2016 (3) TMI 1478 - SC - Indian Laws

Ex-post facto approval by Assessing Authority satisfies Section 3A compliance for sugar storage and removal by mills

The SC held that ex-post facto approval constitutes sufficient compliance with the proviso to Sub-section (1) of Section 3A regarding storage and removal ... Ex-post facto approval - prior approval - approval versus permission - interpretation of 'approval' as ratification - compliance with proviso to Sub section (1) of Section 3A of U.P. Sugarcane Purchase Tax Act, 1961 - penalty for removal in violation of Sub section (1) of Section 3AEx-post facto approval - interpretation of 'approval' as ratification - approval versus permission - compliance with proviso to Sub section (1) of Section 3A of U.P. Sugarcane Purchase Tax Act, 1961 - Ex post facto approval granted by the Assessing Authority constitutes sufficient compliance with the proviso to Sub section (1) of Section 3A where the approval is subsequently granted and the tax has been paid. - HELD THAT: - The Court applied the established distinction between 'approval' and 'permission', noting that 'approval' may operate as ratification and thus can be given after the act. Reliance was placed on the reasoning reproduced from earlier authority which explained that where statutory language requires 'approval' (and not expressly 'prior approval' or 'permission'), the action taken can be validated subsequently by approval; only if disapproved would it lose effect. In the present facts the Assessing Authority had examined and granted approval after verifying that the tax due at removal had been paid, and there was no dispute of tax evasion. Given the conspicuous absence of the word 'prior' in the proviso, ex post facto approval validated the storage outside the factory for the periods in question. [Paras 3, 4]Ex post facto approval by the Assessing Authority validated the appellant's act of storing and removing sugar from an approved godown where tax was paid on removal and satisfied the proviso to Sub section (1) of Section 3A.Penalty for removal in violation of Sub section (1) of Section 3A - ex post facto approval - Imposition of penalty under Sub section (5) of Section 3A is not warranted where ex post facto approval has been granted after verification and there is no evasion of tax. - HELD THAT: - Since the Assessing Authority, before imposing penalty, had granted approval ex post facto after verifying that the tax due on removal had been paid and there was no evasion, the foundational condition for levying the statutory penalty (which applies where quantity is removed in violation of Sub section (1)) was not met in substance. The Court held that penal consequences cannot be sustained once the action is validated by approval and tax compliance is shown. Accordingly the penalty equivalent to the tax was set aside. [Paras 3, 4]The penalty imposed for alleged violation of Sub section (1) of Section 3A was quashed in view of the ex post facto approval and absence of tax evasion.Final Conclusion: The appeals are allowed: ex post facto approval by the Assessing Authority validated the appellant's storage and removal of sugar outside factory premises for 1995 96 and 1996 97 where tax was paid on removal, and the penalty imposed under Section 3A was set aside. Issues involved: Interpretation of provisions of U.P. Sugarcane Purchase Tax Act, 1961 regarding storage and removal of sugar by Sugar Mills, imposition of penalty for not taking prior approval for storage of sugar in rented Godown outside factory premises.Issue 1: Storage and removal of sugar by Sugar MillsThe Appellant, a Sugar Mill, faced challenges in storing sugar in factory premises in 1995-96 and 1996-97, leading to storage in a rented Godown outside the factory. The U.P. Sugarcane Purchase Tax Act, 1961 mandates that sugar produced in the factory cannot be removed for consumption or sale unless the tax u/s 3 is paid. However, a proviso allows storage in an approved space outside the factory with conditions. The Appellant sought ex-post facto approval for storing sugar in the Godown, ensuring tax payment before removal. The Assessing Authority granted ex-post facto approval, verifying tax payment, and warned for timely permissions. Subsequently, a show cause notice was issued for penalty for not taking prior approval, which the Appellant contested, citing ex-post facto approval as sufficient compliance.Issue 2: Imposition of penalty for not taking prior approvalThe Assessing Authority imposed a penalty equivalent to 100% of the tax payable, despite the Appellant's compliance with tax payment at the time of removal. The Appellant's appeal and Writ Petition were dismissed by the lower courts, emphasizing the requirement of prior approval. The Supreme Court analyzed the concept of approval, distinguishing it from permission, highlighting that approval can be subsequent to the action. Referring to relevant case laws, the Court concluded that ex-post facto approval sufficed as compliance with the Act's proviso, as the action was approved by the Assessing Authority. Therefore, the penalty imposition was deemed unjustified, and the appeal was allowed, setting aside the penalty and lower court judgments.Separate Judgement:Civil Appeal No. 1468/2006 was allowed in line with the decision in Civil Appeal No. 1467/2006, with no order as to costs.