TaxTMI 
TaxTMI 
2010 (6) TMI 722
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....uppression of actual turnover. Immediately the petitioner voluntarily remitted the tax due on the differential turnover. Therefore, an order of assessment was passed on January 9, 2009, confirming the proposals made in the pre-assessment notice. (Actually the assessment order dated January 9, 2009 gives the date of the pre-assessment notice as June 5, 2007, though the affidavit of the petitioner in support of this writ petition and the counter-affidavit of the respondents give the date as December 7, 2007.) Though even before the assessment order was passed, the petitioner had paid the entire differential tax and such payment was also reflected in the assessment order itself, the assessing officer levied a penalty of Rs. 25,72,186. Therefore, the petitioner filed a writ petition in W.P. No. 2724 of 2009, challenging the levy of penalty for the year 2005-06. Simultaneously, the petitioner also filed another writ petition in W.P. No. 2725 of 2009, challenging another assessment order in respect of the year 2006-07. Both the writ petitions were disposed of by me, by an order dated February 12, 2009, permitting the petitioner to file an application under section 16(1) of the Pond....
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....tion 27(3) is nothing but charging of interest on that portion of the tax which remained unpaid due to incorrect monthly returns. The petitioner having retained the tax which ought to have otherwise been paid at the appropriate time, was obliged to pay it along with interest. In order to appreciate the rival contentions, it is necessary to have a look at the scheme of the Pondicherry General Sales Tax Act, 1967. Section 13(1) of the Act provides that the assessment of a dealer should be on the basis of the prescribed return relating to his turnover submitted in the prescribed manner within the prescribed period. Rule 18(2) requires every dealer to submit a return in form A2 showing the total and taxable turnover for each month and the amount or amounts collected by him by way of tax during that month. The return for each month is required to be submitted so as to reach the assessing authority on or before the 20th of the succeeding month. Along with the return, the assessee should also submit a receipt for having remitted the tax. If no return is submitted by the dealer, in respect of any month on or before the date specified in rule 18(2), or if the return submitted ap....
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.... tax on the basis of the cancelled assessment has already been collected and if the amount of tax arrived at as a result of the fresh assessment is different from it, any amount overpaid by the dealer shall be refunded to him without interest, or the further amount of tax, if any, due from him shall be collected in accordance with the provisions of this Act, as the case may be. (3) Penalty, if any, imposed and collected under sub-section (3) of section 13 shall be refunded to the dealer without interest on cancellation of the order of original assessment." A careful reading of section 16(2) would show that if the tax already paid was found upon fresh assessment, to be in excess, the dealer will be entitled only to the refund of the excess amount without any interest. This is on the logic that a fresh assessment under section 16(1) is actually necessitated on account of the dealer allowing a best of judgment assessment to be made under section 13(2) due to his own failure either to submit a return or to submit a correct and complete return. Therefore, such a dealer is made entitled by section 16(3) to the refund of the penalty paid under section 13(3). But he is not mad....
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....on 18(1) or 18(2). Let us now see how the first condition prescribed in section 27(3) is satisfied in the case of each of these four types of assessments. For a self-assessment under section 13(1) read with rule 18(2), a timelimit is prescribed for payment of the amount reflected in form A2, by rule 18(3) itself. Since rule 18(3) makes it clear that no notice of demand is required, for making payment of the amount of tax reflected in form A2, the second condition prescribed in section 27(3), viz., "within the time specified in the notice of assessment", becomes redundant. In other words, a person making a self-assessment under section 13(1) and filing form A2 in terms of rule 18(2), is obliged to make payment of the admitted tax at the time of filing the return every month, on or before the 20th day of the succeeding month. If he fails to make payment, along with the return, the amount becomes liable to be recovered in terms of rule 18(3) without any notice of demand. Consequently, one can possibly contend that section 27(3) would come into operation even without a notice of assessment and hence the liability to pay penalty at the rate of two per cent per month on such amount, w....
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....3). If a fresh assessment is made under section 16(1), the penalty imposed under section 13(3) gets cancelled, by virtue of section 16(3). In such cases, the order of assessment prescribes the amount of tax payable, the amount of tax already paid and the difference if any. If this different is not paid, within the time prescribed, the tax becomes payable together with penalty under section 27(3). Therefore, two things happen when a fresh order of assessment is made under section 16(1). They are (i) the best of judgment assessment under section 13(2) gets replaced with the assessment under section 16(1) and (ii) the penalty imposed under section 13(3) also goes. When an assessment of escaped turnover is made under section 18(1), the assessing authority is empowered under section 18(3) to impose a penalty not exceeding one and half times the tax assessed. The imposition of this penalty is permitted if the assessing authority is satisfied that the escape from assessment is due to wilful non-disclosure of assessable turnover. Akin to the penalty under section 13(3), the penalty under section 18(3) is also punitive in nature. It fixes the maximum limit of penalty, giving a leverag....
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....lated "by way of penalty" a sum calculated at the rate of one rupee for every hundred rupees, if the tax assessed was not paid within the time specified in the notice of assessment. After its amendment, the words "by way of penalty" was substituted with the words "by way of interest". When a batch of cases was filed, challenging the validity of section 24(3) of the TNGST Act, 1959, a Division Bench of this court considered in Sakthi Sugars Ltd. v. Assistant Commissioner of Commercial Taxes [1985] 59 STC 52, the nature of the levy under section 24(3) of the Tamil Nadu Act. In paragraphs 15A and 20 of the said decision, the Division Bench held that on a true construction of section 24(3) of the Act, the word "penalty" is to be understood only as "interest", because the amount of arrears of tax which should have gone to the coffers of the State was being retained by the dealer and that the same is actually by way of compensation, for the use by the assessee of that money which rightly belonged to the State. Coming to the question as to when the liability to pay penal interest under section 24(3) of the TNGST Act would commence, in the light of an obligation to file monthly returns ....
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....(3) refers to a notice of assessment, that notice of assessment is the notice which is contemplated by section 12 of the Act read with rule 16 of the Rules which refers to the making of final assessment. . . Therefore, when section 24(3) refers to a notice of assessment, it contemplates a positive act on the part of the assessing authority, calling upon the dealer to pay the tax which has not been paid, and it is only if in spite of such notice of assessment the amount due is not paid, the liability to pay interest under section 24(3) can arise. . . Consequently, having regard to the plain terms of section 24(3), any failure on the part of the dealer to pay the tax payable under rule 18(3) along with the monthly return, will not automatically attract the liability under section 24(3)." Like section 24(3) of the TNGST Act, before its amendment, section 27(3) of the PGST Act, also uses the expression "penalty", but the same is to be construed only as interest, in view of separate and specific provisions for penalty under sections 13(3) and 18(3) and also in view of the decision of the Division Bench in Sakthi Sugars case [1985] 59 STC 52 (Mad). Once the word "penalty" app....
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.... no default on his part and that the liability of the assessee to deposit the amount of tax cannot depend upon a future discretionary event of final assessment by the assessing authority. After the amendment to section 24(3) of the TNGST Act, a Division Bench of this court held in Apollo Tubes Limited v. Additional Deputy Commercial Tax Officer [1994] 93 STC 339, that the liability to pay interest is not only automatic but that the section enjoins upon the assessee, a liability to pay interest in addition to the amount due by way of tax. But again, the question as to whether an assessee is required to pay interest on the additional sales tax upon the inclusion of freight charges in the sale price and whether interest under section 11B of the Rajasthan Sales Tax Act was payable only upon final assessment being made and a notice of demand being issued, was referred to a Constitution Bench in J.K. Synthetics Ltd. v. Commercial Taxes Officer [1994] 94 STC 422 (SC); [1994] 4 SCC 276. Even at the outset, the Constitution Bench in J.K. Synthetics [1994] 94 STC 422 (SC); [1994] 4 SCC 276, made it clear in paragraph 9 that the penalty provisions in a statute have to be strictly constr....
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....ted v. Assistant Commissioner of Commercial Taxes [2002] 126 STC 399. Though the Division Bench that decided E.I.D. Parry (India) Limited [2002] 126 STC 399 (Mad), did not seek to distinguish the decision of the Constitution Bench in J.K. Synthetics [1994] 94 STC 422 (SC); [1994] 4 SCC 276, another Division Bench distinguished it in Ashok Leyland Limited v. Assistant Commissioner (CT) [2002] 127 STC 73 (Mad). The distinction so made as above, was also reiterated by another Division Bench of this court in Indian Commerce and Industries Co. Pvt. Limited v. Commercial Tax Officer [2003] 129 STC 509, on the ground that the provisions of the Rajasthan Act are not in pari materia with the provisions of the Tamil Nadu Act. Thus, almost all the Division Benches of this court, right from Apollo Tubes [1994] 93 STC 339 (Mad), Godrej & Boyce Manufacturing Co. Ltd. [1995] 97 STC 44 (Mad) and E.I.D. Parry (India) Limited [2002] 126 STC 399 (Mad), up to Indian Commerce and Industries Co. Pvt. Limited [2003] 129 STC 509 (Mad), were of the view that interest under section 24(3) was automatic. All these Division Benches of this court, were of the view that the provisions of the Rajasthan Act are....
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....994] 4 SCC 276 would squarely apply even if the Acts are not identical, the Supreme Court went on to hold as follows (at page 25 of 141 STC): ". . . The default arising on non-payment of tax on an admitted liability in the case of self-assessment falls under section 24(3) read with rule 18(3) which attracts automatic levy of interest whereas the default in filing incomplete and incorrect return falls under rule 18(4) which attracts best judgment assessment in which the levy of interest is based on the adjudication by the assessing officer. . ." Thus, from Ghasilal [1965] 16 STC 318 (SC); AIR 1965 SC 1454 to E.I.D. Parry [2005] 141 STC 12 (SC), the law appears to have gone up and down like the tide of the waves. Getting back to the case on hand, the liability to pay interest at two per cent per month, as pointed out earlier, arises only if two conditions are satisfied, viz., (i) that the tax is assessed and (ii) that the tax so assessed is not paid within the time specified in the notice of assessment. In this regard, there is a difference in the language used in section 24(3) of the Tamil Nadu General Sales Tax Act and section 27(3) of the Pondicherry Act. They are as foll....
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....ssessment prescribing a time for payment. But the expression used is "within the time specified in the notice of assessment". There may be a variety of defaults on the part of a dealer. The failure to file a monthly return in time may be a default. The failure to make payment before or along with the return, may be a default. The failure to file a return containing correct and complete particulars, may also be a default. But section 27(3) is not worded in such a manner as to cover every such case of default. In fact, the failure of a person to file a return and the failure to file a return with correct particulars, attracts penalty under section 13(3). Thus, there are not only different varieties of defaults contemplated, but also different varieties of consequences contemplated under the Act. The default contemplated under section 27(3) and the consequence prescribed thereunder, can therefore arise only within the four corners of the section. In other words, the non-payment of the tax assessed under the Act, would attract liability to pay penal interest under section 27(3), only if such non-payment is relatable to the time specified for such payment in the notice of assessment. Th....