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Aman Traders Vs. State of Kerala and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKerala High Court
Decided On
Case NumberO.P. Nos. 2606 and 3001 of 1980, 708, 6274 and 6491 of 1981, 19, 165, 171 and 180 of 1982 and 4558
Judge
Reported in[1987]66STC54(Ker)
AppellantAman Traders
RespondentState of Kerala and anr.
Appellant Advocate S.A. Nagendran and; N.N. Divakaran Pillai, Advs.
Respondent AdvocateGovernment Pleader
DispositionPetition dismissed
Cases ReferredHaridas v. Assistant Commissioner
Excerpt:
- - whatever that be, in the same spirit of being a stickler for the letter of the statute, counsel for the assessee argued with force, that if there be no provision in the statute to warrant an order by the government like exhibit p2, equally, there is no warrant for the officer to draw up a formal order of the type of exhibit p4 (or p5 to p8) imposing a penalty on the petitioner. 'order',in the context, may as well mean any direction which the authorities functioning under the statute are bound to obey and so obey. the best the petitioner can, therefore, claim is relief under sub-sections (4) to (6) of section 23, as they now stand......could be claimed at all, for non-payment of amounts due under provisional assessments, once final assessments are made; it is said that the provisional should be deemed to have merged with the final. there is also an attack against section 23(3), as it now stands. we are however of the view that instead of examining these questions in the abstract, the cases in this batch can be disposed of on their facts, particularly in the light of a circumstance to which it is convenient to immediately advert.2. the law is that the liability to pay penal interest attaches automatically to the demand for tax, when default occurs in payment thereof, however erroneous the assessment be and whether it is disputed or not. there was no provision, prior to act 19 of 1980, even to make allowances for.....
Judgment:

M.P. Menon, J.

1. These are cases where exaction of penal interest under Section 23(3) of the Kerala General Sales Tax Act, 1963, is being challenged. Some of them relate to demands for penal interest made before 16th September, 1980, when alone Sub-sections (4) to (6) were added to the section by the amending Act 19 of 1980. One of the contentions is that the provisions of Section 23(3), as they stood before the aforesaid amendment, were invalid. Another contention is that no penal interest could be claimed at all, for non-payment of amounts due under provisional assessments, once final assessments are made; it is said that the provisional should be deemed to have merged with the final. There is also an attack against Section 23(3), as it now stands. We are however of the view that instead of examining these questions in the abstract, the cases in this batch can be disposed of on their facts, particularly in the light of a circumstance to which it is convenient to immediately advert.

2. The law is that the liability to pay penal interest attaches automatically to the demand for tax, when default occurs in payment thereof, however erroneous the assessment be and whether it is disputed or not. There was no provision, prior to Act 19 of 1980, even to make allowances for variation in the tax liability by appellate or revisional orders. The position, therefore, was that an assessing authority could assess a dealer according to his fancy and that even if the assessment was subsequently set aside, the liability of the dealer to pay penal interest under the arbitrary and illegal assessment would survive. The provisions of Section 23(3) were, therefore, attacked before this Court in O.P. No. 2396 of 1978 and two other connected cases on the ground that they were opposed to Articles 14, 19(1)(f) and (g) and Article 31(1). When the cases came up for hearing before a Division Bench, the State conceded that the penal interest demanded in those cases would not be collected, apparently for the reason that there was difficulty in supporting the provisions, as they then stood. That was on 10th April, 1980 and it was thereafter that sub-Sections (4) to (6) were added on 16th September, 1980. Could it be proper for the State to take a different stand in similar cases which are now before us and can this Court permit the State to so pick and choose That is an aspect we will have to bear in mind when dealing with the individual petitions.

3. In O.P. No. 708 of 1981, the petitioner was paying tax under Rule 21, for the year 1978-79, but the government had issued an order of stay and permitted the petitioner to pay up the amounts in instalments. Penal interest was however charged in the final assessment order on the ground that despite the indulgence given by the Government, the liability had attached itself to the tax payable under Rule 21. The petitioner approached the Deputy Commissioner and the Board of Revenue, but both of them followed the decision of this Court in Haridas v. Assistant Commissioner, Sales Tax [1979] 44 STC 26 and held that as the Government had no power under the Sales Tax Act to permit instalment payments, penal interest should be deemed to have accrued under Section 23(3) from the date on which tax was statutorily due. The learned Government Pleader relies on this decision to support the order impugned. This is what this Court had said in Haridas' case [1979] 44 STC 26 :

The learned Government Pleader is therefore right in his submission that, strictly, on the provisions of the statute, there is no provision enabling the Government to pass an order of the type exhibit P2. But the fact remains that such an order was passed and, for a period of 22 months, the assessee has been respecting that order and paying the instalments as required or permitted by the order. We cannot, especially in the absence of any counter-affidavit on the side of the department, easily take it that the department or the Sales Tax Officer was not aware of the existence of such an order or of a sanction for the instalment payments that the assessee made for a fairly long period of 22 months. Whatever that be, in the same spirit of being a stickler for the letter of the statute, counsel for the assessee argued with force, that if there be no provision in the statute to warrant an order by the Government like exhibit P2, equally, there is no warrant for the officer to draw up a formal order of the type of exhibit P4 (or P5 to P8) imposing a penalty on the petitioner.

And having said so, the court quashed the demand notices also on the ground that the statute had not provided for such notices either, but without prejudice to the right of the department 'if so entitled and so advised' to recover the amount in accordance with law.

4. Section 23(3) contemplates an 'order permitting payment in instalments'. The Sub-section does not stipulate that the order should be by any particular authority. 'Order', in the context, may as well mean any direction which the authorities functioning under the statute are bound to obey and so obey. There is no case for anyone that the Government order in favour of the petitioner herein was disregarded as one without authority. In any event, the effect of the order was to lull the assessee into a belief that he could pay in instalments without incurring other consequences under the Act. The law has not been standing still after the decision in Haridas' case [1979] 44 STC 26 (Ker). The concept of Article 14 of the Constitution has undergone considerable change and even actions taken under colour of statute are nowadays being challenged on principles of promissory estoppel. The tax payable is an amount due to the Government and there may be nothing astounding in suggesting that the Government could hold its hands, so long as it is not acting contrary to the statute or giving up anything statutorily due. If the authorities had totally disregarded the Government order in this case, the position would probably have been different. However, having honoured it for the purposes of collection in accordance with the statute, they cannot be permitted to turn round and say that the order was only partially effective. The assessee cannot be made a victim of the Government's indulgence and a Government order cannot be allowed to operate as a trap. We feel that the stand now sought to be taken by the State is arbitrary and unconscionable. Even statutory obligations have to pass the test of Article 14. The tax liability in this case had arisen in 1978-79 and the penalty provision invoked was the one as it stood before the Act 19 of 1980. Without attempting to lay down any general principle and on the facts of the case, we hold that the penal interest imposed in this case cannot be collected, if the petitioner had completed payments in accordance with the Government order.

5. The facts in O.P. Nos. 6274 of 1981, 6491 of 1981, 171 of 1982 and 180 of 1982 are similar and we, therefore, direct that the amounts claimed by way of penal interest in these cases also be not recovered, if the petitioners have completed payments in accordance with the Government orders.

6. In O.P. No. 165 of 1982, the petitioner had filed appeals before the Sales Tax Appellate Tribunal against assessment orders for the years 1971-72 and 1972-73. His stay petition was not disposed of and he moved this Court in O.P. No. 3531 of 1977 for mandamus. When the O.P. came up for hearing, the Government Pleader filed exhibit P3, memo, to the effect that if the petitioner paid 50 per cent of the amount due within a month, no further steps would be taken for collection of the balance due till the disposal of the appeals. The O.P was disposed of, exhibit P4, judgment, on the basis of the above agreement. But even before the expiry of the one month agreed to, penal interest was demanded as per exhibits P5 and P6. Grant of time by an agreement to which the appropriate authority was a party cannot be different from grant of time by Government. On the facts, again, we direct that exhibits P5 and P6 notices be not enforced, if the petitioner has complied with the terms of exhibits P3 and P4.

7. The facts of O.P. No. 2606 of 1980 are more glaring. For the year 1976-77, the petitioner was provisionally assessed to sales tax for an amount of Rs. 7,500. The assessee filed an appeal, but before the same was disposed of, final assessment was completed on 12th October, 1978, fixing the tax liability at Rs. 1,962. The petitioner had paid Rs. 2,000 in the meanwhile and thus there was excess payment. Still a penal interest of Rs. 2,460 was demanded on 10th March, 1980. The provisional assessment was obviously arbitrary and had the petitioner's appeal been disposed of without delay, the question of penal interest could not have loomed so large. Here again, penal interest was imposed prior to 16th September, 1980. We, therefore, quash exhibit P2.

8. In O.P. No. 19 of 1982 there was a provisional assessment for the year 1976-77. Tax and surcharge payable was Rs. 1,08,432. The petitioner paid Rs. 30,000 and filed an appeal. And during the pendency of the appeal, this Court gave an interim direction in O.P. No. 2354 of 1977 permitting payment of half the arrears due. Exhibit P2 shows that the authorities stopped collection proceedings in view of the above. The final assessment was made on 3rd November, 1979, but that order was set aside by the Additional Deputy Commissioner (Appeals) on 1st January, 1981. In connection with the final assessment proceedings also, there was a stay order from this Court in O.P. No. 4108 of 1980. The petitioner had complied with the conditions imposed from time to time and had paid a total amount of Rs. 1,18,973. Penalty was demanded by exhibit P4 dated 16th July, 1981, long after the final assessment had been set aside and under circumstances, when the petitioner had paid more than the amount due as per the provisional assessment. We think the authorities acted arbitrarily. On the facts, therefore, we hold that the penal interest in question is not recoverable.

9. There were no intervening orders of conditional stay or orders of Government permitting payment in instalments in O.P. No. 3001 of 1980. The only special feature is that according to counsel for the petitioner, the final assessment has been set aside in appeal. The best the petitioner can, therefore, claim is relief under Sub-sections (4) to (6) of Section 23, as they now stand. Without prejudice to his right to claim such relief before the appropriate authorities, we dismiss O.P. No. 3001 of 1980.

10 In O.P. Nos. 4558 and 8027 of 1983 there was admittedly delay in payment. The delay was only nominal, but then, the penal interest will also then be nominal. We find no grounds to interfere. The two original petitions are dismissed.

No Costs.


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