TMI Blog1954 (2) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... also the same and the defence raised before the learned Magistrate in each of the cases was also the same. These revision cases against the said orders of the learned Magistrate have been posted together before this Bench for being dealt with in a batch for the reason that they raise common grounds on which the accused seek to set aside the orders of the learned Magistrate. The accused are merchants dealing in hides and skins in Salem. Their business consists in the purchase of skins and hides and exporting the same to foreign countries. In Cr. R.C. No. 88 of 1953, the accused were called upon to pay sales tax in the sum of Rs. 3,126-4-0 which represented the balance payable out of the sum of Rs. 5,519-13-0 to which the accused were assessed for the year 1950-51. This assessment is said to have been made on the purchases of skins made by the accused in pursuance of orders placed with them by the foreign companies for the supply of the same. In Cr. R.C. No. 89 of 1953, the same accused as in Cr. R.C. No. 88 of 1953, were assessed to sales tax for the months of April to September, 1951, by the Assistant Commercial Tax Officer, Salem, in the total sum of Rs. 4,000-6-6 said to be du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used were not liable to pay the sales tax so assessed. The prosecution, however, contended that it was not open to the accused to raise any question as to the validity of the assessment levied by the Commercial Tax Authorities under the Act in a prosecution laid against them for non-payment of the tax assessed and that Section 16A of the Madras General Sales Tax Act was a bar against the raising of any such question. The learned Magist- rate, relying upon the decision of Panchapakesa Ayyar, J., in In re Gigina Pasha Sahib(1) and also of Ramaswami, J., in Hajee Meeran v. The Public Prosecutor(2) to the effect that Section 16A is not ultra vires of the Constitution, decided against the accused, holding that it was not open to the accused to question before a Criminal Court the validity of the assessment made by the Commercial Tax Authorities and overruling the objection of the accused that Section 16A of the Madras General Sales Tax Act was invalid as it was opposed to Article 286(1)(b) of the Constitution of India, the same having been enacted before the Constitu- tion. The learned Magistrate, therefore, declined to go into the question of the validity or otherwise of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the purchase of any goods in accordance with the rules referred to in clause (i) of this proviso, he shall not be taxed again in respect of any sale of such goods effected by him." Sub-section (6) says that subject to such rules as may be prescribed, the assessing authority may assess a dealer for any year as if his transac- tions in such year had been the same as in the previous year. That this section is the charging section is common ground between the parties. The "turnover" on which the sales tax is to be levied has been defined in Section 2(i) of the Act. It is in the following terms: "'Turnover' means the aggregate amount for which goods are either bought by or sold by a dealer, whether for cash or for deferred payment or other valuable consideration provided that the proceeds of the sale by a person of agricultural or horticultural produce grown by himself or grown on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover." The word "dealer" has also been defined in Section 2, sub- clause (b), as meaning any person who carries on the business of buying or selling goods. The im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson who-(a) wilfully submits an untrue return or fails to submit a return as required by the provisions of this Act, or the rules made thereunder, or (b) fails to pay within the time allowed, any tax assessed on him, or any fee due from him, under this Act or (c) prevents or obstructs inspection or entry by any officer authorised under Sec- tion 14, in contravention of the terms thereof, or (d) fraudulently evades the payment of any tax assessed on him, or any fee due from him, under this Act, or (e) fails to submit an application for registration as required by Section 8A, sub-section (1), or (f) collects any amount by way of tax under this Act, in contravention of the provisions of Section 8B, sub- section (1), or (g) fails to pay the amounts specified in Section 8B, sub-sec- tion (2), within the prescribed time, or (h) wilfully acts in contravention of any of the provisions of this Act, shall, on conviction by a Presidency Magistrate or a Magistrate of the First Class, be liable to a fine which may extend to one thousand rupees, and in the case of a conviction under clause (b), (d), (f), or (g), the Magistrate shall specify in the order the tax, fee or other amount, which the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... realise the taxes and fees due to them and the legislature has perhaps felt that there should be provided some coercive process by means of which taxes and fees and other legitimate dues to Government should be collected in the interests of the administration of the State. If the Legislature had been content with this, then there would have been no room for the petitioner to take up the stand they have done before us. But the legislature went further and enacted a further section, viz., Section 16A. It is to the following effect: "The validity of the assessment of any tax, or of the levy of any fee or other amount, made under this Act, or the liability of any person to pay any tax, fee or other amount so assessed or levied shall not be questioned in any Criminal Court in any prosecution or other proceeding, whether under this Act or otherwise." It is not denied in these cases that the petitioners, as dealers in skins and hides have been assessed to sales tax in respect of their deal- ings and these petitioners, some of them, at any rate, have made pay- ments in part and have failed to pay the balance of the assessed tax. Though the taxes in some cases have been finally assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of this Act shall be read and construed accordingly". The Explanation to this section may be omitted, as it has no rele- vance to the points that arise in the present cases. The first point that has been raised in these revision cases before us by Mr. Jayarama Ayyar appearing on behalf of the petitioners is that the petitioners are not liable to sales tax in view of Section 22 of the Madras General Sales Tax Act which, in substance, is the same as Article 286(1) (b) of the Constitution. The petitioners' contention is that their purchase and sale of the skins and hides was in the course of export of the goods out of the territory of India and the imposition of a tax on the sale or purchase of such goods by the State Government is ultra vires of the Constitution, that is to say, that the State Government is not entitled, through its taxing officers, to levy any taxes of the kind claimed by it from the petitioners on the transactions in question. This was one of the points raised by the petitioners before the learned Magistrate when the cases were tried by him. In order to prove that their purchase and sale was in the course of export of the goods out of the territory of India, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at least have been given an opportunity to prove and argue that the tax levied on them in respect of the transactions carried on by them was not legal and that it offended against Section 22 of the Act and Article 286(1)(b) of the Constitution. There is, no doubt, force in this contention. How far such an opportunity should have been given and how far the Magistrate was bound to decide the question of the validity or otherwise of the tax levied on the petitioners would necessarily depend upon the question as to how far Section 16A which is said to debar the petitioners from claiming any such right is valid and intra vires of the Constitution, and that is the question before us. It has been, however, argued by the learned Advocate-General on behalf of the State that, even assuming that the petitioners had the right to question the validity of the tax imposed on them, still, on the evidence recorded by the learned Magistrate, in view of the recent decisions of the Supreme Court in State of Travancore-Cochin v. The Bombay Co. Ltd.(1) and State of Travancore-Cochin v. Shanmuga Vilas Cashew-Nut Factory(2), the transactions in question are not entitled to exemption either under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n buyer or expected to be received subsequently in the course of business, and the first sale by the importer to fulfil orders pursuant to which the goods were imported or orders expected to be received after the import would also fall within the scope of the exemption provided under Article 286(1)(b) of the Constitution. The majority of the learned Judges of the Supreme Court, however, discountenanced this argument in their observations at pages 474 and 475. These observations explain what exactly was intended by the observations made in the previous decision already referred to. At page 478, while summing up the conclusions, the majority of the learned Judges observed that: (1) [1953] S.C.J. 471; 4 S.T.C. 205. "(1) Sales by export and purchases by import fall within the exemption under Article 286(1)(b). (2) Purchases in the State by the exporter for the purpose of export as well as sales in the State by the importer after the goods have crossed the customs frontier are not within the exemption. (3) Sales in the State by the exporter or importer by transfer of shipping documents while the goods are beyond the customs frontier are within the exemption, assuming that the State-powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the decision of one of us in In re Narasingamuthu Chettiar(1) in support of the conten- tion advanced on behalf of the State. In that decision, the dealer was prosecuted for failure to submit the A return as required by rule 11(1) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, which was an offence punishable under Section 15 (a) and (c) of the General Sales Tax Act and was fined a sum of Rs. 200, in default to suffer simple imprisonment for a period of six months. The question there was whether the assessee prosecuted was a dealer within the meaning of the term as defined in the General Sales Tax Act. It was observed, in the course of the decision, that the question as to burden of proof had become a matter of importance and also whether proceedings under the provisions of the General Sales Tax Act for the recovery of the penalties for non-compliance with the provisions of the Statute by the assessee were purely criminal in nature had also to be determined. After elaborately examining the scope of the previous decisions both in the Indian Courts and in the Courts in the United Kingdom, it was held that: "The standard of proof required from the prosec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is urged that the application of Sec- tion 16A must be limited only to cases which do not come under Section 22 of the Act. The contention is that when the validity of the tax under Section 22 was itself questioned Section 16A cannot be availed of to deprive the petitioners of their right to test the justness or other- wise of the claim to sales tax. That is to say, if the tax claimed is not leviable under Section 22 of the Act, then the tax imposed upon the petitioners cannot be said to be one imposed under the Act. On the other hand, it must be considered to be an assessment de hors the Act and as such, the imposition is outside the scope of the General Sales Tax Act and it should be open to the assessee to question the validity of the assessment. Mr. Jayarama Ayyar further argued that, even if Section 16A is considered to be a valid section, what cannot be questioned, in a Criminal Court is the tax that has been validly imposed under the provi- sions of the Act and not taxes which are invalid under the law and which happen to be contrary to Section 22 of the Act itself. According to him, Section 16A being subject to Section 22, Section 16A cannot be a bar against the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the accused to question the legality of the assessment, notwithstanding Rule 31. The finality referred to in Rule 31 is only for the purpose of the Act and where the legality of the assessment is questioned, whether in a civil suit or in a criminal proceeding, there will be no bar arising under the rule or under Section 228 of the Act. In Raleigh Investment Company v. Governor-General in Council(7), which was a case which arose under the Income-tax Act, the term "assessment made under this Act" occurring in Section 67 has been defined to be "an assessment finding its origin in an activity of the Assessing Officer acting as such and the circumstance that he had taken into account an ultra vires provision of the Act was in that view immaterial in determining whether the assessment was 'made under the Act.' The phrase described the provenance of the assessment; it did not relate to its accuracy in point of law." Relying on these cases, Mr. Jayarama Ayyar's contention is that Section 16A of the Act could not be operative in so far as neither the claim for sales tax from the petitioners was valid, nor were they liable to pay the tax under the Act and that the petitioners in such c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the defaulted amount of tax, the assessee could not have any right to question the validity of the assessment, or the liability to pay the tax, claimed from him before that Court. Just as the executing Court cannot go behind the validity of the decree or otherwise, even so before the Criminal Court, the assessee can- not raise any defence as to the validity or otherwise of the assessment. In such cases, all that the prosecution has to prove under Section 15 (b) is that there has been an assessment made against the assessee that the tax was due from the assessee and that it had not been paid. The offence for which the present petitioners are prosecuted being only the default in payment of the assessed tax, it was not necessary for the prosecution to prove anything beyond these facts and it was therefore not open to the Criminal Court to go into the question of the validity or otherwise of the tax or the liability of the petitioners to pay the same. For, it is only the stage of collection that is before the Criminal Court and at that stage, the assessee cannot be allowed to have the right to question the validity of the assessment itself and therefore it is that the provision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue that the order sought to be enforced is a wrong order and that it does not exist in law so as to impose any liability on the person against whom it is directed, especially when he is sought to be punished, whatever might be the form or nature of punishment; and this is what is sought to be achieved by the enactment of Section 16A. It is pointed out further by the learned Advocate-General that the Madras General Sales Tax Act has provided all the necessary processes to enable the assessee to question the validity of the tax at any stage when it is sought to be levied, and if these processes are gone through and when the tax had become due under the Act, it will no more be open to the assessee to go behind the finality of the tax levied and ques- tion it when it comes to a stage of collecting the same. The machinery provided to enable the assessee to question the legality of the tax, or his liability to pay the same, is contained in Sections 11 to 12C of the Act which have already been referred to in the earlier part of this judgment and the question now is whether, in the case of such machinery having been provided, for affording the fullest opportunity to the assessee to agi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be heard before the Criminal Court to say that the tax has not been validly or properly levied against them, or that they are not liable to pay the same. This argument, in our opinion, appears to be sound only so far as the objections to the assessment order have reference to the provisions of the Act under which the taxing authority claims to have acted in levying the tax but it cannot be tenable when the assessee raises the question as to the propriety of the assessment order itself with reference to provisions of law under which the taxing measure itself has come into existence, and more especially when the very basis of the power to levy the tax is assailed for want of jurisdiction or as being in derogation of constitutional rights. When such questions as the propriety of the order, or the legality of the section, which shuts out any legitimate defence being put forth, are raised, then simply because the matter arises before the Criminal Court, the assessee cannot be denied the right which is available to him ordinarily as an accused person. It is, however, urged that the very object of providing the elaborate remedies contained in the Act will be defeated if a Criminal Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. The term "offence" has been defined in Section 40 of the Indian Penal Code as denoting a thing made punishable under the Penal Code or under any special or local law. The term "conviction" is also defined in the Law Lexicon as meaning "condemnation etc., of a person in a criminal case or matter"-vide Ramanatha Iyer's Judicial Dictionary, pp. 244 and 263. In view of the terminology used in Section 15 of the Madras General Sales Tax Act, it is contended that the prosecution launched against the petitioners in the present cases cannot be said to be merely the enforce- ment of an order of the taxing authority, or a mere proceeding for the realisation of the tax on the analogy of a Civil Court, executing a decree, but that it has been made a criminal offence entailing punishment on conviction in the shape of a fine and such fine is recoverable by attach- ment of the properties of the person fined. So, the prosecution becomes a criminal proceeding both in form and substance. What the petitioners are tried for is, therefore, a criminal offence and the punishment for the offence is a fine. From one point of view, the effect of Section 16A is that once the existence of an assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 15 merely because there are no better terms available, and that the mere use of the same terminology as occurs in the Indian Penal Code, or the Criminal Procedure Code, can- not really be said to make the default in the payment of tax to be on a par with a criminal offence involving moral turpitude such as those made punishable under the Indian Penal Code. It may be true that after all it is only the default in the payment of tax that is made punishable and that too by a mere fine which, in effect, really amounts to a penalty, though it is described in relation to the prosecution and the conviction as a fine. It may also be that the statute under which a fine is levied for default of payment of the tax due from the assessee is a special statute for the enforcement of orders in regard to collection of taxes and that the taxes due to the State have to be collected after they have be- come legitimately due from the assessees by some process which will enable the State not to lose the same and which process has to take the form of a criminal prosecution. But in our view all these would not make it any the less a prosecution and it is no answer to the contention of the learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the tax has yet to be determined before it could be enforced. But Sec- tion 16A debars the assessee from resorting to even such a good and tenable defence. If such be the case, it cannot be argued that the section is intra vires of the Constitution which guarantees that no person shall be punished unheard, and without a right to defend himself in conformity with the existing provisions of law. It is next argued by the learned counsel for petitioners that the fine levied by a Criminal Court cannot be said to be on a par with the levying of a penalty under the Income-tax Act, or the recovery of that tax as if it were an arrear of land revenue. The imposition of a fine by a Criminal Court is on a conviction and it cannot be classified along with penalties under other Acts levied by the taxing authority. A reference to Section 16 of the same Act which provides for composition of offences under the Act makes it quite clear that the failure to pay the tax is made an offence in respect of which a fine could be imposed by the Criminal Court, notwithstanding the fact that such default is made compoundable, and the section gives the power to the prescribed authority to accept from any pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny offence under the Penal Code, it is open to the accused prosecuted under Section 15 to enter the witness box and give evidence in his favour. Certainly, when such a situation is not contemplated, why should the prosecution under Section 15 of the General Sales Tax Act be treated differently from the prosecution under the Indian Penal Code or any other law? Mr. Jayarama Ayyar also laid stress upon the fact that Section 342 of the Criminal Pro- cedure Code which is applicable in the case of ordinary offences under the Penal Code is not made applicable to an offence under Section 15(b) of the General Sales Tax Act and that this be the effect of Section 16A of the General Sales Tax Act, then again, it will offend against the Criminal Procedure Code and the rights given to the accused thereunder. If the Magistrate is not entitled to put questions to the accused who is charged with the offence of having failed to pay the tax due from him to explain the circumstances appearing against him, whatever they might be, then it would certainly amount, according to the learned counsel, to denying the accused the opportunity to plead his innocence before the Magistrate and explain the incrimina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r not to pay the same and so forth, and in so far as it is not open to the accused even within the limited scope of the taxing law, to disprove the offence of the non-payment of the tax by showing adequate grounds for such non-payment or failure, it cannot be said that the protection afforded to other accused in other criminal cases is available to him. Once again though what Section 16A contem- plates is to prevent only the re-opening of the question of the validity of the tax, or the liability of the person to pay the same, before the Criminal Court and even though the scope of the Magistrate's jurisdiction is limited to decide upon the simple issue whether the tax due has been paid or not still so long as the enquiry before the Magistrate is in the nature of criminal trial, quasi or otherwise, the accused cannot be deprived of the elementary rights which the Criminal Procedure Code and the Evidence Act guarantee him. It may, however, be argued that even in this trial, it is open to the accused to show that the notice under Section 10 is defective, or that the time within which the payment shall be made had not expired, so what when the scope of the prosecution itself is limited, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying or otherwise dealing with such offences. Mr. Jaya- rama Ayyar's contention is that, in so far as the effect of Section 16A of the General Sales Tax Act is that the accused assessee shall not be entitled to question the validity of the assessment against him or his liability to pay the same, because all that the prosecution has to prove against him is the existence of an assessment order which has been validly served on him specifying a time within which he has to pay, the right given to the accused to claim a trial according to the provisions of the Criminal Procedure Code is taken away. So far as the limita- tion imposed under Section 5(2) is concerned, it is argued that it has reference only to the manner or place of investigating, inquiring into, or trying and it will not be correct to say that it warrants the depriving of all the other rights available to the accused to a prosecution, namely, to defend himself by disproving the validity of the claim against him or by putting forth a defence that there is no liability which can be enforced against him, for the default of which he could be punished and so forth. In the Full Bench decision of this Court in Thiruvengadaswami v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by him that the scope of the Full Bench decision in Thiruvengada- swami v. Municipal Health Officer, Karaikudi(1), is not what the learned Advocate for the petitioners contends, but that it only has the effect of declaring that the previous decisions in Public Prosecutor v. Khader Khan(2) and Public Prosecutor v. Kondappa(3) were wrongly decided and they turned upon the interpretation of word "due" as meaning "legally due". We regret, it is not possible for us to agree with the learned Advocate-General that Section 16A of the General Sales Tax Act does not take away the rights that are vested in the accused under Section 5(2) of the Criminal Procedure Code when he is tried under (1) (1950) I.L.R. 1950 Mad. 118. (3) (1947) 1 M.L.J. 317. (2) (1946) 2 M.L.J. 461; 1 S.T.C. 142. Section 15, sub-clause (b), of the said Act. Section 1, sub-clause (2), of the Criminal Procedure Code does not, in our opinion, have the effect of enacting anything in derogation of Section 5(2). It only relates to the extent of the application of the Code of Criminal Procedure in the matter of territorial and other jurisdiction etc., and by no means nullifies the effect of Section 5(2). Even granting tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers, as in the illustration above, we do not think that we can agree with him. It will be nothing of a travesty of justice if we are to acquiesce in such a position. For, in such a situation, as described above, in our view, it should be open to the assessee to con- tend before the Criminal Court that the assessment has not taken place, that he has not been made aware of it or that he has not been heard before it was passed, that the order itself has come into existence behind his back, that it is the result of the exercise of fraud upon the powers vested in the assessing authorities or that the order has been passed without jurisdiction and as such not enforceable against him. If the assessee is not entitled to do all this, we do not think that Section 16A of the Act, which is only a complete negation of the rights of the asses- see given to him under the Criminal Procedure Code can be held to be consistent with the Constitution or the existing law regulating criminal justice. In Syed Mohamed Co. v. State of Madras(1), relied on by the learned Advocate-General, a Bench of this Court has held that Section 16A of the General Sales Tax Act is valid and it cannot be said to be oppos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been obtained before it became law to prevail in the State. There is nothing before us to show that Section 16A of the General Sales Tax Act has been, at any time, reserved for the assent of the Governor-General under Section 107 of the Government of India Act, 1935, then in force or under Article 254 of the Constitution at any subsequent date. It cannot be disputed that actually Section 16A of the General Sales Tax Act affects the jurisdic- tion of the Sessions Court or the High Court, for, if that section of the Act is to be taken as operative, the accused assessee will not be entitled to prefer any revision against the order of the Magistrate under Section 15(b). But as Sections 435 and 439 of the Criminal Procedure Code stand, even in quasi-criminal proceedings the accused has the right to take up the matter before the Sessions Court or the High Court as the case may be and no valid reason is shown as to why such a valuable right should be denied to the assessee when he is convicted and fined under Section 15(b) of the Act. Therefore, in our view, inasmuch as Section 16A has the effect of depriving the accused of his right under these sections of the Criminal Procedure Code it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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