1. This is a sales tax reference at the instance of the Commissioner of Sales Tax raising the following question :
'Whether, on the facts and in the circumstances of the case, penalty can be imposed under section 11(3a) of the Act in the event of default in the payment of tax under section 10 of the Act ?'
2. The question arises because of facts which are really to be found in the order of the Financial Commissioner dated 4th January, 1973. Under the scheme of the Bengal Finance (Sales Tax) Act, 1941, which was applicable at the relevant time, a dealer was required to furnish quarterly returns accompanied by a receipt showing payment in a Government treasury or the Reserve Bank of India. A provision was also made 'that the payment of tax could be made by cheque in which case no receipt accompanied the return. In the first quarter of the year 1971-72, the dealer tendered a cheque for Rs. 821.63 along with his return. On the dishonour of the cheque, a penalty of Rs. 4,000 was imposed which was reduced in appeal to Rs. 3,000. On revision to the Financial Commissioner, it was held that section 11(3a) did not apply to such cases and, hence, the penalty was quashed. The order did not give any reasons, but was based on a previous decision of the Financial Commissioner in Revision No. 398 of 1972.
3. The controversy arising on these facts has arisen in some other cases also which have been independently heard by us and virtually this judgment will decide the present reference as well as a number of other references.
4. According to section 10(3) of the Act, a registered dealer is required to furnish quarterly returns. This is the effect of the section read with the Rules. Section 10(3) itself reads as follows :
'10. (3) Before any registered dealer furnishes the returns required by sub-section (2), he shall pay into a Government treasury or the Reserve Bank of India or in such other manner as may be prescribed the full amount of tax due from him under this Act according to such returns, and shall furnish along with the returns a receipt from such treasury or bank showing the payment of such amount.'
5. Normally, if a dealer pays the tax according to the return into the Government treasury or the Reserve Bank and furnishes the receipt along with the return, there can be no default of the type which has arisen in the present case. However, the sub-section indicates that the payment can be made 'in such other manner as may be prescribed'. One such method is to send a cheque along with the return. In such a case if the cheque is dishonoured, then there will be no payment as required by this section, and so, a question as to how and when a penalty can be imposed for default to pay the tax arises.
6. The two provisions of law which have some bearing on this question are section 11(1), and section 11(3a) which was introduced into the Act by an amendment made in 1959. The two provisions can now conveniently he quoted :
'11. (1) If no returns are furnished by a registered dealer in respect of any period by the prescribed date, or if the Commissioner is not satisfied that the returns furnished are correct and complete, the Commissioner shall, within eighteen months after the expiry of such period, proceed in such manner as may be prescribed to assess to the best of his judgment the amount of the tax due from the dealer and in making such assessment shall give the dealer a reasonable opportunity of being heard; and in the case of failure by a registered dealer to submit in respect of any period, a return accompanied by a receipt from a Government treasury or the Reserve Bank of India as required under sub-section (3) of section 10, by the prescribed date, the Commissioner may, if he is satisfied that the default was made without reasonable cause, direct that the dealer shall pay by way of penalty in addition to the amount of the tax so assessed a sum not exceeding one and a half times that amount.
11. (3a) When a dealer is in default in making a payment of the tax, the Commissioner or any person appointed to assist him under sub-section (1) of section 3, may, in his discretion, direct that, in addition to the amount of the arrears, a sum not exceeding that amount shall be recovered from the dealer by way of penalty.'
7. The provision in section 11(1) shows that if a registered dealer fails to submit a return accompanied by a receipt from a Government treasury or the Reserve Bank of India, a penalty can be imposed at the rate of one and a half times of the amount of tax. This provision deals with a case where there is a default to file the return in time. If there is a default on account of the cheque being dishonoured, this provision does not seem to have any bearing. On the other hand, section 11(3a) deals with a case where there is a default in the payment of tax. In this case, the penalty can be imposed equal to the amount. Clearly, the penalty under section 11(3a) is more properly attracted to a case where a return is filed without paying the corresponding tax, and the provisions of section 11(1) which deal with the failure to file the return and other defaults are not attracted.
8. Section 11(3a) actually applies in two separate cases. It applies when tax is not paid along with the return as required by section 10(3), or it applies when after the assessment has been made and there is a failure to pay the tax. As pointed out by the learned counsel for the Commissioner of Sales Tax, a default arising by reason of dishonour of a cheque is a much earlier, default which can be detected almost immediately; it does not require completion of the assessment before a penalty can be imposed.
9. The learned counsel has also brought to our notice that this case is covered by State of Orissa v. Kalinga Automobiles Ltd.  33 S.T.C. 565, State of Madhya Pradesh v. Shyama Charan Shukla : 1SCR861 , decided by the Supreme Court, and State of Rajasthan v. Ghasilal : 2SCR805 also decided by the Supreme Court. He has also brought to our notice that a similar view has also been taken in an unreported case decided by a Bench of this Court in Commissioner of Sales Tax, Delhi Administration v. Venus Card Manufacturing Co., Delhi (Sales Tax Reference No. 20 of 1974 decided on 16th October, 1979 (Delhi High Court).).
10. We agree with this view and answer the question referred to us in the affirmative in favor of the Commissioner of Sales Tax and against the assessed. As the assessed is absent, there will be no order as to costs. We would also like to mention that under section 11(3a) the penalty cannot exceed the amount of the tax and as the quantum of penalty which was quashed by the Financial Commissioner was Rs. 3,000, it will be necessary for the revisional authority to determine the proper penalty chargeable in this case in the light of the provisions of section 11(3a) of the Act.
11. Reference answered in the affirmative.
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