TMI Blog1980 (10) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... n of sales tax and as a deterrent measure so that the dealers may not evade or delay the payment of tax." With increase in rate of tax and growth in volume of business the tendency of withholding tax realised from customers on behalf of the Government, of which the dealer thus became custodian only, increased and it began to be utilised as capital for as long as possible either under the cover of disputed tax or in lieu of stay orders granted by this Court, State Government or authorities under the statute itself. In order to curb this tendency and tighten the collection machinery further sub-sections (1) and (1-A) of section 8 were substituted by subsections (1), (1-A), (1-B) and (1-C) of Act 23 of 1975. In order to understand the scheme of payment of interest since 1975 and appreciate the rival submissions made by the learned counsel for the parties, sub-sections (1), (1-A) and (1-B) as far they are relevant are extracted below: "8. Payment and recovery of tax.-(1) The tax admittedly payable shall be deposited within the time prescribed or by the thirty-first day of August, 1975, whichever is later failing which simple interest at the rate of two per cent for every month or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the former at higher rate makes it necessary to examine the meaning of the expression "tax payable under the Act". An attempt was made on behalf of the petitioner to equate it with "tax admitted" in the proviso to section 9 and it was urged that the interpretation given by this Court in Commissioner of Sales Tax v. Bishambhar Dutt Mohan Lal [1979] 43 STC 189; 1979 UPTC 801 should be applied and the expression should be understood in the same sense. The learned counsel relied on similarity of language in the two sub-sections and placed the following comparison: Explanation to section 8(1) the tax admittedly payable means the tax which is payable under this Act on the turnover of sales or, as the case may be, the turnover of purchases, or of both admitted by him in any return or proceeding under this Act, whichever is greater,..............." Proviso (a) to section 9(1) the amount of tax or fee due under this Act on the turnover of sales or purchases, as the case may be admitted by the appellant in the returns filed by him or at any stage in any proceeding under this Act, whichever is greater." It is true that the phraseology of explanation and the proviso to section 9(1) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd deposits the same. After some time the rate is enhanced with retrospective effect. The dealer becomes liable to pay tax on the rate prescribed by the retrospective legislation. But whether this can be considered to be tax payable under the explanation as well? Similarly a certain commodity is held to be taxable by this Court under a specific entry of a notification. The dealer in subsequent years deposits tax in accordance with it. During pendency of the proceedings the Supreme Court takes a different view either in the case of the assessee or some other dealer and holds that the item is taxable at higher rate under a different notification. What is the tax payable for purposes of subsection (1) of section 8. The tax held payable in earlier years or the tax which should have been paid in view of the pronouncement made by the Supreme Court. Similarly where the assessee deposits tax on lesser rate or claims exemption because the goods have been sold or purchased in circumstances specified in section 3-AAA, 3-AAAA, 3-D or 4 and files the form prescribed under the Rules but those forms are rejected due to some technical omission. What would be the tax payable, the tax which the deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im to calculate the tax in such a manner and would not penalise him for acting in the manner in which he was expected to act. The dealer while calculating the amount of tax payable by him at a particular time is not expected to anticipate either that the decisions which at that particular time held the field would be reversed or that subsequently the legislature will step in and make an enactment rendering his calculation wrong by making a legislation effective from an earlier date and to make his calculation accordingly. It therefore, follows that where a dealer calculates the tax payable by him in accordance with the prevailing interpretation on the subject, it would not be possible to say that the same is not the tax payable under the Act. So long as the calculation is in accordance with the Act the dealer cannot be fastened with liability of interest on any amount found in excess due to change in law or its interpretation. Once calculation has been done in accordance with the Act it is not subject to alteration or variation for purposes of payment of interest. It continues to be so till the assessment is made. The point of time when calculation of tax payable has to be made is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on its turnover while filing return within the time specified at that rate. If the payment is not made or it is made at lesser rate, the dealer becomes liable to pay interest on it at the rate of two per cent from the date of filing of return or if no return is filed from the date it should have filed till the date of assessment. But the dealer may raise dispute about taxability or about rate; and then the question may arise what is the tax payable under the Act, that which is calculated or determined by the dealer or that found to be due by the assessing authority. In such cases it is the bona fide of the assessee which shall have to be examined. So long as the calculation is honest and fair the dealer shall not incur any liability to pay interest. The apprehension of the learned standing counsel that if this view is taken no assessee shall deposit any tax and he shall escape liability to pay interest does not appear to be justified. Whether the determination by a dealer was bona fide or not can be easily ascertained on well-settled principles laid down by the Honourable Supreme Court and this Court in numerous decisions. It is true that it shall differ from case to case and may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xercise in futility. It shall frustrate the legislative intention which is so apparent. An interpretation which renders any provision redundant or inoperative cannot be accepted. Nor is there any rationale in the argument that time granted for deposit of tax assessed is fresh grant of time. The two sub-sections operate in different fields. They do not overlap nor do they deal with the same situation. For purposes of levy and payment of interest the entire period beginning from the date the return of turnover has to be filed or is due to be filed till final payment of tax assessed has been bifurcated into two, one from the date when return becomes due till the date of assessment and the other from assessment till payment. After assessment the liability to pay interest arises if tax assessed is not deposited within three months. The cause of action is the default in payment of tax within the time specified in the notice of demand. It has nothing to do with the default committed by dealer in tax admittedly payable under the Act. The event of assessment order results in ceasure of liability under sub-section (1) and merger of tax admittedly payable in tax assessed. The grant of three m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner (Assessment) directed the petitioner to deposit interest amounting to Rs. 2,17,846.28 on Rs. 2,38,350 for a period of forty six months beginning from 1st June, 1975, to 20th April, 1979. It is against this demand that this petition has been filed. The question is whether this demand is justified. The return for the last quarter ending March, 1975, must have been filed by April. Till that date the law as declared by this Court and understood by the assessee was that biscuit was cooked food. In the return filed it therefore paid tax on the turnover disclosed at two per cent. This determination of tax payable was in accordance with the Act. The petitioner could not be held liable to pay interest on it because subsequently in case of another assessee it was held that biscuit was not cooked food. As seen earlier this may result in tax in excess but it could not render the calculation of tax payable under the Act erroneous or mala fide. At the time of deposit within the time specified the tax admittedly payable on biscuit was two per cent only. It was argued by the learned standing counsel that the effect of the decision given by this Court was that biscuit shall be deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctordes were assessed to tax as unclassified item and the amount so assessed was deposited by the petitioner on 11th July, 1977. There is no dispute in this regard. What happened thereafter was that the assessing authority issued a notice on 23rd May, 1980, asking the petitioner to deposit interest on the aforesaid amount from 1st June, 1973, to 2nd August, 1977. It is this notice which is under challenge. On the principle laid down by us above no demand of interest could be made from the petitioner for the quarters in which the calculation was made on circular issued by the Commissioner that electrodes are taxable under entry electrical equipments. The decision in B.C.M. Franklin's case [1973] 31 STC 251; 1972 UPTC 716 was given by this Court in October, 1972. It is not clear when the decision was published or became known to the petitioner. On the returns filed prior to it there could be no question of levying any interest. For the quarters of which return was filed after October, 1972, the liability can be fastened only if the petitioner had knowledge through the decision of this Court that electrode was unclassified item yet it determined the tax payable as nil on the circula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned that as sale was made to registered dealers and such sales being exempt under section 3-D(1) the petitioner did not commit any error in determining the tax payable to be nil under section 8(1). Therefore, its failure to file form could result in enhancement of "tax in excess" but the assessing authority could not while assessing tax create any demand for interest. Reliance was placed on Commissioner of Sales Tax v. Venus Auto Traders 1980 UPTC 273. None of the submissions have any merit in it. We have already indicated above that liability to pay interest under sub-section (1) of section 8 is not affected by the deposit of tax assessed within the time specified. The only question, therefore, is whether the calculation of tax payable was in accordance with the Act. It is not disputed that if the petitioner effected sales to a person other than a registered dealer then it was liable to pay tax under subsection (2) of section 3-D. The liability to pay tax therefore depended on this crucial fact which is required to be proved by filing form III-C(1) under subrules (6) and (7) of rule 12-B. It is admitted that these forms were not filed. In the absence of these forms it cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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