Full Judgment Text
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CASE NO.:
Appeal (civil) 6448-6455 of 2002
PETITIONER:
E.I.D. Parry (India) Ltd.
RESPONDENT:
Asst. Commissioner of Commercial Taxes, Chennai
DATE OF JUDGMENT: 03/05/2005
BENCH:
S. N. Variava,Dr. AR. Lakshmanan & S. H. Kapadia
JUDGMENT:
J U D G M E N T
[with Civil Appeal No. 4230 of 2003]
S. N. VARIAVA, J.
These Appeals are against the Judgment of the Madras High
Court dated 8th October, 2001.
Briefly stated the facts are as follows:
The Appellants are the manufacturer of sugar. They purchase
sugarcane from farmers. By virtue of the Sugarcane (Control) Order,
1966 made under the Essential Commodities Act, 1955 the price for
such purchase is statutorily fixed. Clause 3 of the Sugarcane (Control)
Order lays down the minimum price of sugarcane payable by a
producer of sugar. This is the price which is payable immediately at
the time that the sugar is purchased. Over and above this, by virtue
of Clause 5-A, an additional price is also payable. This additional price
is to be fixed on the basis of a formula laid down in the first Schedule
of the Sugarcane (Control) Order. The Formula given therein is as
follows:
R \026 L + 2A + B
X = -------------------
2C
R is the amount in rupees of sugar produced during the sugar year
excluding the excise duty paid or payable to the factory by the
purchaser. It is evident from the formula itself that the additional
price is the amount which is incapable of determination at the time the
sugarcane is supplied to the factory by the grower. The additional
price can only be determined at the end of the sugar year and not
earlier. Even though the additional price could not be determined till
the end of the sugar year, in practice it took a long time to determine
this price. Therefore the State Government advised the sugar
producers to pay a price which was higher than the minimum price
fixed under Clause 3. The manufacturers of sugar, like the Appellants,
also paid the additional price as fixed by the Government at the time
of purchase. The additional price so paid was then adjusted against
the price fixed under Clause 5-A of the Sugarcane (Control) Order,
1966.
Under the Tamil Nadu General Sales Tax Act, 1959 dealers were
given an option, under Section 13(2), of paying tax in advance on the
basis of monthly returns. Section 13 is relevant and it reads as
follows:
"13. Advance payment of tax
(1) The tax for each year payable under any of the
provisions of this Act may be collected in advance during
the year in monthly or other prescribed instalments and for
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this purpose a dealer may be required to furnish within the
prescribed period such returns as may be prescribed. The
assessing authority may provisionally determine the
amount of tax payable in advance during any year or in
respect of any period and on such determination and
intimation to the dealer he shall pay such tax in such
instalments and within such period as may be prescribed.
(2) In lieu of the tax provisionally determined
under sub-section (1), a dealer may, at his option, pay tax
in advance during the year on the basis of his actual
turnover for each month or for such other periods as may
be prescribed. For this purpose, he may be required to
furnish returns showing his actual turnover for each month
or other periods as may be prescribed and to pay tax on
the basis of such returns. The tax under this sub-section
shall become due without any notice of demand to the
dealer on the date of receipt of the return or on the last
due date as prescribed, whichever is later.
2A. Notwithstanding anything contained in sub-
sections (1) or (2), every dealer other than those paying
tax under sub-section (2) of section 3D, section 3E or 7E,
whose total turnover in the preceding year was not less
than ten lakhs of rupees or his taxable turnover was not
less than three lakhs of rupees and all dealer newly
registered in the year shall pay tax during the year on the
basis of his actual turnover for each month or for such
other period, as may be prescribed.
(3) If no return is submitted by the dealer under
sub-section (1) or sub-section (2) within the prescribed
period, or if the return submitted by him appears to the
assessing authority to be incomplete or incorrect, the
assessing authority may, after making such enquiry as it
considers necessary, determine the tax payable by the
dealer to the best of its judgment:
PROVIDED that, before taking action under this sub-
section on the ground that the return submitted by the
dealer is incomplete or incorrect, the dealer shall be given
a reasonable opportunity of proving the correctness or
completeness of the return submitted by him.
(4) If the assessing authority has reason to believe
that the tax determined by it for any period was based on
too low a turnover or was made at too low a rate or was
based on too high a turnover or was made at too high a
rate, it may enhance or reduce, as the case may be, such
determination tax:
PROVIDED that before making an enhancement of
the tax payable as aforesaid, the assessing authority shall,
except where such enhancement is based on the turnover
finally determined for the preceding year, give a
reasonable opportunity to the dealer to show cause against
such enhancement and make such enquiry as it may
consider necessary.
(5) The determination and collection of tax under
this section shall be subject to such adjustment as may be
prescribed on the completion of final assessment in the
manner prescribed."
The Appellants were thus filing returns. In these monthly returns they
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showed their turnover on the basis of minimum price paid by them and
paid tax thereon. They indicated the additional price which they had
paid as per the advice of the Government but did not include it as part
of the turnover and did not pay tax on such additional price. As and
when the price, under Clause 5-A, was fixed the Appellants filed a
revised return and paid tax on that.
After the revised returns were filed an Assessment Order was
passed. In the Assessment Order interest was sought to be charged,
under Section 24(3), on the price fixed under Clause 5-A from the date
that the sugar was purchased till payment of tax was made by the
Appellants. The Appellants challenged the demand for interest before
the Tamil Nadu Taxation Special Tribunal. The Tribunal dismissed the
Petition on 19th April, 2000. The Appellants then filed Writ Petition
before the High Court which has been dismissed by the impugned
Judgment.
Two questions arise for our consideration: (a) whether the
advance paid, pursuant to the advice of the Government, can be
considered to be price and thus includible in the monthly turnover of
the Appellants and (b) whether interest under Section 24(3) can be
charged on the price fixed under Clause 5-A and/or on the advance
paid and if so, from what date.
On these questions, Mr. Vellapally has submitted that the price
fixed under Clause 5-A would only be known after it was determined
and that till the Clause 5-A price was announced it would not be
includible in the returns for the reason that the price would not be
known. He submitted that the advances given as per the advice of the
Government are mere ad-hoc payments and that these advances do
not constitute price. In support of his submission, he relied upon the
Judgment of this Court in the case of State of Tamil Nadu vs. Kothari
Sugars & Chemicals Ltd. reported in 1996 (7) SCC 751. He further
submitted that, in any case, on a plain reading of Sections 13 and 24
of the Tamil Nadu General Sales Tax Act no interest can be levied
unless and until an assessment has taken place and a notice of
demand has been issued and tax had not been paid within the time
specified in the notice of demand. In support of this submission, he
relied upon the cases of J.K. Synthetics Ltd. vs. Commercial Taxes
Officer reported in 1994 (4) SCC 276 and Frick India Ltd. vs. State of
Haryana reported in 1994 (5) SCC 559.
On the other hand, Mr. Iyer submitted that the Appellants had
chosen to follow the procedure under Section 13(2). He submitted
that tax had to be paid on the actual turnover. He submitted that the
decision of this Court in Kothari Sugars and Chemicals Ltd.’s case
(supra) was only concerned with the question as to whether the
amounts paid in advance, over and above the price fixed under Clause
5-A, can be considered to be price. He submitted that the
observations made in that case are in the context of this question. He
points out that this Court has in the case of U.P. Cooperative Cane
Unions Federations vs. West U.P. Sugar Mills Association reported in
2004 (5) SCC 430 so noted. He submitted that therefore the
observations in Kothari Sugars and Chemicals Ltd.’s case cannot be
construed to mean that the advance price, paid towards the price fixed
under Clause 5-A, does not constitute price. He further submitted
that J.K. Synthetics Ltd.’s case would have no application as, in the
present case, the tax is to be paid on actual turnover which would
mean the actual amounts paid by way of price.
We have heard the parties and considered the submissions.
Let us first consider whether the advance paid, towards the
Clause 5-A price, constitutes price and is includible in the monthly
returns as turnover. As stated above, reliance has been placed, by Mr.
Vellapally, on the Judgment of this Court in Kothari Sugars and
Chemicals Ltd.’s case (supra). This Judgment does indicate that the
advance paid pursuant to the advice of the Government cannot be
considered to be the price. But we find that the observations made in
this Judgment are in the context of the question whether additional
amounts paid over and above the price fixed under Clause 5-A can be
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considered to be the price. This has been so noticed by a Constitution
Bench of this Court in U.P. Cooperative Cane Unions Federations’s case
(supra). In Kothari Sugars & Chemicals Ltd.’s case, tax had
admittedly been paid in time on the advance paid towards Clause 5-A
price. Tax was also sought to be levied on monies advanced over and
above the Clause 5-A price. The observations made are merely setting
out that advances made, over and above the Clause 5-A price, cannot
be considered to be price. However it is clear that if amounts are paid
towards the Clause 5-A price, they would be payment towards price
and therefore part of turnover even though they may be paid in
advance. In our view, Kothari Sugar & Chemicals Ltd.’s case does not
lay down to the contrary. It does not even deal with this aspect. Of
course Clause 5-A price will not be known till much later. However the
Government advice makes it clear that the advance payment is to be
towards the Clause 5-A price. Thus so long as the advance made is
less than or equal to the Clause 5-A price it is advance payment of
price. However if anything more has been paid then that would not be
price in the absence of a contract or any statutory provision. It will
thus have to be held that in the monthly returns the advance should
have been included as part of turnover. If tax has been paid on
advance and it is found that excess payment has been made, refund of
tax on the excess payment can be claimed.
The question then arises whether interest, under Section 24(3)
can be charged on the Clause 5-A price or on the advance and if so
from what date. As has been noted hereinabove, the price fixed
under Clause 5-A can only be decided on the basis of a formula set out
hereinabove. It therefore cannot be decided at least till the end of
the sugar year. In practice it is however decided much later. As the
price would be an unknown, neither the assessee could predict what
the price would be nor could the Assessing Officer, even on the basis
of his best judgment, predict what that price would be. Therefore till
the price under Clause 5-A is fixed there would be no question of an
assessee including it in the monthly returns filed by him. A monthly
return filed not showing the price fixed under Clause 5-A would neither
be incorrect nor incomplete. It is only after the price under Clause 5-
A is fixed that the assessee would be required to file a revised return
showing the price fixed under Clause 5-A as part of his turnover. Mr.
Iyer fairly admitted that interest on the price fixed under Clause 5-A
could not be levied from the date the sugarcane was purchased as it
would be impossible to know in advance what the price under Clause
5-A would be. His submission however was that the advance paid was
towards the price fixed under Clause 5-A and therefore the amount
paid as advance should have been included in the monthly returns as
turnover and tax paid on that. He submitted that such returns had to
show the actual turnover and if the returns did not show the actual
turnover then the returns were incorrect and/or incomplete and
therefore interest would be leviable from the date that these amounts
were actually paid to the sugarcane growers till the tax on these
amounts was paid.
Thus the Assessment Order levying interest on the entire price
fixed under Clause 5-A and the Judgments of the Tribunal and the
High Court upholding that are clearly erroneous. As stated above, the
price fixed under Clause 5-A would not be known till much later. Thus,
it would be impossible to show it in the monthly returns filed earlier.
Of course as indicated earlier, Mr. Iyer is right the monthly returns
should have included the amounts paid as advance in the turnover.
The question still remains whether by not including them interest
becomes payable on them under Section 24(3).
To consider this aspect, one needs to look at Section 13, which
has been set out hereinabove. It is to be seen that under Section
13(2) tax could be paid in advance on the basis of monthly returns. A
plain reading of Section 13(2) shows that the tax which has to be paid
on the basis of such returns. If, as now contended by Mr. Iyer, the
returns are incomplete or incorrect then, under Section 13(3), the
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Assessing Authority must, after giving a reasonable opportunity to the
assessee, determine what was the tax payable and issue a notice to
pay the tax within a particular period. The determination and
collection under Section 13 would then be subject to such adjustments
as may be prescribed on completion of the final assessment.
Section 24 reads as follows:
"24. Payment and recovery of tax
(1) Save as otherwise provided for in sub-section
(2) of section 13, the tax assessed or has become payable
under this Act from a dealer or person and any other
amount due from him under this Act shall be paid in such
manner and in such instalments, if any and within such
time as may be specified in the notice of assessment, not
being less than twenty-one days from the date of service
of the notice. The tax under sub-section (2) of section 13
shall be paid without any notice of demand. In default of
such payments the whole of the amount outstanding on
the date of default shall become immediately due and shall
be a charge on the properties of the person or persons
liable to pay the tax or interest under this Act.
(2) Any tax assessed on or has become payable
by, or any other amount due under this Act from a dealer
or person and any fee due from him under this Act, shall,
subject to the claim of the Government in respect of land
revenue and the claim of the Land Development Bank in
regard to the property mortgaged to it under section 28(2)
of the Tamil Nadu Co-operative Land Development Banks
Act, 1934 (Tamil Nadu Act X of 1934), have priority over
all other claims against the property of the said dealer or
person and the same may without prejudice to any other
mode of collection be recovered-
(a) as land revenue; or
(b) on application to any Magistrate by such
Magistrate as if it were a fine imposed by
him;
PROVIDED that no proceedings for such recovery
shall be taken or continued as long as he has, in regard to
the payment of such tax, other amount or fee, as the case
may be, complied with an order by any of the authorities
to whom the dealer or person has appealed or applied for
revision, under sections 31, 31A, 33, 35, 36, 37 or 38.
(3) On any amount remaining unpaid after the date
specified for its payment as referred to in sub-section (1)
or in the order permitting payment in instalments, the
dealer or person shall pay, in addition to the amount due,
interest at one and half per cent per month of such
amount for the first three months of default and at two per
cent per month of such amount for the subsequent period
of default.
PROVIDED that if the amount remaining unpaid is
less than one hundred rupees and the period of default is
not more than a month, no interest shall be paid:
PROVIDED FURTHER that where a dealer or person
has preferred an appeal or revision against any order of
assessment or revision of assessment under this Act, the
interest payable under this sub-section, in respect of the
amount in dispute in the appeal or revision, shall be
postponed till the disposal of the appeal or revision, as the
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case may be, and shall be calculated on the amount that
becomes due in accordance with the final order passed on
the appeal or revision as if such amount had been specified
in the order of assessment or revision of assessment, as
the case may be.
(3A) Where a dealer submits the prescribed return
within ten days after the expiry of the prescribed period,
he shall also pay, in addition to the amount of tax due as
per his return, interest at two per cent of the tax payable
for every month or part thereof.
(4) Where the tax paid under this Act is found to be
in excess on final assessment or revision of assessment, or
as a result of an order passed in appeal, revision or
review, the excess amount shall be refunded to the dealer
after adjustment of arrears of tax, if any, due from him.
Where the excess amount is not refunded to the dealer
within a period of ninety days from the date of the order of
assessment or revision of assessment and in the case of
order passed in appeal, revision or review, within a period
of ninety days from the date of receipt of the order, the
government shall pay by way of interest, where the
amount refundable is not less than one hundred rupees, a
sum equal to the sum calculated at the rate of one percent
or part thereof of such amount for each month or part
thereof after the expiry of the said period of ninety days.
Explanation: For the purpose of this section, the
expression "order passed in appeal, revision or review"
shall not include an order passed in such appeal, revision
or review with direction to make fresh assessment order."
Under Section 24(1) if the tax has been assessed or has become
payable under the Act, then the payment has to be made within the
said time as may be specified in the notice of assessment and tax
under Section 13(2) has to be paid without any notice of demand.
However, as seen above, the tax under Section 13(2), in the absence
of any determination by the Assessing Authority, is tax as per the
returns. If default is made in payment of such tax then interest
becomes payable under the Act. In the present case, it is an
admitted position that tax as per the monthly return had been paid
within time. It is also an admitted position that there was no
assessment, even provisional, by the Assessing Authority prior to the
final assessment made after the revised returns had been filed.
Interest becomes payable under Section 24(3) on an amount
remaining unpaid after the date specified for its payment under sub-
section (1) of Section 24. As seen above sub-section (1) of Section
24 deals with an assessed tax or tax which has become payable under
the Act. In cases covered by Section 13(2) tax must be paid without
any notice of demand. But as stated above, under Section 13(2) tax is
to be paid "on the basis of such returns". Tax as per the returns has
admittedly been paid. If the returns were incomplete or incorrect as
now claimed the assessing authority had to determine the tax payable
and issue a notice of demand. In the absence of any assessment,
even provisional, and a notice of demand no interest would be payable
under Section 24(3). In this case, it is an admitted position that as
soon as the revised return was filed the Appellants paid the tax as per
the revised return. Therefore they paid the tax even before the final
assessment took place. Thus the claim for interest, under Section
24(3) from the date that the advances were paid to the sugarcane
growers is not sustainable. There is no provision under the Act which
permits charging of interest unless and until there has been a
provisional assessment and a notice of demand prescribing the period
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within which the tax was to be paid.
Our view finds support from the Constitution Bench decision of
this Court in J.K. Synthetics Ltd.’s case (supra). It must be mentioned
that earlier to J.K. Synthetics Ltd.’s case the question whether interest
would be payable from the date of return on the footing that the
return is an incorrect return had come up for consideration before a
three Judge Bench of this Court in the case of Associated Cement
Company Ltd. vs. Commercial Tax Officer, Kota reported in 1981 (4)
SCC 578. There was a difference of opinion. The majority Judgment
held that the return must be a true return and if in a final assessment
it is held that the return was incorrect or incomplete, then interest
would be leviable from the date the incomplete or incorrect return was
filed. The minority opinion held that tax was to be paid as per the
return and so long as tax was paid as per the return, merely because
in the final assessment it was held that the return was incorrect or
incomplete interest could not be levied prior to the date of final
assessment and the demand thereunder. The majority view was
doubted and the question was referred to a Constitution Bench. The
Constitution Bench in J.K. Synthetics Ltd.’s case accepted the minority
view and overruled the majority view. The Constitution Bench held
that tax was payable only as per the returns. It is held that if
incomplete or incorrect return are filed it was open to the Assessing
Officer to provisionally assess and make a demand. It is held that if
that was not done then interest could not be levied on the footing that
in a final assessment it is found that the returns had been incorrect.
The decision in J.K. Synthetics Ltd.’s case was thereafter
followed by another Constitution Bench in the case of Frick India Ltd.’s
case (supra). These Judgments fully cover the question under
consideration. They are not only binding on us but we are in full
agreement with the principle laid down therein.
Mr. Iyer made an attempt to distinguish the Judgments on the
ground that the provisions under consideration, in J. K. Synthetics
Ltd.’s case, are not in pari materia with the provisions of the Tamil
Nadu General Sales Tax Act. He submitted that the words "actual
turnover" had not been used in the Rajasthan Act. He submitted that
under the Tamil Nadu General Sales Tax Act the return has to be as
per the actual turnover. In our view, the words "actual turnover" can
have no different meaning from the word "turnover". The word
"turnover" has been defined under Section 2(r) to mean the aggregate
amount for which the goods are bought and sold. Under Section 13(2)
the monthly return has to indicate the actual turnover and tax is then
payable as per the return. If the return shows the actual turnover and
tax is not paid as per the return, then interest would be payable under
Section 24(3) as that would be a case where amount has remained
unpaid after the date specified for its payment. However, if the
monthly return does not indicate the actual turnover then it was for
the Assessing Authority to make a demand on the footing that the
return was incomplete or incorrect. In the absence of any such
demand interest would not become payable under Section 24(3) as
there is no provision for charging of interest prior to the date of
demand. In this respect the principles laid down in J.K. Synthetics
Ltd.’s case fully apply even though the provisions of the Tamil Nadu
General Sales Tax Act and the Rajasthan Act may not be identical.
The principle to be kept in mind is, that, when the levy of interest
emanates as a statutory consequence and such liability is a direct
consequence of non-payment of tax, be it under Section 215 of the
Income Tax Act or under Section 7(2) / 7(2A) read with Section
11B(a) of the Rajasthan Sales Tax Act, 1954 (as discussed in the
decision of this Court in the case of J. K. Synthetics Ltd.’s case (supra)
or under Sections 13(2) / 24(3) read with Rule 18(3) under the Tamil
Nadu General Sales Tax Act, 1959, then such a levy is different from
the levy of interest which is dependent on the discretion of the
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Assessing Officer. The default arising on non-payment of tax on an
admitted liability in the case of self-assessment falls under Section
24(3) read with Rule 18(3) which attracts automatic levy of interest
whereas the default in filing incomplete and incorrect return falls under
Rule 18(4) which attracts best judgment assessment in which the levy
of interest is based on the adjudication by the Assessing Officer.
Therefore, Rule 18(3) and Rule 18(4) operate in different spheres.
In this view of the matter, the impugned Judgment of the High
Court and the Order of the Tribunal as well as the Assessing Authority
cannot be sustained and are hereby set aside to the extent they levy
interest under Section 24(3).
In this view of the matter, the Appeals stand allowed. There will
be no order as to costs.