Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7
PETITIONER:
FERTILIZER CORPORATION OF INDIA LTD.
Vs.
RESPONDENT:
STATE OF BIHAR
DATE OF JUDGMENT04/12/1987
BENCH:
RANGNATHAN, S.
BENCH:
RANGNATHAN, S.
MUKHARJI, SABYASACHI (J)
CITATION:
1988 AIR 361 1988 SCR (2) 148
1988 SCC Supl. 73 JT 1987 (4) 549
1987 SCALE (2)1182
ACT:
Bihar Sales Tax Act, 1959: ss. 14, 15 & 20 Rebate-
Belated returns-Provisions for extension of time not availed
of-Returns otherwise accepted-Penal provision for delay not
invoked-Tax deposited within time-Assessee whether entitled
to rebate.
Interpretation of Statutes: Procedural provision-
Interpretation of-Can be construed liberally so long as the
principal object is not frustrated.
HEADNOTE:
%
Section 14(1) of the Bihar Sales Tax Act, 1959 requires
dealers to furnish returns within such period and to such
authority as may be prescribed. Rule 10(2) of the Bihar
Sales Tax Rules, 1959 requires the assessee to file
quarterly returns within one calendar month of the expiry of
the period to which they relate. Sub-section (3) of s. 14
provides for extension of time for submission of the return.
Subsection (2) of s. 20 requires dealers to pay into the
Government Treasury the full amount of tax due and furnish a
receipt along with the return. Section 15 entitles the
assessee to rebate in tax on returns furnished under sub-s.
(1) of s. 14 or within extended period. The proviso to sub-
s. (2) of s. 20 entitles a dealer to deduct from the amount
of tax due from him any amount which may be admissible as
rebate under the provisions of s. 15.
The assessee filed its quarterly returns under s. 14(1)
of the Act late by a few days. There was no application made
by it to the prescribed authority for extension of time. The
assessee, however, paid the tax before the due date of the
respective returns and availed itself of the rebate by
deducting the same while paying the tax due.
The Tribunal held that as the assessee did not file its
returns within the prescribed period and had sought no
extension, it was not entitled to the rebate. The High Court
upheld the view taken by the Tribunal.
Allowing the appeal,
149
^
HELD: 1. The assessee was entitled to the rebate of tax
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7
provided for in s. 15 of the Bihar Sales Tax Act, 1959.
[156B]
2. The condition in s. 15 referring to a return has a
substantive as well as procedural content. The latter should
be construed somewhat liberally and generously so long as
the principal object of the provision is not frustrated.
[155H; 156A]
C.I.T. v. Kulu Valley Transport Co. Pvt. Ltd., [1970]
77 I.T.R. 518; Gursahai Saigal v. C.l. T. [1963] 48 I.T.R.
S.C. 1; Allen v. Trehearne, [1938] 22 T.C. 15 and C.I.T. v.
Mahaliram Ramjidas, [1940] 8 I.T.R. 442. referred to.
3.1 The object of s. 15 of the Act is to confer a
benefit on an assessee for prompt payment of the tax. In the
instant case, the assessee had paid the tax before the due
dates. The tax paid accords with the tax due on the basis of
returns. There was short delay only in the filing of the
returns. [153D-E]
3.2 The Act does not set out any particular procedure
for obtaining extention of time. It does not prescribe any
form of application. It does not require that the prescribed
authority must pass an order recording his satisfaction that
the time should be extended and granting time. it envisages
three consequences to the assessee for failure to file a
return within the prescribed time, or extended time: (i)
loss of rebate under s. 15, (ii) risk of a penalty under s.
14(4), and (iii) risk of a best judgment assessment under s.
16(4). [154A-D]
3.3 In the instant case the assessing authority has
neither levied a penalty nor made a best judgment assessment
nor recorded a finding that the delay was without reasonable
cause. From these circumstances it is reasonable to infer
that the returns, though filed belatedly, have been accepted
and acted upon by the prescribed authority. An extention of
time can thus be inferred from the attendant circumstances
of the case. [154D-F]
3.4 The condition precedent for the grant of rebate
that the assessee should have filed its return within the
prescribed or extended period, can, therefore, be said to
have been fulfilled in the present case. [153H; 154A]
Jamuna Floor & oil Mills Pvt. Ltd. v. State of Bihar,
[1968] 22 S.T.C. 1, approved.
150
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 948-950
of 1975.
From the Judgment and order dated 12.9.1974 of the
High Court of Patna in Tax Case Nos. 2 to 4 of 1968.
Harish N. Salve, Mrs. A.K. Verma, Ms. S. Sethna and
Joel Peres for the Petitioner.
D. Goburdhan for the Respondent.
The Judgment of the Court was delivered by
RANGANATHAN, J. These three appeals by the Fertiliser
Corporation of India Limited (hereinafter referred to as
’the asses see’) arise out of its sales tax assessments for
the assessment years 1959-60, 1960-61 and 1961-62 under the
Bihar Sales Tax Act, 1959, (hereinafter referred to as ’the
Act’). They raise a very short but interesting question.
regarding the entitlement of the assessee to the rebate of
tax provided for in section/5 of the Act.
At the outset, a reference may be made to the salient
portions of certain relevant provisions of the Act. Section
14(1) provides that every registered dealer shall furnish
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7
such returns within such period and to such authority as may
be prescribed. The prescribed authority is the Assistant
Commissioner of Sales Tax who is also the assessing
authority. Under rule 10 of the Rules framed under the Act,
the assessee should file quarterly returns. Such returns are
to be filed within one calendar month of the expiry of the
period to which they relate. Sub-section (3) of s. 14
provides for an extension of time for the filing of the
return. It reads:
"If the prescribed authority is satisfied that a
dealer is, for reasonable cause, unable to furnish
any return within the prescribed period or the
period fixed under the proviso to sub-section (1),
the said authority may extend the period for
submission of the return."
Section 20 of the Act requires that, before any registered
dealer furnishes a return under the Act, he should pay into
a Government Treasury the full amount of tax due under the
Act according to such return and should also furnish along
with the return a receipt from such Treasury showing the
payment of the said amount. S. 15 is the
151
provision entitling the assessee to a rebate. It reads as
follows:
"Rebate-A rebate at the rate of one per centum of
the amount of tax admitted to be due in the return
furnished under sub-section (1) of section 14 in
the prescribed manner and within the prescribed or
extended period shall be allowed to a registered
dealer who has paid such amount according to the
provisions of sub-section (2) of section 20.
Provided that where the amount finally
assessed on the dealer is less than the admitted
amount, rebate at the said rate shall be allowed
only on the amount so assessed: C
Provided further that the State Government
may, by notification, and subject to such
conditions or restrictions as may be specified
therein, enhance or reduce the rate of rebate in
respect of registered dealers generally or any
class of such dealers "
It may be noted that, under the proviso to section 22 of the
Act, a registered dealer is entitled to deduct from the
amount of tax due from him under the Act according to his
return any amount which may be admissible as rebate under
the provisions of section 15.
In the present case, the assessee filed its quarterly
returns under section 14(1) of the Act but, except for the
second quarter of 196061, the returns were all filed
belatedly. To illustrate, the returns for the second, third
and fourth quarters of 1959-60, were filed by the assessee
only on the 7th November, 1959, 11th February, 1960 and Ist
June 1960. In other words, the returns-were late by a few
days. It is common ground that there was no application made
by the assessee to the prescribed authority for extension of
the time prescribed under the Act for the filing of the
return. The assessee however, paid the taxes before the due
dates of the respective returns, availed itself of the
rebate and deducted the same while paying the tax due on the
returns filed by it.
The short question that arose before the Tribunal as
well as the High Court was whether the assessee was entitled
to the rebate under section 15. The Tribunal held that the
rebate is available to an assessee only if-
152
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7
(i) the tax on the basis of returns is paid as
prescribed in section 20; and
(ii) the quarterly returns of the assessee ha-d been
filed within the prescribed period or extended period.
As the assessee had not filed its returns within the
prescribed period and, since the assessee had sought no
extension, it was held that the assessee was not entitled to
the rebate. The assessee sought for a reference and, before
the High Court, relied on a decision of the same High Court
in Jamuna Flour & oil Mills Pvt. Ltd. v. State of Bihar,
[1968] 22 S.T.C. 1. The facts of the case were similar to
those of the present case and the assessee had been held
entitled to the rebate. It is sufficient to extract the
relevant portion of the head note:
"For the quarter ending 30th June, 1961, the
assessee had paid the tax due before 31st July,
1961, but it actually filed the return only on Ist
August, 1961. The assessee was assessed on the
basis of the return submitted by it but its claim
for rebate under section 15 of the Bihar Sales Tax
Act, 1959, was rejected by the taxing authority on
the ground that for the purpose of eligibility for
rebate under section 15, the assessee must fulfil
two conditions, viz., (1) the tax due for the
quarter must be paid before the end of succeeding
month, and (2) the return must also be filed by
the end of the succeeding month: Held, that the
assessee was entitled to the rebate under section
15 for the quarter ending 30th June, 1961.
Although the return was submitted one day
late, as the assessee was assessed not under the
best of judgment principle but on the return
submitted by it, it must be said that, impliedly
the period for furnishing the return was extended
by one day as permitted by section 14(3). The
passing of an express order by the taxing
authority, regarding its satisfaction about the
existence of reasonable cause for failure to
furnish the return by 31st July 1961, was not
necessary.
on a proper construction of section 15 read
with section 20, the eligibility for claiming
rebate arises if the amount is paid under section
20(2). That portion of
153
section 15, which refers to the filing of return
within the prescribed period, should not be
construed as a condition for a right to claim
rebate. The reference to the return in section 15
is for the purpose of ascertaining the amount of
tax admitted to be due and it is not meant to
restrict the assessee’s right to claim rebate."
The two judges who heard the case of the assessee were
divided in their opinion on the question at issue. The
matter was, therefore, referred to a larger bench. This
Bench (by a majority of 2 to 1) took the same view as
Tribunal. The assessee is in appeal before us, convassing
the correctness of the decision of the Full Bench.
We have given careful thought to the contentions of the
counsel tor the parties and the differing views expressed by
the Judges who heard the above two cases. We have reached
the conclusion that the view taken by the High Court in
Jamuna Flour and oil Mills (Pvt.) Ltd. v. State of Bihar,
[1968] 22 S.T.C. 1, is the better view on a proper
construction of the relevant statutory provisions. The
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7
object of section 15 of the Act is to confer a benefit on an
assessee for prompt payment of the tax. In this case there
is no dispute that the assessee had paid the tax before the
due dates. There is also no dispute that the tax paid
accords with the tax due on the basis of returns. The only
question is whether the assessee should be penalised by
being denied the rebate due to it because there was a short
delay in the filing of the returns.
The argument on behalf of the Revenue which has
appealed to the High Court is this. Section 15 is not a
taxing provision but one which confers a benefit or
concession to assessee. Settled principles of construction
of taxing statutes require that such conditions should be
strictly construed. The section lays down two conditions for
the grant of benefit or concession of which one is not
fulfilled. Though the assessee had paid the taxes in time,
it had neither filed returns within the prescribed time nor
cared to obtain an extension for filing the same. There is
no reason why such an assessee should be shown any leniency
and given a benefit which it does not deserve on the
language of the statute.
Granting the correctness of the above argument and
assuming that it is also a condition precedent for the grant
of rebate that the assessee should have filed its return
within the prescribed or extended period, we think it can be
said that the said condition is fulfilled
154
in the present case. The return was admittedly not filed
within the time prescribed under s. 14(1). Has it been
filed, then, within the extended period? In answering this
question, certain features of the Act have to be kept in
mind. The first is that the Act does not set out any
particular procedure for obtaining extension of time. It
does not prescribe any form of application. It does not say
that such application must be filed before the expiry of the
prescribed period. It does not require that the prescribed
authority must pass an order recording his satisfaction that
the time should be extended and granting time. The second is
that, under the provisions of the Act three consequences are
envisaged where a return is not filed within the prescribed
time or extended time:
(i) the assessee will lose the benefit of rebate under
s. 15;
(ii) the assessee will run the risk of a penalty under
s. 14(4);
(iii)the assessee will also run the risk of a best
judgment assessment under s. 16(4).
In the present case, the assessing authority has neither
levied a penalty nor made a best judgment assessment. The
assessment orders, while adverting to the delay in the
filing of the returns, do not record a finding that the
delay was without reasonable Cause. These are circumstances
from which, we think, it is reasonable to infer that the
returns, though filed belatedly, have been accepted and
acted upon by the prescribed authority. We see no reason why
an extension of time cannot be inferred from the attendant
circumstances in this case.
Learned counsel for the assessee also suggests a
different kind of approach to the issue before us. He
submits that all that s. 15 aims at is to grant a tax rebate
of 1% of the amount of tax admitted to be due as per the
return filed by the assessee. The further words used in
section 15 to describe the return, namely, that it should be
a return filed in the prescribed manner and within the
prescribed or extended period are merely words descriptive
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7
of the procedure of filling a return. The basic condition
necessary for claiming the tax rebate is only that there
should be a valid return and that the tax on the basis of
the valid return should have been paid by the assessee. He
submits that while the substantive part of the condition
should be strictly construed by insisting upon the presence
of a valid return, the procedural aspect referred to can
well receive a liberal construction. In the present case, he
points out, there is no dispute that the returns
155
filed by the assessee were valid. In fact the assessments
have been made on the basis of the returns filed. The tax
has been paid even before the submission of the returns.
There is no suggestion that the tax paid fell short of the
tax due on the return. This is also not a case where the
assessed tax is much higher than the tax admitted on the
basis of the return. In these circumstances, he argues, the
assessee must be held to have fulfilled the conditions
prescribed in s. 15.
Learned counsel for the assessee referred to certain
decisions in support of such a rule of construction. In C.I.
T. v. Kulu Valley Transport Co. Pvt. Ltd., [1970] 77 I.T.R.
518 the court had to construe a provision intended to
benefit the assessee. Under s. 22 (2A) of the Income-Tax
Act, 1922, a return of loss had to be filed within the time
prescribed for return under s. 22(1) if the assessee wanted
to carry forward the loss claimed. It was not so filed but
was nevertheless treated as a valid return by reading the
provisions of section 22(1) and 22(3) of the Act jointly and
giving a liberal interpretation to s. 22(2A). In the case of
Gursahai Saigal v. C.I.T., [1963] 48 I.T.R. S.C. 1 the
question was regarding the charge of interest s. 18A(8) of
the same Act. This provision did reveal a lacuna but reading
the provision along with s. 18A(6), the Court gave effect to
the intendment of the Legislature. It was explained that s.
18A(8) was not a provision creating a charge of tax but only
laying down the machinery for its calculation or procedure
for its collection. The dictum of Scott L.J. in Allen v.
Trehearne, [1938] 22 T.C. 15 that machinery provisions
should be interpreted largely and generously in order not to
defeat the main object of liability laid down by the statute
was referred to. The following observations of the Privy
Council in C.I.T. v. Mahaliram Ramjidas, [1940] 8 I.T.R. 442
were also relied upon:
"The section, although it is part of a taxing Act,
imposes no charge on the subject, and deals merely
with the machinery of assessment. In interpreting
provisions of this kind the rule is that that
construction should be preferred which makes the
machinery workable."
Though the above decisions arose under a different
enactment and on different statutory language, they dealt
with somewhat analogous situations and furnish useful
guidance here. They do lend support to the assessee’s
contention. It does seem that the condition in s. 15
referring to a return has a substantive as well as
procedural content and it may not be inappropriate to
construe the latter
156
somewhat liberally and generously so long as the principal
object of the provision is not frustrated.
For these reasons, we are of the opinion that the High
Court should have answered the question, as re-framed by it,
in the negative and in favour of the assessee. We approve
the decision in Jamuna Flour & oil Mills Pvt. Ltd. v. State
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7
of Bihar, [1968] 22 S.T.C. 1 and reverse the decision in the
present case.
The appeal is allowed. But, in the circumstances of the
case, we make no order as to costs.
P.S.S. Appeal allowed.
157