Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 10
PETITIONER:
COMMISSIONER OF SALES TAX, M.P. INDORE AND ORS.
Vs.
RESPONDENT:
RADHAKRISHAN AND ORS.
DATE OF JUDGMENT06/10/1978
BENCH:
KAILASAM, P.S.
BENCH:
KAILASAM, P.S.
SINGH, JASWANT
KOSHAL, A.D.
CITATION:
1979 AIR 1588 1979 SCC (2) 249
CITATOR INFO :
R 1979 SC1803 (12)
RF 1991 SC 101 (22,45,205)
ACT:
Madhya Pradesh General Sales Tax Act 1958-Whether
partners can be held liable for the tax assessed against the
firm.
Sec. 22(4-A) and Sec. 46(1) (c)-Two different
procedures for enforcing and realizing the assessment-
Whether valid-vesting of discretionary power in the State or
public authorities or an officer of high standing is treated
as a guarantee that the powers will be used fairly and with
a sense of responsibility.
HEADNOTE:
The three respondents who were the three partners of a
registered Partnership doing the business of sale of bidis
did not file any sales tax return. They did not get the firm
registered under the Madhya Pradesh General Sales Tax Act
1958. Treating the firm as an unregistered dealer a best
judgment assessment was made by the sales tax officer and
demand notices were accordingly issued. Even so the firm
failed to pay the tax. Thereupon the Commissioner of Sales
Tax accorded sanction under section 46(1)(c) of the Madhya
Pradesh General Sales Tax Act 1958 for criminal prosecution
of the three respondents.
Their writ petition for quashing the order for
criminal prosecution was granted by the High Court.
On the questions ( 1 ) whether the three partners can
be held liable for the tax assessed against the firm and (2)
whether the sanction given by the Commissioner for
Prosecution under sec(ion 46(1)(c) is sustainable in law.
Dismissing the appeal the Court,
^
HELD: 1. (a) In the absence of a specific provision in
the Act, the partners of the firm cannot be held liable for
the tax assessed on the firm. [38C]
(b) A firm in a partnership and a Hindu undivided
family are recognised as legal entities and as such
proceedings can only be taken against the firm or undivided
family as the case may be. Neither the partners of the firm
nor the members of the Hindu undivided family will be liable
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 10
for the tax accessed against the firm or the undivided Hindu
family. [37H-38A]
State of Punjab v. M/s Jullundur Vegetables Syndicate,
[1966] 2 S.C.R. 457; Kapur Chand Shrimal v. Tax Recovery
Officer, Hyderabad and Ors., [1969] l S.C.R. 691: relied on.
(c) The definition of "dealer" in clause 2(d) of the
Act makes it clear that a firm is a separate entity and is a
dealer for the purposes of the Act. A firm under section
7(2) of the Act is deemed to be a registered dealer. Section
18 provides that the amount of tax due from a registered
dealer shall
34
be assessed separately for each year. Accordingly the
dealer, which is a firm in this case, was assessed and
notice given to the firm [37A-C]
(d) In the absence of a specific provision (such as the
one found in S. 18 of the Bombay Sales Tax Act 1959) that
where a firm is liable to pay tax under the Act, the firm
and each of its partners shall be jointly and severally
liable for such payment, the partners of a firm cannot be
held liable for the tax assessed on the firm. [38C]
2. (a) The provisions of the Act conferring different
procedures for collection of tax cannot be held to be
invalid. [44B]
(b) When power is conferred on high and responsible
officers, they are expected to act with caution and
impartiality while discharging their duties and the
circumstances under which they will choose either of the
remedies available should be left to them. The vesting of
discretionary power in the State or public authorities or an
officer of high standing is treated as a guarantee that the
power will be used fairly and with a sense of
responsibility. [42G]
(c) The guidance will have to be inferred from the
policy of the law itself, that is, if on particular facts of
a case the Commissioner in exercise of his discretion comes
to the conclusion that a more drastic remedy should be
taken, the exercise of that option cannot be termed
unconstitutional. Courts will be justified in giving a
liberal interpretation to the section in order to avoid
constitutional invalidity and reading down the sections if
it becomes necessary to uphold its validity. [43B, D]
(d ) In the present case before a prosecution can be
launched under section 46, it is necessary that the assessee
should have failed to pay the tax due within the time
allowed without reasonable cause. The duty of the
Commissioner is, therefore, to be satisfied that the
assessee has failed without reasonable cause and without
recourse to prosecution under section 46(1)(c), the tax due
cannot be collected’ The provisions of section 22(4-A) can
be read as being applicable to cases in which the stringent
step of prosecution is considered not necessary. The option
is with the Commissioner and if he thinks levy of penalty
would achieve the purpose of collection of the tax he can
have recourse to the provisions of section 22 (4-A) . Before
levying a penalty under section 22(4-A), the Commissioner
shall give reasonable opportunity of being heard as to why
the penalty should not be levied. Reading the two provisions
harmoniously, discretion is given to the Commissioner to
resort to one of the two remedies as the facts of the case
may require. In graver cases he will be justified in taking
the drastic remedy and resorting to prosecution in the
criminal court if he is satisfied that such a course is
necessary for the collection of the tax expeditiously. If
the discretion is not properly exercised the Court may be
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 10
justified in interfering in such cases but the law cannot be
held to be invalid. The present case is a grave case of
failure to pay the tax as repeated reminders went unheeded.
The Commissioner on the facts, was fully justified in coming
to the conclusion that resort to prosecution was necessary.
[43E-44A]
(e) Taking into account the scheme of the Act, it can
be inferred that a more drastic remedy is to be taken when
such a step is found necessary on the facts of a case. Thus
construed the validity of the section cannot be
35
questioned, but if the facts of a case do not warrant taking
of the graver step and no adequate reasons are found that
order in such circumstances may be found to be invalid.
[44B-C]
Maganlal Chaganlal (P) Ltd. v. Municipal Corporation of
Greater Bombay and Ors., [1974] 2 S.C.C. 402, State of
Kerala and Ors. v. C. M. Francis & Co. & Ors., [1961]
12 S.T.C. 119, Shanti Prasad Jain v. 7 The Director of
Enforcement, [1963] 2 S.C.R. 297, Rayale Corporation
(P) Ltd. & Ors. v. Director of Enforcement, New Delhi
[1970] 1 SCR 639; Ram Swarup v. Union of India, A.I.R.
1965 SC 247, Province of Bombay v. Bombay Municipal
Corporation, 73 I.A. 271, R. S. Joshi, S.T.O. Gujarat
etc. v. Ajit Mills Ltd., Ahmedabad & Anr. etc., [1978]
1 SCR 338; referred to.
JUDGMENT:
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.
78 of 1972.
From the Judgment and order dated 16-3-1971 of the
Madhya Pradesh High Court in Misc. Petition No. 85/69.
S.K. Gambhir for the Appellant.
H. W. Dhabe and A. G. Ratnaparkhi for Respondents Nos.
1-3.
The Judgment of the Court was delivered by
KAILASAM, J.-This appeal is by Commissioner of Sales
Tax, M.P., Indore and three others by certificate of fitness
granted by the high Court of Madhya Pradesh from the
judgment and order dated 16th March, 1971 in Miscellaneous
Petition No. 85 of 1969, whereby the High Court allowed the
petition filed by the respondents and quashed (a) the
sanction for criminal prosecution of the respondents
accorded by the commissioner of Sales Tax by his memorandum
dated 29th April. 1966 and (b) the proceedings before the
criminal court started under section 46(1) (c) of the Madhya
Pradesh General Sales Tax Act, 1958, in Criminal Case No.
4344 of 1968.
The three respondents are the three partners of a firm
known as M/S. Ramakrishna Ramnath. It is a registered
partnership firm. The firm was engaged in business of sale
of bidis and during the relevant period used to purchase
tendu leaves from the dealers. The firm failed to file any
return and get itself registered under the State of Madhya
Pradesh. The firm was treated as unregistered dealer and was
assessed to sales-tax on the basis of the best judgment.
There were three assessment orders. The first was for the
period 1-11-1956 to 23-10-1960 by an order dated 26th
December, 1964, assessing the firm at Rs. 16,380 and
imposing a penalty of Rs. 5,000. The second order related to
the period 21-10-]960 to 8-11-1961 and was dated 20th
36
December, 1964. The firm was assessed to Rs. 8,080 and a
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 10
penalty. Of Rs. 2,000 was imposed. The third order was dated
20th December, 1964 and was for the period 9-11-1961 to 28-
10-1962. The assessment against the firm was for Rs. 8,000
and a penalty of Rs. 2,000 was imposed. The demand notices
were issued in the forms prescribed in the name of the firm
by the Sales Tax officer. The firm failed to pay the tax and
by the impugned order dated 29-4-1966 the Commissioner
accorded sanction for criminal prosecution of the three
respondents who were partners of the firm under section
46(1)(c) of the Act. A challan was filed on 9th December,
1968 and a criminal Case No. 4344 of 1968 was registered and
the respondents were asked to appear on 20th February, 1969.
On 17th February, 1969 the respondents filed writ petition
out of which the present appeal arises For quashing the
order of sanction for criminal prosecution dated 29th April,
1966 given by the Commissioner of Sales Tax and of the
proceedings before the criminal court in Criminal Case No.
4344 of 1968.
By its judgment dated 16th March, 1971 the High Court
allowed the petition and quashed the sanction for criminal
prosecution given by the Commissioner of Sales Tax and the
criminal proceedings. The High Court considering the general
and legal importance of the question, granted a certificate
of fitness to the Commissioner of Sales Tax and the present
appeal is thus before this Court.
Two questions that arise in this appeal are: (i)
whether the three partners can be held liable for the tax
assessed against the firm; (ii) whether the sanction given
by the Commissioner for prosecution under section 46(1)(c)
is sustainable in law.
Regarding the first question the High Court held that
the result of non-payment of tax against a firm cannot be
visited on individual partners of the firm. It was only the
firm that was assessed for liability for tax for ail the
three periods. In spite of repeated notices the firm did not
pay the assessment or the penalty that was imposed. The
notice of demand in Form 19 prescribed under M.P. General
Sales Tax Act, 1958 (hereinafter to be referred as Act) was
sent to the firm demanding payment of the tax and penalty
with a direction that the whole sum should be deposited in
the Government treasury within 30 days from the receipt of
the notice of the demand and the treasury receipt in proof
of payment of the sum should be produced before the Sales
Tax officer. The dealer received a notice on 6th January,
1965, but failed to deposit the sum as directed. On these
facts the Inspector of Sales Tax came to the conclusion that
the dealer had committed an offence under section 46 (1) (c)
of the Act and accorded sanction under section 46(2) of the
Act for prosecuting the three surviving partners of the
37
firm who are the three respondents herein. The question
arises whether under the circumstances the partners can be
prosecuted for the default of payment of tax and penalty by
the firm. ’Dealer’ is defined in clause 2(d) of the Act. It
includes under section 2(d) (1) a local authority, a
company, an undivided Hindu family or any society (including
a co-operative society), club, firm or association which
carried on such business. This definition makes it clear
that the firm is a separate entity and is a dealer for the
purposes of the Act. The firm under section 7(2) of the Act
was deemed to be a registered dealer. Section 18 provides
that the amount of tax due from a registered dealer shall be
assessed separately for each year. Accordingly the dealer,
which is a firm in this case, was assessed and notice given
to the firm.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 10
In state of Punjab v. M/s. Jullundur Vagetables
syndicate() this court held that the firm which was assessed
to sales-tax under the East Punjab General Sales Tax was a
separate entity under the Act. The firm was assessed to
sales tax in 1953. The order was set aside by the Financial
Commissioner, and proceedings were started for fresh
assessment but by that time the firm was dissolved. The
Sales Ta. Officer made the assessment even thought the firm
had already been dissolved. The High Court on a reference
held that the firm being a separate entity under the Act,
there was no machinery provided under the Act for assessing
a firm after its dissolution in respect of turnover of
business before the dissolution. This Court held that though
under the partnership law a firm is not a legal entity, for
the purpose of sales tax under the Act, it is a legal
entity, and therefore, on dissolution the firm ceases to be
a, legal entity and there is no provision in the Act as it
stood in 1953 expressly empowering the assessing authority
to assess the dissolved firm in respect of the turnover
before its dissolution. There was no further scope for
assessing the firm which ceases to have legal existence.
In Kapurchand Shrimal v. Tax Recovery Officer
Hyderabad & Ors.,(2) a case arising out of the Income Tax
Act, this Court held that the Legislature having treated a
Hindu undivided family as a taxable entity distinct from
individual members constituting it, proceedings for
assessment and recovery of the tax having been taken against
the Hindu undivided family, it was not open to the tax
recovery officer to initiate proceedings against the manager
of the Hindu undivided family for his arrest and detention.
These two cases clearly establish that a firm in a
partnership and a Hindu undivided family are recognised as
legal
(1) [1966] 2 S.C.R. 457.
(2) [l969l 1 S.C.R. 691.
38
entities and as such proceedings can only be taken against
the firm or undivided family as the case may be Neither the
partners of the firm nor the members of the Hindu undivided
family will be liable for the tax assessed against the firm
or the undivided Hindu family. It may be noted that section
276(d) of the Income Tax Act specifically includes all
partners within the definition of the word ’firm’ and a
company includes directors. In Bombay Sales Tax Act 1959
under section 18 it is specifically provided that where any
firm is liable to pay that under the Act, the firm and each
of the partners of the firm shall be jointly and severally
liable for such payment. In the absence of a specific
provision as found in section 18 of the Bombay Act the
partners of the firm cannot be held liable for the tax
assessed on the firm. on this point we agree with the High
Court that the partners cannot be made liable for the tax
assessed on the firm.
The second question that arises is whether the
sanction given by the Commissioner is sustainable in law.
The validity of the sanction is questioned on the ground
that under the Sales Tax Act the Commissioner is entitled to
pursue two different procedures for enforcing and realizing
the assessment made but as there is no guidance as, to the
circumstances in which he should resort to either of the two
procedures, the provisions regarding grant of sanction is
invalid. The two procedures that are available are under
sections 22(4-A) and 46(1)(c) of the Act. Section 22(4-A)
runs as follows:
"(4-A) If the tax assessed under this Act or any
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 10
of the Acts repealed by section 52 or any other account
due under this Act or any instalment thereof is not
paid by any dealer or other persons liable to pay such
tax, other amount due or any instalment thereof within
the time specified , therefore in the notice of demand
or in the order permitting payment in instalments or
within the time allowed for its payment by the
appellate or revising authority, the Commissioner may,
after giving the dealer or other person a reasonable
opportunity of being heard, direct that such dealer or
person shall, in addition to the amount due, pay, by
way of penalty, 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; and
(b) one and half per cent of such amount for each
month or part thereof subsequent to the first
three months aforesaid."
39
There had been subsequent amendments by Act 31 of 1975
but A they are not relevant for the purposes of this case.
Section 22(4-A) was inserted by the M.P. Act 16 of 1965 and
was published in the gazette of 3rd April, 1965 and by a
Notification dated 9th April, 1965 was brought into force on
15th April, 1965. The Notice was given by the Commissioner
demanding payment of the tax and penalty from the firm
within 31 days on 4th January, 1965. The period expired on
5th February, 1965. The sanction for prosecution was given
by the Commissioner on 29th April, 1966. Before the High
Court as well as before this Court both the counsel for the
respondents and the State conceded that section 22(4-A) is
retrospective in operation and, therefore, sub-section is
applicable to the facts of the case. The sub-section
provides that when the amount due is not paid within the
time allowed, the Commissioner may after giving the dealer a
reasonable opportunity of being heard direct that such
dealer in addition to the amount due pay by way of penalty a
sum as specified in sub-clauses (a) and (b) lo sub-section
(4-A). The procedure prescribed in section 22(4-A) for
collection of the amount is by levy of a penalty, after
giving the dealer a reasonable opportunity of being heard.
The other procedure that is available to the
Commissioner is by taking proceedings under section 46 of
the Act. Section 46 enumerates certain offences and
penalties for contravention of some of the provisions of the
Act. We are concerned with section 46(1) (c) which reads as
follows:-
"46(1) (c) Whoever, without reasonable cause
fails to pay the tax due within the time allowed,
shall, without prejudice to the recovery of any tax
that may be due from him, be punishable with simple
imprisonment which may extend to six months or a fine
not exceeding one thousand rupees or with both, and
when the offence is a continuing offence, with a
further fine not exceeding fifty rupees for every day
the offence continues."
Sub section (2) provides that no Court shall take
cognizance of any offence punishable under this Act or any
rule made thereunder except with the previous sanction of
the Commissioner. If action is to be taken under section 46,
the Commissioner will have to find that the dealer has
failed to pay the tax within the time allowed and without
reasonable cause. The submission of the learned counsel is
that the procedure under section 46 if taken is harsh and
more severe than the one contemplated under section 22(4-A)
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 10
which enables the Commissioner to levy a penalty and that
too only after giving a reasonable opportunity of being
heard. Before initiating prosecution the
40
Commissioner is not under an obligation to give any notice
to the assessee. Section 47-A was introduced from 1st
January, 1964 by M.P. Act No. 20 of 1964 which provides that
no prosecution for contravention of any provision of this
Act or of rules made thereunder shall be instituted in
respect of the same facts on which a penalty has been
imposed under this Act or the said rules, as the case may
be. By the introduction of section 47-A it is seen that when
once proceedings are taken under section 22(4-A) no
prosecution under section 46(1)(c) can be instituted. The
position, therefore, is that the Commissioner is at liberty
to choose only one of the two remedies and the challenge is
that one is harsher than the other and there is no guidance
provided to the Commissioner as to which of the procedure he
should adopt in a given case.
An authoritative statement of the Supreme Court on
this point is found in Maganlal Chaganlal (P) Ltd., vs.
Municipal Corporation of Greater Bombay and others.(1) It
was observed that one finds it difficult to reconcile
oneself to the position that the mere possibility of resort
to the Civil Court should make invalid a procedure which
would otherwise be valid. It can very well be argued that as
long as a procedure does not by itself violate either Art.
19 or Art. 14 and is thus constitutionally valid, the fact
that procedure is more onerous and harsher than the
procedure in the ordinary civil Courts, should not make that
procedure void merely because the authority competent to
take action can resort to that procedure in the case of some
and ordinary civil court procedure in the case of others.
That a constitutionally valid provision of law should be
held to be void because there is a possibility of its being
resorted to in the case of some and the ordinary civil Court
procedure in the case of others somehow makes one feel
uneasy and that has been responsible for the attempts to get
round the reasonaning which is the basis in the decision in
Northern India Caterers v. State of Punjab.(2)
It was further held that if from the preamble and
surrounding circumstances as well as provisions of the
statute themselves explained and amplified by affidavits
necessary guidelines can be inferred the statute will not be
hit by Art. 14. The provisions in revenue recovery Acts and
other Acts creating special tribunals and procedure for
expeditious recovery of revenue and state dues are held to
be in public interest and do not violate Article 14.
Regarding the validity of two remedies for recovery of
sales-tax the Supreme Court in State of Kerala and other v.
C. M. Francis &
(1) [1974] S.C.C. 402.
(2) [1967] 3.S.C.R. 399.
41
Co. and others(1) held that if two remedies are open, both
can be re sorted, at the option of the authorities
recovering the amount unless the Statute in express words
lays down that one remedy is to the exclusion of the other.
The two remedies that were available in the case were, one
under section 13 of the Act which provided that if the tax
is not paid it may be recovered as if it were an arrears of
land revenue and the other under section 19 which provided
that any person who failed to pay within the time allowed
any tax assessed on him under the Act shall on conviction by
the Magistrate of the First Class be liable to pay fine
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 10
which may extend to one thousand rupees. This Court after
observing that the question that arose was whether section
19 should prevail over section 13 of the Act stated that
’both the sections lay down mode of recovery of arrears of
tax and as has already been noticed by the High Court, lead
to the application of process, of recovery by attachment and
sale of movable and immovable properties belonging to the
tax-evader and it cannot be said that one proceeding is more
general than the other, because there is much that is common
between them, in so far as mode of recovery is concerned".
Referring to section 19 the Court observed that in addition
to recovery of the amount, it gives power to the magistrate
to convict and sentence the offender to fine or in default
of payment of fine, to imprisonment and expressed its
opinion that neither of the remedies for recovery is
destructive of the other, because if two remedies are open,
both can be resorted to, at the option of the authorities
recovering the amount. This decision supports the contention
of the learned counsel for the appellant that when two
remedies, one under section 22 (4-A ) and another under
section 46(1) (c) are available, both can be resorted to at
the option of the authorities recovering the amount but for
section 47A. In the case referred in (1961) 12 S.T.C. 119,
the two remedies were, one by collection of the amount as an
arrears of land revenue and the other by resorting to
prosecution before the criminal court. In Shanti Prasad Jain
v. The Director of Enforcement(2) the question arose whether
discretion left to the executive to choose between two
preliminary procedures was discriminatory. Under section
23A, the Director of Enforcement may adjudge the matter
himself and levy a penalty not exceeding three times the
value of the foreign exchange, in respect of which the
contravention had taken place or Rs. 5,000 whichever is more
or he may send it on to a court if he considers that a more
severe penalty than he can impose is called for whereupon on
a conviction by a court, the person is punishable with
imprisonment for two years or fine. The Court observed that
under
(1) (1961) 12 S.T.C. 119.
(1) [1963] 2 S.C.R. 297.
4-817 SCI/178
42
section 23-D, the necessary guidance is given in that at any
stage of the inquiry the Director of Enforcement is of
opinion that having regard to the circumstances of the case
the penalty which He is empowered to impose would not be
adequate he shall instead of imposing any penalty must make
a complaint in writing to the Court. As sufficient guidance
was given regarding circumstances under which cases can be
transferred to the criminal court, the Court held that the
power is not unguided or arbitrary. In Rayale Corporation
(P) Ltd. & Ors. vs. Director of Enforcement, New Delhi(1),
this Court following the Shanti Prasad Jain’s case (supra)
held that the Director of Enforcement can only file a
complaint by acting in accordance with proviso to section
23D(l) which clearly lays down that the complaint is only to
be filed in those cases where at any stage of the inquiry
the Director of Enforcement comes to the conclusion that,
having regard to the circumstances of the case, the penalty
which he is empowered to impose could not be adequate. 1
Shanti Prasad Jain’s case (supra) as well as the Rayale
Corporation’s case (supra) there were clear guidelines as to
when prosecution can be resorted to and on that basis the
Court held that the power cannot be said to be unguided. The
decision in ( 1961 ) 12 S.T.C. page 119 (supra) was not
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 10
referred to in the two decisions. In Ram Sarup v. Union of
India & Another(") the question arose as to whether the
power under section 125 of the Army Act which empowered the
officer either to try a case by court-martial or by an
ordinary court or by a criminal court, was left entirely
within his discretion without any guidance, was violative of
Article 14 of the Constitution. The Court held that the
choice as to which court should try the accused is left to
the responsible military officers under whom the accused is
serving and these officers were to be guided by
consideration of the exigencies of the service, maintenance
of discipline in the army, speedier trial, the nature of the
offence and the person against whom the offence is
committed. When power is conferred on high and responsible
officers they are expected to act with caution and
impartiality while discharging their duties and the
circumstances under which they will choose either of the
remedies available should be left to them. The vesting of
discretionary power in the state or public authorities or an
officer of high standing is treated as a guarantee that the
power will be used fairly and with a sense of
responsibility.
It has been held by the Privy Council in Province of
Bombay v. Bombay Municipal Corporation(3) that every statute
must be supposed
(1) [1970] 1 S.C.R. 639.
(2) A.I.R. 1965 S.C. 247.
(3) 73 I.A. 271.
43
to be for public good at least in intention and therefore of
few laws can it be said that the law confers unfettered
discretionary power since the policy of law offers guidance
for the exercise of discretionary power. Applying the
principles of this decision to the present case, the
guidance will have to be inferred from the policy of the law
itself, that is, if on particular facts of a case the
Commissioner who is an officer of high standing, in exercise
of his discretion comes to the conclusion that more drastic
remedy should be taken, the exercise of that option cannot
be termed as unconstitutional. In considering the validity
of a statute the presumption is in favour of its
constitutionality and the burden is upon him who attacks it
to show that there has been a clear transgression of
constitutional principles. For sustaining the presumption of
constitutionality the Court may take into consideration
matters of common knowledge, matters of common report the
history of the times and may assume every state of facts
which can be conceived. lt must always be presumed that the
Legislature understands and correctly appreciates the need
of its own people and that discrimination. if any, is based
on adequate grounds. It is well settled that courts will be
justified in giving a liberal interpretation to the section
in order to avoid constitutional invalidity. These
principles have given rise to rule of reading down the
section if it becomes necessary to uphold the validity of
the sections. In the present case it is seen, under section
46 before a prosecution can be launched, it is necessary
that the assessee should have failed to pay the tax due
within the time allowed without reasonable cause. The duty
of the Commissioner is therefore to be satisfied that the
assessee has failed without reasonable cause and without
recourse to prosecution under section 46(1)(c) the tax due
cannot be collected. The provisions of section 22(4-A) can
be read as being applicable to cases in which the stringent
step of prosecution is considered not necessary. The option
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 10
is with the Commissioner and if he thinks levy of penalty
would achieve the purpose of collection of the tax he can
have recourse to the provisions of section 22(4-A). Before
levying a penalty under section 22(4-A), the Commissioner
shall give reasonable opportunity of being heard as to why
the penalty should not be levied. Reading the two provisions
harmoniously, we are of the view that the discretion is
given to the Commissioner to resort to one of the two
remedies as the facts of the case may require. In graver
cases he will be justified in taking the drastic remedy and
resorting to prosecution in the criminal court if he is
satisfied that such a course is necessary for the collection
of the tax expeditiously. If the discretion is not properly
exercised the court may be justified in interfering in such
cases but the law cannot be held to be invalid. In the
present case, we have no doubt, it is a grave case
44
of failure to pay the tax as repeated reminders went
unheeded. The Commissioner on the facts is fully justified
in coming to the conclusion that resort to, prosecution is
necessary. On a consideration of the decisions on the point
we are satisfied that there is nothing illegal in conferring
different procedures on the authorities.
Taking into account the scheme of the Act it can be
inferred that a more drastic remedy is to be taken when such
a step is found necessary on the facts of the case. Thus
construed the validity of the section cannot be questioned,
but if the facts of the case do not warrant taking of the
graver step and no adequate reasons are found that order in
such circumstances may be found to be invalid.
In R. S. Joshi, S.T.O. Gujarat etc. v. Ajit Mills Ltd.,
Ahmedabad & Anr. etc. etc.(’) the validity of provisions of
the Act which gave the authority a discretion either to
proceed under section 37 or section 63(1) of the Bombay
Sales Tax Act without specific guidelines was considered. It
was pointed out that section 37 provided for levy of penalty
and forfeiture while under section 63(1)(h) the person
becomes liable to be criminally prosecuted for contravening
the provisions of section 46 without reasonable excuse and
held that there is no contravention of Article 14.
In the result we hold that the provisions of the Act
conferring different procedures for collection of tax cannot
be held to be invalid. But in view of our finding that the
partners cannot be proceeded with for collection of arrears
of the firm this appeal stands dismissed with costs.
N.V.K. Appeal dismissed.
(1) [1978] 1 S.C.R. 338
45