TMI Blog1994 (5) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... an, Ray, G.N. And Bharucha S.P.,JJ. JUDGMENT The Judgment of the Court delivered by AHAMADI, J.--These appeals by special leave are directed against certain assessment order made by the Commercial Taxes Officer relating to the Assessment Years 1975-76, 1976-77 and 1977-78 under the Rajasthan Sales Tax Act, 1954 (hereinafter called the Act ) and the Central Sales Tax Act, 1956 (hereinafter called the Central Act ). The question relates to payment of interest on tax on the amount of freight charged in respect of sale of cement under the relevant Cement Control Order. The returns were filed by the appellant on the premiss that the amount of freight charged in respect of sale of cement under the said Control Order did not form part of the sale price for the payment of sales tax. The appellant contends that it had raised the contention bona fide but the same was rejected by this Court by its judgment and order dated 22-8-1978 in the case of Hindustan Sugar Mills Ltd. v. State of Rajasthan J.K. Synthetics Ltd. v. CTO, Kota . By the said decision this Court held that the freight element formed part of the price of cement and sales tax was leviable on the sale price inclusive o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act 13 of 1963 with effect from 29-4-1963, empowers the State Government notwithstanding sub-section (2) to require any dealer or class of specified dealers to pay tax at intervals shorter than those prescribed under sub-section (1) in which case the dealer will deposit the tax at such shorter intervals. Such deposit of tax shall, under Section 7(4), be deemed to be provisional, subject to necessary adjustments in pursuance of the final assessment of tax. Section 7-A enjoins the making of a provisional assessment on best-judgment basis if the dealer fails to submit a return or fails to deposit tax as required by Section 7(2- A). Section 7-AA prescribes the penalty for failure to furnish the returns. According to Section 10 the assessment and determination of tax due for any year, shall be made after the returns for all the periods of that year have become due. Section 11 -B makes provision for charging interest on failure to pay tax, fee or penalty. Clauses (a) and (b) of the said Section 11 -B before its substitution by Act 4 of 1979 w.e.f. 7-4-1979, read as under :- "11 -B. Interest on failure to pay tax, fee or penalty.- (a) If the amount of any tax payable under sub-sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be paid would be on "the full amount of tax due shown in the return". Since in the present case the full amount of tax ,shown in the return was deposited no such demand for interest as has been made could be entertained. The Revenue on the other hand contends that when the law enjoins on the assessee to file a return , it can only mean a true and correct return, that is, a return which reflects the tax due on final assessment. Therefore, contends the Revenue, as the whole amount found due on final assessment was not included in the return and the full amount of tax due on that basis was not deposited as required by law, interest became payable under Section 11-B of the Act. The assessee on the contrary relies on the difference in language between sub-sections (2) and (2-A) of Section 7 and emphasising on the words "amount of tax due shown in the return" found in sub-section (2-A) of Section 7, which phraseology is not to be found in sub-section (2) of that section, contends that no interest can be charged under Section 11 -B. 5. Sub-sections (2) and (2-A) of Section 7 as they stood before their amendment by Rajasthan Act 4 of 1979, read as under : "(2) Every such return s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notification in advance of the return and the return shall be accompanied by the receipt for the full amount of tax due "shown in the return". Although the phraseology used in sub-sections (2) and (2-A) of Section 7 is not the same, the content and purport of the two sub-sections is more or less identical, namely, both the sub-sections require that the return shall be accompanied by a receipt evidencing the deposit of the "full amount of tax due" on the basis of the return or on the basis of the information shown in the return. The full amount of tax due and payable prior to the submission of the return is clearly relatable to the information furnished in the return. Undoubtedly, the information to be furnished in the return must be "correct and complete", that is, true and complete to the best of knowledge and belief; without the dealer being guilty of wilful omission. This is the essence of the verification clause found at the foot of Form ST 5. Rule 25 expects the verification of the return to be in the manner indicated in Form ST 5. Therefore, on a conjoint reading of Section 7(1), (2) and (2-A), Rule 25, the information to be furnished under Form ST 5 and the form of veri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in not including the freight charges in the price of the commodity on the basis whereof the tax was assessed before filing of the returns; on the contrary, contends the assessee, it had acted "bona fide" having regard to the ratio of this Court s decision in Hyderabad Asbestos Cement Products Ltd. v. State of A. P. (1969) 24 STC 487: (1969) 1 SCWR 560 Counsel for the, Revenue, however, points out that considerations for the levy of penalty under Section 7-AA are different from those which guide the recovery of interest under Section 11 -B and while in a given case levy of penalty may not be permissible, recovery of interest on unpaid tax amount may still be justified. 7. As the relevant Assessment Years in question are from 1975-76 to 1977-78 we are concerned with Section 11-B as it stood before its substitution by Act 4 of 1979 w.e.f. 7-4- 1979. Section 11 -B then provided that if the amount of any tax payable under sub-sections (2) and (2-A) of Section 7 is not paid within the time allowed or if the tax amount specified in any notice of demand is not paid within the period specified, the dealer shall be liable to pay simple interest on such amount at one per cent per month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin 30 days from the receipt of notice, he is required to pay interest at the rates prescribed by the sub-section. But if he pays the difference of tax within the prescribed time, there is no question of charging interest. If such an interpretation is not placed and if the Revenue s plea is accepted serious anomalies would surface. Firstly, if the liability to pay interest on the balance tax amount accrues from the date of submission of returns under Section 7, clause (b) of Section 11 -B read with Section 1 1(2) would be rendered nugatory. Otherwise one would be required to hold that interest would be payable from the date of submission of the return till the date of issuance of notice of demand and thereafter no interest would have to be paid till the expiry of the specified period or 30 days, as the case may be, and thereafter interest would have to be paid at a given rate for the first three months and thereafter at a higher rate. Such could not be the legislative intent. Secondly, take the case of a dealer who has failed to submit a return and is subjected to assessment of tax on the basis of best judgment. Pursuant to the said assessment he deposits the tax. Such a dealer wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al withdrew his writ petition. Thereafter on 4-12-1959, the Sales Tax Officer, Kota City Circle, sent him a show-cause notice asking him to deposit the tax due up to date within a week, failing which he threatened to take necessary action permissible in law. On receipt of the notice Ghasilal filed a return in respect of the 4th quarter ending on 22-10-1957 and deposited the tax of Rs 11,808.37. On 25-4-1960, the Sales Tax Officer made an assessment in respect of the accounting period from 3-11-1956 to 22-10-1957 and imposed a penalty under Section 16(1)(b) of the Act on the ground that the assessee had not deposited the tax for the earlier quarters on the due dates and the tax for the 4th quarter was deposited after a lapse of two years. His appeal was dismissed by the Deputy Commissioner of Sales Tax who endorsed the view that the interim order of the High Court had not precluded the assessee from paying the tax and filing the returns. On the same line of reasoning penalty was also levied for the subsequent periods. Ghasilal challenged the levy of penalty by a writ petition and the High Court allowed the same. It may be noted that Section 7-AA was not on the statute book then and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad with Section 5 of the Act, is the charging provision whereas the rest of the provisions provide the machinery for the levy and collection of the tax. In order to ensure prompt collection of the tax due certain penal provisions are made to deal with erring dealers and defaulters and these provisions being penal in nature would have to be construed strictly. But the machinery provisions need not be strictly construed. The machinery provisions must be so construed as would enable smooth and effective collection of the tax from the dealers liable to pay tax under the statute. Section 1 1 -B provides for levy of interest on failure of the dealer to pay tax due under the Act and within the time allowed. Should this provision be strictly construed or should it receive a broad and liberal construction, is a question which we will have to consider in determining the sweep of the said provision. We will do so at the appropriate stage but for the present we may notice the thrust of this Court s decision in the case of Associated Cement Co. Ltd.3 10. That was a case in which the Company had submitted its returns under the Act as well as the Central Act for the period between 1-8-1973 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the basis of the returns filed under Section 7(1), and had thereby complied with Section 7(2), and had subsequently deposited the additional tax on the basis that freight charges were includible in the taxable turnover while submitting the revised return under Section 7(3), the question of charging interest could not arise, Venkataramiah, J. observed : (SCC p. 604, para 33) "In the present case if we construe the words on the basis of return occurring in subsection (2) of Section 7 of the Act as on the basis of a true and proper return which ought to have been filed under sub-section (1) of Section 7 then all the three classes of persons viz. (i) those who have not filed any return at all and who are later on found to be liable to be assessed, (ii) those who have filed a true return but have not deposited the full amount of tax which they are liable to pay and (iii) those who have filed a return making a wrong claim that either the whole or any part of the turnover is not taxable and who are subsequently found to have made a wrong claim, would be placed in the same position and they would all be liable to pay interest on the amount of tax which they are liable to pay but h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such return. It is not the assessed tax nor is it the tax due on tile basis of a return which ought to have been filed by the assessee but it is the tax due according to the return actually filed that is payable under sub-section(2) of Section 7. This provision is really in the nature of self-assessment and what it requires is that whatever be the amount of tax due on the basis of self assessment must be paid up along with the filing of the return which constitutes self-assessment. I fail to see how the plain words of subsection (2) of Section 7 can be tortured to mean full amount of tax due on the basis of return which ought to have been filed but which has not been filed." Pointing out that the construction pressed by the Revenue leads to a serious anomaly, the learned Judge proceeds to observe: (SCC p. 587, para 7) "If this construction were accepted, the tax payable under sub-section (2) of Section 7 would be the full amount of tax due on the basis of a correct and proper return and that would necessarily be the same as the tax assessed by the assessing authority, because what is a correct and proper return would be determinable only with reference to the assessment u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly filed by the assessee and not on the basis of a correct and proper return which ought to have been filed by him." 15. Next, the learned Judge finds it difficult to understand how the tax which is yet to be ascertained through the process of assessment can be made payable by the assessee from the date of submission of the return. If it Is so payable it is equally difficult to understand why it should bear interest from the date of filing of the return up to the date of assessment only and thereafter be free from the liability to bear interest up to the period specified in the notice of demand and if no such period is specified till the expiry of 30 days from the date of service of the notice. The learned Judge, therefore, concludes that the scheme of taxation under the Act clearly envisages that it is only when the assessment is made and the period specified in the notice of demand or 30 days, as the case may be, expires that the amount of tax as assessed becomes payable and if the same is not paid within the time allowed, the liability to pay interest thereon accrues. What becomes payable under Section 7(2) is only the tax due on the basis of the return actually filed, i.e., o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Even in those cases, CIT v. M. Chandra Sekhar (1985) 1 SCC 283: 1985 SCC (Tax) 85: (1985) 151 ITR 433 and Central Provinces Manganese Ore Co. Ltd. V. CIT (1986) 3 SCC 461: 1986 SCC (Tax) 601: (1986) 160 ITR 961, all that the Court pointed out was that provision for charging interest was, it seems, introduced in order to compensate for the loss occasioned to the Revenue due to delay. But then interest was charged on the strength of a statutory provision, may be its objective was to compensate the Revenue for delay in payment of tax. But regardless of the reason which impelled the Legislature to provide for charging interest, the Court must give that meaning to it as is conveyed by the language used and the purpose to be achieved. Therefore, any provision made in a statute for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjectival law. So construed and applying the normal rule of interpretation of statutes, we find, as pointed out by us earlier and by Bhagwati, J. in the Associated Cement Co. case3, that if the Revenue s contention is accepted it leads to conflicts and creates certain anomalies which could never have been inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not the case here. It is difficult on the plain language of the section to hold that the law envisages the assessee to predicate the final assessment and expect him to pay the tax on that basis to avoid the liability to pay interest. That would be asking him to do the near impossible. 18. The learned counsel for the Revenue placed strong reliance on the decision of this Court in Kesoram Industries Cotton Mills Ltd. V. CWT (1966) 2 SCR 688: AIR 1966 SC 1370: 59 ITR 767. Reference was to the discussion on the third question, namely, whether the assessee owed a debt on the valuation day within the meaning of Section 2(m) to be deductible in computing the net wealth of the assessee. In that case the assessee had in the accounts for the year ending 31-3-1957, shown a certain amount as provision for payment of income tax and supertax. The majority answered the question in the affirmative whereas the third learned Judge disagreed. In the view we are taking on the relevant provisions of the Act it is unnecessary for us to examine the merit or demerit of the rival views. 19. In the result we are of the view that the majority opinion expressed by Venkataramiah, J. in the Associa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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