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Commercial Taxes Officer, Circle 'B' Jaipur Vs. Hemraj Udhyog and Anr. (01.08.1985 - RAJHC) - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtRajasthan High Court
Decided On
Case NumberSales Tax Reference Petition Nos. 226 and 259 of 1980
Judge
Reported in[1987]64STC324(Raj)
AppellantCommercial Taxes Officer, Circle 'B' Jaipur;Commercial Taxes Officer, Bharatpur
RespondentHemraj Udhyog and Anr.;Keshri Lal Lalchand and Anr.
Appellant Advocate G.S. Bapna, Adv.
Respondent Advocate V.K. Singhal, Adv.
DispositionPetition dismissed
Cases ReferredJaipur v. National Engineering Industries Ltd.
Excerpt:
.....to be treated as juvenile under the said act. - interest on failure to pay tax, fee or penalty. 5. it may be pointed out that prior to the insertion of section 11b in the act, provision relating to penalty was contained in section 16(1)(b) of the act and according to clause (ii) of section 16 as it stood prior to may 2, 1969, if a dealer without reasonable cause failed to pay any tax, fee or penalty within time, then in addition to the amount payable, penalty was payable at the rate of 1 per cent of the amount of tax, fee or penalty for each completed month for the first three months and at the rate of 11/2 per cent for each completed month thereafter during the time the default continues. thus the position of law has been clearly specified from april 7, 1979, that interest was..........respect of which interest is paid under the provisions of sections 11 and 14.4. it was held by the board of revenue that according to section 11b of the act interest could be charged only i,n respect of completed months and that no interest was chargeable for default in the payment of tax in respect of periods of time less than a'month. it was argued by the learned counsel for the department that the crucial words in the provisions contained in section 11b of the act were 'during the time' and that the board was not justified in holding that interest could be charged under those provisions only for completed months in default and not for shorter period constituting a month. on the other hand, it was argued by the learned counsel for the assessees that the board of revenue has.....
Judgment:

Dwarka Prasad, J.

1. As a common question of law arises in these two cases, we propose to dispose of them by a common order.

2. These reference applications under Section 15(2) and Section 15(3A) of the Rajasthan Sales Tax Act, 1954 (hereinafter referred to as 'the Act') are treated as revision petitions under Section 15(1) of the Act as amended by the Rajasthan Sales Tax (Amendment) Act, 1984, because of the provisions of Sub-section (10) of Section 13 of the Amending Act of 1984, as they were pending before this Court at the time when the amending Act of 1984 came into force.

3. The question which arises in both these cases is as to whether interest could be levied under Section 11B of the Act in respect of default of payment of tax for part of a month at the relevant time. The period of assessment in the case of M/s. Hemraj Udhyog in respect of which this question arose, was from June 22, 1974, to July 10, 1975. In the case of M/s. Keshrilal Lalchand the period of assessment was from April 1, 1971, to March 31, 1972. The provisions of Section 11B of the Act, which are relevant for consideration in these cases read as under :

11B. Interest on failure to pay tax, fee or penalty.-(a) If the amount of any tax payable under Sub-sections (2) and (2A) of Section 7 is not paid within the period allowed, or

(b) if the amount specified in any notice of demand, whether for tax, fee, or penalty, is not paid within the period specified in such notice, or in the absence of such specification, within 30 days from the date of service of such notice, the dealer shall be liable to pay simple interest on such amount at one per cent per month from the day commencing after the end of the said period for a period of three months and at one and a half per cent per month thereafter during the time he continues to make default in the payments :

Provided that, where, as a result of any order under this Act, the amount, on which interest was payable under this section, has been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded :

Provided further that no interest shall be payable' under this section on such amount and for such period in respect of which interest is paid under the provisions of Sections 11 and 14.

4. It was held by the Board of Revenue that according to Section 11B of the Act interest could be charged only i,n respect of completed months and that no interest was chargeable for default in the payment of tax in respect of periods of time less than a'month. It was argued by the learned counsel for the department that the crucial words in the provisions contained in Section 11B of the Act were 'during the time' and that the Board was not justified in holding that interest could be charged under those provisions only for completed months in default and not for shorter period constituting a month. On the other hand, it was argued by the learned counsel for the assessees that the Board of Revenue has consistently taken the view right from 1976 up-till now that interest under the aforesaid provision of Section 11B of the Act could be charged only for completed months and that a period of less than a month should be ignored on the ground that the words 'per month' were employed in Section 11B of the Act.

5. It may be pointed out that prior to the insertion of Section 11B in the Act, provision relating to penalty was contained in Section 16(1)(b) of the Act and according to Clause (ii) of Section 16 as it stood prior to May 2, 1969, if a dealer without reasonable cause failed to pay any tax, fee or penalty within time, then in addition to the amount payable, penalty was payable at the rate of 1 per cent of the amount of tax, fee or penalty for each completed month for the first three months and at the rate of 11/2 per cent for each completed month thereafter during the time the default continues. On May 2, 1969, the provision relating to penalty for default in payment of tax, fee or penalty contained in Section 16(1)(b) of the Act was deleted by amending Act No. 11 of 1969 and the provisions of Section 11B as reproduced above, were inserted. These provisions continued to. hold the field until Section 11B was wholly substituted by a new Section 11B with effect from April 7, 1979, by the amending Act No. 4 of 1979. According to Sub-section (1) of Section 11B, as the provision now stands after April 7, 1979, if a dealer has not paid tax as per the return or within the time allowed by or under the provisions of the Act, he is liable to pay interest on the whole or that part of the amount of tax which has not been paid as per the return, at the rate of 11/4 per cent per month from the date by which he is required to pay the tax by or under the provisions of the Act for a period of three months and at the rate of 11/2 per cent thereafter until the date of payment. Thus the position of law has been clearly specified from April 7, 1979, that interest was payable with effect from the date by which the dealer was required to pay the tax until the date of payment. However, as pointed out above, we are concerned with the period between May 2, 1969 and April 7, 1979, in which the unamended provision of Section 11B of the Act was in force.

6. Learned counsel for the Revenue sought support for his submission by referring to provisions of the Income-tax Act relating to imposition of penalty and the decisions bearing on such provisions.

7. We may point out that the provisions relating to imposition of penalty contained in Section 271(1)(a) of the' Income-tax Act, 1961 provide that penalty is payable in the circumstances, mentioned therein for 'every month during which the default continued'. Thus, from the very language employed in Section 271(1)(a) of the Income-tax Act, 1961 it is quite clear that penalty could be imposed only for completed months during which the default continued and no penalty could be imposed for fraction of a month on account of the expression 'for every month' used in the aforesaid provision. As such there could be no controversy about the provisions relating to imposition of penalty under the Income-tax Act. The expression used in Section 11B of the Act is 'during the time he continues to make default to pay tax' and it is possible that the aforesaid may be interpreted to mean not only completed months but also fraction of a month, but it was pointed out by the learned counsel for the assessees that the Board of Revenue has consistently interpreted the provisions contained in Section 11B of the Act as referring to completed months and it has been held that a period less than a month should be ignored in calculating interest imposable under Section 11B of the Act. In face of the fact that the Board of Revenue has taken this view consistently for a long period of ten years, it is urged that this Court should not unsettle the settled position relating to the interpretation of the provisions contained in Section 11B of the Act even if two views on the subject are possible. It cannot definitely be held that the view taken by the Board of Revenue is wholly erroneous and the language employed by the legislature in Section 11B of the Act is capable only of one interpretation that interest is imposable also on fractions of a month. To our mind it appears that the provisions contained in the unamended Section 11B of the Act are ambiguous and can be interpreted in the manner in which the Board of Revenue has tried to interpret the same, although it is possible that we may decline to take a different view.

8. We may refer to the decisions of the Board of Revenue which have been brought to our notice on the subject.

9. In Premier Vegetable Products v. Commercial Taxes Officer, Special Circle II, Jaipur 1974 RRD 324, although the question of charging interest on the outstanding amount of tax arose and interest was undoubtedly charged for a period of 20 days, but no objection was raised, nor the question was considered in the aforesaid decision as to whether the interest could be legally charged under Section 11B of the Act in respect of a fraction of month or for a period less than a completed month.

10. Then in Nagpal Bros. v. Commercial Taxes Officer, Special Circle I, Jaipur 1976 RRD 330 a single member of the Board of Revenue held that interest was imposable only for completed months, although in this decision also no discussion appears relating to the interpretation of Section 11B of the Act.

11. In Commercial Taxes Officer, Special Circle I, Jaipur v. National Engineering Industries Ltd. (1978) 12 TR 295 a Division Bench of the Board of Revenue held that interest could not be imposed if the amount of tax remained unpaid for less than one month and agreed with the view taken by the Board of Revenue in Nagpal Brothers' case 1976 RRD 330.

12. In Commercial Taxes Officer, Special Circle II, Jaipur v. Jaipur Bottling Co. 1979 RRD 520 a Division Bench of the Board of Revenue agreed with the view taken in another decision dated March 19, 1979, by the Division Bench of the Board of Revenue that under Section 11B of the Act period of delay short of one month cannot be taken into account while calculating the amount of interest.

13. Again in Commercial Taxes Officer, Bharatpur v. Keshrilal Lalchand (1983) 3 TBR 260 a Bench of the Board of Revenue held that the period of delay short of one month cannot be taken into consideration while calculating the amount of interest payable by the assessee.

14. The same view was also taken in Elec. Const. & Equip. Co. Ltd. v. Commercial Taxes Officer, Jaipur 1983 RRD 621, Commercial Taxes Officer, Special Circle I, Jaipur v. Pushpa Motors (P.) Ltd. 1984 RRD 478 and Commercial Taxes Officer, Special Circle-4, Jaipur v. Bata India Ltd. (1985) 5 TBR 150.

15. Learned counsel appearing for the department pointed out that a Bench of the Board of Revenue in Commercial Taxes Officer, Special Circle I, Jaipur v. Western Indian State Motors RRD 1981 NUC 37 did not agree with the decisions in Nagpal Bros. v. Commercial Taxes Officer, Special Circle I, Jaipur 1976 RRD 330 and Commercial Taxes Officer, Special Circle I, Jaipur v. National Engineering Industries Ltd. (1978) 12 TR 295. It appears that a Bench of the Board of Revenue was not inclined to agree with the decisions, but in view of the several decisions of the Board of Revenue on the subject, the Bench referred the matter to the larger Bench. It was stated at the Bar before us that the larger Bench of the Board of Revenue has not so far decided the matter.

16. Thus it appears from the consideration of the various decisions of the Board of Revenue that from 1976 up-till 1985 the Board of Revenue has consistently taken a view in respect of charging of interest on default in payment of tax and it has been held that tax is payable by the assessee for completed months, but a period less than a month should be ignored from consideration while calculating the amount of interest payable by the assessee in default in payment of tax. We are also mindful of the fact that provision of Section 11B which existed at the relevant time, no longer exists and has been substituted by a new section with effect from April 7, 1979. In these circumstances, we are of the view that a particular interpretation was accepted and acted upon by the taxing authorities for a long period of time and the provision no longer exists, but has been replaced by a different provision, it would not be proper for this Court to depart from the interpretation which has held the field for a very long time. We may refer in this connection to a decision of their Lordships of the Supreme Court in Commissioner of Income-tax, West Bengal III v. Balkrishna Malhotra : [1971]81ITR759(SC) . Their Lordships observed in the aforesaid case that in 1953 the High Court of Madras took a particular interpretation of the word 'assessment' in proviso to Section 34(3) of the Indian Income-tax Act, 1922 and no other High Court had taken a contrary view. In these circumstances, their Lordships observed that the Revenue must have acted in all these years on the basis of that decision of the High Court in the matter and such a view should not easily be departed from. It was also observed in that case that another view of the law may be possible, but law is not a mere mental exercise and that courts while reconsidering decisions rendered a long time back particularly under taxing statutes cannot ignore the harm that is likely to be caused by unsettling law that had been once settled. It was also pointed out by their Lordships that 1922 Act had been repealed by the Income-tax Act, 1961 and the corresponding provisions of the new Act were different from the provisions contained in the earlier Act. In those circumstances, their Lordships held that there was no justification in departing from the interpretation placed by the Madras High Court a long time back, though a different view of law may be reasonably possible. Following the principles laid down by their Lordships of the Supreme Court in the aforesaid case, we hold that although a different view about the interpretation of Section 11B of the Act is reasonably possible, yet in view of the long string of decisions of the Board of Revenue existing over a long period of almost ten years and more particularly in view of the fact that the new provisions contained in Section 11B of the Act are materially different from the repealed provisions of that section, in our view, it would not be proper to take a different interpretation of the provisions of Section 11B, as it then existed, more than six years after its repeal and substitution by new provisions. Therefore, we hold that under the repealed provisions of Section 11B of the Act interest could be charged from the dealer only in respect of completed months, if there was a default in payment of tax and the fraction of a month for a period less than a month should be ignored for purposes of calculation of interest for the period of default in payment of tax.

17. In this view of the matter the applications for reference, which have been deemed as revision petitions under the amended provisions of Section 15(1) of the Act, are dismissed but the parties are left to bear their own costs.


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