1971 (3) TMI 98 - HC - VAT and Sales Tax

Court Invalidates Penalty Under Central Sales Tax Act

The court held that the Central Sales Tax Act did not permit penalties for delayed return submissions. The penalty imposed by the Commercial Tax Officer ... - Issues Involved:1. Authority to impose penalty under the Central Sales Tax Act for non-submission of returns.2. Interpretation of Section 9(2) of the Central Sales Tax Act.3. Applicability of state sales tax laws for penalty imposition under the Central Sales Tax Act.4. Procedural versus substantive provisions in tax legislation.5. Constitutionality and legislative competence concerning penalty provisions.Detailed Analysis:1. Authority to Impose Penalty under the Central Sales Tax Act for Non-Submission of Returns:The core issue was whether a dealer liable to Central sales tax under the Central Sales Tax Act could be subjected to a penalty for non-submission of returns of turnover within time. The appellant argued that the Central Sales Tax Act did not expressly provide for such a penalty, and hence, any imposition of penalty was ultra vires. The Commercial Tax Officer had levied a penalty of Rs. 2,500 for the delay in filing the return, which the appellant contested as illegal.2. Interpretation of Section 9(2) of the Central Sales Tax Act:Section 9(2) of the Central Sales Tax Act was pivotal in this case. It states that the authorities empowered to assess, reassess, collect, and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, reassess, collect, and enforce payment of tax, including any penalty payable by a dealer under this Act. The appellant contended that this section did not authorize the imposition of penalties for delays in return submission, as it referred only to penalties under the Central Act, not state laws.3. Applicability of State Sales Tax Laws for Penalty Imposition under the Central Sales Tax Act:The taxing authorities argued that Section 9(2) incorporated the entire machinery for collecting taxes, including penalties under the state laws. They relied on the expressions 'general sales tax law of the appropriate State' and 'the provisions of such law, including provisions relating to returns... shall apply accordingly.' However, the court found that such an interpretation would override the specific provision in Section 9(2) that penalties must be 'payable by a dealer under this Act,' meaning the Central Act, not state laws.4. Procedural versus Substantive Provisions in Tax Legislation:The court distinguished between procedural law (methods of assessment and collection) and substantive law (imposition of penalties). The court emphasized that penalties are substantive provisions and cannot be imposed unless expressly provided for in the statute. The decision drew support from other judicial precedents, including a subsequent decision by the Mysore High Court and the Supreme Court, which clarified that procedural laws of the state could be used for collection but not for creating new substantive liabilities.5. Constitutionality and Legislative Competence Concerning Penalty Provisions:The appellant also argued that allowing states to impose penalties under the Central Sales Tax Act would lead to inconsistencies and potential discrimination, violating Article 14 of the Constitution. The court agreed that a uniform approach was necessary and that the Central Act did not authorize states to impose penalties for delays in return submission. The court emphasized that penalties must be clearly provided for in the statute, and such provisions were absent in the Central Sales Tax Act.Conclusion:The court concluded that the Central Sales Tax Act did not authorize the imposition of penalties for delays in the submission of returns. The order of penalty imposed by the Commercial Tax Officer was found to be illegal and ultra vires. The appeal was allowed, the rule was made absolute, and appropriate writs were issued to cancel the penalty orders. The court emphasized the necessity of clear statutory provisions for the imposition of penalties and rejected the interpretation that state laws could be used to impose penalties under the Central Act.