TMI Blog1975 (2) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... te, (P.G. Bhartari and K.J. John, Advocates of M/s. J.B. Dadachanji Co., with him), for the appellant in C.A. No. 2089. L.N. Sinha Solicitor-General (M.G. Bhandare, Senior Advocate, and M.N. Shroff, Advocate, with him), for the respondent in C.A. No. 2089 -------------------------------------------------- The judgment of RAY, C.J., and KHANNA, J., was delivered by RAY, C.J.- These appeals raise the question as to whether the assessees 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. The penalty imposed under the State Act is for default in payment of taxes within the prescribed time. The Central Act states in section 9(1) that the tax payable by any dealer under the Central Act on sales of goods effected by him in the course of inter-State trade or commerce shall be levied by the Government of India and the tax so levied shall be collected by that Government in accordance with the provisions of sub-section (2) in the State from which the movement of goods commenced. Section 9(2) of the Central Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r penalty for default in payment of tax as enacted in the State Act is applicable to the payment and collection of the tax under the Central Act and is incidental to and part of the process of such payment and collection. The Solicitor-General on behalf of the revenue placed reliance on the decisions in K.V. Adinarayana Setty v. Commercial Tax Officer, Kolar Circle, Kolar [1963] 14 S.T.C. 587., Commissioner of Sales Tax, Madhya Pradesh v. Kantilal Mohanlal and Brothers [1967] 19 S.T.C. 377., M/s. H.M. Esufali H.M. Abdulali v. Commissioner of Sales Tax, M.P. [1969] 24 S.T.C. 1., and Auto Pins (India) v. State of Haryana [1970] 26 S.T.C. 466., in support of his contention. The contentions of the Solicitor-General are these: Section 9(1) of the Central Act speaks of tax. That section does not mention penalty. Tax will include collection and enforcement of payment. The words "tax and penalty payable by a dealer under this Act" indicate that the words "under this Act" in the Central Act relate only to a dealer. Section 9(2) of the Central Act is a provision prescribing the procedure for assessing, collecting and enforcing payment of tax. The words "collect and enforce payment of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the State to assess, reassess, collect and enforce payment of tax and penalty payable under the Central Act. just as tax payable under the Central Act can be collected and enforced similarly, only penalty payable under the Central Act can be collected and enforced. Counsel on behalf of the assessees relied on the decisions in D.H. Shah Co. v. State of Madras [1967] 20 S.T.C. 146., State of Madras v. M. Angappa Chettiar and Sons [1968] 22 S.T.C. 226., Guldas Narasappa Thimmaiah Oil Mills v. Commercial Tax Officer, Raichur [1970] 25 S.T.C. 489., and Hurdatroy Jute Mills Private Ltd., Katihar v. Superintendent of Commercial Taxes, Purnea [1972] 30 S.T.C. 151., in support of the proposition that the substantive law for penalty under the State Act is not incorporated in the Central Act. Section 9(2) of the Central Act first provides that the authorities empowered to assess, reassess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, reassess and enforce payment of tax including any penalty payable by a dealer under the Central Act. The State sales tax authorities are thus created a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable for the purpose of assessment, reassessment, collection and enforcement of payment of tax including penalty payable under the Central Act. The words of the last part of section 9(2), viz., "shall apply accordingly" relate clearly to the words "and for this purpose" with the result that the provisions of the State Act shall apply only for the purpose of assessment, reassessment, collection and enforcement. The doctrine of ejusdem generis shows that the genus in section 9(2) of the Central Act is "for this purpose". In other words, the genus is assessment, reassessment, collection and enforcement of payment. The genus is applicable in regard to the procedure for assessment, reassessment, collection and enforcement of payment. The genus is from whom to collect and against whom to enforce. It is apparent that the extent of liability for tax as well as penalty is not attracted by the doctrine of ejusdem generis in the application of the provisions of the State Act in regard to assessment, reassessment, collection and enforcement of payment of tax including any penalty payable under the Central Act. The deeming provision in the Central Act that the tax as well as penalty le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evy of a penalty under section 16(2) of the Madras Act. The Mysore High Court in Guldas Narasappa Thimmaiah Oil Mills' case [1970] 25 S.T.C. 489., which is the present appeal, pointed out that the provisions contained in section 13(1) and (2) of the State Act in regard to penalty for default in making payment could not be applicable because a comparable provision was not to be found in the Central Act. The Mysore High Court correctly pointed out that the words "as if the tax or penalty payable by such a dealer under this Act" show that the words "payable by such a dealer under this Act" relate to tax or penalty which is payable only under the Central Act. The Mysore High Court relied on the decision of this court in State of Kerala v. P.P. Joseph Co. [1970] 25 S.T.C. 483 (S.C.)., in support of the proposition that the State law is applicable only in regard to procedure for assessment, reassessment, collection and enforcement. If the liability to pay tax is determined by the provisions of the Central Act the liability to pay penalty is also that which is payable under the Central Act. This court in the Kerala case [1970] 25 S.T.C. 483 (S.C.)., said that the procedural law pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attract liability to pay. Section 44 of the Act stated that the assessee would be liable to assessment under Chapter IV for the amount of tax payable and all the provisions of that chapter would apply. This court said that the word "assessment" had been used in its widest connotation in Chapter IV of the Act. It was contended that an order imposing penalty under section 28 of the Act could not by virtue of section 44 be imposed. This court held that section 44 of the Act expressly enacted that the provisions of Chapter IV would apply to the assessment of a business carried on by a firm even after discontinuance of its business. Section 28 is one of the sections in Chapter IV. Section 28 imposed a penalty for the concealment of income or the improper distribution of profits. The defaults made in furnishing a return of the total income, in complying with a notice and in concealing the particulars of income were treated as penalties under section 28. Section 28 was held by this court to be a provision enacted for facilitating the proper assessment of taxable income and to apply to an assessment under Chapter IV. The decision of this court in Abraham's case [1961] 41 I.T.R. 425 (S.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncepts under the Indian Income- tax Act. The word "assessment" could cover penalty proceedings if it is used to denote the whole procedure for imposing liability on the taxpayer as happened in Abraham's case [1961] 41 I.T.R. 425 (S.C.); [1961] 2 S.C.R. 765. Penalty is within assessment proceedings just as tax is within assessment proceedings when the relevant Act by substantive charging provision levies tax as well as penalty. Penalty is not merely sanction. It is not merely adjunct to assessment. It is not merely consequential to assessment. It is not merely machinery. Penalty is in addition to tax and is a liability under the Act. Reference may be made to section 28 of the Indian Income-tax Act, 1922, where penalty is provided for concealment of income. Penalty is in addition to the amount of income-tax. This court in Jain Brothers v. Union of India [1970] 77 I.T.R. 107 (S.C.)., said that penalty is not a continuation of assessment proceedings and that penalty partakes of the character of additional tax. The Federal Court in Chatturam v. Commissioner of Income-tax, Bihar [1947] 15 I.T.R. 302 (F.C.)., said that liability does not depend on assessment. There must be a charging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collection and enforcement of tax and penalty payable by a dealer under the Act. For these reasons, the appeal of M/s. Khemka Co. is accepted. The answer to the reference by the High Court is discharged. 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. The appeal of the State of Mysore in Civil Appeal No. 2118 of 1970 is dismissed. The appellant will be entitled to costs in Civil Appeal No. 2089 of 1969. In view of the fact that in Civil Appeal No. 2118 of 1970 the High Court made no order as to costs, the parties will pay and bear their own costs. The judgment of MATHEW and CHANDRACHUD, JJ., was delivered by MATHEW, J. -We take up for consideration Civil Appeal No. 2089 of 1969 and the decision there will govern the decision of Civil Appeal No. 2118 (NT) of 1970. The question for consideration in Civil Appeal No. 2089 of 1969 is, whether, upon a correct construction of section 9 of the Central Sales Tax Act (hereinafter referred to as the "Central Act"), it was permissible for the Sales Tax Officer in question to invoke the provisions of section 16(4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, he shall, in the prescribed manner, pay into a Government treasury the full amount of the tax due from him according to such returns. Sub-section (3) provides that before any registered dealer furnishes a revised return which shows a greater amount of tax to be due than was payable in accordance with the original return, he shall pay into a Government treasury the extra amount of the tax. Sub-section (4) states that if the tax is not paid by any dealer within the prescribed time, the dealer shall pay, a penalty in addition to the amount of tax and sub-section (6) enables the realisation of tax and penalty as an arrear of land revenue. A careful analysis of section 9(2) of the Central Act would show that the authorities empowered to assess, reassess, collect and enforce payment of tax payable under the general sales tax law of the appropriate State shall assess, reassess, collect and enforce payment of tax including any penalties payable by a dealer under the Central Act as if the tax or penalty payable by a dealer under that Act (Central Act) is a tax or penalty payable under the general sales tax law of the State and, for that purpose, the authorities may exercise all or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant before the court who was carrying on business in foodgrains in partnership with another person was liable to a penalty for submitting the returns of the income of the firm even after his partner's death. It was found that certain income of the firm was concealed and the Income-tax Officer not only assessed the firm to tax for the suppressed income but also imposed penalty for concealing the same. Section 44 of the Indian Income-tax Act, 1922, at the material time, stood as follows: "Where any business carried on by a firm...........has been discontinued ......every person who was at the time of such discontinuance...a partner of such firm.....shall in respect of the income, profits and gains of the firm be jointly and severally liable to assessment under Chapter IV for the amount of tax payable and all the provisions of Chapter IV shall, so far as may be, apply to any such assessment." It was contended for the assessee that a proceeding for imposition of penalty and a proceeding for assessment of income-tax were distinct, that although section 44 may be resorted to for assessing tax due and payable by a firm which has discontinued, an order imposing penalty under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saved. One question before this court was whether the Income-tax Officer had power on October 31, 1951, to impose penalty under section 40(1) of the Hyderabad Income-tax Act. The court held that the power of the Income-tax Officer to impose penalty under section 40(1) of the Hyderabad Income-tax Act in respect of the years preceding the date of the repeal of that Act was not lost because by section 13 of the Finance Act, 1950, the operation of the Hyderabad Act in respect of levy, assessment and collection of income-tax and super-tax in respect of the period prior to April 1, 1951, was saved and, therefore, the proceedings for imposing the penalty could be continued even after the enactment of section 13(1) of the Indian Finance Act, 1950. The real significance of the ruling for the point under consideration here is that at the time when the penalty was imposed, the only provisions of the Hyderabad Income-tax Act which survived the repeal were those relating to levy, assessment and collection of income-tax and super-tax in respect of the period prior to April 1, 1951, and unless the power to impose the penalty was included within the power to levy, assess or collect the tax, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficult to hold that Parliament invested the State authorities with power to assess, reassess, collect and enforce payment of tax payable under the Central Act as if the tax is tax payable under the general sales tax law of the State, but denuded them of their power to invoke the provision in the general sales tax law of the State for imposition of penalty for enforcing payment of the tax payable thereunder, as that is an effective means to the enforcement of payment of tax within the prescribed time. It was contended that only the penalties expressly provided for in the Central Act could be imposed by the sales tax authorities of the State by employing the machinery for collection of tax under the general sales tax law of the State and that no penalty which is not provided for by the Central Act could be imposed by the State authorities. In this connection, the appellant placed great reliance upon the decision of a Division Bench of the Calcutta High Court in Mohan Lal Chokhany v. Commercial Tax Officer [1971] 28 S.T.C. 367. The question there was whether penalty can be imposed for failure to submit the return by a dealer under the Central Act though only the general sales tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noring what are the powers actually conferred by the words "enforce payment of tax..........as if the tax......... payable by such a dealer under this Act is a tax.............payable under the general sales tax law of the State", in the sub-section. The marginal note of section 10 of the Central Act is "penalties" and the section enumerates six grounds for imposing penalty from (a) to (f): (a) failure of a dealer to get himself registered as required by section 7; (b) a registered dealer falsely representing when purchasing any class of goods that the goods of such class are covered by his certificate of registration; (c) not being a registered dealer, falsely representing when purchasing goods in the course of inter-State trade or commerce that he is a dealer; (d) after purchasing any goods for any of the purposes specified in clause (b) of sub- section (3) of section 8, failing without reasonable excuse to make use of the goods for any such purpose; (e) having in his possession any form prescribed for the purpose of sub-section (4) of section 8 which has not been obtained by him in accordance with the provisions of the Act or any Rules made thereunder; and (f) co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble under the Central Act, the authorities of the State have no power to impose the penalty. When section 9(2) says that assessment, reassessment, collection and enforcement of payment of tax due under the Central Act should be made by the authorities of the State as if the tax payable under that Act is tax payable under the general sales tax law of the State and for that purpose "they may exercise all or any of the powers they have under the sales tax law of the State", there can be no manner of doubt that if, for enforcing payment of tax due under the sales tax law of the State, they have power to impose penalty, they have the same power of imposing penalty for enforcing payment of tax payable under the Central Act. The express provision in section 9(2) enabling the imposition of penalties payable under the Central Act by the sales tax authorities of the State does not in any way derogate from the grant of power to those authorities to enforce the payment of tax payable under the Central Act as if the tax was payable under the general sales tax law of the State and to enforce payment of it under the machinery of the general sales tax law of the State. The reason why the sales tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of or for the purpose of making the assessment, reassessment, collection or enforcement of payment of tax payable under the Central Act. Is it possible to imagine any reason for Parliament to withhold from the sales tax authorities of the State an effective means for enforcing the payment of tax payable under the sales tax law of the State and which is specifically provided for in that law for collection of tax payable under the Central Act? We think not. As we said, in the nature and the scheme of the Central Act, it was not necessary to provide for imposition of penalty or for the other methods of enforcing the payment of tax payable under the Central Act since Parliament has adopted the machinery provided in the general sales tax law of the State as respects enforcement of the tax payable under the Central Act. The decisions in D.H. Shah Co. v. State of Madras [1967] 20 S.T.C. 146., State of Madras v. Angappa Chettiar Sons [1968] 22 S.T.C. 226., Guldas Narasappa Thimmaiah Oil Mills v. Commercial Tax Officer, Raichur [1970] 25 S.T.C. 489., and Hurdatroy jute Mills Pvt. Ltd. v. Superintendent of Commercial Taxes, Purnea [1972] 30 S.T.C. 151., relied on by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords "and the provisions of such law including the provisions relating to penalties" would put it beyond doubt that the word "penalties" in the latter part of the sub-section can only refer to penalties imposable under the general sales tax law of the State in relation to assessment, reassessment, collection and enforcement of payment of tax payable thereunder. We hold that the Sales Tax Officer was empowered to impose penalty provided in section 16(4) of the Bombay Sales Tax Act for non-payment of the tax payable under the Central Act within the prescribed time. We would dismiss Civil Appeal No. 2089 of 1969 and allow Civil Appeal No. 2118(NT) of 1970 without any order as to costs. BEG, J.- Civil Appeal No. 2089 of 1969 arises out of an assessment order relating to the period of assessment from April 1, 1959, to December 30, 1959. The order purports to have been made under the Central Sales Tax Act of 1956 (hereinafter referred to as the "Central Act") and the assessment year given there is 1962-63. The total sales tax was assessed at Rs. 44,181.92. In addition, a penalty of Rs. 8,347.32 was levied for delay in payment. The order passed on the appeal to the Assistant Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lays down: "Payment and recovery of tax.-(1) The tax under this Act shall be paid in such manner and in such instalments, if any, and within such time, as may be prescribed. (2) If default is made in making payment in accordance with sub- section (1)- (i) the whole of the amount outstanding on the date of default shall become immediately due and shall be a charge on the properties of the person or persons liable to pay the tax under this Act; and (ii) the person or persons liable to pay the tax under this Act shall pay a penalty equal to- (a) one per cent of the amount of tax remaining unpaid for each month for the first three months, after the expiry of the time prescribed under sub-section (1) and (b) two and one-half per cent of such amount for each month subsequent to the first three months as aforesaid. (3) Any tax assessed, or any other amount due under this Act from a dealer, may without prejudice to any other mode of collection, be recovered- (a) as if it were an arrear of land revenue, or (b) on application to any Magistrate, by such Magistrate as if it were a fine Imposed by him........... In this case, the Commercial Tax Officer, Raichur, filed applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not have applied its mind to provisions which came into existence afterwards. It could not, therefore, have incorporated them by reference as parts of a procedure applicable to assessments which took place after 1959 when the Bombay Act of 1953 was repealed. At the time of the passing of the Central Act, the relevant statute in existence in Bombay was the Bombay Act of 1953. But, section 16(4) of the Bombay Act of 1953, under which the sales tax authorities purported to act, did not exist on the statute book at the time of assessment. Unless we assume that section 9(2) of the Central Act, by a necessary implication, authorises the State Legislatures to go on imposing such penalties for such breaches of duty as it pleases them to lay down on behalf of Parliament, subsequently enacted provisions of State enactments would not be available. I also find from the Mysore Act of 1957, that section 13 of the Act was entirely recast in 1958. It would, I think, be carrying the theory of referential legislation too far to assume that section 9(2) of the Central Act, 1956, purported to authorise the State Legislatures to impose liabilities in the nature of additional tax or penalties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into operation after its imposition. In any case, it is an imposition of a pecuniary liability which is comparable to a punishment for the commission of an offence. It is a well- settled canon of construction of statutes that neither a pecuniary liability can be imposed nor an offence created by mere implication. It may be debatable whether a particular procedural provision creates a substantive right or liability. But, I do not think that the imposition of a pecuniary liability, which takes the form of a penalty or fine for a breach of a legal obligation, can be relegated to the region of mere procedure and machinery for the realisation of tax. It is more than that. Such liabilities must be created by clear, unambiguous and express enactment. The language used should leave no serious doubts about its effect so that the persons who are to be subjected to such a liability for the infringement of law are not left in a state of uncertainty as to what their duties or liabilities are. This is an essential requirement of a good government of laws. It is implied in the constitutional mandate found in section 265 of our Constitution: "No tax shall be levied or collected except by authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty imposed upon any dealer under section 10A shall be collected by the Government of India in the manner provided in sub- section (3)- (a) in the case of an offence falling under clause (b) or clause (d) of section 10, in the State in which the person purchasing the goods obtained the form prescribed for the purposes of clause (a) of sub-section (4) of section 8 in connection with the purchase of such goods; (b) in the case of an offence falling under clause (c) of section 10, in the State in which the person purchasing the goods should have registered himself if the offence had not been committed. (3) The authorities for the time being empowered to assess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India and subject to any rules made under this Act, assess, collect and enforce payment of any tax, including any penalty, payable by a dealer under this Act in the same manner as the tax on the sale or purchase of goods under the general sales tax law of the State is assessed, paid and collected; and for this purpose they may exercise all or any of the powers they have under the general ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 10A of the Central Act and not by any provision of the State Act. It has to be remembered that section 9(2) of the 1956 Act, which corresponds to section 9(3) after 1958, begins with: "subject to the other provisions of this Act and the Rules made thereunder, the authorities for the time being empowered to assess, reassess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall......" In other words, the powers of the State Sales Tax Officers are specifically limited by the provisions of the Central Act. They cannot go beyond these provisions. The next part of section 9(2) of the 1956 Act further emphasises this aspect by making it clear that these powers are exercisable only "for this purpose". In other words, they are not authorised to collect dues for purposes extraneous to the Central Act. We may then go to the last part of section 9(2) of the 1956 Act, which is strongly relied upon on behalf of the States concerned, to urge that the State provisions relating not merely to collection of taxes but imposition of penalties are incorporated by reference into the provisions of the Central Act. In this debatable area, I think the t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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