1975 (2) TMI 91 - SC - VAT and Sales Tax

Whether the assessee 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? Held that - Appeal allowed. The question is answered in the negative viz. that the Tribunal was wrong in holding that penalty could be levied under section 16(4) of the Bombay Sales Tax Act 1953

Issues Involved:
1. Whether assessees under the Central Sales Tax Act, 1956 can be made liable for penalty under the provisions of the State Sales Tax Act.
2. Interpretation of Section 9(2) of the Central Sales Tax Act.
3. Applicability of penalties under the State Sales Tax Act for defaults in payment of taxes under the Central Sales Tax Act.
4. The scope of powers of State authorities in enforcing penalties under the Central Sales Tax Act.

Detailed Analysis:

1. Whether assessees under the Central Sales Tax Act, 1956 can be made liable for penalty under the provisions of the State Sales Tax Act:
The judgment primarily addresses whether penalties for defaults in payment of taxes under the Central Sales Tax Act can be imposed under the provisions of the State Sales Tax Act. The contention of the assessees was that the Central Act does not provide for penalties for delays or defaults in tax payments, making the imposition of such penalties under the State Act illegal. Conversely, the revenue argued that the State Act's penalty provisions apply to the Central Act's tax collection process.

2. Interpretation of Section 9(2) of the Central Sales Tax Act:
Section 9(2) of the Central Act states that the authorities empowered to assess, reassess, collect, and enforce payment of any tax under the general sales tax law of the State shall, on behalf of the Government of India, assess, reassess, collect, and enforce payment of tax, including any penalty, payable by a dealer under the Central Act as if it were under the general sales tax law of the State. This section was scrutinized to determine if it includes penalties imposed by the State Act for defaults under the Central Act.

3. Applicability of penalties under the State Sales Tax Act for defaults in payment of taxes under the Central Sales Tax Act:
The judgment examined whether the penalties for non-payment of tax under the State Act could be applied to the Central Act. The Solicitor-General argued that the procedural law of the State Act, including penalties, is incorporated into the Central Act for enforcement purposes. However, the assessees contended that the Central Act must have a substantive provision for penalties, and the State Act's penalty provisions cannot be applied in its absence.

4. The scope of powers of State authorities in enforcing penalties under the Central Sales Tax Act:
The judgment analyzed the extent to which State authorities could exercise their powers under the State Act to enforce penalties for defaults under the Central Act. The court concluded that the State authorities act as agents of the Government of India and can only enforce penalties explicitly provided under the Central Act. The court emphasized that the Central Act is a self-contained code, and the State Act's penalty provisions cannot be extended to the Central Act without explicit incorporation.

Judgment Summary:

The court held that the provision in the State Act imposing penalties for non-payment of taxes within the prescribed time does not apply to penalties under the Central Act. The Central Act contains specific provisions for penalties, and these are the only penalties that can be imposed on dealers under the Central Act. The court found that the Central Act's Section 9(2) does not incorporate the State Act's substantive penalty provisions but only its procedural aspects for assessment, reassessment, collection, and enforcement of payment.

Therefore, the appeal of M/s. Khemka & Co. was accepted, and the Tribunal's decision that penalties could be levied under Section 16(4) of the Bombay Sales Tax Act, 1953, was overturned. The appeal of the State of Mysore was dismissed. The court clarified that penalties under the Central Act must be explicitly provided within the Act itself, and State authorities cannot impose penalties under the State Act for defaults under the Central Act.

Separate Judgments:

MATHEW and CHANDRACHUD, JJ.:
These judges concurred with the majority opinion and further elaborated that the provision for penalties in the State Act is to enforce the payment of tax within the prescribed time and operates as a deterrent. They emphasized that the Central Act's Section 9(2) adopts the State Act's procedural machinery, including penalties, for enforcing the payment of tax under the Central Act. They dismissed the appeal of M/s. Khemka & Co. and allowed the appeal of the State of Mysore.

BEG, J.:
Justice Beg agreed with the majority opinion and highlighted that the imposition of penalties creates a substantive liability, which must be explicitly provided by law. He emphasized that the Central Act's Section 9(2) does not authorize the imposition of penalties under the State Act for defaults under the Central Act. He concurred with the decision to accept the appeal of M/s. Khemka & Co. and dismiss the appeal of the State of Mysore.

Order:
In accordance with the majority opinion, the appeal of M/s. Khemka & Co. was accepted, and the Tribunal's decision was overturned. The appeal of the State of Mysore was dismissed. The appellant was entitled to costs in Civil Appeal No. 2089 of 1969, and the parties were to bear their own costs in Civil Appeal No. 2118 of 1970.

← Previous Next →