TaxTMI 
TaxTMI 
1975 (2) TMI 91
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....delivered by RAY, C.J.-These appeals raise the question as to whether the assessees under the Central Sales Tax Act, 1956, hereinafter referred to as the Central Act, could be made liable for penalty under the provisions of the State Sales Tax Act, hereinafter referred to as the State Act. The penalty imposed under the State Act is for default in payment of taxes within the prescribed time. The Central Act states in section 9(1) that the tax payable by any dealer under the Central Act on sales of goods effected by him in the course of inter-State trade or commerce shall be levied by the Government of India and the tax so levied shall be collected by that Government in accordance with the provisions of sub-section (2) in the State from which the movement of goods commenced. Section 9(2) of the Central Act is as follows: "Subject to the other provisions of this Act and the Rules made thereunder, the authorities for the time being 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....
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....14 S.T.C. 587., Commissioner of Sales Tax, Madhya Pradesh v. Kantilal Mohanlal and Brothers [1967] 19 S.T.C. 377., M/s. H.M. Esufali H.M. Abdulali v. Commissioner of Sales Tax, M.P. [1969] 24 S.T.C. 1., and Auto Pins (India) v. State of Haryana [1970] 26 S.T.C. 466., in support of his contention. The contentions of the Solicitor-General are these: Section 9(1) of the Central Act speaks of tax. That section does not mention penalty. Tax will include collection and enforcement of payment. The words "tax and penalty payable by a dealer under this Act" indicate that the words "under this Act" in the Central Act relate only to a dealer. Section 9(2) of the Central Act is a provision prescribing the procedure for assessing, collecting and enforcing payment of tax. The words "collect and enforce payment of tax, including any penalty" in section 9(2) of the Central Act include not only penalties imposed by the Central Act but also penalties under the State Act. The words "as if the tax or penalty payable by such a dealer under this Act is a tax or penalty payable under the general sales tax law of the State" indicate that tax or penalty is imposed by the Central Act and by incorporating t....
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.... State of Madras v. M. Angappa Chettiar and Sons [1968] 22 S.T.C. 226., Guldas Narasappa Thimmaiah Oil Mills v. Commercial Tax Officer, Raichur [1970] 25 S.T.C. 489., and Hurdatroy Jute Mills Private Ltd., Katihar v. Superintendent of Commercial Taxes, Purnea [1972] 30 S.T.C. 151., in support of the proposition that the substantive law for penalty under the State Act is not incorporated in the Central Act. Section 9(2) of the Central Act first provides 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 and enforce payment of tax including any penalty payable by a dealer under the Central Act. The State sales tax authorities are thus created agents of the Government of India. The second important part in section 9(2) of the Central Act is that the State authorities shall assess, reassess, collect and enforce payment of tax including any penalty payable by the dealer under the Central Act as if the tax or penalty payable by such a dealer under the Central Act is a tax or penalty payable under the general sales tax law of the S....
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....t, collection and enforcement. The doctrine of ejusdem generis shows that the genus in section 9(2) of the Central Act is "for this purpose". In other words, the genus is assessment, reassessment, collection and enforcement of payment. The genus is applicable in regard to the procedure for assessment, reassessment, collection and enforcement of payment. The genus is from whom to collect and against whom to enforce. It is apparent that the extent of liability for tax as well as penalty is not attracted by the doctrine of ejusdem generis in the application of the provisions of the State Act in regard to assessment, reassessment, collection and enforcement of payment of tax including any penalty payable under the Central Act. The deeming provision in the Central Act that the tax as well as penalty levied under the Central Act will be deemed as if payable under the general sales tax law of the State cannot possibly mean that tax or penalty imposed under any State Act will be deemed to be tax or penalty payable under the Central Act. The entire authority of the State machinery is that "for this purpose" meaning thereby the purpose of assessing, reassessing, collecting and enforcing pa....
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....he Central Act. The Mysore High Court correctly pointed out that the words "as if the tax or penalty payable by such a dealer under this Act" show that the words "payable by such a dealer under this Act" relate to tax or penalty which is payable only under the Central Act. The Mysore High Court relied on the decision of this court in State of Kerala v. P.P. Joseph & Co. [1970] 25 S.T.C. 483 (S.C.)., in support of the proposition that the State law is applicable only in regard to procedure for assessment, reassessment, collection and enforcement. If the liability to pay tax is determined by the provisions of the Central Act the liability to pay penalty is also that which is payable under the Central Act. This court in the Kerala case [1970] 25 S.T.C. 483 (S.C.)., said that the procedural law prescribed in the general sales tax law of the State applies to the matter of assessment, reassessment, collection and enforcement of payment of tax under the Central Act because the liability to pay tax is determined under the Central Act. Similarly, liability to pay penalty is determined with reference to the provisions of the Central Act. This court in Orissa Cement Limited v. State of Oris....
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....ot by virtue of section 44 be imposed. This court held that section 44 of the Act expressly enacted that the provisions of Chapter IV would apply to the assessment of a business carried on by a firm even after discontinuance of its business. Section 28 is one of the sections in Chapter IV. Section 28 imposed a penalty for the concealment of income or the improper distribution of profits. The defaults made in furnishing a return of the total income, in complying with a notice and in concealing the particulars of income were treated as penalties under section 28. Section 28 was held by this court to be a provision enacted for facilitating the proper assessment of taxable income and to apply to an assessment under Chapter IV. The decision of this court in Abraham's case [1961] 41 I.T.R. 425 (S.C.); [1961] 2 S.C.R. 765. is non sequitur in regard to the contentions advanced on behalf of the revenue in the present case. The reason is that in Abraham's case [1961] 41 I.T.R. 425 (S.C.); [1961] 2 S.C.R. 765. assessment and imposition of penalty is under the same chapter in the Act. The assessment is under Chapter IV. Penalty is provided in a section under Chapter IV. Penalty is arising in....
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.... levies tax as well as penalty. Penalty is not merely sanction. It is not merely adjunct to assessment. It is not merely consequential to assessment. It is not merely machinery. Penalty is in addition to tax and is a liability under the Act. Reference may be made to section 28 of the Indian Income-tax Act, 1922, where penalty is provided for concealment of income. Penalty is in addition to the amount of income-tax. This court in Jain Brothers v. Union of India [1970] 77 I.T.R. 107 (S.C.)., said that penalty is not a continuation of assessment proceedings and that penalty partakes of the character of additional tax. The Federal Court in Chatturam v. Commissioner of Income-tax, Bihar [1947] 15 I.T.R. 302 (F.C.)., said that liability does not depend on assessment. There must be a charging section to create liability. There must be first a liability created by the Act. Second, the Act must provide for assessment. Third, the Act must provide for enforcement of the taxing provisions. The mere fact that there is machinery for assessment, collection and enforcement of tax and penalty in the State Act does not mean that the provision for penalty in the State Act is treated as penalty unde....
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.... Mysore in Civil Appeal No. 2118 of 1970 is dismissed. The appellant will be entitled to costs in Civil Appeal No. 2089 of 1969. In view of the fact that in Civil Appeal No. 2118 of 1970 the High Court made no order as to costs, the parties will pay and bear their own costs. The judgment of MATHEW and CHANDRACHUD, JJ., was delivered by MATHEW, J.-We take up for consideration Civil Appeal No. 2089 of 1969 and the decision there will govern the decision of Civil Appeal No. 2118 (NT) of 1970. The question for consideration in Civil Appeal No. 2089 of 1969 is, whether, upon a correct construction of section 9 of the Central Sales Tax Act (hereinafter referred to as the "Central Act"), it was permissible for the Sales Tax Officer in question to invoke the provisions of section 16(4) of the Bombay Sales Tax Act for imposing penalty for failure by the dealer to pay the sales tax payable under the Central Act within the prescribed time. The High Court of Bombay held that the Sales Tax Officer had power to impose the penalty under that section and the question in this appeal is whether the High Court was right. Section 9 of the Central Act, in its present form, was introduced in 1969 wi....
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....tates that if the tax is not paid by any dealer within the prescribed time, the dealer shall pay, a penalty in addition to the amount of tax and sub-section (6) enables the realisation of tax and penalty as an arrear of land revenue. A careful analysis of section 9(2) of the Central Act would show that the authorities empowered to assess, reassess, collect and enforce payment of tax payable under the general sales tax law of the appropriate State shall assess, reassess, collect and enforce payment of tax including any penalties payable by a dealer under the Central Act as if the tax or penalty payable by a dealer under that Act (Central Act) is a tax or penalty payable under the general sales tax law of the State and, for that purpose, the authorities may exercise all or any of the powers they have under the general sales tax law of the State. In effect, what section 9(2) says is that sales tax and the penalties payable by a dealer under the Central Act are deemed to be sales tax and penalties payable under the general sales tax law of the State and the sales tax authorities of the State can exercise all or any of the powers they have under the general sales tax law of the State ....
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....on 44 of the Indian Income-tax Act, 1922, at the material time, stood as follows: "Where any business carried on by a firm...........has been discontinued ......every person who was at the time of such discontinuance...a partner of such firm.....shall in respect of the income, profits and gains of the firm be jointly and severally liable to assessment under Chapter IV for the amount of tax payable and all the provisions of Chapter IV shall, so far as may be, apply to any such assessment." It was contended for the assessee that a proceeding for imposition of penalty and a proceeding for assessment of income-tax were distinct, that although section 44 may be resorted to for assessing tax due and payable by a firm which has discontinued, an order imposing penalty under section 28 cannot, by virtue of section 44, be passed. The court said that penalty "is imposable as a part of the machinery for assessment of tax liability". The court quoted with approval the following observations of Subba Rao, C.J., in Mareddi Krishna Reddy v. Income-tax Officer, Tenali [1957] 31 I.T.R. 678.: ".... The defaults enumerated therein (in section 28) relate to the pro- cess of assessment. Section 28, t....
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....t, 1950, the operation of the Hyderabad Act in respect of levy, assessment and collection of income-tax and super-tax in respect of the period prior to April 1, 1951, was saved and, therefore, the proceedings for imposing the penalty could be continued even after the enactment of section 13(1) of the Indian Finance Act, 1950. The real significance of the ruling for the point under consideration here is that at the time when the penalty was imposed, the only provisions of the Hyderabad Income-tax Act which survived the repeal were those relating to levy, assessment and collection of income-tax and super-tax in respect of the period prior to April 1, 1951, and unless the power to impose the penalty was included within the power to levy, assess or collect the tax, the imposition of penalty would have been ultra vires the power of the Income-tax Officer. In Orissa Cement Limited v. State of Orissa [1971] 27 S.T.C. 118 (S.C.)., the question was whether a dealer under the Central Act could claim the benefit of section 13(8) of the Orissa Sales Tax Act, 1947, which provided that rebate of one per cent on the amount of tax payable by a dealer shall be allowed if such a tax is paid by the....
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....effective means to the enforcement of payment of tax within the prescribed time. It was contended that only the penalties expressly provided for in the Central Act could be imposed by the sales tax authorities of the State by employing the machinery for collection of tax under the general sales tax law of the State and that no penalty which is not provided for by the Central Act could be imposed by the State authorities. In this connection, the appellant placed great reliance upon the decision of a Division Bench of the Calcutta High Court in Mohan Lal Chokhany v. Commercial Tax Officer [1971] 28 S.T.C. 367. The question there was whether penalty can be imposed for failure to submit the return by a dealer under the Central Act though only the general sales tax law of the State provided for it. The court came to the conclusion that no penalty can be imposed. For doing so, the court said: firstly, that by section 9(2) of the Central Act, the whole machinery provided in the general sales tax law of the State has not been incorporated in the Central Act; secondly, that the authorities for the time being empowered to assess, reassess, collect and enforce payment of any tax under the g....
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....mself registered as required by section 7; (b) a registered dealer falsely representing when purchasing any class of goods that the goods of such class are covered by his certificate of registration; (c) not being a registered dealer, falsely representing when purchasing goods in the course of inter-State trade or commerce that he is a dealer; (d) after purchasing any goods for any of the purposes specified in clause (b) of sub- section (3) of section 8, failing without reasonable excuse to make use of the goods for any such purpose; (e) having in his possession any form prescribed for the purpose of sub-section (4) of section 8 which has not been obtained by him in accordance with the provisions of the Act or any Rules made thereunder; and (f) collecting any amount by way of tax in contravention of the provisions contained in section 9A. When a person comes within any of these six grounds he shall be punishable with simple imprisonment which may extend to six months, or with fine, or with both; and when the offence is a continuing offence, with a daily fine which may extend to Rs. 50 per day during which the offence continued. Sub-section (1) of section 10A provides t....
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....ave under the sales tax law of the State", there can be no manner of doubt that if, for enforcing payment of tax due under the sales tax law of the State, they have power to impose penalty, they have the same power of imposing penalty for enforcing payment of tax payable under the Central Act. The express provision in section 9(2) enabling the imposition of penalties payable under the Central Act by the sales tax authorities of the State does not in any way derogate from the grant of power to those authorities to enforce the payment of tax payable under the Central Act as if the tax was payable under the general sales tax law of the State and to enforce payment of it under the machinery of the general sales tax law of the State. The reason why the sales tax authorities of the State were given specific power under section 9(2) to enforce the penalties payable by a dealer under the Central Act is that those penalties were not and perhaps could not have been provided for in the sales tax law of the State. The penalties provided for in section 10 read with section 10A of the Central Act are not for the purpose of or in connection with assessment, reassessment, collection and enforceme....
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....he Central Act? We think not. As we said, in the nature and the scheme of the Central Act, it was not necessary to provide for imposition of penalty or for the other methods of enforcing the payment of tax payable under the Central Act since Parliament has adopted the machinery provided in the general sales tax law of the State as respects enforcement of the tax payable under the Central Act. The decisions in D.H. Shah & Co. v. State of Madras [1967] 20 S.T.C. 146., State of Madras v. Angappa Chettiar & Sons [1968] 22 S.T.C. 226., Guldas Narasappa Thimmaiah Oil Mills v. Commercial Tax Officer, Raichur [1970] 25 S.T.C. 489., and Hurdatroy jute Mills Pvt. Ltd. v. Superintendent of Commercial Taxes, Purnea [1972] 30 S.T.C. 151., relied on by the appellants do not require any elaborate consideration as they do not advance any reasons other than those already referred to in this judgment. The reasoning of the Madras High Court in D.H. Shah & Co.'s case(1) to the effect that Parliament could not have adopted by section 9(3) of the Central Act (substantially corresponding to the present section 9(2) of the Central Act) a provision of the general sales tax law of the State which was not i....
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....d in section 16(4) of the Bombay Sales Tax Act for non-payment of the tax payable under the Central Act within the prescribed time. We would dismiss Civil Appeal No. 2089 of 1969 and allow Civil Appeal No. 2118(NT) of 1970 without any order as to costs. BEG, J.-Civil Appeal No. 2089 of 1969 arises out of an assessment order relating to the period of assessment from April 1, 1959, to December 30, 1959. The order purports to have been made under the Central Sales Tax Act of 1956 (hereinafter referred to as the "Central Act") and the assessment year given there is 1962-63. The total sales tax was assessed at Rs. 44,181.92. In addition, a penalty of Rs. 8,347.32 was levied for delay in payment. The order passed on the appeal to the Assistant Commissioner of Sales Tax shows that the only point pressed in the appeal related to the penalty levied under section 16(4) of the Bombay Sales Tax Act of 1953 (hereinafter referred to as "the Bombay Act of 1953"). As the appeal was rejected, a revision application was filed before the Sales Tax Tribunal, Bombay, which also upheld the penalty imposed under section 16(4) of the Bombay Act of 1953. This provision laid down: "16. (4) If the tax is n....
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....; and (ii) the person or persons liable to pay the tax under this Act shall pay a penalty equal to- (a) one per cent of the amount of tax remaining unpaid for each month for the first three months, after the expiry of the time prescribed under sub-section (1) and (b) two and one-half per cent of such amount for each month subsequent to the first three months as aforesaid. (3) Any tax assessed, or any other amount due under this Act from a dealer, may without prejudice to any other mode of collection, be recovered- (a) as if it were an arrear of land revenue, or (b) on application to any Magistrate, by such Magistrate as if it were a fine Imposed by him........... In this case, the Commercial Tax Officer, Raichur, filed application under section 13(3)(b) of the Mysore Act before the Munsif-Magistrate of Raichur for recovery of the sum due as penalty as if it was a fine imposed by the court. The Munsif-Magistrate having Issued a distress warrant for recovery of this sum, the assessee had applied to the High Court under section 13(4) of the Mysore Act, which reads as follows: "The High Court may either suo motu or on an application by the Com- missioner or any person aggrieved ....
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....ties purported to act, did not exist on the statute book at the time of assessment. Unless we assume that section 9(2) of the Central Act, by a necessary implication, authorises the State Legislatures to go on imposing such penalties for such breaches of duty as it pleases them to lay down on behalf of Parliament, subsequently enacted provisions of State enactments would not be available. I also find from the Mysore Act of 1957, that section 13 of the Act was entirely recast in 1958. It would, I think, be carrying the theory of referential legislation too far to assume that section 9(2) of the Central Act, 1956, purported to authorise the State Legislatures to impose liabilities in the nature of additional tax or penalties leaving their rates and conditions for their imposition also to be determined by the State Legislatures as and when the State Legislatures decided to impose or amend them. It is evident that these differ from State to State, and, in the same State, at different times. A conferment of such an uncontrolled power upon the State Legislatures could, if it was really intended, be said to travel beyond the province of permissible delegated legislation on the principles....
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....uniary liability, which takes the form of a penalty or fine for a breach of a legal obligation, can be relegated to the region of mere procedure and machinery for the realisation of tax. It is more than that. Such liabilities must be created by clear, unambiguous and express enactment. The language used should leave no serious doubts about its effect so that the persons who are to be subjected to such a liability for the infringement of law are not left in a state of uncertainty as to what their duties or liabilities are. This is an essential requirement of a good government of laws. It is implied in the constitutional mandate found in section 265 of our Constitution: "No tax shall be levied or collected except by authority of law." It was argued on behalf of the State that section 9(2) of the Central Act contains an express reference to provisions relating to, inter alia, "refunds, rebates, penalties, compounding of offences". Relying upon these words in the last part of section 9(2) of the Act, it was urged that there is no manner of doubt that the penalties leviable under the State law can be utilised for the purpose of enforcing the tax liabilities under the Central Act. Sect....
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....section 10, in the State in which the person purchasing the goods should have registered himself if the offence had not been committed. (3) The authorities for the time being empowered to assess, 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 and subject to any rules made under this Act, assess, collect and enforce payment of any tax, including any penalty, payable by a dealer under this Act in the same manner as the tax on the sale or purchase of goods under the general sales tax law of the State is assessed, paid and collected; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, appeals, reviews, revisions, references, penalties and compounding of offences, shall apply accordingly: Provided that if in any State or part thereof there is no general sales tax law in force, the Central Government may, by rules made in this behalf, make necessary provision for all or any of the matters specified in this sub- section, and such rules may provide that a b....
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....Tax Officers are specifically limited by the provisions of the Central Act. They cannot go beyond these provisions. The next part of section 9(2) of the 1956 Act further emphasises this aspect by making it clear that these powers are exercisable only "for this purpose". In other words, they are not authorised to collect dues for purposes extraneous to the Central Act. We may then go to the last part of section 9(2) of the 1956 Act, which is strongly relied upon on behalf of the States concerned, to urge that the State provisions relating not merely to collection of taxes but imposition of penalties are incorporated by reference into the provisions of the Central Act. In this debatable area, I think the true meaning can only be found by considering the provisions as a whole. The context of the whole sales tax law of the State as well as that of the law contained in the Central Act must be taken into account. After considering the provisions of the Central Act as well as the State Acts relating to penalties, one is irresistably driven to the conclusion that provisions relating to penalties are special and specific provisions in each Act. They are not part of the "general sales tax ....