TMI Blog1971 (3) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 5 Clive Row, Calcutta, holding registration certificate No. 372A LR (Central). It is his case that for the purpose of assessment under the said Act he is required to submit a yearly return and his accounting year is the Ramnavami year. In respect of the year ended on Chait Sudi 8, 2019, corresponding to 12th April, 1962, he had to submit return by 11th June, 1962, in accordance with the provisions of the Central Sales Tax (Registration and Turnover) Rules, 1957, read with rule 8 of the Central Sales Tax (West Bengal) Rules, 1958. On the 24th March, 1964, the Commercial Tax Officer issued a notice in form 3, prescribed under rule 9 of the Central Sales Tax (West Bengal) Rules, 1958, calling upon the appellant to appear and produce the books of accounts before him on the 7th May, 1964, for the purpose of assessment of the Central sales tax for the year ended on Chait Sudi 8, 2019, and also for showing cause why penalty under section 11(1) of the Bengal Finance (Sales Tax) Act, 1941, should not be imposed upon him. On the 18th September, 1964, the Commercial Tax Officer completed the assessment for the period under section 9(3) of the Central Sales Tax Act, read with section 11(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Sales Tax (West Bengal) Rules, 1958, providing for imposition of penalty are illegal and ultra vires the Central Sales Tax Act and/or the rule-making powers of the State Government. The matter came up before P.K. Banerjee, J. Banerjee, J., discharged the rule and dismissed the application and the petition by an order and judgment dated the 19th February, 1970. The learned Judge came to the conclusion that under section 11 of the Bengal Finance (Sales Tax) Act, the sales tax authorities in West Bengal were empowered to impose penalty for non-submission of return or late submission of return and also for default in payment of assessed tax and, therefore, reading section 9(3) of the Central Act with section 11 of the Bengal Finance (Sales Tax) Act, the sales tax authorities could impose penalty on a registered dealer who did not file return under the Central Sales Tax Act and/or did not pay any assessment. The appellant's contention that section 9 of the Central Sales Tax Act of 1956 was ultra vires on the ground of entry 92A or 93 of List I of Schedule VII of the Constitution of India was rejected. The learned Judge further came to the conclusion that by incorporation of the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the general sales tax law of the appropriate 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 this Act as if the tax or penalty payable by such a dealer under this Act is a tax or penalty payable under the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, penalties, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly." It is followed by a proviso which is not material for the present purpose. Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of return is not one of the grounds mentioned in section 10 for which a penalty could be imposed under the Central Sales Tax Act. Actually the first part of section 10 does not mention penalties but fine and imprisonment. Section 10A of the Central Sales Tax Act mentions "imposition of penalty in lieu of prosecution". It provides: "If any person purchasing goods is guilty of an offence under clause (b) or clause (c) or clause (d) of section 10, the authority who granted to him or, as the case may be, is competent to grant to him a certificate of registration under this Act may, after giving him a reasonable opportunity of being heard, by order in writing, impose upon him by way of penalty a sum not exceeding one-and-a-half times the tax which would have been levied. under this Act in respect of the sale to him of the goods if the offence had not been committed: Provided that no prosecution for an offence under section 10 shall be instituted in respect of the same facts on which a penalty has been imposed under this section." By an amendment of this section 10A, which itself was introduced by Act 31 of 1958 with effect from the 1st October, 1958, a new subsection (2) was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose they may exercise all or any of the powers they have under the general sales tax law of the State" followed by the provisions which have also been quoted above. There the limiting words are "for this purpose" and not any other purpose. Now, each one of these five points of emphasis in section 9(2) of the Central Sales Tax Act has a significant bearing and relevancy on the points to be decided in this appeal. Each one of these five considerations are in favour of this appellant and against the revenue. Before proceeding with the interpretation of these special features of section 9(2) of the Central Sales Tax Act, it would be appropriate at this stage to notice the contention put forward by the learned Advocates for the taxing authorities, Mr. Das Gupta, Mr. Somendra Chandra Bose and Dr. Devi Pal. The answer on behalf of the taxing authorities to these contentions of the appellant appears to be this: According to the taxing authorities, section 9(2) incorporates the entire machinery for collecting the taxes including penalties as provided in the State laws and the different State Sales Tax Acts. For this purpose, on behalf of the taxing authorities, reliance is placed on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act as imposable even though it is not a ground of penalty under that Act would be to delete the express provisions in section 9(2) saying "including any penalty payable by a dealer under this Act" and also to override the purpose for which such powers are exercisable under section 9(2) of the Central Sales Tax Act which are clearly limited by the use of the expression "and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State". In the decision of the Division Bench of the Mysore High Court, we do not find any reference to these crucial expressions and their interpretations. As against this authority of Adinarayana Setty v. Commercial Tax Officer[1963] 14 S.T.C. 587., it will be now necessary to notice another subsequent decision of a Division Bench of the same Mysore High Court in Guldas Narasappa Thimmiah Oil Mills v. Commercial Tax Officer, Raichur[1970] 25 S.T.C. 489., on which Mr. Mukherjee, the learned Advocate for the appellant, relies. The ratio of this decision in Guldas Narasappa's case(2) is that the provisions relating to the imposition of penalty in a taxing statute are substantive in character and they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in State of Kerala v. P.P. Joseph and Co. and Joseph Elias [1970] 25 S.T.C. 483 (S.C.). There the Supreme Court points out that the effect of the Central Sales Tax (Amendment) Ordinance, 1969, was to supersede the judgment of the Supreme Court in the case of Yaddalam Lakshminarasimhiah Setty[1965] 16 S.T.C. 231 (S.C.). It also points out that by section 9(2) of the Central Sales Tax Act, 1956, as amended by the Ordinance of 1969, the procedural law prescribed by the general sales tax law of the State applied in the matter of assessment, reassessment, collection and enforcement and payment under the Central Sales Tax Act, but the liability to pay was determined by the provisions of the Central Sales Tax Act. Plainly, the Supreme Court has clearly laid down the distinction between the "procedural law" and the "liability to pay" and that for the former the State law of machinery was attracted, but for the latter the "liability to pay" must be determined by the provisions of the Central Sales Tax Act. The Supreme Court further points out that the effect of the amendment of section 2(j) of the Central Sales Tax Act, 1956, by the Ordinance with retrospective effect from the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself all concessions given under the Orissa Act for payment within the prescribed time and the rebate was offered to facilitate and expedite that collection. Penalty stands, in our opinion, on an entirely different footing. Penalty can only be collected by express words or by necessary implication in the statute and not inferentially nor is it like rebate a matter of procedure for granting concession for earlier or due payment, but is a matter of substantive liability imposing additional burden and imposition. We are also of the opinion that if tax must be clearly brought within the statute, penalty must equally, if not more so, be brought within the bounds of the statute. It will be worth while to cite an authority of the Madras High Court in the State of Madras v. M. Angappa Chettiar and Sons[1968] 22 S.T.C. 226. , where the Madras High Court lays down the principle that the power to collect penalty under section 9(3) of the Central Sales Tax Act, 1956 (as it stood before) will cover only the penalty payable under that Act and will not include a power to impose the penalty itself for a contravention or omission for which that Act does not contain a provision apart from the M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port of the goods out of, the territory of India, within the meaning of section 5 of that Act. The result is that in the submission of returns of the sales tax payable under the Bengal Act in Form III there is a specific column in the return where the registered dealer in showing the deductions has got to show, for instance in clause 6, "sales of goods which have not taken place in West Bengal, or have taken place in the course of inter-State trade or commerce or in the course of import into, or export out of, the territory of India". Therefore, the taxing authorities in the State, in any event, are having returns even of sales of inter-State trade or commerce, although the State cannot impose a tax on the sales or the turnover in the course of inter-State trade or commerce. That perhaps may be one of the reasons why non-submission of returns under the Central Sales Tax Act is not made an offence under the Central Sales Tax Act. That would tend to the conclusion that delay in submission of returns under the Central Sales Tax Act was not contemplated at all and, therefore, there was no question or scope for imposing any penalty for such delay. In this connection, the Central Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrect or complete within the meaning of section 11(1) of the Bengal Act as quoted above. Presumably that is the reason why the Central Sales Tax Act does not make any special provision for penalty for delay or failure in submitting the return. There is one more aspect to this problem. A penalty should be strictly construed. As a tax cannot be imposed by implication, a penalty cannot be imposed by implication. It must be clearly provided for. That is the settled principle of construction. In the present context, it is not necessary to discuss the different views on the question whether a penalty is an additional tax or not. See Lalchand Gopaldas v. Commissioner of Income-tax, U.P. and V.P.[1963] 48 I.T.R. 324. and the Supreme Court decision in Commissioner of Income-tax, Andhra Pradesh v. Bhikaji Dadabhai Co.[1961] 42 I.T.R. 123 (S.C.). What is important from the point of view of construction is that penalty being ex hypothesi penal must be clearly imposed by statute. Many taxing statutes, as for instance, Income-tax Act, make elaborate provisions for penalty. Such penalties are not to be equated with criminal proceeding. In Inland Revenue Commissioners v. Jackson[1962] 44 I.T.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffence" in this connection is a clear indication that the fine and offence within the meaning of rule 12 are relatable only to prosecution and criminal proceedings provided in the Central Sales Tax Act and has nothing to do with "Penalties" for non-submission of returns or delay in the submission of returns. Section 11 of the Central Sales Tax Act provides for cognizance of offences punishable under the Central Sales Tax Act or the Rules made thereunder. Section 10 of the Central Sales Tax Act to which reference has already been made provides that if any person comes within sub-clause (a), (b), (c), (d), (e) or (f) of that section, he shall be punishable with simple imprisonment which may extend to six months or with fine or with both and when the offence is a continuing offence with a daily fine which may extend to Rs. 50 for every day during which the offence continues. Although the marginal note to section 10 of the Central Sales Tax Act is "penalties", yet the section is wholly taken up with criminal prosecution, imprisonment and fine and not penalties at all and as such "penalties" are to be clearly distinguished from "fine" and "criminal prosecution". This conclusion is fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat basis at all. On its own terms, therefore, the present order of penalty cannot in any event stand. For, plainly it is in violation and in disregard of even section 11(1) of the Bengal Sales Tax Act, the material portion of which I have just now quoted. Reading this order of penalty which is challenged in this appeal, we are left with no doubt that the taxing authorities have made an utter confusion in law and procedure. In the first place, although the order of penalty purports to say that it is one under section 11(1) of the Bengal Finance (Sales Tax) Act, yet in fact and in terms it is not so as has been indicated just now. Secondly, it makes a confusion between the Central Sales Tax Act and the Central Sales Tax (West Bengal) Rules, 1958. That confusion is first between "fine" and "penalty". The penalty the taxing authorities have imposed in this case is not in accordance with rule 12, nor is it in accordance with the competence of the rule-making power under section 13(5) of the Central Sales Tax Act. Lastly, the order of penalty makes a confusion between fine in a prosecution for an offence under the Central Sales Tax Act and the concept of penalty. The order of pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int could be made of infringement of article 21, as these two sections constitute the procedure established by law and, secondly, the proviso to section 46(2) of the Income-tax Act did not indicate a different and alternative mode of recovery of the certified amount of tax but only conferred additional powers on the Collector for the better and more effective application of the only mode of recovery authorised by sub-section (2) of section 46, and, therefore, viewed in that light, there was no question of the possibility of any discrimination violating article 14 of the Constitution. It is interesting to note that Chandrasekhara Aiyar, J., who agreed with the majority view in that decision expressed his doubts on this point of discrimination. The learned Judge observed at page 28 of the report in these terms: "We have to face and accept wholly different consequences for nonpayment of income-tax according as the assessee belongs to one State or another. The nature of the tax is one and the same, and it is levied under a single Central Act, and yet the ultimate coercive processes for recovery differ in nature and extent between State and State. We have to attribute to the Legisla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round but for which the penalty cannot exceed 1/10th per cent. of the tax due or rupees five for every day thereafter. We have already noticed that section 11(1) of the West Bengal Finance (Sales Tax) Act introduces a penalty which may amount to one and a half times the amount of tax which is similar to the provision in the Gujarat Sales Tax Act and in the Maharashtra Sales Tax Act. According to Mr. Mukherjee, this is discriminatory and does not treat equal persons equally or equal offences equally. In support of this argument, the learned Advocate for the appellant also relies on the actual language of entry 92A and entry 93 in List I of the Legislative List in the Seventh Schedule of the Constitution of India. Entry 93 of List I of the Seventh Schedule of the Constitution of India uses these words: "Offences against laws with respect to any of the matters in this list". From this it would follow that Parliament could legislate for offences against laws imposing taxes on the sale or purchase of goods in the course of inter-State trade or commerce. According to Mr. Mukherjee, the learned Advocate for the appellant, to read section 9(2) of the Central Sales Tax Act as granting power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng between one State and another when it is a Central statute operating throughout the land. Any benefit enjoyed by one State is enjoyed by all others. So also any disadvantage suffered by one State under the Act is suffered by all others. Then, to infer that the imposition of tax on inter-State sales where it has been exempted in respect of intra-State sales will necessarily impede the flow of trade is to oversimplify the complicated factors which influence the flow of trade and for this the Supreme Court decision in Nataraja Mudaliar[1968] 22 S.T.C. 376 (S.C.); A.I.R. 1969 S.C. 147. is cited. For the reasons stated above, we set aside the order of the learned Judge and allow this appeal. The rule is made absolute. Let appropriate writs issue in terms of prayers (a) and (c) of the petition. The respondents will pay the appellant a consolidated cost of seven gold mohurs for the hearing of the appeal and the rule. Let the operation of this order remain in abeyance for six weeks from date, as prayed for. We, however, direct that the amount of Rs. 2,500 deposited by the appellant with the Registrar, Appellate Side, should now be returned to the appellant upon furnishing security to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g any penalty payable by any dealer under the Central Act, in the same manner as tax on sales or purchases of goods under the general sales tax laws of the State, and that for this purpose such authorities may exercise all or any of the powers they have under the general sales tax law of the State, and the provisions of such law including the provisions relating to returns, appeals, reviews, revisions, references, refunds and penalties shall apply accordingly. It is clear that what sub-section (3) provides is that the State sales tax authorities should assess, collect and enforce taxes under the Central Act including penalty payable under the Central Act and, in doing so, such authorities shall exercise all the powers they have under the sales tax laws of the State. Quite plainly, the Legislature contemplated that the penalty to be realised by the State sales tax authorities would be a penalty under the Central Act, and not any other penalty under any other Act. It is true that in realising penalty the State authorities would exercise all the powers under the general sales tax laws of the State; but such authorisation does not amount to a provision for levy of a penalty under the C ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
