah Oil Mills v. Commercial Tax Officer, Raichur  25 S.T.C. 489. It has been stated therein:
In our judgment, the provisions relating to penalty in a taxing statute are substantive in character. In this view such provisions cannot be reasonably accepted as forming part of the procedural law. Unless such penal provisions in the State law are expressly adopted by the provisions of Section 9(2) of the Central Act, they cannot be relied upon for the purpose of recovery of tax due under the Central Act. Further, Section 9(2) of the Central Act as amended by Act No. 28 of 1969, has effected changes so as to exclude any idea of adoption of substantive provisions of a State Act relating to assessment and recovery of tax and penalty. But the argument advanced on behalf of the State is that notwithstanding the changes effected by this amending provision of the Central Act, the sales tax can be collected and enforced as if it is a tax under the State law. The argument is that in such an event, the rule of strict liability set out in Section 13(2) of the State Act would be automatically attracted. But, this argument overlooks the fact that what has to be collected is the sales tax and penalty as assessed and levied under the Central Act, as clearly enjoined by Section 9(2) of the Act. A provision relating to penalty similar to the one specified in Section 13(2) of the State Act is nowhere to be found in the Central Act. Therefore, unless the provision is specifically adopted by express words or by necessary implication, Section 13(2) will not be attracted for the purpose of levy of penalty on the basis of a default committed in connection with the payment of sales tax levied under the Central Act....
12. To the same effect is the decision of the Calcutta High Court in the case of Shri Mohan Lal Chokhany v. Commercial Tax Officer, Lyons Range  28 S.T.C. 367. The Patna High Court in the case of Hurdatroy Jute Mills Private Ltd., Katihar v. Superintendent of Commercial Taxes, Purnea  30 S.T.C. 151, has also adopted a similar view.
13. Learned standing counsel seeks to distinguish these decisions by saying that in the State Rules made under the Act in exercise of powers vested under Section 13, in the Mysore, West Bengal and Bihar Acts, no provision for imposition of penalty in the event of default to satisfy the tax demanded has been made. Levy of penalty in those cases was justified under the provision of the State sales tax law and the High Courts did not accept that stand. In view of the fact that there is a special provision in the Rules made under the Act as applicable to Orissa, it cannot be said that levy of penalty for default to satisfy the tax demand is without authority of law.
14. The point of distinction as indicated by the learned standing counsel is certainly germane, but, in our view, it does not completely answer the point raised on behalf of the petitioner. Emphasis has been laid on behalf of the petitioner on the provision that levy of penalty for non-payment of tax has not been authorised by the statute. As rightly indicated by the Calcutta High Court in the case of Shri Mohan Lal Chokhany v. Commercial Tax Officer  28 S.T.C. 367, the ratio of the decision in Guldas Narasappa's case  25 S.T.G, 489 is that the provisions relating to the imposition of penalty in a taxing statute are substantive in character and they cannot reasonably be said to form part of the procedural law and unless such penal provisions in the local Sales Tax Act are expressly adopted by the provisions of Section 9(2) of the Central Sales Tax Act, they cannot be relied upon for the purpose of the recovery of tax due under the Central Act. Mitra, J., who agreed with the learned Chief Justice in the said Calcutta decision added saying:. It is to be remembered that the Central Act has provided for various acts or omissions for which penalty may be imposed under the Central Act, and delay in filing of returns or non-payment of tax already imposed, are not matters for which penalties can be imposed under the Central Act. In my view, the provisions in Section 9(2) of the Central Act do not enable the sales tax authorities of the State of West Bengal to impose a penalty for delay in filing a return, nor does it empower them to impose a penalty for non-payment of a tax or a penalty. It is well-settled that a taxing statute must be strictly construed and in so far as a penalty contemplated by Section 9(2) of the Central Act is concerned, I am of the opinion that it must be held to be a tax. In order to enable the sales tax authorities of the State of West Bengal to impose a tax for either of the purposes mentioned above, there must be clear and unambiguous provisions in the Central Act itself, and in the absence of such provisions in the Central Act, it cannot be said that the reference to the procedure for realisation of tax and penalty in Section 9(2) of the Central Act enables the State sales tax authorities to impose a penalty either for delay in filing a return or for non-payment of a tax or penalty imposed upon an assessee.
15. It is a well-settled principle of law that unless the statute expressly or by necessary implication authorises the Rules to create a penal liability, the rule-making authority would have no jurisdiction to create a penal liability. In the present case, we have not been shown any specific provision in the Central Act which authorises a rule like Rule 16(2) of the Orissa Rules made under the Central Act. That rule, therefore, is in excess of jurisdiction conferred on the State Government. We, accordingly, conclude that Rule 16(2) of the Central Sales Tax (Orissa) Rules authorising levy of penalty for nonpayment of tax demanded is ultra vires the Act and, therefore, contrary to law.
16. It necessarily follows out of the aforesaid conclusion that the levy of penalty in the instant case is an act without jurisdiction. We, accordingly, quash the imposition of penalty and allow the writ petition. The petitioner shall have his costs of the proceeding. We assess the hearing fee at Rs. 200 (two hundred).
K.B. Panda, J.