TaxTMI 
TaxTMI 
1968 (7) TMI 64
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.... the opponent-firm after adjusting the payments made by the opponent-firm according to the provisions of law. When the assessee approached the Deputy Commissioner of Sales Tax in revision, by the order dated 22nd September, 1963, the revision was only partially allowed and the Sales Tax Officer was directed to recover the balance due calculating the penalty at 1 per cent. for late payment. When the opponent-firm finally approached the Tribunal in revision, the Tribunal has set aside the order imposing penalty after the date of the assessment order till the communication of the judgment of the Tribunal and has confirmed the rest of the order passed by the Deputy Commissioner, on the ground that during the period the appellate and the revisional authorities granted the stay orders against the recovery of the balance of tax, the assessee committed no default for which it could be penalised. The State has, therefore, required the Tribunal to make the aforesaid reference to this Court. The relevant section which falls for our interpretation is section 16. Sub-clause (4) runs as under: "If the tax is not paid by any dealer within the prescribed time, the dealer shall pay, by way of....
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.... enhanced rate of 2½ per cent. Thus, the main ingredient which must be satisfied before section 16(4) for imposing penalty is attracted is not mere non-payment of tax by the dealer, but his continuance to make a default. The Legislature having provided a penalty which is at such a high rate for the entire period during which non-payment continues, it has advisedly confined the same to those cases where the dealer continues to make a default. It would be revolting to our sense of justice to penalise a person without hearing for default. Even though the hearing has not been specifically provided for in section 16(4), that lacuna would always be filled up by Courts, as an implicit requirement of the principle of natural justice when a person is sought to be penalised. As for the other requirement the Legislature itself was careful enough to make a specific provision that this penalty attaches to cases where default continues and not otherwise. Therefore, the authority which assesses this penalty must find out during what period the assessee has continued to make default and thereafter it can impose penalty within the limits laid down by the statute. The first proviso carves out....
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....t in payment of tax within the prescribed period only if he failed to comply with the notice in the second proviso, which alone attracts the penal provision. Mr. Mody in this connection also relied upon the decision in A.S.U. Sahigara & Co. v. Commercial Tax Officer [1968] 21 S.T.C. 77. , where a Division Bench of the Mysore High Court held that the period of time within which the petitioner could pay the tax without committing the default was extended and, therefore, no penalty could be levied during such period. Applying the aforesaid ratio to the facts of our case, if the ground which attracts penalty is the continuous making of the default by the dealer under section 16(4), it is apparent that during the period when the appellate or the revisional authority granted stay, there would be no question of any default. The penalty did not start running at all during this period because the operation of the order itself had been stayed by the appellate or the revisional authority. The tax authorities ignored this basic fact and, therefore, the Tribunal was justified in correcting this perverse approach and in interfering with the order of imposition of penalty even during th....
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....e in the negative. The reference is accordingly answered and the State shall pay the costs of this reference to the assessee. DIVAN, J., delivered the following judgment on August 12, 1968: In this reference under section 34 of the Bombay Sales Tax Act, 1953 (hereinafter referred to as the Act), at the instance of the State of Gujarat, the following question has been referred by the Sales Tax Tribunal to this Court: "Whether on the facts and in the circumstances of the case penalty under sub-section (4) of section 16 of the Bombay Sales Tax Act, 1953, could be imposed on the opponents for the period for which the payment of dues was excused by the appellate and revisional authority by grant of stay order?" The facts giving rise to this reference are as follows: The opponents herein are a firm registered under the Act and is a registered dealer. The Sales Tax Officer, Enforcement Branch, Ahmedabad, assessed the opponent-firm for the period 1st April, 1954, to 31st March, 1955, by his assessment order. Against the said assessment order the assessee-firm preferred an appeal under section 30 of the Act and the appeal was filed before the Assistant Commissioner of Sal....
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....y between the parties, it is necessary to bear in mind that after the assessment order was passed by the Sales Tax Officer in the first instance, the assessee-firm was allowed to prefer an appeal against the assessment order without payment of tax and penalty and the recovery thereof was stayed by the Assistant Commissioner. In the same manner, the Deputy Commissioner also admitted the revision application against the order of the Assistant Commissioner on part-payment of the dues and on furnishing security for the balance and thereafter the Sales Tax Tribunal also admitted the revision application against the order passed by the Deputy Commissioner on giving security without further payment; and both the revisional authorities, viz., the Deputy Commissioner and the Sales Tax Tribunal, had granted stay orders against the recovery of the balance of the tax. These facts are not in dispute before us; but the question is whether in the light of the provision of section 16(4) of the Act, the penalty could be imposed for the period when the stay orders of this kind passed by the appellate and revisional authorities were operative. Section 16 of the Act, as in force at the relevant tim....
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....y, in respect of any particular dealer and for reasons to be recorded in writing, extend the date of such payment or allow such dealer to pay the tax due and the penalty, if any, by instalments. (6) Any amount of the tax together with the penalty, if any, which remains unpaid after the date specified in the notice issued under subsection (5) shall be recoverable as an arrear of land revenue." The other sections relevant for the purposes of this judgment are sections 30 and 31 of the Act. Section 30 provided as follows: "30. (1) Within sixty days from the making of an order of assessment either with or without penalty or the passing of any other order under this Act, any person may, in the prescribed manner, appeal to the prescribed authority against such order. (1A) No appeal against the order of assessment, with or without penalty, shall ordinarily be entertained by the prescribed authority unless it is accompanied by satisfactory proof of the payment of the tax with penalty, if any, in respect of which the appeal has been preferred: Provided that the authority may, if it thinks fit, for reasons to be recorded in writing, entertain an appeal against such order, ....
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....red on the appellate authority in case of appeals and on the revisional authority in case of revision applications to entertain the appeal or the revision application without payment of the tax with penalty, if any, or on payment of such smaller amount, as may be directed and it is in the light of these powers conferred upon the appellate authority or the revisional authority to entertain the appeal or the revision application without the payment of the tax with or without penalty, if any, that we have to read the proviso to section 16(4), which as quoted above, lays down that where the tax has not been paid by any dealer within the prescribed time but the dealer has filed an appeal or an application for revision in respect of such tax, the authority hearing the appeal or the application for revision may direct that the penalty in respect of any period shall be paid at such rate as it may think fit, the rate being not less than one per cent. and not more than two and one-half per cent. of the amount of tax for each month. It is, therefore, clear that the first proviso to section 16(4) confers a power upon the appellate authority and upon the revisional authority to impose penalty i....
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.... by the order made by the Government and instead of the tax becoming due on the expiry of 21 days specified in the notice, it became due when the instalments allowed by the Government became due. It is clear from the facts which I have set out just now that it was because of the supersession of the notice of the Commercial Tax Officer by the order of the Government allowing instalments, that the Division Bench came to the conclusion that no default was committed by the assessee concerned and that the default could be said to be committed in respect of each instalment when the instalments allowed by the Government became due. Somnath Iyer, J., delivering the judgment of the Division Bench pointed out at page 79 of the report as follows: "Under section 13 of the Sales Tax Act, a dealer becomes a defaulter when he neglects to make payment of the tax when it becomes due. Since the date on which the tax had to be paid by the petitioner was shifted from the date fixed by the Commercial Tax Officer to the dates of the instalments allowed by Government, the petitioner would have become a defaulter only if there was non-payment of any one of those instalments when they became due, and on....
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....ty from the assessee only if the case of the assessee falls within section 16(4) of the Act, the question that arises before us in the instant case is as to whether any default can be said to have been committed by the assessee when he did not pay the tax during the pendency of the appeal and the pendency of the revision applications first before the Deputy Commissioner and then before the Tribunal. The decision of another Division Bench of the Mysore High Court in B.V. Aswathiah & Bros. v. Commercial Tax Officer[1963] 14 S.T.C. 467., is again of not much assistance to us in solving the problem before us because that decision lays down that under the provisions of the Mysore Act and the Rules framed thereunder, an assessee is required to pay the admitted tax and if he underestimates his turnover, no penalty could be levied till the final assessment was made. In my opinion, it is important to bear in mind that under the so-called stay orders first the stay was granted by the Assistant Commissioner and thereafter in the case of the stay orders granted by the Deputy Commissioner and by the Sales Tax Tribunal, there was stay of the recovery of the amount of sales tax due from the....
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....late authority and the revisional authority to direct that the penalty in respect of any period shall be paid at such rate as it might think fit, the rate of penalty being not less than 1 per cent. and not more than 2½ per cent. of the amount of tax each month. This power of the appellate authority and the revisional authority as set out in the proviso to section 16(4) has to be read in the light of the power given to the appellate authority by the first proviso to section 30(1) and to the revisional authority by rule 37 of the Rules to allow the appeal or application to be filed without the payment of the tax. In my opinion, it is only by the concession that might be granted by the appellate authority under section 30(1) proviso or by the revisional authority under rule 37 of the Rules that the appeal or the revision application can be filed without the prior payment of tax; and the first proviso contemplates that when such tax is not paid by the assessee before filing the appeal or before filing the revision application, the authorities hearing the appeal or the revision application have been empowered to direct levy of the penalty in respect of any period at the rate of n....
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.... amount of tax for each month. It is true that the words used in the proviso are "may direct" so far as the imposition of the penalty by the appellate or the revisional authority is concerned, but the question in the instant case is whether the word "default" as used in the phrase "during which he continues to make default in the payment of the tax" means any deliberate withholding of the tax or means mere non-payment of the tax. In the light of the proviso to section 16(4) and in the light of the discretion conferred upon the appellate authority and upon the revisional authority to hear the appeal or revision application without insisting on the prior payment of the tax in respect of which the appeal or the application has been filed, it is clear that in the context in which the word "default" occurs and in view of the scheme of the different sections and rule 37 of the Rules, which I have referred to above, the only meaning that can be attached to the word "default" is non-payment and nothing more. The only effect of the so-called stay orders granted by the Assistant Commissioner, the Deputy Commissioner and the Tribunal was to stay the coercive machinery for the recovery of the ....
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....nce of opinion between Divan, J., and Mehta, J. The reference arises out of assessment to sales tax made on the assessee for the period 1st April, 1954, to 31st March, 1955, under the Bombay Sales Tax Act, 1953. The original assessment was made by the Sales Tax Officer and a certain amount was determined as payable by the assessee by way of sales tax but the assessee was aggrieved by the order of assessment and he therefore preferred an appeal to the Assistant Commissioner of Sales Tax under section 30 of the Act. The first proviso to section 30, sub-section (1), provided that no appeal against an order of assessment, with or without penalty, shall ordinarily be entertained by the prescribed authority unless it is accompanied by satisfactory proof of the payment of the tax, with penalty, if any, in respect of which the appeal has been preferred. But the rigour of this provision was mitigated by the second proviso which declared that the prescribed authority may, if it deerns fit, for reasons to be recorded in writing, entertain an appeal against such order without payment of the amount of the tax including penalty, if any, or on proof of payment of such smaller amount as it may dir....
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.... assessee admitted the revision application on the assessee making part-payment of the amount of the tax and furnishing security for the balance. The Deputy Commissioner of Sales Tax also by an order, a copy of which has been tendered as part of exhibit A collectively, granted stay against the recovery proceedings instituted by the department. The revision application was thereafter heard by the Deputy Commissioner of Sales Tax and on the merits, the assessee did not succeed but so far as penalty was concerned, the Deputy Commissioner of Sales Tax directed that penalty under section 16(4) should be restricted only to one per cent. of the amount of the tax. The assessee then carried the matter in revision to the Tribunal. The Tribunal also, like the revenue authorities, granted an order staying the recovery proceedings against the assessee and admitted the revision application without requiring any further payment of the amount of tax from the assessee. The Tribunal ultimately, when it came to hear the revision application, confirmed the assessment on merits but so far as penalty was concerned, the Tribunal took the view that since stay orders had been granted by the different appel....
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.... Collector may, subject to such conditions as may be prescribed, remit the whole or part of the amount of the penalty payable by a dealer in respect of any period under this subsection. (5) (i) The amount of tax- (a) due where the returns are furnished without full payment thereof, or (b) assessed for any period under section 14 or under section 15 less the sum, if any, already paid by the dealer in respect of such period, or (ii) the amount of the penalty payable under sub-section (4), shall be paid by the dealer into a Government treasury by such date as may be specified in a notice issued by the Collector for the purpose and the date to be so specified shall be not less than thirty days from the date of service of such notice: Provided that the Collector may, in respect of any particular dealer and for reasons to be recorded in writing, extend the date of such payment or allow such dealer to pay the tax due and the penalty, if any, by instalments. (6) Any amount of the tax together with the penalty, if any, which remains unpaid after the date specified in the notice issued under subsection (5) shall be recoverable as an arrear of land revenue." This section,....
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....evenue. Two consequences were thus provided for as arising on non-payment of the amount of tax by the dealer within the prescribed time. One was penalty and the other was proceedings for recovery. If the assessee wanted to avoid these two consequences, he could either make payment of tax within the prescribed time or apply to the Collector for extending the date of payment or allowing the payment to be made by instalments and then comply with the extended date or the dates of instalments. If he did not do so, he would be liable to pay by way of penalty, in addition to the amount of tax, a sum equal to a certain percentage of the amount of tax depending upon how long the default continues. The State would also be entitled to proceed to recover the amount of tax from the assessee as an arrear of land revenue. The assessee in the present case admittedly failed to pay the amount of tax within the prescribed time and proceedings for recovery of the amount of tax were therefore instituted against him by the department. These proceedings were however stayed by the appellate and revisional authorities and there is no question before me in relation to these proceedings. The question arises ....
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....h during which this default, that is non-payment, continues the dealer is liable to pay penalty. So long as the default, that is non-payment, continues, the liability to penalty is imposed by the sub-section Proprio vigore and it is only the discontinuance of the default, that is payment of the amount of the tax, which can put an end to the operation of the sub-section. Now this provision would obviously cause great hardship to an assessee who might not be able to pay up the amount of tax by reason of financial stringency or other justifying circumstance. To mitigate this hardship in some measure, in cases where an appeal or a revision application might have been preferred by the assessee, the first proviso to the sub-section provided that the authority hearing appeal or the revision application may direct that the penalty in respect of any period shall be paid at such rate as it may think fit, the rate being not less than one per cent. and not more than two and one-half per cent. of the amount of tax for each month. The authority hearing the appeal or the revision application was thus given the discretion to fix the rate of penalty at a figure less than two and one-half per cent. ....
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....s an officer corresponding to the Additional Collector of Sales Tax so as to be entitled to exercise the powers of the Collector, no contention can be advanced that though the orders passed by the Assistant Commissioner of Sales Tax and the Deputy Commissioner of Sales Tax were ostensibly orders of stay, they had the effect of extending the date of payment. But apart altogether from this difficulty I fail to see how the orders staying the recovery proceedings can be regarded as orders extending the date of payment. As a matter of fact the order of stay passed by the Assistant Commissioner of Sales Tax in so many terms says that the order shall not prejudice the penalty leviable under subsection (4). Moreover this argument cannot possibly apply to the order of stay passed by the Tribunal. It was then urged on behalf of the assessee and that was the argument which found favour with the Tribunal and also with Mehta, J.that during the period that the stay orders were operative the assessee could not be said to be continuing to make default. This argument also does not appeal to me. The stay orders granted by the Assistant Commissioner of Sales Tax, the Deputy Commissioner of Sales T....