TMI Blog1958 (11) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... id only Rs. 341-4-9 and failed to pay the balance of Rs. 401-13-0. C.C. No. 187 of 1954 related to a similar failure of the respondent to pay a balance of Rs. 1,080 out of the tax of Rs. 1,350 assessed on him for 1949-50. For both the years, the assessing authority assessed the respondent under "the best of his judgment" provisions, as the respondent submitted no return. The amounts of tax demanded were those upheld by the Sales Tax Appellate Tribunal on appeals preferred by the respondent. The tax for the year 1950-51 was based on the average per month of the number of sarees received by the respondent from November, 1950, to March, 1951, for which period alone he maintained accounts. The turnover for all the 12 months was calculated at this average and each saree was valued at Rs. 12 which was the value given by the respondent in his letter dated 23rd August, 1951 (Exhibit P-12 in C.C. No. 186 of 1954). The tax for the year 1949-50 was calculated on the basis of the information furnished by one Shaik Ahmad, another master weaver at Kosigi, who had been the President of the Yarn Advisory Committee at Kosigi between 1950 and 1952. The number of looms under the respondent was fixe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1947 which came into force on 1st January, 1948, the offence made punishable under section 15(b) was failure "to pay the tax due from him within the time allowed". By Madras Act XXV of 1947, the words "to pay within the time allowed, any tax assessed on him, or any fee due from him, under this Act" were substituted in section 15(b) and a new section 16-A was inserted, precluding the validity of assessments under the Act and the liability to pay the amounts assessed from being questioned in Criminal Courts. Section 16-A held the field until it was declared to be void by a Division Bench of the Madras High Court in In re Guruviah Naidu Co.[1954] 5 S.T.C. 129; A.I.R. 1954 Mad. 833. Decisions rendered after Madras Act XXV of 1947 came into force proceeded on the footing that neither the legality nor the quantum of assessments made under the Act could be questioned in Criminal Courts. However, section 16-A has been since repealed in the State of Andhra by section 11 of Act XIII of 1954. In construing the present position under section 15(b) and the effect of the decisions under the Act, one point which arises for consideration is whether the amendment of the terms of section 15(b) by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence. His Lordship Das, Acting C.J., who delivered the judgment observed: "Even if, therefore, we concede, without deciding it, that section 16-A did not prevent the respondents from questioning the validity of the assessment, it was quite impossible for the respondents, on the evidence adduced by them, to contend. that the purchases were exempt from sales tax by virtue of Article 286(1)(b), that the assessments were illegal and that consequently the non-payment thereof was not an offence." As the assessment is required to be under the Act, it is open to the accused to contend that the provisions of the Act have not been complied with. However, it has been held in a series of decisions of single Judges of the Madras High Court that prior to the insertion of section 16-A, an accused could question not only the legality but also the quantum of assessment. In Public Prosecutor v. D. Khader Khan[1946] 1 S.T.C. 142; 1946 M.W.N. 762. , the defence of the accused was that his turnover was very poor, that he did not have so much sales as it was thought he had and that therefore he was not liable to pay the sales tax. Kuppuswami Ayyar, J., held that in a prosecution for failure to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to interfere with the assessment. These decisions have no bearing on the question of the scope of the defence available to an accused in prosecutions under the penal provisions of such Acts. Nevertheless, it appears to me that the point taken by the learned Public Prosecutor is well-founded. The nature of an offence created by a special law has to be considered on the language and object of the statute in question. The language of section 15(b) does not require anything more to be proved with reference to the assessment than that the assessment should have been made under the Act. The object of section 15(b) is evidently to enforce payment and deter non-payment of taxes assessed under the Act through the agency of the Criminal Courts. The section provides for the imposition of a fine by a Criminal Court for default in the statutory duty created by section 10, and also provides that in the event of a conviction the tax which the accused has failed to pay shall be recoverable as a fine. This provision for the recovery of the tax cannot be regarded as much more drastic than the provision in section 10, for section 10 says in effect that the tax may be recovered under the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and to the trend of decisions of the Madras High Court mentioned above, I think that it is necessary that the scope of the defence available to an accused in prosecutions under section 15(b) of the Madras General Sales Tax Act, 1939, should be settled by a Division Bench of this Court. I therefore direct that the appeals be posted before a Bench. In pursuance of the abovesaid order of reference, Appeals Nos. 118 and 119 of 1955 came on for hearing before Subba Rao, C.J., and Basi Reddy, J., and the following order was made by the Court on 9th November, 1957. Order of reference to the Full Bench. The Order of the Court was pronounced by SUBBA RAO, C.J.-These appeals raise the question of the true construction of section 15(b) of the Madras General Sales Tax Act, 1939. The Deputy Commercial Tax Officer, Adoni, assessed the respondent, who is a master weaver at Kosigi to sales tax for the two years 1949-50 and 1950-51. The assessments were confirmed by the Sales Tax Appellate Tribunal. The department launched prosecutions against the respondent under section 15(b) of the Act before the Sub-divisional Magistrate, Adoni. C.C. No. 186 of 1954 relates to the assessment for the year 1950 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is only confined to ascertain whether the tax was assessed on the accused under the Act. (2) The Criminal Court cannot question the assessment if it is made under the Act but can do so if the assessment is made outside the Act, i.e., the assessment is made in contravention of the provisions of the Act, or, in pursuance of the Act or the provisions thereof which are ultra vires of the Legislature. (3) The validity and the correctness of the assessment are open to the scrutiny of a Magistrate. The third view enables a Magistrate to question the correctness of the decisions of the tribunals constituted under the Act, and compels the prosecution to sustain the assessment by producing the entire material which has already been sifted and considered by statutory tribunals. The question is whether duplication of this procedure and the possibility of conflicting decisions was contemplated by the Legislature or whether section 15 was enacted simply as a convenient and expeditious device to collect the tax. The decisions taking the contrary view lay emphasis on the fact that when the Legislature makes the non-payment of tax an offence without circumscribing the scope of the enquiry, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uvengadasami v. Municipal Health Officer(1949) 1 M.L.J. 488.also assumed the correctness of the aforesaid decisions: "A distinction has to be drawn regarding the powers of a criminal court when its machinery is sought by the statutory body for recovering a licence fee, a tax or tithe, and cases where a citizen is prosecuted for carrying on a business or industry without a licence where the statutory body, rightly or wrongly but bona fide, refused the licence. In the former case it is open to the court to weigh the evidence and find out whether the statutory body was justified in levying an unreasonable fee." A Division Bench of the Madras High Court in Guruviah Naidu and Co., In re[1954] 5 S.T.C. 129; I.L.R. 1955 Mad. 184., though in a different context accepted and followed the aforesaid rulings. But the Supreme Court in Poppatlal Shah v. The State of Madras[1953] 4 S.T.C. 188; (1953) 1 M.L.J. 739., acquitted the accused, who was prosecuted under section 15(b) of the Act, on the ground that his sale did not come within the meaning of that term in section 2(h) and that the assessment of tax, therefore, was not warranted by the provisions of the Act. The Supreme Court again in Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or hearing before a single judge who referred it to a Bench having regard to the importance of the matter and the Bench in its turn has placed it before the Full Bench for the same reason. The questions that are referred to the Full Bench are: (1) Whether, in a prosecution under section 15(b) of the Madras General Sales Tax Act, it is open to question the validity of the assessment made under the Act? (2) Whether, in a prosecution under section 15(b) of the Madras General Sales Tax Act, the Criminal Court has jurisdiction to adjudicate upon the correctness of the amount of tax assessed under the Act? As the controversy centres round the interpretation of section 15(b), it is useful to extract the terms thereof, omitting the unnecessary portion: "Any person who(b) fails to pay within the time allowed, any tax assessed oil him or any penalty levied or any fee due from him under this Act, Page No: 96 shall, on conviction by a Magistrate of the first class, be liable to be punished with simple imprisonment which may extend to six months or with a fine which may extend to one thousand rupees, or with both and in the case of conviction under clause (b) or (d), the Magistrate shall specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the estate was not leviable to profession tax. This objection was overruled and profession tax was levied. As the tax was not paid, he was prosecuted. The accused raised a plea that he was not liable to pay the tax. This defence was not accepted with the result that he was convicted and this was confirmed in appeal. The matter was brought up to the High Court in revision. In quashing the conviction, Venkataramana Rao, J., who delivered the opinion of the Bench remarked: "We are therefore clearly of the opinion that it is incumbent upon the prosecution to establish affirmatively that the profession tax was legally leviable from the accused and it is also open to the accused to plead and prove that he is not liable to pay the tax and therefore he is not liable to be prosecuted under rule 30, clause 2, of Schedule 4 of the District Municipalities Act." Discussing the applicability of rule 28 of schedule 4 of the District Municipalities Act, which stated that the assessment or demand of any tax where no appeal is made as thereinbefore provided, and when such appeal was made the adjudication of the Council thereon shall be final, the learned Judge observed that the finality was onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 175 provides an appeal against the order of the 'President and two Commissioners' to Magistrates. Section 176 authorises a reference by the Magistrates to the High Court. Section 177 declares the finality of the decision of the respective authorities in the following terms: 'The assessment, revision or demand of any tax or toll, when no complaint, application or objection is made as hereinbefore provided, and the adjudication of an appeal by the Magistrates shall be final'. It will be noticed that the declaration of finality is not merely with reference to the decision of Magistrates or of the President and Commissioners, but, in, case no complaint or objection is made, with reference also to the original assessment." This statement embodied in that decision has some bearing on this enquiry as the Madras General Sales Tax Act devises a machinery similar to that contained in the Act that fell to be considered by the learned Judges there. There are a number of other cases which fall in line with these two rulings and it is unnecessary to allude to all of them. Following Ramaswami Iyengar v. Sivakasi Municipality(1936) M.W.N. 1337. , Kuppuswamy Ayyar, J., in Public Prosecutor v. Kha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the demand for payment of the impost they were prosecuted. The defence was that the assessment levied on them was invalid and therefore they were not liable to pay tax. It was argued on behalf of the prosecution that it was not open to the accused to put forward such a plea in view of section 16-A of the Act. The contention of the prosecution prevailed resulting in the conviction of the accused. On appeal, a Bench of the Madras High Court took the view that section 16-A was ultra vires the Constitution of India and repugnant to the provisions of the Criminal Procedure Code as it deprived the accused of the benefit of the ordinary rules of Criminal Jurisprudence. It was this decision perhaps that was responsible for the acquittal under appeal now. This case is in conflict with Syed Mohammad Co. v. State of Madras [1952] 3 S.T.C. 367; (1952) 2 M.L.J. 598.There, some tanners were assessed under the Madras General Sales Tax Act and no appeal having been filed against it, it became final. However, the assessees did not pay the tax and consequently they were prosecuted under section 15(b) of the Act by the Department. While proceedings were pending before the Magistrate the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1958] 9 S.T.C. 510; (1958) 2 M.L.J. 243. overruled Guruviah Naidu, In re(1) and approved of Syed Mohammad Co. v. State of Madras[1952] 3 S.T.C. 367; (1952) 2 M.L.J. 598.The learned Judges enunciated the principle that when a person was prosecuted under section 15(b) of the Madras Sales Tax Act it was not open to him to raise any objection which could have been raised before the authorities set up under the General Sales Tax Act, the only objections which may be raised being those which the authorities were precluded from entertaining, such as that the Act or any particular provision was ultra vires. He could also show that he was not the person who could be assessed or that the tax levied had been paid. The Full Bench reviewed exhaustively the case law on the topic. It was stated that the Act had set up a hierarchy of tribunals and courts before which persons sought to be assessed could place their objections and the assessees had ample opportunities of contesting the correctness and legality of the assessment before the various authorities mentioned therein. It also pointed out the anomalies resulting from the assessee being permitted to question the correctness of the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such manner and within such time, not being less than fifteen days from the date of service of the notice of assessment or of the levy of penalty, and in default of such payment the whole of the amount then remaining due may be recovered from him as if it were an arrear of land revenue. It is plain that by reason of section 10(1) there arises a duty to pay the tax demanded on the basis of the assessment. If the demand is not complied with, different courses are open to the Revenue: one is to collect it as if it were an arrear of land revenue as contemplated by section 10 itself; and the other is to prosecute him under section 15(b). Such being the situation, the question for consideration is whether the assessee could be permitted to call in question the assessment either with regard to its legality or correctness, when the latter course is pursued by the Department. We may at this stage turn to the pronouncement of the Privy Council in Raleigh Investment Company Ltd. v. Governor-General in Council.[1947] 15 I.T.R. 332; A.I.R. 1947 P.C. 78. What happened there was this. Raleigh Investment Company Ltd. laid an action on the original side of the High Court of Calcutta claimin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on appeal-the details relating to the procedure are immaterial-the assessee could ask for a case to be stated on any question of law for the opinion of the High Court and, if his request were refused, he might apply to the High Court for an order requiring a case to be stated and to be referred to the High Court (See section 30 and The Secretary of State for India v. V.M. Meyyappa Chettiar [1936] 4 I.T.R. 341; I.L.R. 1937 Ma. 211. It cannot be doubted that included in the questions of law which might be raised by a case stated is any question as to the validity of any taxing provision in the Incometax Act to which effect has been given in the assessment under review. Any decision of the High Court upon that question of law can be reviewed on appeal. Effective and appropriate machinery is therefore provided by the Act itself for the review on grounds of law of any assessment. It is in that setting that section 67 has to be construed." In the concluding paragraph of the judgment their Lordships added: "The only doubt, indeed, in their Lordships' mind, is whether an express provision was necessary in order to exclude jurisdiction in a Civil Court to set aside or modify an assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e words "tax assessed under the Act" is different. They only connote that an assessment in fact has been made. There is no warrant for importing the words "lawfully or legally assessed" into the section. We are of opinion that the clause "any tax assessed on him............under this Act" in section 15(b) cannot have the implication. In this context, we cannot do better than quote the words of Lord Uthwatt in Raleigh Investment Co. v. Governor-General in Council[1947] 15 I.T.R. 332; A.I.R. 1947 P.C. 78. Construirig a similar expression in the Indian Income-tax Act, this is what his Lordship says: "The obvious meaning, and in their Lordships' opinion the correct meaning, of the phrase assessment made under the Act' is an assessment finding its origin in an activity of the assessing officer acting as such." Thus, it is clear that these words convey only the idea that the assessment was in fact made by an officer of the Department purporting to act under the Act, and not that the impost was warranted by the terms of the Act. That section does not contemplate the whole process relating to the validity and the correctness of the assessment being gone through once again. The very object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessment on the dealer was made under the Act and that it remained unpaid within the time allowed. No other inquiry is warranted by the language of that section. Only the two elements mentioned above need be established to enable the prosecution to succeed. Finally, our answers to the two questions are: (1) In a prosecution under section 15(b) of the Madras General Sales Tax Act, it is not open to question the validity of the assessment made under the Act. (2) In such a prosecution, the Criminal Court has no jurisdiction to adjudicate upon the correctness of the amount taxed under the Act. C.A. No. 167 of 1956.--The respondents in this appeal urge that on the date on which default was committed section 16-A was deleted by the Andhra Legislature and it was only much later that a similar provision was introduced in the Act and consequently it was open to the accused to plead that he was not liable to pay any tax. We do not think we can give effect to this contention. We have already pointed out that the absence of section 16-A would not make any difference as to the jurisdiction of the Criminal Court to take cognisance of such a plea. Even without that section, the scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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