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Jayantilal Trambaklal Patel Vs. B.M. Gandhi, Sales Tax Officer - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtGujarat High Court
Decided On
Case NumberSpecial Civil Application No. 841 of 1963
Judge
Reported in(1965)0GLR337; [1965]16STC1039(Guj)
ActsBombay Sales Tax Act, 1953 - Sections 38, 38(1), 38(2), 38(3), 38(4) and 38(5); Bombay Sales Tax (Amendment) Act, 1959; Bombay Land Revenue Code, 1879 - Sections 150 and 187; Constitution of India - Article 226
AppellantJayantilal Trambaklal Patel
RespondentB.M. Gandhi, Sales Tax Officer
Appellant Advocate G.M. Vidyarthi, Adv.
Respondent Advocate B.R. Sompura, Assistant Government Pleader and; M.G. Doshit, Additional Government Pleader
Cases ReferredThe Bank of India v. Bowman
Excerpt:
sales tax - recovery of amount - section 38 of bombay sales tax act, 1953 and bombay land revenue code, 1879 - whether state entitled to proceed against surety for payment of tax liability of assessee under code of 1879 as if amount payable by surety were arrears of land revenue - state not to invoke section 38 - no express provision stating that amount to be recoverable as arrears of land revenue - no provision of law authorises state to recover amount due under surety bond as it were arrears of land revenue - state not empowered to follow coercive machinery of code of 1879 - state open to follow ordinary remedy of action at law - question answered in negative. - - 100 per month to hasmukhlal and in consideration of this facility for payment by instalments being given to hasmukhlal,..........a surety for payment of tax liability of an assessee under the procedure provided in the bombay land revenue code, 1879, as if the amount payable by the surety were an arrear of and revenue. the facts giving rise to the petition are undisputed and may be briefly stated as follows :- one hasmukhlal was carrying on business in the name of messrs hasmukhlal & company at ahmedabad and on 24th september, 1952, sum of rs. 6,945.63 np. was payable by him to the state in respect of arrears of tax and penalty under the provisions of the bombay sales tax act, 1953. on the request of hasmukhlal, the sales tax recovery mamlatdar, who was taking steps to recover the said amount from hasmukhlal, granted instalments of rs. 100 per month to hasmukhlal and in consideration of this facility for payment.....
Judgment:

Bhagwati, J.

1. The short question that arises in this petition is whether the State is entitled to proceed against a surety for payment of tax liability of an assessee under the procedure provided in the Bombay Land Revenue Code, 1879, as if the amount payable by the surety were an arrear of and revenue. The facts giving rise to the petition are undisputed and may be briefly stated as follows :-

One Hasmukhlal was carrying on business in the name of Messrs Hasmukhlal & Company at Ahmedabad and on 24th September, 1952, sum of Rs. 6,945.63 nP. was payable by him to the State in respect of arrears of tax and penalty under the provisions of the Bombay Sales Tax Act, 1953. On the request of Hasmukhlal, the Sales Tax Recovery Mamlatdar, who was taking steps to recover the said amount from Hasmukhlal, granted instalments of Rs. 100 per month to Hasmukhlal and in consideration of this facility for payment by instalments being given to Hasmukhlal, the petitioner executed surety bond stipulating that if Hasmukhlal committed default in payment of any three monthly instalments, the petitioner would pay to the State the full amount due and payable by Hasmukhlal and if the petitioner failed to do so, the State would be entitled to auction the house of the petitioner described in the surety bond and to appropriate the sale proceeds in or towards payment of the said amount. It appears that Hasmukhlal committed default in payment of more than three instalments and the entire amount accordingly became due and payable by Hasmukhlal to the State. The Sales Tax Recovery Mamlatdar thereupon issued a notice dated 4th March, 1963, to Hasmukhlal calling upon him to show cause why legal steps should not be taken against him for recovering the amount due and payable by him to the State. Since there was no response to this notice, the Sales Tax Recovery Mamlatdar addressed another notice to Hasmukhlal on 20th June, 1963, intimating to him that it was decided to recover the amount due and payable by him summarily and to take coercive action for recovery of the said amount against Hasmukhlal and the petitioner. A copy of this notice was sent by the Sales Tax Recovery Mamlatdar to the petitioner. Since the Sales Tax Recovery Mamlatdar threatened to recover the amount under the surety bond from the petitioner as an arrear of land revenue by employing the coercive machinery of the Bombay Land Revenue Code, 1879, the petitioner filed the present petition against the Sales Tax Officer and the Sales Tax Recovery Mamlatdar as respondents challenging the right of the State to recover the amount due under the surely bond as an arrear of land revenue. On the petitioner being admitted a rule was issued and in opposition to the rule and affidavit sworn by the second respondent was filed on behalf of the respondents. In the affidavit the respondents asserted their right to proceed to recover the amount due from the petitioner as if it were an arrear of land revenue and made it clear that they proposed to recover the said amount by adopting the coercive machinery provided in the Bombay Land Revenue Code, 1879.

2. Before we proceed to deal with the question of law arising on the petition, we may point out that the petitioner also alleged in the petition that the surety bond was not binding on him by reason of non-fulfilment of certain conditions which according to him were agreed upon between the parties as conditions precedent to the attachment of liability under the surety bond, but these allegations were disputed on behalf of the respondents and since they raised disputed questions of fact, Mr. G. M. Vidyarthi, learned Advocate appearing on behalf of the petitioner, frankly stated before us that it would not be possible for him to press the contention based on these allegation in the petition invoking the extraordinary jurisdiction of this Court under Article 226 of the Constitution. The only question which was, therefore, debated before us by Mr. G. M. Vidyarthi on behalf of the petitioner was whether the State was entitled to adopt the coercive machinery of the Bombay Land Revenue Code, 1879, for the purpose of recovering the amount due under the surety bond from the petitioner. Mr. G. M. Vidyarthi contended that there was no provision of law under which the amount due from the petitioner under the surety bond was recoverable as an arrear of land revenue and unless there was some such provision, the State was not entitled to proceed to recover the said amount from the petitioner by taking resort to the provisions of the Bombay Land Revenue Code, 1879. This contention was combated by Mr. B. R. Sompura, learned Assistant Government Pleader appearing on behalf of the revenue. He of course agreed, and indeed he could not do otherwise, that unless there is some provision of law which authorises the State to recover an amount due from a debtor as an arrear of land revenue, the State cannot resort to the coercive machinery provided in the Bombay Land Revenue Code, 1879, for recovering such amount from the debtor. But, he said, such provision was to be found in section 38(5) of the Bombay Sales Tax Act, 1959, or at any rate in the third clause of section 187 of the Bombay Land Revenue Code, 1879. Let us examine these provisions.

3. Section 38, as the marginal note indicates, deals with the subject of payment of tax by the dealer. Sub-section (1) provides that the tax shall be paid in the manner provided in the Act and at such intervals as may be prescribed by the Rules. Sub-sections (2) and (3) provide for payment by the registered dealer of the amount of tax due according to the returns filed by him from time to time and sub-section (4) declares inter alia that the amount of tax due where returns have been furnished without full payment therefor or assessed or reassessed for any period under section 33 of 35 and the amount of penalty levied under section 36 or 37 shall be paid by such date as may be specified in a notice issued by the Commissioner for the purpose. Sub-section (5) then enacts :-

'(5) Any tax, penalty or sum forfeited, which remains unpaid after the date specified in the notice for payment, or after the extended date of payment, and any instalment not duly paid, shall be recoverable as an arrear of land revenue.'

4. It is clear from the language of sub-section (5) that so far as tax is concerned, sub-section (5) applies to recovery of tax remaining unpaid after the date specified in the notice for payment and the reference to the notice for payment brings in the provisions of sub-section (4) and shows that the tax which can be recovered as an arrear of land revenue under sub-section (5) is tax due where returns have been furnished without full payment therefore or assessed or reassessed under section 33 or 35 which tax would be payable by an assessee-dealer. Sub-section (5) therefore applies only to recovery of tax due from an assessee-dealer and remaining unpaid after the date specified in the notice for payment given to the assessee-dealer under sub-section (3). On the same reasoning the penalty which can be recovered as an arrear of land revenue under sub-section (5) is penalty levied under section 36 or 37 and that penalty would be payable by (1) an assessee-dealer, or (2) a purchasing dealer or commission agent who has given certificate under section 11 and acted contrary to such certificate, or (3) a person contravening the provisions of section 46 or 48(1). So far as penalty is concerned, sub-section (5) therefore applies only to recovery of penalty due from an assessee-dealer or other person liable to pay the same under section 36 or 37. Sub-section (5) has obviously no application where what is sought to be recovered is not tax due from an assessee-dealer or penalty due from an assessee-dealer or other person on whom it is levied under section 36 or 37 but an amount due from a surety under a surety bond executed in order to secure payment of the amount of tax or penalty by the assessee-dealer or other person liable to pay the same under section 36 or 37. In such a case it cannot be said that when the amount due under the surety bond is recovered from the surety, what is recovered from the surety is by way of tax or penalty or bears the character of tax or penalty. Tax or penalty would be payable only by the assessee-dealer or other person on whom penalty is levied under section 36 or 37. What is payable by the surety is the amount due under the contract embodied in the surety bond and not tax or penalty. When the surety pays the amount he pays it not as tax or penalty due from him but as amount due from him under the surety bond and the amount is recovered from him not as tax or penalty but as amount due from him under the surety bond. Sub-section (5) of section 38 cannot, therefore, be availed of by the State for the purpose of contending that the amount due from the petitioner under the surety bond was recoverable as an arrear of land revenue and that the State was consequently entitled to adopt the coercive machinery set out in the Bombay Land Revenue Code, 1879, for the purpose of recovering such amount from the petitioner.

5. It was then contended on behalf of the Revenue that in any event by reason of section 187 of the Bombay Land Revenue Code, 1879, the amount due from the petitioner as surety was recoverable as an arrear of land revenue and for this purpose reliance was placed on the third clause of that section which provides inter alia that all sums declared by any contract with the Government to be leviable as an arrear of land revenue shall be levied under the foregoing provisions of Chapter XI of the Bombay Land Revenue Code, 1879. The argument was that the contract between the petitioner and the State embodied in the surety bond declared the amount due from the petitioner under the surety bond leviable as an arrear of land revenue and the State was therefore by virtue of the third clause of section 187 entitled to recover that amount from the petitioner by adopting the coercive machinery set out in Chapter XI of the Bombay Land Revenue Code, 1879. But when we turn to the surety bond we find that there is no provision in the surety bond which declares that the amount due from the petitioner shall be leviable as an arrear of land revenue. The only provision in the surety bond on which reliance could if at all be placed on behalf of the Revenue was the provision which empowered the State, in case of default on the part of the petitioner, to auction his house and to appropriate the sale proceeds in or towards payment of the amount due from him under the surety bond. But that is a far cry from saying that the amount shall be recoverable as an arrear of land revenue. If an amount is recoverable as an arrear of land revenue, it can be recovered by following any of the six processes set out in section 150 of the Bombay Land Revenue Code, 1879, of which sale of the defaulter's immovable property is only one such process. It does not therefore follow merely because the State is empowered to recover the amount due from the petitioner under the surety bond by auctioning his house that the amount is leviable as an arrear of land revenue. Our attention was drawn to the decision of a Division Bench of the Bombay High Court in The Bank of India v. Bowman ((1955) 57 Bom. L.R. 345), but we do not see how that decision is of any help to the Revenue. In that case the contract between the surety and the State expressly provided that the amount payable by the surety shall be recoverable by the State as an arrear of land revenue. There is no such express provision in the surety bond in the present case nor is it possible to spell out any such provision by necessary implication. The third clause of section 187 cannot therefore be invoked by the Revenue in support of its claim to recover the amount due from the petitioner by following the coercive process set out in the Bombay Land Revenue Code, 1879.

6. These were the only provisions of law on which reliance was placed on behalf of the Revenue and since, in our opinion, for reasons which we have stated above, they do not support the claim of the Revenue and there is no other provision of law authorising the State to recover the amount due from the petitioner under the surety bond as if it were an arrear of land revenue, the State cannot proceed to recover that amount by following the coercive machinery of the Bombay Land Revenue Code, 1879, and must be left to follow the ordinary remedy of an action at law which every creditor who wishes to enforce his debt has against the debtor.

7. We therefore allow the petition and direct that a writ of prohibition be issued prohibiting the respondents from enforcing the notice dated 20th June, 1963, against the petitioner or from taking any steps or proceedings to recover the amount alleged to be due from the petitioner under the surety bond as if it were an arrear of land revenue. The respondents will pay the costs of the petition to the petitioner.

8. Petition allowed.


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