D.A. Desai, J.
1. This appeal by judge's summons is preferred by the Sales Tax Officer, Petlad, against the decision of the official liquidator of RAjratna Naranbhai Mills CO. LTd. (in liquidation), hereinafter referred to as the company, dated 29th August 1972, rejecting a part of the claim in the amount of Rs. 28,80,1.77 being the amount of penalty included in the whole claim of Rs. 70,945.60 as the debt inadmissible for payment by the official liquidator in winding up, and refusing to grant priority in payment as envisaged by section 530(1)(a) of the Companies Act, 1956. The applicant has prayed that the court should give a direction directing the liquidator to grant priority in payment of Rs. 1,064.44 as sales tax due and payable under the BOmbay Sales TAx Act and Rs. 11,216.50 being sales tax due and payable under the Central Sales TAx Act and the balance of the claim admitted by the liquidator plus the claim rejected by the liquidator as ordinary debt ranking pari pasu with other unsecured creditors including the penalty amount which has been levied for the period subsequent to the date of the order of winding up.
2. Company was ordered to be would up by an order made on 26th June, 1967. The liquidator after obtaining directions of the court invited the creditors of the company to prove their debts or claims and simultaneously to establish any title they may have to priority under section 530. Pursuant to this invitation to prove the debts, the Sales Tax Officer, Petlad, submitted as many as five affidavits, the last being the most comprehensive filed on 21st August, 1971, claiming an aggregate amount of Rs. 70,945.60 as the amount of sales tax plus penalty payable by the company and claimed priority for the whole or any portion of the amount claimed by the petitioner and admitted claim to the tune of Rs. 42,143.63 payable as debt pari passu with other ensured creditors of the company. Hence, the Sales Tax Officer has taken this judge's summons preferring an appeal under rule 164 of the Companies (Court) Rules, 1959.
3. At the hearing of this submissions, learned Advocate-General, who appeared of the petitioner, urged that out of the admitted claim in the amount of Rs. 41,143.83, the liquidator was in error in not granting priority in payment of debt of Rs 22,280.96 consisting of Rs. 11,064.46 being sales tax payable by the company for the period from April 1, 1957 , to December 31, 1965, under the Bombay Sales tax Act, and balance of Rs. 11,216.50 being the amount of sales tax payable under the Central Sales tAx Act for the period d from July 1, 1957, to December 31, 1965, because the assessment order was made in respect of the aforementioned claim within a period of 12 months next before the relevant date and the notice of demand which made the tax payable was also issued within a period of 12 months next before the relevant date. It was urged that apart from any other consideration the petitioner is entitled t a priority in payment for the amount of Rs. 22,280.96 as the claim was of sales tax which was due on the relevant date and which became due and payable within 12 months next before the relevant date. It was conceded that balance of the admitted claim in the amount of Rs. 19,862.87 being the amount of sales tax due and payable under the Bombay Sales Tax Act for the period from January 1, 1966, to June 26, 1967, would not be entitled to priority in payment. It was also conceded that the claim for an amount of Rs. 195.42 has been rightly rejected. To correctly appreciate the facts, break-up of the claim herein made by set out in a tabulated form.
CLAIM UNDER THE BOMBAY SALES TAX ACT,
Period of Notice for Date on Date of Amount of Amount of Amount due
assessment assessment assessment issue of tax determ- tax paid as per
served on order is demand ined as per with the demand
passed notice. assessment return notice
Rs. Rs. Rs.
1-4-57 to 27-4-62 16-12-66 17-12-66 7,735.96 3,906.31 2,829.75
1-1-58 to 27-4-62 16-12-66 17-12-66 6,65.03 3,781.21 2,117.43
1-1-60 to 20-1-64 31-1-67 31-1-67 23,178.44 22,197.63 1,029.89
1-1-61 to 20-1-64 31-1-67 1-2-67 25,204.43 24,266.08 1,137.36
31-12-61 rectification 29-8-67 2-9-67 100.00 100.00
1-1-62 to 20-1-64 31-1-67 1-2-67 21,178.53 20,992.52 367.92
1-1-63 to 20-1-64 31-1-67 1-2-67 30,079.50 29,370.79 741.83
1-1-64 to 13-6-66 31-1-67 1-2-67 34,405.95 33,226.19 1,258.83
1-1-65 to 13-6-66 31-1-67 12-2-67 20,944.67 20,464.22 481.45
CLAIM UNDER THE CENTRAL SALES TAX ACT
1-1-57 TO 27-4-62 16-12-66 17-12-66 8,196.03 5,957.82 2,238.45
1-1-58 TO 27-4-62 16-12-66 17-12-66 3,858.99 1,685.82 2,173.17
1-1-59 TO 27-4-62 16-12-66 17-12-66 2,028.21 894.36 1,133.85
1-1-60 TO 20-1-64 31-1-676 1-2-67 2,274.23 1,489.30 238.97
1-1-62 TO 20-1-64 31-1-676 1-2-67 2,309.05 940.22 1,454.83
1-1-63 TO 20-1-64 31-1-676 1-2-67 10,733.48 6,638.07 3,895.41
1-1-65 TO 13-6-66 31-1-67 1-2-67 1,119.50 1,027.40 92.10
31-12-65 As per rectification order 10.28
4. It would appear that from the claim admitted as payable by the liquidatro to the extent of Rs. 42,143.83 priority in payment is claimed for the amount of Rs. 22,280.96 on the submission that the claim represents the claim for tax payable to the State Government as it was due on the relevant date and had become due and payable within 12 months next before the relevant date, and, therefore, it was entitled to a priority in payment as envisaged by section 530(1)(a) of the Companies Act.
5. Section 530(1)(a) reads as under :
'530. Preferential payments.- (1) In a winding up, there shall be paid in priority to all debts-
(a) all revenues, taxes, cases and rates due from the company to the Central or a State Govt. or to a local authority at the relevant date as defined in clause (c) of sub-section (8), and having become due and payable within the twelve months next before the date.'
Clause (c) of sub-section (8) of section 530 defines 'the relevant date' to mean in the case of a company ordered to be wound up compulsorily, the date of the appointment (or first appointment) of a provisional liquidator, or if no such appointment was made, the date of winding up order, unless in either case the company had commenced to be would up voluntarily before the date. Therefore, the relevant date for the purpose of the present inquiry would be the date on which winding up order was made, namely, 26th June, 1967. In order to claim priority by invoking clause (g) of sub-section (1) of section 530, it must be shown that revenues, taxes, ceases and rates due from the company to the STate Govt. were due at the relevant date and had become due and payable within 12 months next before that date. The word 'due' had been used twice over in the clause. In fact the clause is divided into two parts : (i) the amount in respect of which priority is claimed must be due from the company at the relevant date ; and (ii) it must have become due and payable within the 12 months next before that date. This word 'due' implies or conveys different meanings in the juxtaposition in which it is used in two parts of the same clause. Ordinarily, when the same word is used in two parts of the same clause or for that matter of the same section, legislature may intend to use it to convey the same meaning unless of course the context in which it is used contra-indicates the same. Subject, however, to this well known cannon of construction, the safest rule is to put a liberal construction on the language used in the statute, unless of course such construction leads to absurdity. As observed by Lord Warrington in Parrell v. Fordree  A.C. 676 (H.L.), at page 682, the safer and more correct course of detailing with a question no. construction is to take the words themselves and arrive, if possible, at their meaning without, in the first instance, reference to cases, because this rule of construction is based on the well- known principle that the legislature has meant what they have actually expressed, because the object of all interpretations is to discover the intention of the legislature. Intention, however, must be deduced from the language used. Therefore, where the language is plain and admits of but one meaning, the task of interpretation can hardly be said to arise.
6. Looking to the language used in the sub-clause uninfluenced and uninhibited by decision and giving the language therein used its literal meaning, it appears that the word 'due' in the first part of the clause could only mean 'outstanding at the relevant date'. If the debt for the payment of which priority is claimed was not outstanding at the relevant date, there is not question of claiming priority in payment of that amount. Therefore, when it is aid that the amount in respect of which priority is claimed must be due at the relevant date, the only meaning one can give to it is that it must be outstanding at the relevant date. This meaning of the word 'due' in the first part of the clause is reinforced by keeping in view the purpose of the winding up provisions of the Companies Act. As observed by me in Rajratna Naranbhai Mills Co. LTd. v. New Quality Bobbin Works [1973[ 43 Comp. Cas. 131 (Guj.), at page 137, the object of the winding up proceedings in respect of a company is to collect all the assets, properties and chooses-in-action belonging to a company under liquidation and to distribute them to various persons having claim against the company keeping in view priorities fixed by various provisions of the Companies Act. Ordinarily, a liquidator after collecting all the assets, properties and claim in favour of the company would first pay up any secured creditor if he has not chosen to remain outside the winding-up and then a preferential creditor and thereafter unsecured creditors and the balance amongst the contributories. In order to prevent a scramble for the assets of an insolvent company, the liquidator has to set in and take possession of and protect and assets of the company so that the object of the winding- up provisions of the companies act, to put all unsecured creditors upon an equality and to pay them pari passu is fully carried out. Further, section 530 finds its place in Chapter V of Part VII of the Companies Act under the heading 'Proof and ranking of claims.' After the liquidataor has realised all the assets of the company it is incumbent upon him to invite the creditors to prove their debts. Rule 147 of the Companies (Court) Rules, 1959, provides that the liquidator has to fix the date on or before which all the creditors of the company are to prove their debts or claims and to establish any title they may have to priority under section 530. Obviously, proof will be offered and can be accepted in respect of the debt outstanding on the date of winding-up. If it was not outstanding on the date of winding-up, the liquidator cannot entertain proof of such debt because nothing was outstanding on the date on which he steps in and acquires jurisdiction to distribute the assets of the company according to the provisions contained in the winding up chapter of the Companies Act. Not only this, rule 156 enables the creditors to claim interest up to the date on which winding-up order is made and rule 179 provides in certain circumstances payment of interest subsequent to the date of winding-up. Obviously, therefore, looking to the juxtaposition in which section 530 is placed in the scheme of Chapter V of Part VII of the Companies Act, and looking to the purpose for which sub-clause (a) in enacted, the word 'due' in the first part of the clause must mean 'outstanding at the relevant date'.
7. Now, merely because any particular debt in respect of any relevant tax, less or rate due to the Central or State Govt. or to the local authority is outstanding at the relevant date, that by itself is not sufficient to clothe it with priority in payment thereof in the distribution of the assets of the company. The plain language of the clause exhibits legislative intention that priority in payment is not to be accorded to all revenues, taxes, cease and rather payable to the Central Government or State Government or local authority and outstanding on the relevant date. If such a construction were to be put on the clause, the latter part of the clause would be rendered nugatory. Some meaning must be assigned to the latter part of the clause. Latter part of the clause reads 'having become due and payable within the twelve months next before the date'. In the filed of tax laws, it is well-known phenomenon that tax becomes due at certain time and becomes payable at some other point of time. It may become due and payable simultaneously. It may as well as become due at one time and payable at some other point of time. Upon a true construction of sub-clause (a) priority can be claimed in respect of that amount which must fall within one of the nomenclatures set out in the sub-clauses and which must be outstanding at the relevant date and the amount became due, meaning thereby that the incident occurred which made the amount due and it became also payable within 12 months next before the relevant date. 'Having become due and payable' would literally mean that process or event of bringing liability into existence occurred and fastened the liability for its being discharged. Both the events must occur within 12 months next before the relevant date. 'Having become due' indicates the tense used which would indicate the process of becoming due. At first bluish one feels that the legislature was guilty of tautology in saying that debt must be due and payable because debt is either payable in prescient or in future, if a date for payment is fixed and debt due is necessarily payable. But, no deeper examination of the sub clause, the legislative intent becomes quite manifest. The amount may be outstanding and payable by the company at the relevant date but that amount may be outstanding for a long time prior to the relevant date, or, for a period proceeding 12 month next before the relevant date. Such amount would undoubtedly be due from the company at the relevant date. In respect of such amount the first part of the clause would necessarily be satisfied but before priority could be claimed and granted, it will have to be found out whether that debt which was outstanding at the relevant date became due, meaning thereby that the event which brought debt into existence occurred within 12 months and also it became payable, meaning thereby its payment could have been enforced against the company within 12 months. There specific conditions are prescribed in sub-clause (a) and all three must co-exist and be satisfied in respect of any particular debt for which priority is claimed before priority in payment can be accorded to it. These three conditions are :
(i) debt of the kind mentioned in clause (a) must be outstanding on the relevant date ;
(ii) the debt must have become due, in the sense, it must have been incurred at any time within 12 months next before the relevant date ; and
(iii) the debt must have become payable at any time within 12 months next before the relevant date.
8. Analyzing the section, these three conditions emerge and all the three must be satisfied and the debt must be in respect of revenue, taxes, ceases and rates and must be due to the Central or State Govt. or a local authority.
9. Now, apparently confusion may be created when it is said that debt is due and payable because the debt which is due may presumably be payable and the debt which is payable must necessarily be due. But this confession can be cleared by recollecting that a debt may come into existence and its payment may be postponed. Ordinarily, a debt as soon as it is incurred, unless payment is postponed, may also be payable. But when one turns to a debt in respect of tax, the difference between debt due and debt payable becomes immediately discernible. A debt in respect of a tax may become due at one time and payable at a different time in future. It is quite well-known that tax becomes due at one point of time, but when it becomes due it dies not necessarily become payable and it may become payable at a future date. All the three stages can be well comprehended in respect of a debt which is nothing but arrears of tax. The dictum debit in presenti solvendum in future clearly brings out the distinction of a debt becoming due, meaning thereby coming to existence at one time and becoming payable in future. Dot is sometimes defined as a sum of money which is now payable or may become payable in the future by reason of a present obligation. Therefore, it is quite conceivable that a debt may become due at one point of time and may become payable at some other point of time and since then it may be outstanding. A Division Bench of this High Court in Commissioner of Wealth-tax v. Raipur Mfg. Co. Ltd : 52ITR482(Guj) , while examining the meaning of the expression 'debt owed' in the definition of 'net wealth' in section 2(m) of the Wealth-tax Act, 1957, observed as under :
'.....it seems to be abundantly clear that in order to constitute a debt it is not pre-requisite that there must be an ascertained sum of money legally recoverable in present. It is sufficient if there is a pursuant obligation to pay a sum of money, whether the amount thereof is ascertained or not and whether the amount is presently payable or payable at a future date. It must not be a contingent obligation.'
10. This view was confirmed in Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax : 59ITR767(SC) , wherein the Supreme Court observed as under :
'The said decisions also accept the legal position that a liability depending upon a contingency is not a debt in presenti or in future till the contingency happened. But if there is a debt the fact that the amount is to be ascertained does not make it any the less a debt if the liability is certain and what remains is only the quantification of the amount.'
11. Learned Advocate-General urged that while constructing the expression 'having become due and payable' it would be improper to rely on the ratio of the case because the court in that case was concerned with the expression 'debts owed' as it finds its place in the definition of 'net wealth' in section 2(m) of the Wealth-tax Act, 1957. In fact, in a very elaborate judgment, the Division Bench examined what constitutes 'debt' and whether the meaning undergoes change because of the context in which that word is used in the definition of the expression 'net wealth'. The context, however, did not affect the intrinsic meaning of the word 'debt' as used in the definition of the expression 'net wealth' and as used in clause (a) of sub-section (1) of section 530 of the Companies Act.
12. Priority is claimed for payment of the amount which admittedly is to be paid as and by way of sales tax payable by the company. It is admitted that the amount was outstanding on the relevant date. The real controversy centers round the question whether the amount in respect of which priority is claimed had become due and payable within 12 months next before the relevant date. The information set out in tabulated form in the earlier part of this judgment would show that the amount in respect of the sales tax payable under the Bombay Sales Tax Act is for the period commencing from 1st April, 1957, and ending with 31st DEcember 1965. So also the amount claimed as tax payable under the Central Sales Tax Act is payable for the period commencing from 1st July, 1957 and ending with 31st December, 1965. If the period for which tax is claimed is very simple, because the entire period was beyond the period of 12 months next before the relevant dates, the relevant date being 26th June, 1967. The contention is that the sales tax becomes due and payable only when the amount of tax is assessed in an assessment proceeding and demand notice is served in respect of the tax so assessed. If that contention were to prevail, obviously the assessment order rand issue of demand notice pursuant to the assessment order are within 12 months next before the relevant date and the claim for priority would be amply justified. But it was contended by Mr. Ashok L. Shah, learned advocate, who appeared for the official liquidator that even if the tax in respect of which priority is claimed became payable on the assessment order being made and demand notice being issued, it did not become due within 12 months next before the relevant date,but it became due as and when the taxing event occurred and that was much prior to the period prescribed in the clause (a) for claiming priority.
13. The question that clearly falls to be determined is as to when the sales tax becomes due and payable. Sales Tax is a tax on the sale of goods as clearly mentioned in the preamble of the Bombay Sales Tax Act, 1953, as well as the Bombay Sales Tax Act, 1959. At any rate, it cannot be considered as tax on the goods itself but it is a tax on the sale of goods. It has to be ascertained as to when sales tax which is a tax on sale of goods becomes due and when it becomes payable. In respect of the sales tax it is agreed that three independent situations can be envisaged. They are :
(i) when a return is submitted by the assessee, computing therein tax payable as per the return and the amount is paid and challan is submitted along with the return ;
(ii) when a return is submitted and tax is computed as per the return, but the amount of tax so computed is not paid; and
(iii) when the assessee submits the return and simultaneously computes the tax as per the return and pays the same along with the return, but at the time of assessment by the authority concerned, more tax than what is computed and paid by the assessee is found due and payable by the assessee and, pursuant to the assessment, a demand notice is issued.
14. Learned Advocate-General claimed priority in respect of the tax which becomes payable under the third category and did not argue that as and when tax is made payable, priority ought to be granted. Therefore, in this case I am concerned with the third situation in which the case of the petitioner falls and priority is claimed by him.
15. At this stage, it is necessary to refers to the relevant charging sections of the Bombay Sales Tax Act, 1953, the BOmbay Sales Tax Act, 1959, and Central Sales Tax Act. Section 5 of the Bombay Sales TAx Act, 19543, provides for the incidence of tax and it says that every dealer whose turnover either of all sales or of all purchase made during the relevant year has exceeded or exceeds the limits prescribed therein shall be liable to pay the tax under the Act on his turnover of sales and his turnover of purchases made on or after the appointed day. Section 6 provides for liability of the dealer to pay tax as therein provided and section 6(1)(ia) provides that the dealer who is liable to pay tax under the Act shall pay sales tax or purchase tax under the Act, on his sales or purchases in accordance with the provision of section 7A. SEction 8 provides for levy of sales tax on the turnover of sales of goods as specified in column 1 so Schedule B at the rate, if any, specified against them in column 2 of the said Schedule, subject to other provisions of the Act. Then comes section 16 which provides for the manner of payment and recovery of tax. A duty is cast on every registered dealer to furnish return at the intervals and in the manner prescribed in the rules. Sub-section (4) of section 16 provides that if the tax is not paid by any dealer within the prescribed time, the dealer shall pay, by way of penalty in addition to the amount of tax, a sum therein provided. Chapter III of the Bombay Sales Tax Rules, 1954, provides for submission of quarterly returns and further enjoins a duty upon the registered dealer to attach one copy of the receipt challan in respect of the tax due according to such return and penalty, if any, payable under sub-section (4) of section 16. Reading sub-section (4) of section 16 along with the rule 4, it becomes crystal clear that penalty at the rate prescribed in sub-section (4) of section 16 has to be paid along with the tax payable as per the return for the period during which there is delay in submitting the return and payment of the tax as per the return. It would thus appear that sales tax is levied on the sale of goods. Taxing event is the sale of goods. The liability to pay sales tax is cast on the registered dealer. He is required to submit the quarterly return of his turnover. And along with the quarterly return of his turnover he has to submit a challan showing payment of tax computed on the return submitted by him. And if there is delay in submission of the return and payment of tax as per the return he must add to the tax payable by him the amount of penalty computed as per the provisions contained in sub-section (4) of section 16. This provision is very important to find out as to when tax becomes due. A tax becomes due when the taxing event occurs. Taxing event in the case of sales taxis sale of goods. The person liable to pay tax is the registered dealer and method of payment is quarterly submission of return showing turnover and payment of tax as per the return. Penalty is payable when tax which has become due is not paid. One cannot levy penalty for non-payment of tax or non-payment of tax within prescribed period unless the tax has before and due payable. The charging section in the BOmbay Sales Tax Act, 1953, clearly shows that the tax is levied on sale of specified rates and it is payable every three months when a duty is cas ton the registered dealer to submit his return. The duty is ascertainable because the moment the registered dealer on whom duty is cast to submit the return and pay tax as per the return fails to submit the return and pay tax within the prescribed time, he incurs liability to tape penalty. The fact that he has to pay penalty merely because of his failure to submit return and pay tax in time indicates that the tax had already become due and payable by him as per his own computation and he failed to pay within the stipulated time which entailed liability to pay penalty.
16. It was, however, urged that tax which was found payable by the assessee at the time of assessment become due when the assessment proceeding is over and tax is assessed and demand notice is served. The contentions that, though undoubtedly duty is cast on the assessee to compute tax as per his return and pay it, yet when assessment proceedings are conducted and conclude and assessment order is made, the tax really becomes payable. It is quite possible that if no assessment a larger amount is found due by way of tax then the one computed by the assessee and paid by him along with his return that additional tax found payable on assessment may become payable on the assessment order being made and consequent demand notice being served upon the assessee. Does it, however, mean that the tax also become due at the time when the assessment order is made I think not. Ultimately, when assessment proceedings are completed what is examined by the competent authority is the return submitted by the assessee and evidence furnished by him and the proof tendered by him in support of his return which, when not accepted, may entail a higher liability for tax. But such assessment is always in relation to the period for which assessment is being made. Even the assessment proceedings relate to assessment of tax on tax in events that occurred during a certain period. To illustrate, suppose the assessee submitted quarterly return for the period from January 1, 1957, to December 31, 1957, and paid tax as computed by him, at the time of filing his returns. Now, the authority may commence assessment proceedings for the period January 1, 1957, to December 31, 1957, somewhere in 1960, and reject certain proof tendered by the assessee whereby he adds to the turnover and assess the tax payable by the assessee and after giving credit for the amount already paid serves demand notice or the balance. Can it be said that tax became due when assessment is made, or it has already become due during the relevant period for which assessment is being made and become payable when assessment order is made The scheme of the Sales Tax Act does not leave an assessee option not to pay tax till assessment proceeding is completed and assessment order is made. In fact, the scheme entails a liability on the assessee himself first to compute the tax while submitting his return and pay the same. His failure to pay tax as per his computation, or his failure to submit return within the stilted time, and to pay tax at the time of submitting return would entail liability to payment of penalty which again has to be computed by him and paid along with the tax. It is the provision which shows the incidence of tax. Therefore, in the scheme of the SAles Tax Act taxing event appears to be sale of goods. Mode of payment its that it is deferred till quarterly return is submitted correct return and pay tax computed as per his correct statement. If the assumption is justified assessment is merely a formality because nothing becomes payable at the time of assessment as the assessee had submitted return and paid tax computed as per the return. Assuming that the return submitted by the assessee is not accepted by the authority and the authority while making assessment makes demand of the tax in higher amount than what the assessee computed and paid while submitting the return, certainly the difference between what is paid and what is payable would become payable when the assessment order is made. But that amount becomes payable as sales tax in respect of the sales that took place during the accounting year while submitting the return if a correct return was submitted. The tax was due during that very period. Therefore, apart from anything else, merely at present looking at the scheme of the Bombay Sales Tax Act, 1953, the sales tax become due even in respect of that amount which is found to be payable in assessment when the sales took place, meaning thereby when taxing event under the sales tax act occurred. The scheme of the Bombay Sales TAx Act, 1953, , and the scheme of the Central Sales TAx Act, 1956, as far as submitting of return and payment of tax is concerned is in pari material and the same conclusion holds good in respect of them also.
17. If the scheme of the Sales Tax Act and especially the charging sections and the sections casting liability on the person liable to pay tax and the mode, manner and method of payment of tax is correctly understood by me, there is no escape from the conclusion that tax became due even in the third class of cases as envisaged by the learned Advocate-General when the taxing event occurred.
18. Liability to pay income tax arises in a different manner but as it is another taxing statute, reference was made to the provisions of the Income- tax Act, 1922, in support of the submission that tax becomes due and payable only when it is assessed and a demand notice pursuant to the assessment is served upon the assessee. I am not inclined to examine the provisions of the Income-tax Act, 1922, or, for that matter, the Income-tax Act, 1961, to find out as to when income-tax becomes due, save saying that income-tax becomes due at the end of the accounting year. By the very nature of income-tax, every piece of income, whenever earned, does not entail liability to pay tax such as every sale by the registered dealer may entail liability to pay sales tax. In the case of income-tax when a certain quantum of income is reached within the accounting year, then at the end of the accounting year, having regard to certain income which is taxable, liability to pay tax arises. Payment of advance income-tax stands on a different footing. In the case of payment of advance income-tax, as the statute authorities the competent authority to ask for payment of advance income-tax, notice to the assessee to pay the same makes advance tax due and payable from the date on which taxis demanded. But in the case of ordinary income-tax as understood in contradistinction to advance income-tax, there is consensus of judicial opinion that it becomes due at the close of the accounting year and becomes payable when assessment is made. I would refer to some of the authorities bearing on the subject when I examine the authorities relied on by either side in this case, but at this stage it is sufficient to say that the analogy about income-tax becoming payable on the assessment order being made and demand being served will not assist in determining as to when sales tax becomes due in the situation as envisaged in this case.
19. I would now refer to some of the authorities relied upon on either side. In Kesoram Industries's case : 59ITR767(SC) , it has been in terms held that income tax becomes due at the latest on the last date of the accounting year. After examining various provisions of the Income-tax Act, as also the decisions of the Bombay, Gujrat (Commissioner of Wealth-tax Raipur Mfg. Co.  52 I.T.R. 482; 4 G.L.R. 741 (Guj.)) and the Kerala High Courts, the Supreme Court agreed with the conclusion arrived at by the Division Bench of this High Court and in terms held that a debt is a present obligation to pay an income-tax is a present liability though it becomes payable after it is quantified in accordance with ascertainable data and there is a prefect debt at any rate on the last date of the accounting year and not a contingent liability. This observation would negative the contention not the learned Advocate- General that incometax only becomes due when assessment is made and the quantified liability comes into existence and demand notice is served. On the contrary, the view taken by me gets some support from the judgment of th Divisions Bench of the High Court consisting of Bhagwati C. J. and T. U. Mehta J. in Jivanlal Maganlal Patel v. Mangaldas Joshi  27 S.T.C> 419 (Guj.), at page 425. The Division Bench in that case was concerned with the examination of the scheme of sections 19(4) and 34 of the Bombay Sales Tax Act, 1959. Expression which came up for construction before the Division Bench was 'tax due' in section 34 and the liability of the transferee to pay tax which became due before transfer of a business. Contention before the Division Bench was that the tax does not become due unless quantified. Negativing the contention it was held that even if the amount of sales tax is not quantified as a result of a pending assessment, liability to pay tax is considered as tax due by sub-section (4) of section 19 of the Act. The reasoning of the Division Bench proceeds on the basis that tax becomes due as soon as a taxing event occurs, and in order to decide whether a certain tax is due or not, it is immaterial whether by the assessment order it is quantified or nt. In this connect it is advantageous to refer to Recols (India) Ltd. In re  23 COmp. Cas. 380, 381 ; 4 S.T.C. 271 ;  I.L.R. 2 Cal. 378 [S.B.]. It is necessary to examine in some detail this judgment because both the sides have relied upon it ; the learned ADvocate-General relied on the judgment of Chakravarti C. J. and Mr. Shah, for the official liquidator, relied upon the judgment of Sinha J. though reference to the Special Bench has been answered back by unanimous decision. The matter came up before a Special Bench consisting of three judges of the Calcutta High Court upon a reference made by a single judge of that High Court which was in the following words :
'Whether sales tax is to be treated as a preferential debt within the meaning of section 230 of the Indian Companies Act (which is in pari material with section 530(1)(a) of the Companies Act, 1956) From which date-from the date of demand or the date when the sale price is received, or any other date ?'
20. The answer of the Bench was that the amount of sales tax which became due and payable on the date of service of notice of demand was entitled to preferential payment. The learned Advocate-General relied upon the answer to the reference given by the Special Bench and urged that the sales tax always becomes due and payable when assessment order is made and demand notice is issued. Mr. A. L. Shah, on the other hand, contended that the Special Bench has not further examined the question whether both the conditions must co-exist before priority in payment is granted. Chakravarti C. J. in his judgment referred to the Privy Council decision in Doorga Prosad v. Secretary of State  13 I.T.R. 285 (P.C.), wherein it was held that the tax was due when a demand was made under sections 29 and 45 of the Income-tax Act and that it then became a debt due to the Crown. Having relied upon this observation Chakravaarti C. J. noted that the Judicial Committee was not considering the point of time at which income- tax became due and payable and made the observation referred to above in connection with a different point. Having said this, reliance was placed on the observations just hereinabove quoted by me by observing that it was not conceded that so far as income-tax was concerned, the proposition was not correct. Thereafter, the judgment of Chakravarti C J. proceeds on the basis that the dictum laid down in Doorga Prasad's case  13 I.T.R. 285 (P.C.), holds good evening the case of sales tax and accordingly held that sales tax in respect of which priority was claimed became due only when notice of demand was served which was within 12 months next before the relevant date. I have already pointed out above that there is noteworthy and understandable difference between the sales tax becoming due and income-tax becoming due because taxing event in the case of these two taxes is different. Therefore, the analogy of the income-tax, except for the purpose of saying that it may become due at one date and payable at a future date, cannot be further relied upon. In this connection, Sinha J. has, in his concurring judgment, examined the question as to when sales tax becomes due and when it becomes payable under Bengal Finance (Sales Tax) Act, 1941. This question was examined by Sinha J. in order to find out as to when sales tax became due in that case and when it became payable so as to be entitled to payment in priority. After examining the effect of the charging sections and sections levying tax, and the sections providing for the mode, manner and method of payment of tax, it was observed  23 Comp. Cas. 381, 396 ; 4 S.T.C. 271 ;  I.L.R. 2 Cal. 378 [S.B.] :
' The cumulative effect of section 4,5 and 6 of the Act is that the tax becomes due as soon as the gross turnover within the taxable period exceeds the taxable quantum. It is true that the dealer is entitled to certain deductions under section 5 and exemptions under section 6, but all that is taken into account is arriving at the 'taxable turnover' . Such an adjustment must have to be calculated and in all probability is calculated by the dealer just before drawing up the return. But that process cannot hold up the tax being due. '
21. This view of Sinha J. lends assurance to the view I have already taken that tax becomes due when the taxing event occurs. It may further become payable when the return is submitted as initially tax is to be paid according to the return ; where the whole or part of the return is not accepted then tax becomes payable when assessment taken place. But even if tax becomes payable at some future date, it is none-the-less tax which was due for the period for which return is submitted or in respect of sales which took place or the period for which assessment is being made. However, Sinha, J., with great respect, after examining the case from this angle fell into an error by not examining the question whether both the conditions in the latter part of the clause (a) of section 530(1) must co-exist and be satisfied before priority in payment can be claimed and concurred in the order passed by Chakravarti C.J. Therefore , with respect , it is not possible to accept the answers given by the Special Bench to the question posed before it though part of the reasoning is quite convincing and must be looked upon with respect.
22. Reliance was also placed on the decision in In the matter of Bihar Bolts and Rivets and Engineering Works (in Liquidation) (2)  29 Comp. Cas 482; 10 S.T.C.. K. Sahai J., after referring to Recols (India) case (1)  23 Comp. Cas 381, 396; 4 S.T.C. , relied upon the construction placed upon the expression ' having become due and payable' by Sinha J. and held that section 530(1) (a) does not require that claim must become due as well as payable within a period of 12 months . But before reaching this conclusion, it was observed as under :
' But a dealer can always be certain of what sales tax he has to pay as soon as he effects the sale. At the time when a dealer prepares his return , he only adds up the sales effected by him during the period in question. The assessment is a process whereby a prescribed authority similarly adds up the amounts . I do not, therefore , think that the liability to pay sales tax arises either at the preparation of the return or the passing of the assessment order .'
23. It was thus held that sales tax becomes due as soon as sale taken place which is a taxing event. This part of the judgment lends support to the view taken by me. The observation in the latter part whether the amount in respect of which priority is claimed must be both due and payable within 12 months next before the relevant date (sic) , neither side relied upon this judgment and I must confess with great respect that it is not possible to accept the conclusions recorded on this point. Next case referred to was Joint Official Liquidators of Peerdhan Juharmal Bank Ltd. v. Commissioner of Income-tax (1)  24 comps. Cas 41 ; 25 I.T.R. 140; A.T.R. 1954 Mad. 858. Now, this case would lend no assistance in deciding the question raised before me because the question raised before a Division Bench of the Madras High Court in that case payable. The liability to pay advance income-tax stands on a different footing and the assessee becomes liable to pay advance income-tax on a notice served upon him and, therefore , advance income-tax becomes due any sales tax stands on a different footing and this case would not lend any assistance in deciding the question raised in this matter. In Income-tax Officer v. Official Liquidator (2)  37 Comps. Cas. 114 ; 63 I.T.R.810 (Mys.). claim for priority in payment of income-tax was negatived. In fact the case has been disposed of on its own facts. But, Mr. Shah drew my attention to this case in support of his submission that the observation of the Patna High Court in In the matter of Bihar Bolts and Engineering Works : AIR1959Pat537 . on the question whether the amount should become due as well as payable within 12 months was not approved and was in fact questioned. But, as the case has been disposed of on its own facts, I need not examine it further. In sales Tax Officer v. Official Liquidator (4)  38 Comps. Cas. 430 (All.) the Allahabad High Court rejected the claim for priority in respect of sales tax dues observing that section 530(1)(a) not only requires that the tax should have become due within the relevant period but that it should have also become payable within that period . Both these conditions must, therefore, co-exist before priority mentioned therein can be claimed . Curious part of its is that in reaching this conclusion it was observed that the view taken of its is taken in reaching this conclusion it was observed that the view taken by the court gets support from the decision in Recols (India) Ltd (5)  23 Comps. Cas. 380 380 ; 4 S.T.C. 271 ;  I.L.R. 2 Cal 278 [S.B.] . But unfortunately there in no obsesrvation to that effect in Recols (India) Ltd. (1)  23 Comps. Cas 380; 4 S.T.C.  I.L.r. 2 Cal 378 (S.B.) However, the view I am taking gets some support from the decision of the Allahabad High Court , in that it has in terms been held that the tax should become due and payable within a period of 12 months next before the relevant date and both these conditions must co-exist before priority could be claims.
24. Having examined the question both on principle as well as on authority, there is no escape from the conclusion that before priority in payment of any amount could be claimed under section 350(1) (a) , it must be shown that the amount claimed was outstanding as debt on the relevant date and that it must have become due, meaning thereby that the liability to pay arose at any time within 12 months next before the relevant date as well as it must have become payable within that period. Unless all these conditions are satisfied priority envisaged by that section cannot be claimed in respect of the sales tax. I have come to the conclusion that tax becomes due when taxing event occurs and not when assessment order is made. To make it abundantly clear even in a case where quarterly returns of sales tax are submitted and tax computed don each return is paid and he, at the time of assessment , something more is found due by rejecting proration of the return submitted by the assessee, or for any paid with the return is assessed and balance becomes payable and in respect of which notice of demand is issued , yet that tax becomes due at the time when the taxing event occurred, namely , sales were effected though it might have become payable when the assessment is made.
25. If the conclusion herein recorded is correct , then the claim for priority has been rightly negatived by the liquidator because even though amount for which priority is claimed was the amounts of tax arrears that become payable at the time of making assessment order after giving credit much prior to 12 months next before the relevant date and even if it has become payable on the assessment order being made and demand notice being issued, as both the conditions did not co-exist and are not satisfied, claim for priority has been rightly negatived by the official liquidator and there is not reason to interfere with the order.
26. Next contention of the learned Advocate-General was that he official liquidator was not error in rejecting the claim for penalty in its entirety. It is true that the liquidator has rejected the entire claim of penalty. Now, penalty is also levied for the period preceding the relevant date. The amount of penalty levied till the relevant date under the Bombay Sales Tax Act, excluding the amount not pressed by the learned Advocate-General, comes to Rs. 612093. The amount of penalty till the relevant date levied under the Central Sales Tax Act comes to Rs. 6120.42 . The total of the penalty up to the relevant date comes to Rs. 1,225.35 . This has been rejected by the official liquidator . Mr. Shah appearing for the official liquidator conceded that the liquidator is willing to admit the claim of Rs. 1,225.35 as ordinary claim and that was quite satisfactory to the learned Advocate-General. Therefore, to that extent the order of the liquidator will have to be varied.
27. The petitioner also claims penalty for the period subsequent to the relevant date and requests the court to admit it as an ordinary claim to rank pair pass with other unsecured creditors. It may be mentioned that no priority is claims in respect of the penalty subsequent to the relevant date. The question is whether any penalty for non-payment of tax due would be payable in respect of an insolvent company for the period subsequent to the relevant date.
28. The learned Advocate-General urged that penalty is noting but a tax incidental to and a part of the process of assessment of tax and collection. On the other hand , Mr. Shah, for the official liquidator, contended that penalty under the Sales Tax Act partakes the character of interest for late payment , meaning thereby for withholding the amount from the Government which ought to have been paid by a certain date and in respect of which interest akin to damages may be payable. The question will have to be examined from two different angles , firstly, whether failure to pay ordinary debt, in other words, unsecured debt, soon after the relevant date, would entail any consequence If failure to pay unsecured debt would not entail any consequence for its non-payment , then penalty being nothing more than consequence of the failure to pay in time, it would not be admissible as a claim in winding -up. It is, therefore, necessary to examine what is the effect of winding -up order in respect of an insolvent company on the right of unsecured creditors to claim payment of debt which has become due and payable. Section 528, on which reliance was placed by the learned Advocate- General , reads as under :
' 528. Debts of all descriptions to be admitted to proof :- In every winding -up (subject , in the case of insolvent companies, to the application in accordance with the provisions of this Act or the law of insolvency) , all debts payable on a contigency, land all claims against the company, present of future , certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company , a just estimate being made , so far as possible, of the value of such debts or claims as may be subject to any contingency , or may sound only in damages , or for some others reason may not bear a certain value.'
29. Section 528 provides as to what debts should be admitted to proof in winding- up in respect of a company other than an insolvent company. Section 529 specifically provides for application of insolvency rules in winding up of insolvent companies. Section 529 reads us under :
' 529 Application of insolvency rules in winding up of insolvent companies - (1) In the winding up of an insolvent company, the same rules shall prevail and be observed with regard to-
(a) debts provable;
(b) the valuation of annuities and future and contingent liabilities; and
(c) the respective rights of secured and unsecured creditors ;
as are in force for the time being under the law of insolvency with respect to the estates of persons adjudge insolvent.'
30. It would, therefore, be necessary to refer to the rules which prevail with regard to respective rights of secured and unsecured creditors as are in force for the time being under the law of insolvency with respect to the estates in persons adjudged insolvent. Section 45 of the Provincial Insolvency Act provides that a creditor may prove the debt not payable when the debtor is adjudged insolvent as if it were payable presently, and he is entitled to receive dividends equally with other creditors, deduction therefrom only a rebate of interest at the rate of six per cent. per annum computed form the declaration of a dividend to the time when the debt would have become payable according to the terms on which it was contracted. Section 46 deals with mutual dealings and set-off. Section 47 deals with the positions of secured creditors . Section 48 provides for payment of interest. In short, it provides payment of interest in certain circumstances only up to the date of adjudication . There are parallel provision in the Presidency Towns Insolvency Act.
31. On a conspectus of these sections, the theory in bankruptcy is to stop all things as the date of the bankruptcy and to divide the wreck of the man's property as it stood at that date (vide In Re Savin (1)  L.R. 7 Ch. App. 760 764. ) It should be so in the case of an insolvent company also because on winding -up order being made, right of the creditors and liabilities of the company are crystallized as on that date. There is no question of the company incurring any further liability for any inaction on its part, because the liquidate on the winding-up order being made steps in and proceeds to collect the assets of the company and distributes the same in accordance with the principles set out in the winding-up provisions of the Companies Act. There is, therefore , no question of any further liability being incurred merely on account of non-payment of a liability of a debt which was outstanding on the relevant date. Now , if penalty amount under the Sales Tax Act is nothing but a liability imposed on account of non- payment of tax, it would mean that continuous recurring liability to pay penalty must come to an end on the date on which winding-up order is made. Any other construction would put tax liability in a preferred position compared to other liability of the company and except where preference is shown by law itself , there is no reason to grant any other preference in favour of tax liability.
32. It was , however , contended that penalty is nothing but tax itself under a different nomenclature and liability to pay tax cannot come to an end if it otherwise accrues merely because winding-up order is made. Reference was made to K.V. Adinarayana Setty v. Commercial TAx Officer, Kolar Circle, Kolar (1)  14 S.T.C. 587 (Mys.) . The matter came up before a Division Bench of the Mysore High Court by way of criminal revision petition against the order made by the Magistrate who had ordered issue of warrant for attachment of movable of the respondent for recovering sales tax in arrears. Section 1393) (b) of Mysore Sales Tax Act , 1956, enabled the Commissioner Tax Officer to collect tax as distinct form penalty due under the Central Sales Tax ACt by approaching a Magistrate. It was, however, contended that respondent would not be legally liable to pay any amounts claimed as penalty under section 13(2) of the Mysore Act, because even if any person makes default in payment of the tax under the Central Sales Tax Act, he is not under any liability to pay penalty under section 13 (2) of the Mysore Act. It is in this background that the observation was made that penalty levied under section 32 is something which is incidental to and part of the process of payment and collection of tax. In Commissioner of Income-tax v. Bhikaji Dadabhai & Co. : 42ITR123(SC) , the Supreme Court, while examining the provisions of the Hyderabad Income-tax Act, which was kept alive by the Finance Act, 1950 , observed that penalty is regarded as an additional tax imposed upon a person in view of this dishonest or contumacious conduct. Thought under the Hyderabad Income-tax , distinct provisions are made for recovery of tax dues and penalty, that does not alter the true character of penalty imposed . Imposition of penalty is a necessary concomitant or incident of the process of assessment, levy and collection of tax. In State of U.P. v. Dyer Making Breweries Ltd 93) S.C  31 S.T.C. 588 the Supreme Court observed that levy of penalty is one form of levying tax. If the Sales Tax Officer was competent to levy sales tax on the assessee in respect of assessment for certain years, he was equally competent to levy penalty on the assessee in respect it was urged that levy of penalty was one form of levying tax or levying penalty is incidental to and part of the process of payment and collection of tax. As against this , Mr. Shah referred to M. A. Abdul Rahim and Mohd. Ibrabim & Co. v. Deputy Commercial Tax Officer (4) : AIR1965Mad524 . In that case section 24(3) of the Mysore General Sales Tax Act, 1959 , came up for consideration. This section authorised levy of penalty if the tax due or installment thereof is not paid by the deals within the time specified, penalty to be levied at the rate precribed therein. Tax was being assessed under the Mysore General Sales Tax Act, 1939, in that case but penalty was being levied under section 24 (3) of the Mysore General Sales tax Act , 1959. Claim for penalty was negatived as it was not leviable under the 1939 Act. Argument was that levy of amount as penalty was a process of recovery of amount due. That argument was negatived. The question raised could have been answered by observing that though the 1939 Act did not provide for levy of such penalty, yet it was, in passing , observed that penalty in such circumstances is nothing but by way of interest on arrears of sales tax. Penalty in every case may not partake the character of interest on tax which is not paid. Full Bench of the Andhar Pradesh High Court in State of Andhar Pradesh v. Godavarthi Kasiviswandham (1) , observed that penalty under the Sales Tax Act is clearly separate and distinct from the tax and the usual proceedings taken for the assessment of the tax are not sufficient for the levy of penalty also, because penalty is not merely incidental to assessment proceedings. It was , however, observed that the word 'tax' as used in the Act does not include penalty. The two are treated therein as distinct and separate.
33. What exactly is th nature of penalty in a given case may spend upon the provisions of the statue under which it is levied . It may partake the character of interest in the case of delayed payment of tax. It may be punitive in character, in order to punish the dishonesties or contumacy of the dealer. A very broad proposition that penalty under a taxing statute always partaken the character of interest cannot be accepted. It the penalty in a given case partaken the character of interest, then rules of bankruptcy which will be applicable to the winding-up of an insolvent company would not permit payment of interest in the guise of penalty for a period subsequent to the relevant date. Theory in bankruptcy to stop all things at the date of bakruptcy applies in whatever guise interest is claimed (vide In re Savin (2)  L.R. 7 Ch. App. 760 . Further , the court of the bankruptcy is a court of equity and would have regard to the substance of the transaction. Rule 179 of the Companies (Court) Rules on this point lends assurance to the view taken by me that while interest up to the date of winding-up is admissible, interest beyond the relevant date could be given only in certain circumstances.
34. Assuming that penalty does not partake the character of interest, but is punitive in character , can the official liquidator be punished for his failure to pay tax due soon after the relevant date. The official liquidator incurred for the particular consumer. The entire operation and levying of charges in strictly controlled by the rules and provisions of statutes and one of the provided for in the agreement between the parties. It was not possible to agree with the learned single judge that too much sanctity should not be attached to such an the learned single judge that too much sanctity should not be attached to such an agreement between unequally placed parties or that once electric supply was disconnected or supply of power was discontinued , the agreement came to an end.
SAILA BALA ROY V. DARJEELING MUNICIPALITY  A.I.R. 1936 265 WATKINS MAYOR AND CO. V. JULLUNDUR ELECTRIC SUPPLY CO.  A.I.R. 1955 Punj. 133 MAHARASHTRA STATE ELECTRICITY BOARD V. MADHUSUDANDASS AND BROTHERS  A.T.R. 1966 Bom. 160 and NATESA CHETTIAR v. MADRAS STATE ELECTRICITY BOARD : (1969)1MLJ69 (Mad) followed.
35. Under section 529 of the Companies Act , in the winding up of an insolvent company, the same rules shall prevail and be observed with regard to the debts provable as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged involved . It was common ground that the company in this case was in insolvent circumstances. From the date of the winding up order of June 26, 1967 , till March 31, 1968 , that is till the termination of the agreement of 1962, the company was under a liability to the termination of the agreement of 1962, the company was under a liability to pay the minimum charges. Reading the provisions of section 34 of the Provincial Insolvency Act, which is applicable to this case and the provisions of section 528 and 529 of the companies Act, it was clear that he liability of the company to pay the minimum charges was a debt that the liability of the company to pay the minimum charges was a debt provable in winding up again this insolvent company and, therefore, the official liquidator was bound to admit this claim as a debt provable in the course of winding up.
36. Held also, that delayed payment charges partake of all the characteristics of interest on the outstanding amount due by the consumer to the Board. Interest form the date of winding up cannot be allowed under ordinary circumstances until all the claims are paid in full. As the company was in insolvent circumstances the delayed payment charges of Rs. 1,999 for the period commencing form June 26, 1967, could not be allowed to be levied by the Board.
O.J. Appeals No. 1 of 1973 from Company Application No. 76 of 1972 in Company petition No. 21 of 1966.
J.M. Thakore (Advocate-General ) with P.S. Shah (Addl. Government Pleader ) for the appellant.
A.L. Shah for the respondent.