TaxTMI 
TaxTMI 
2010 (10) TMI 899
X X X X Extracts X X X X
X X X X Extracts X X X X
....ding Rules; the construction and interpretation of an exemption notification; and whether the interest is payable on tax only on quantification of tax by way of assessment under the Act or for any period prior to that. The material facts are: The assessee is M/s. Tulip Products Co., a partnership firm having a fruit processing unit at 37, Imjad Ali Lane, Calcutta. It is a small-scale industrial unit. The unit is engaged in manufacturing juice, jelly, jam, etc. The unit was registered as a dealer under the Bengal Finance (Sales Tax) Act, 1941 (hereinafter to be referred as, "the Act, 1941"), the West Bengal Sales Tax Act, 1954 (hereinafter to be referred as, "the Act, 1954"), and was later registered under the West Bengal Sales Tax Act, 1994 (hereinafter to be referred as, "the Act, 1994"). The relevant assessment periods are April 1, 1995 to April 30, 1995 and May 1, 1995 to March 31, 1996. In the returns filed for the aforesaid period, the assessee claimed exemption from payment of sales tax mainly relying on the exemption notification issued by the State Government bearing No. 1428-F. T. dated May 26, 1994 and rule 41 of the West Bengal Sales Tax Rules, 1995 (hereinaf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y was less than Rs. 5 lakhs during the relevant assessment periods and, therefore, the appellant's small-scale industrial unit is eligible for exemption from payment of tax in view of the notification issued by the State Government and also under the Rules. The learned senior counsel would further contend that the purport and intent of the notification would be frustrated if such liberal construction is not taken, and if costs of repairing, overhauling and minor modification were included in investment on cost of plant and machinery, naturally the investment made in plant and machinery would go beyond the prescribed limit and that cannot be the intention of the State Government while issuing notification granting exemption to small-scale industrial units. He also submitted that a liberal construction should be adopted while interpreting the exemption notification as the purpose is to encourage small-scale industrial units. It is also contended by the learned counsel that the interest payable on tax due shall become payable only on quantification of amount of tax by way of assessment and service of demand notice and not for the period prior to that. The learned senior counsel Sri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....efore, in exercise of the power conferred by section 4AA of the West Bengal Sales Tax Act, 1954 (West Bengal Act IV of 1954) (hereinafter referred to as the said Act), the Governor is pleased hereby to direct that no tax shall be payable under the said Act on sales by a dealer of - (a) (i) fruit juices, (vii) fruit syrups, (viii) fruit concentrates, (ix) fruit squashes, (x) fruit cordials, and (xi) fruit sarbat, including in this Department Notification No. 3945-F.T., dated the August 26, 1977, as subsequently amended; (b) canned, bottled or any other preserved fruits, included in this department Notification No. 2252- F.T., dated the June 9, 1969; (c) processed food, commonly known as instant food, that is to say, pre-cooked or curried vegetable, and vegetable soup, included in this Department Notification No. 1036 F.T., dated the March 31, 1988, when the notified commodities mentioned in (a), (b) or (c) are manufactured in his small-scale industrial unit in West Bengal registered with the Directorate of Cottage and Small-scale Industries of the Government of West Bengal and the investment by the dealer in plant and machinery of such unit is less than five....
X X X X Extracts X X X X
X X X X Extracts X X X X
....getable soup, (v) vegetable product, that is to say, vegetable pulp, vegetable peel, vegetable juice, (vegetable sauce, vegetable pickles) or vegetable sarbat, manufactured in his small-scale industrial unit in West Bengal, registered with the Directorate of Cottage and Small-scale Industries, Government of West Bengal and where investment by such dealer in plant and machinery of such unit is less than five lakh rupees, such dealer may deduct such sales under sub-clause (xi) of clause (a) of sub-section (3) of section 17 from his gross turnover of sales." Section 2 of the Act is the interpretation clause. Clause (b) of section 2 defines "dealer". Section 4 is the charging section. Section 4AA empowers the State Government to grant exemptions or reductions in rate of tax on the sale or purchase of goods by a dealer or category of dealers to be specified in any notification to be issued by the State Government in the pubic interest. The scheme of the Rules and the notification issued by the State Government in exercise of the power under section 4AA of the Act, 1954, is that the commodities specified in the notification must be manufactured by a small-scale industrial unit in W....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) In Inland Revenue Commissioners v. Desoutter Brothers Ltd. [1946] 1 All ER 58 (CA), it is stated: "The word 'investment', is not a word of art but has to be interpreted in a popular sense. It is not capable of legal definition but a word of current vernacular. The words 'invest' and 'investment' are to be taken in the business sense of laying out money for interest and profit." In a slightly different context, following the Desoutter Brothers case [1946] 1 All ER 58 (CA), it was held in Inland Revenue Commissioners v. Broadway Car Co. (Wimbledon) Ltd. [1946] 2 All ER 609 (CA), that the question whether a particular source of income was an investment or not must be decided as it would be by businessmen according to ordinary commonsense principles. In our view, for the purpose of the Rules and the notification, "investment" must be understood according to its common business and commercial usage. While an exact definition to suit all requirements will not be appropriate, it may be said that investment in general would be spending money for the purpose of acquiring property or commodities that in turn generate further income. In the notification issued by the S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng of the words given in the exemption notification is to be gathered from the language employed in the notification. Notifications by which exemption or other benefits are provided by the Government in exercise of its statutory powers normally have some purpose. Such purpose is not to be defeated nor are those who may be entitled for it to be deprived by interpreting the notification which may give it some meaning other than what is clearly and plainly flowing from it. This court, in the case of Novopan India Ltd., Hyderabad v. Collector of Central Excise and Customs, Hyderabad [1994] Supp 3 SCC 606, has observed: "The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee-assuming that the said principle is good and sound-does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State. This is for the reason explained in Mangalore Chemicals [1991] 83 STC 234 (S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s clear from the discussed cases, it is a necessary pre-condition that first the assessee should fall within the clear wording of the notification. The assessee in this matter falls outside the parameters of this notification, since his investment is over Rs. 5 lakhs, therefore, there is no question of the notification applying to him. Thus, there is no requirement of liberal construction as the notification does not apply to the assessee in the first place. Contention (c) The learned senior counsel Sri A.K. Ganguli contended that interest on tax can be charged only after quantification of tax liability by the assessing officer. Therefore, the respondent was not justified in issuing the demand notice for payment of tax by including interest element. There has been a legislative amendment incorporating statutory provision for payment of interest even before quantification of tax liability and service of demand notice pursuant to such quantification. For ready reference, we quote below the relevant sections. Section 10A of the Act, 1941 is as under: "10A. Interest payable by dealer.-(1) Where a registered or certified dealer furnishes a (return) referred to in section 10 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e after assessment by the date specified in the notice issued under sub- section (3) of section 11 for payment thereof, he shall pay a simple interest at the rate of two per centum for each English calendar month of default from the first day of the month next following the date specified in such notice up to the month preceding the month of full payment of such tax or up to the month preceding the month of commencement of proceedings under sub-section (4) of section 11, whichever is earlier, upon so much of the amount of tax payable by him according to such notice as remains unpaid at the (end of each such month of default.) Similarly, in section 31 of the Act, 1994, it is provided that: "31. Interest for non-payment or delayed payment of tax before assessment.-(1) Where a registered dealer, or a dealer required to furnish return under sub-section (3) of section 30, furnishes a return referred to in that section in respect of any period by the prescribed date or thereafter, but fails to make full payment of the tax payable under sub-section (4) of that section in respect of such period by such prescribed date, he shall pay a simple interest at the rate of two per cent for ea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d manner, pay into a Government Treasury or the Reserve Bank of India the amount of interest payable by, or due from, him by such date as may be prescribed. (4) Interest under sub-section (1) or sub-section (2) of this section shall be payable in respect of the returns, the prescribed dates for functioning of which under sub-section (2) or sub-section (3) of section 30 are the dates subsequent to the appointed day." Interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable. The interest is levied on the actual amount of tax withheld and the extent of delay in paying the tax on the due date. Essentially, it is compensatory and different from penalty which is penal in character (see Pratibha Processors v. Union of India AIR 1997 SC 138). In the instant case, it is not in dispute that the amount of tax due on the basis of the return furnished by the assessee has not been paid before the expiry of the last date of filing of such return required by section 10A of the Act, 1941 and section 31 of the Act, 1994. These sections provide that where tax due on the basis of the return has not been paid befo....