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Kirtikumar Dhanjibhai Mohaya Vs. V.K. Trivedi, Sales Tax Officer (1), Unjha, District Mehsana - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtGujarat High Court
Decided On
Case NumberSpecial Civil Application No. 3570 of 1984
Judge
Reported in[1985]58STC125(Guj)
ActsCentral Sales Tax Act, 1956 - Sections 9(2); Gujarat Sales Tax Act, 1969 - Sections 41, 44 and 45
AppellantKirtikumar Dhanjibhai Mohaya
RespondentV.K. Trivedi, Sales Tax Officer (1), Unjha, District Mehsana
Appellant Advocate R.D. Pathak, Adv.
Respondent Advocate R.M. Vin, Government Pleader, i/b., Bhaishanker Kanga & Girdharlal
Cases Referred(See Shyam Kishori Devi v. Patna Municipal Corporation
Excerpt:
.....sections 46 a (1) and 46 a (2) of gujarat sales tax act, 1969 - mandatory for sale tax officers to make draft order whenever assessment results in additional liability either on account of tax or penalty as specified in two subsections of act. (ii) rule of construction - court must construe section as it stands and must not add any words in absence of clear necessity. - - 1. a small but interesting question arises as to when the sales tax authority exercising the powers under section 41 for making an order of assessment or exercising powers under section 44 for making an order of reassessment or for making an order of penalty under section 45 or 46 of the gujarat sales tax act, 1969 (hereinafter referred to as 'the said act') is under obligation to make draft assessment order in..........the gujarat sales tax act, 1969 (hereinafter referred to as 'the said act') is under obligation to make draft assessment order in this petition. the question arises on the facts and in the circumstances as narrated hereinbelow. 2. the period of assessment with which we are concerned in this petition is from 1st april, 1982 to 16th july, 1983. the petitioner is a proprietary concern doing business of goods transport by road in the name and style of 'orient mail speed transport service'. it appears that a raid was carried out by the sales tax authorities at the business premises of the petitioner which is situated at unza and as a result thereof certain records were seized. it appears that the petitioner could not explain certain consignments noticed in the sense that he could not furnish.....
Judgment:

Mehta, J.

1. A small but interesting question arises as to when the sales tax authority exercising the powers under section 41 for making an order of assessment or exercising powers under section 44 for making an order of reassessment or for making an order of penalty under section 45 or 46 of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as 'the said Act') is under obligation to make draft assessment order in this petition. The question arises on the facts and in the circumstances as narrated hereinbelow.

2. The period of assessment with which we are concerned in this petition is from 1st April, 1982 to 16th July, 1983. The petitioner is a proprietary concern doing business of goods transport by road in the name and style of 'Orient Mail Speed Transport Service'. It appears that a raid was carried out by the sales tax authorities at the business premises of the petitioner which is situated at Unza and as a result thereof certain records were seized. It appears that the petitioner could not explain certain consignments noticed in the sense that he could not furnish the precise particulars of the consignor and/or the consignee. The petitioner, however, contended that he was no a dealer and therefore not liable for registration. This contention did not find favour with the Sales Tax Officer (1), Unza, who was seized of the matter. He, therefore, proceeded to make an order of assessment under section 9(2) of the Central Sales Tax Act, 1956, read with section 41(6) of the Act raising the aggregate demand of Rs. 1,24,717.12 comprising of Rs. 99,774.12 as Central sales tax and Rs. 24,943 as penalty for concealment.

3. By the present petition this order of assessment is challenged mainly, inter alia, on the ground that it is without jurisdiction inasmuch as the Sales Tax Officer failed to make a draft order of assessment as he was obliged under section 46A of the Act which could have been finalished by the Assistant Commissioner of Sales Tax (Appeals) on the objections being raised against the said order, since the effect of the impugned order was to impose a tax liability exceeding Rs. 25,000 and a liability for penalty exceeding Rs. 7,500.

4. The grievance of the petitioner is that since that occasion did not arise inasmuch as the Sales Tax Officer has made a final order for all intents and purposes, he has been deprived on an opportunity of being assessed by a higher authority as intended by the legislature. Since this was the main and the sold point urged in the petition, we had thought fit to issue rule nisi and made it returnable immediately. In response to the rule issued by the Court, the respondent has filed his reply affidavit and resisted the petition on the ground that he was not under any obligation to make a draft order as was sought to be contended by the petitioner under section 46A of the Act since no return has been filed by the petitioner. According to the respondent, the obligation to make a draft order arises only when the effect of a proposed order of assessment is to levy tax liability of not less than Rs. 25,000 in addition to the amounts of tax indicated by the dealer in his declaration or the return in respect of a given period, or for that matter to impose a liability of penalty of not less than Rs. 7,500 in addition to the penalty already imposed in respect of that period. It is in the context of these rival contentions that we have to determine as to what is the true construction and effect of sub-sections (1) and (2) of section 46A of the Act.

5. Before we set out the material portions of the relevant sub-sections, it is necessary to remain ourselves that the Sales Tax Officer is one of the authorities mentioned in section 27 of the Act and he has been delegated the power to make an order of assessment under section 41 or to make an order of reassessment on the conditions prescribed in section 44 being satisfied and to levy penalty in the contingencies mentioned in sections 45 and 46. The Sales Tax Officer can exercise his power of assessment under section 41 which provides for assessment of tax. It should be noted that every registered dealer has to furnish declaration or return for such period and by such date and to such authority as may be prescribed subject to the power of the Commissioner to except such dealer from furnishing such declaration or return or to permit him otherwise. A dealer can furnish the revised declaration or return before the period specified in sub-section (3) of section 40, if he discovers any omission of any incorrect statement having gone in his return. The Commissioner has also power under sub-section (2) to call upon any dealer whose turnover is likely to exceed the specified amount which has been prescribed according to the nature of the business of the dealer by serving a notice in the prescribed manner and on such notice being served, the dealer is under an obligation to furnish the declaration or return as if he was a registered dealer. Under section 41, a registered dealer is to be assessed separately for each year during which he is liable to pay tax or for such period exceeding one year on an application being made in that behalf by the dealer. The Commissioner would on being satisfied about the declaration or the return being complete and correct, assess the amount of tax accordingly. If he is not satisfied and feels that the presence of the dealer or the production of further evidence is necessary, he may fix a date and place and call upon the dealer by a notice in that behalf to attend and produce or cause to be produced the evidence on which the dealer relies in support of his declaration or return. If a dealer fails to comply with such notice, the Commissioner can make best judgment assessment. If a dealer fails to furnish the declaration or return in respect of any period by a prescribed date, or if he has failed to apply for registration within the time as required by the Act, the Commissioner shall make best judgment assessment. Section 44 provides for reassessment for turnover escaping assessment. It should be emphasised that unlike a similar provision in the Income-tax Act, 1961, reassessment under section 44 is competent only if there has been an original assessment and if it is found subsequently that taxable sales or taxable purchases have escaped assessment altogether. Sections 45 and 46 provide for imposition of penalty in certain cases. We need not set out the contingency which attracts penalty elaborately. Section 46A which is the important section which we have to construe provides for hearing of dealers in certain cases. This provision has been inserted in the statute with effect from 1st April, 1979 by the Gujarat Sales Tax (Amendment) Act (No. 10 of 1979). It should be recalled that the provision has been inserted in light of the recommendation made by the report of the study group established by the State Government.

6. October 10, 1984.

7. We will refer to the purpose which had prompted the Study Group to insert these new provision in the statute book presently when we will decide as to whether the interpretation canvassed on behalf of the petitioner-society is well-founded or not. Suffice it to say for the immediate purposes that the insertion was found necessary in order to minimise the chances of arbitrary increase in the tax burden or carelessness or even corruption at the assessment level so as to improve the quality of the work of assessment and re-enforce the confidence of the assessees in the administration. Before we address ourselves to the rival interpretations, it is necessary to set out the material part of section 46A(1) and (2) so far as relevant for purposes of this petition. It reads as under :

'46A. Dealers to be heard in certain cases. - (1) Where any sales tax authority mentioned in section 27 exercising the powers under section 41 proposes to make an order of assessment under that section and, such order if made, would in the opinion of such authority, impose on a dealer a liability to pay an amount not less than Rs. 25,000 by way of tax in respect of a period in addition to amount of tax indicated by the dealer in his declaration or return in respect of that period, such authority shall serve in such manner as may be prescribed on such a dealer a draft order and invite his objections in relation to it.

(2) Where any sales tax authority mentioned in section 27 exercising the powers under section 44, 45 or 46 proposes to make an order of reassessment under section 44 or an order imposing a penalty under section 45 or 46 and such order if made, would in the opinion of such authority, impose on a dealer a liability to pay a amount not less than Rs. 25,000 by way of tax or an amount not less than Rs. 7,500 by way of penalty in respect of a period in addition to the amount of tax assessed or penalty imposed in respect of that period, such authority shall serve in such manner as may be prescribed on such dealer a draft order and invite his objections in relation to it.

(3) and (4) ......'

8. The grievance of the petitioner is that the Sales Tax Officer has acted beyond his jurisdiction inasmuch as the tax liability which ensued under the impugned assessment orders wa exceeding Rs. 25,000 and also exposed the assessee to the liability of penalty exceeding Rs. 7,500 and therefore, the Sales Tax Officer was duty-bound to pass a draft assessment order so as to enable the petitioner to file his objections, if any, in which case the jurisdiction to assess the petitioner would have been of the Assistant Commissioner of Sales Tax, and in so far as the Sales Tax Officer has made final assessment order in clear violation of the statutory obligation prescribed under section 46A(1) and (2), he exceeded his jurisdiction and the impugned orders of assessment are, therefore, bad in law and vitiated. The learned Advocate for the petitioner further submitted that the Court should construe the section so as to make it workable since it is not a charging section and it is a part of the machinery prescribed under the statute. In support of this submission, the learned Advocate relied on the decision of the Supreme Court in Associated Cement Co. Ltd. v. Commercial Tax Officer, Kota [1981] 48 STC 466 (SC).

9. On behalf of the State Government, these contentions have been sought to be repelled on the short ground that section 46A(1) is attracted only in a case where the tax liability exceeds Rs. 25,000 in addition to the amount of tax indicated by the dealer in his declaration or return in respect of a given period and similarly if the liability of penalty exceed Rs. 7,500 in addition to the amount of penalty imposed in respect of a given period. In other words, the contention was that if the effect of an assessment is to impose additional tax liability over and above the one which is an admitted liability or to impose additional liability by way of penalty over and above the one which is determined in respect of a given period, then only there is a statutory obligation to make a draft order. The submission is that if in a given case no return is made by an assessee, the question of additional liability does not arise at all and similarly if the liability for penalty is determined for the first time, there is by necessary implication no additional liability imposed and therefore also the provision of draft assessment is not attracted.

10. On a plain reading of the relevant sub-sections, the contention urged on behalf of the State Government appears to be attractive but on close scrutiny of the contention in context of the purpose and object of the newly inserted provisions of section 46A, we are afraid that the contention is not capable of being sustained. The reasons are obvious. On the plain reading of the two sub-sections, it is clear that the legislative intent appears to be that whenever the assessment results in additional liability either on account of tax or penalty as specified in the two sub-sections respectively, there is an obligation on the Sales Tax Officer to make a draft Order. It is no doubt true that the two sub-sections, as they are worded, may create an impression that it is only when a return is filed and the tax liability is indicated on self-assessment which is sought to be increased by the additional liability as specified in sub-section (1), there is an obligation of making a draft assessment order and similarly if the liability of penalty exceeds the specified amount in addition to the one already determined in respect of the same period, then there is an obligation of making draft assessment order. But when were read the section closely the interpretation which has been advanced on behalf of the State Government appears to us to be clearly de hors the legislative intent. To put the whole matter tersely the legislative intent manifested in the provisions is that if there is additional tax or penalty liability a specified therein, in addition to the one which is indicated or fixed, there is a statutory obligation of making a draft assessment order. The pertinent words in section 46A, namely, 'in addition to the amount of tax indicated by the dealer in his declaration or returns' or 'in addition to the amount of tax assessed or penalty imposed' would, in substance and effect, mean that in addition to the amount of tax indicated, if any, or the amount of penalty in addition to the one imposed, if any. If a nil returns is filed, or if no return is filed, and the tax liability assessed exceeds the amount specified in sub-section (1), it would be for all intents and purposes a liability in addition to the one indicated. Similarly, if no liability of penalty is imposed in respect of any period and the penalty imposed which is under challenge exceeds the amount specified in sub-section (2), then it is one which is in addition to the nil penalty.

11. The learned Government Pleader urged that if the interpretation which has been canvassed on behalf of the petitioner-assessee is accepted, it would be contrary to the recognished principles of interpretation of statutes. The first and the foremost principle is that when the language is clear and unambiguous, ordinary and natural meaning of the words used should be adhered to. The second recognised principle which would be violated is that the Court is not entitled to add any words to the section since it would virtually tantamount to legislating which is not the function of the Court. It is axiomatic to say that the grammatical sense of the words in a statute is to be adhered to, and they should be prima faice given ordinary meaning. It is also recognised on matter of principle as well on authority that where grammatical construction is clear and unequivocal that construction ought to prevail unless there is a strong and obvious reason to the contrary. This cardinal rule of literal and grammatical construction is subject to the qualification that the language of statute is not always that which a rigid grammarian would use, and that in certain exceptional cases a departure from the ordinary and plain language is permissible. It is not necessary to set out elaborately as to what are the exceptional cases or what are the principles which should guide the Courts for departing from the grammatical and literal construction of the words of a statute. One of the exceptional situations where such a departure has been recognised on matter of principle of interpretation of statues is that where the ordinary meaning and the grammatical construction of the words of a statute lead to a manifest contradiction of the apparent purpose of the enactment, it is permissible to department from the cardinal principle of the plain grammatical and literal construction of the words. (See Maxwell on the Interpretation of Statutes, Twelfth Edition, page 229, and Tirath Singh v. Bachittar Singh AIR 1955 SC 830 at page 833). We must, therefore, remind ourselves that section 46A is a new provision which has been inserted in the Gujarat Sales Tax Act by the Gujarat Sales Tax (Amendment) Act (No. 10 of 1979) with effect from 1st April, 1979. We have, therefore, to consider what is the purpose of this enactment, namely, provision contained in section 46A. In order to understand the apparent purpose of the enactment, we are entitled to look to the Committee Report since it is legitimate to look at the report of the Committee so as to see what was the mischief at which this part of the amending Act was directed to.

12. It is well-settled that the alternations made in the Bill during its passage through the Committee, the Statement of Objects and Reasons, and Report of the Select Committee cannot be legitimately taken into account to construe a provision where it is absolutely clear. (See R. P. Kapur v. Pratap Singh AIR 1964 SC 295). However, it is equally settled that though such reports may be considered for determining the meaning of the statute where the meaning is doubtful and like other intrinsic aid to construction their use must be to solve the ambiguity rather than create it. It is beyond dispute that these Committee Reports or for that matter the Statement of Objects and Reasons and the Bill are not admissible as an aid to the construction of a statute; but they can be referred to for the limited purpose of ascertaining the conditions prevailing at the time and the object of the enactment which actuated the Bill and the extent and urgency of the evil which is sought to be remedied. (See State of West Bengal v. Subodh Gopal AIR 1954 SC 92). We have, therefore, to see as to what is the apparent purpose of the enactment and in order to determine the purpose of the enactment, we may, therefore, conveniently refer to the report of the study group established by the State Government. The object and the purpose of the insertion of this new provision as stated by the study group in its report of the Sales Tax Study Team 1977 published by the Government of Gujarat, inter alia, in Chapter V relating to assessment, audit and recovery under the caption 'Scrutiny of Draft Order by Superior Officer' in paragraph 5.03 reads as under :

'5.03. Another suggestion has been made before the Team that where in consequence of assessment the Sales Tax Officer proposes to impose an additional tax liability of Rs. 25,000 or more, he should furnish a copy of the draft order to the dealer who may, if he thinks fit, ask for hearing on the draft order by the Assistant Commissioner of Sales tax to whom the Sales Tax Officer is subordinate. We recommend this suggestion for the favourable consideration of Government. We may add that the law should provide that jurisdiction in such case shall thereupon pass to the Assistant Commissioner of Sales Tax who shall after going through the normal procedure of assessment of the dealer's case, pass an order of assessment. If the suggestion is accepted, the chances of arbitrary increase in tax burden or of carelessness of even of corruption, will be considerably reduced and both the quality of work of assessment and the confidence reposed therein by the dealers will improve. The number of appeals filed will also tend to decrease ...'

13. It is, therefore, clear that the apparent purpose of the enactment is to curb the arbitrary assessment or assessments made carelessly or for ulterior purposes. The purpose of the new provision is also to reduce the number of appeals arising from such arbitrary, indifferent and tainted assessments. If that is the purpose of the enactment, we are of the opinion that the restricted interpretation canvassed by the State Government would defeat the legislative intent which has not been manifested unequivocally. We do not see any reason as to why there should be a statutory obligation of making a draft assessment order only in those cases where the tax liability is indicated in the return or the declaration. The learned Government Pleader failed to give satisfactory explanation when we asked him that if an assessee makes a nil return and the Sales Tax Officer is minded to pass an order which imposes a tax liability exceeding Rs. 25,000, would he be under obligation to make a draft assessment order or not On the interpretation canvassed by the learned Government Pleader, the obligation would arise only if not only the return is filed but also where an assessee has, of his self-assessment, indicated the liability to pay some tax. We do not see any reason to restrict this obligation to those cases where return is filed, since hypothetically there may be cases of nil return also in the which case, according to the interpretation of the learned Government Pleader, the Sales Tax Officer is under obligation to make a draft order of assessment if the tax liability ensuing as a result thereof exceeds Rs. 25,000. The interpretation which has been canvassed may probably expose the entire provision to the vice of being violative of article 14 of the Constitution though we are not expressing any opinion in this behalf. It is a settled principle that the Courts must presume the constitutional validity of the provision. It is, therefore, necessary to read down this section by adding the words, if any, either in sub-section (1) or sub-section (2) as we have indicate above. The learned Government Pleader strenuously attempted to impress upon us that in reading this section, as the Court is inclined to red, the Court will be adding words in the statute which the Court cannot do it on recognised principles of interpretation of statute. Before we deal with this submission of the learned Government Pleader, we would like to dispose of the second submission made on behalf of the petitioner that the provision in question being a part of machinery section must be construed so as to make the machinery workable. We are afraid that the principle which has weighed with the Supreme Court in Associated Cement Company's case [1981] 48 STC 466 (SC) would not be attracted in the present case before us since the relevant principle of interpretation with which the Supreme Court was concerned was that in interpreting the provision dealing with the machinery of assessment, the rule in that construction should be preferred which makes the machinery workable, i.e., which effectuates the charging section. (See India United Mills v. Commissioner of Excess Profits Tax, Bombay AIR 1955 SC 79). Here, it cannot be urged successfully that relying on this principle unless the section is interpreted in the manner in which it is suggested, it would not effectuate the charging section. The decision is, therefore, of no assistance to the cause of the petitioner.

14. It is not an immutable rule of construction that the Court is not justified in any circumstances to add to the words in construing a statute. If the Court is satisfied and feels certain that the language employed by the legislature does not represent its avowed intention, if interpreted literally and grammatically, it can legitimately add to the language of the statute in interpreting it. It is a well-known rule of construction that the Court must construe a section as it stands and must not add any words to it in absence of a clear necessity. (See Shyam Kishori Devi v. Patna Municipal Corporation AIR 1966 SC 1678 at page 1679). Unless, therefore, we read the section as we are inclined to by adding the words, if any, the result would be that no only the constitutional validity of the provision may possibly by in jeopardy by would defeat the avowed intention of the legislature. We are, therefore, of the opinion that the Sales Tax Officer has exceeded the jurisdiction in passing the final order of assessment without passing the draft assessment order.

15. The result is that this petition is allowed and impugned order of assessment dated 25th May, 1984 is quashed and set aside and the matter is remitted to the Sales Tax Officer for passing fresh draft assessment order and issuing notice to the petitioner as contemplated under section 46A if he is so advised. Rule is made absolute accordingly with no order as to costs.


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