Full Judgment Text
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CASE NO.:
Appeal (civil) 3009 of 1999
PETITIONER:
MARUTI WIRE INDS. PVT. LTD.
Vs.
RESPONDENT:
S.T.O., IST CIRCLE, MATTANCHERRY & ORS.
DATE OF JUDGMENT: 27/03/2001
BENCH:
S.P. Bharucha, R.C. Lahoti & Y.K. Sabharwal.
JUDGMENT:
R.C. Lahoti, J.
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Whether the appellant, an assessee, is liable to pay any
penal interest on the assessed tax under Section 23(3) of
the Kerala General Sales Tax Act, 1963 (hereinafter the
Act, for short), from the date when return was due though
neither a return was furnished nor any tax paid on
self-assessment basis, is the question arising for decision
in this appal.
Briefly stated the relevant facts are as follows. In
April, 1983 the appellant, stationed in Patna, entered into
an agreement with M/s. Tata Oil Mills Co. Ltd. to supply
imported inedible tallow to their factory at Ernakulam.
Accordingly, the tallow was imported at the Cochin Port and
delivered to the buyer. The appellant did not file a return
of the turnover relating to the above-said transaction. The
Sales Tax Officer finalised the assessment on 10.10.1984 and
served the appellant on 4.3.1985 with notice raising a
demand of sales tax whereafter the tax was paid. The
appellant was then served with two notices raising demand
for payment of Rs.1,85,882.58p. as penal interest under
sub-section (3) of Section 23 of the Act for the period
20.5.1983 (the date by which the return of turn-over was due
to be filed accompanied by proof of payment of the tax due
as per return) to 25.2.1985. This demand was impugned by
filing a writ petition before the High Court of Kerala at
Ernakulam. A learned single Judge allowed the petition and
quashed the said demand. The State of Kerala preferred a
writ appeal which has been allowed and the judgment of the
learned single Judge has been set aside. The aggrieved
appellant has filed this appeal by special leave.
Sub-section (3) of Section 23 of the Act reads as
under:-
(3) If the tax or any other amount assessed or due
under this Act is not paid by any dealer or other person
within the time prescribed therefor in this Act or in any
rule made thereunder and in other cases within the time
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specified therefor in the notice of demand, or within the
time allowed for its payment by the appellate or revisional
authority, as the case may be, or if payment is permitted in
instalments by any of the authorities empowered in this
behalf, any such instalment is not paid within the time
specified, therefor, the dealer or other person shall pay,
by way of penal interest, in the manner prescribed, in
addition to the amount due, a sum equal to-
(a) one per cent of such amount for each month or part
thereof for the first three months after the date specified
for its payment;
(b) two per cent of such amount for each month or part
thereof subsequent to the first three months aforesaid.
The present one is not a case where any amount of tax
was collected by the appellant and then not deposited. It
is an admitted position that the validity of impugned demand
depends on the meaning to be assigned to the expression "if
the tax or any other amount assessed as occurring in
Section 23(3) of the Act. According to the appellant there
was no order of assessment nor a return of turnover filed by
way of self assessment in which case it should have been
accompanied by proof of payment of tax as per self
assessment and, therefore, the appellant was not required to
pay tax unless and until a demand based on an order of
assessment was raised against it. According to the
respondent, an assessee held liable to payment of sales tax
and not filing a return of turn-over, cannot be placed on a
higher pedestal than an assessee who files a return and,
therefore, a reasonable construction to be placed on
sub-section 3 of Section 23 would be that an assessee not
filing a return of turnover should be held liable to pay
penal interest with effect from a date on which he should
have filed a return of turnover accompanied by payment of
tax even if such return was not actually filed. The learned
counsel for the appellant submitted in response that the
scheme of the Act as it stood at the relevant time
contemplates a different penal action against such default,
i.e. penalty under Section 45A of the Act for failure to
submit the return of turnover which penalty can be as high
as an amount twice the amount of sales tax payable but
liability to pay penal interest cannot be cast on the
assessee for such failure when the Act does not specifically
provide for levy of penal interest for failure to file
return of turnover. We find merit in the appellants plea.
A legislative casus omissus cannot be supplied by judicial
interpretative process.
Shri G.C. Sharma, learned senior counsel for the
appellant has relied on the Constitution Bench decision of
this court in J.K. Synthetics Ltd. Vs. Commercial Taxes
Officer, (1994) 94 STC 422 in support of his submission. In
J.K. Synthetics case, majority opinion in Associated Cement
Co. Ltd. Vs. Commercial Tax Officer, (1981) 48 STC 466
(SC) has been over-ruled and the minority opinion of P.N.
Bhagwati, J. (as His Lordship then was) has been approved.
In Associated Cement Co.s case, the demand for payment of
interest was raised under Section 11B of Rajasthan Sales Tax
Act, 1954. The assessee had submitted returns accompanied
by receipts evidencing the payment of tax on the basis of
the returns. The freight charges realised by the assessee
were not included in the quantum of taxable turnover. Later
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on, law was settled by this court holding that the freight
charges were liable to be included in the figure of turnover
whereafter the assessee filed a revised return including
freight charges in the quantum of turnover and also paid the
additional tax. Question arose, whether interest could be
levied for the delay in depositing the tax amount relatable
to the freight charges? Venkataramiah, J., speaking for
himself and on behalf of A.P. Sen, J, held that the
expression on the basis of return should be construed as
on the basis of a true and proper return and an assessee,
who did not file a return or made a wrong plea as to part of
the turnover being not taxable but subsequently found to
have made a wrong claim, would be liable to pay interest on
the amount of tax which the assessee was held liable to pay
but did not pay and such a construction would be in
conformity with the legislative intention. Bhagwati, J. in
his dissenting opinion construing the expression full
amount of tax due on the basis of the return held:
. We must look at the return actually filed by
the assessee in order to see what is the full amount of tax
due on the basis of such return. It is not the assessed tax
nor is it the tax due on the basis of a return which ought
to have been filed by the assessee but it is the tax due
according to the return actually filed that is payable under
sub-section (2) of section 7. This provision is really in
the nature of self-assessment and what it requires is that
whatever be the amount of tax due on the basis of
self-assessment must be paid up along with the filing of the
return which constitutes self-assessment. I fail to see how
the plain words of sub-section (2) of section 7 can be
tortured to mean full amount of tax due on the basis of
return which ought to have been filed but which has not been
filed.
[emphasis supplied]
Repelling a similar plea raised on behalf of the Revenue
as has been raised before us, Bhagwati, J. observed that if
the assessee fails to file a return, he exposes himself to
penalty for such default; the Legislature could never have
intended that the assessee should be liable, on pain of
imposition of penalty, to deposit an amount which is yet to
be ascertained through assessment.
The same issue which was dealt with by a three-Judges
Bench of this court in the case of Associated Cement Co.
Ltd. came up for the consideration of Constitution Bench in
the case of J.K. Synthetics Ltd. (supra). This court
overruled the majority opinion and approving the minority
opinion in Associated Cement Co.s case held that the
provision by which the authority is empowered to levy and
collect interest, even if construed as forming part of the
machinery provisions, is a substantive law, not adjectival
law, and interest cannot be recovered by way of damages for
wrongful detention of the amount. This court further held
that the tax payable or tax due is that amount which
becomes due ex-hypothesi on the turnover and taxable
turnover shown in or based on the return or as to which an
order of assessment has been made.
In view of the law laid down by the Constitution Bench,
we are clearly of the opinion that the liability of the
assessee appellant to pay sales tax could have arisen either
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on return of turnover being filed by way of self-assessment
or else on an order of assessment being made. No doubt Rule
27 (7A) of the Kerala General Sales Tax Rules, 1963 casts an
obligation on assessees to file a return of total turnover
and taxable turnover accompanied by proof of payment of the
amount of tax due within 20 days of the previous quarter but
such a return was not filed by the appellant. A failure to
file return of taxable turnover may render the assessee
liable for any other consequences or penal action as
provided by law but cannot attract the liability for payment
of penal interest under sub-section (3) of Section 23 of the
Act on the parity of reasoning that if a return of turnover
would have been filed on the due date then the tax as per
return would have become due and payable on that date.
For the foregoing reasons, the appeal is allowed. The
judgment of the Division Bench is set aside and that of the
learned single Judge is restored. There will be no order as
to the costs.