TMI Blog1984 (12) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... the period from 1st January, 1971 to 31st December, 1971 on 5th March, 1973. According to the assessment order the balance tax due by the respondent came to Rs. 50,018.40. The Sales Tax Officer also levied a penalty of Rs. 12,505 under section 36(2)(c) of the Act. Thus the total amount of the liability of the respondent to the department came to Rs. 62,523.40 for which a demand notice under section 38(4) was issued by the Sales Tax Officer on 6th March, 1973. The said demand notice was served on the respondent on 9th March, 1973. As per this notice an amount of Rs. 62,523.40 had to be paid by the respondent on or before 23rd April, 1973. The respondent did not pay this amount by that date, but paid it by instalments on subsequent dates. The entire amount was paid off by 25th June, 1974. In the meantime sub-section (3) of section 36 of the Bombay Sales Tax Act was amended with effect from 11th May, 1973. As the tax demanded was paid late, the Sales Tax Officer issued a show cause notice dated 12th June, 1975 under section 36(3) for the levy of penalty. The respondent by its letter dated 19th June, 1975 urged that due to financial difficulties the tax could not be paid in time. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty in terms. Once the dealer committed default in the payment of tax on the due date as per the notice of demand, the default was complete and the liability for the penalty was to be considered as of that date. It was open to the Legislature, as it had done, to provide for the measure of this penalty to be calculated in a particular manner, but that in no way showed that the default was continuous. It was submitted by Mr. Surte that the penalty in respect of a dealer in default could be calculated only at the rates prescribed under sub-section (3) of section 36, as at the time when the default took place, namely, prior to 11th May, 1973. 5.. Before considering the merits of the submissions advanced to us, it would not be out of place to refer to the relevant provisions of the Bombay Sales Tax Act. Section 33 of the Act provides for assessment of tax. Section 38 deals with the questions of payment of tax, deferred payment of tax and so on. Sub-section (4) of section 38, as it stood at the relevant time, inter alia, provided that the amount of tax assessed or reassessed for any period under section 33 or section 35 less any sum already paid by the dealer in respect of such peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nced proceedings for levying penalty under section 18(l)(a) of the Act for late submission of returns. The Wealth-tax Officer ultimately levied penalty on the respondent. In respect of the assessment year 1964-65 from 1st July, 1964 to 31st March, 1969 the penalty was calculated at 2% per month, calculated on the footing that the penalty imposable was at the rate of 2% per month subject to the maximum of 50% of the wealth-tax payable under section 18(1)(a) before its amendment on 1st April, 1969 and for the period from 1st April, 1969 to 18th March, 1971 it was calculated at 1/2% of the net wealth for each month of default under section 18(1)(a) as amended by the Finance Act, 1969. In respect of the assessment year 1965-66, for the period from 1st July, 1965 to 31st March, 1969 penalty was similarly calculated at 2% per month and from 1st April, 1969 to 18th March, 1971 it was calculated at 1/2% of the net wealth-tax per month. We shall refer to these amendments in some detail a little later. Section 14 of the Wealth-tax Act was amended as from 1st April, 1965. We are not directly concerned with that amendment, but suffice it to say that sub-section (1) of section 14 provided, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court was as to how the penalty was to be calculated for the default provided in section 18(1)(a) of the Wealth-tax Act, 1957 namely, the failure to file the return of wealth before the due date without reasonable cause. It was held by the Supreme Court that where the default complained of is one falling under section 18(1)(a) of the Wealth-tax Act, 1957 the penalty has to be computed in accordance with the law in force on the last day on which the return in question has to be filed. Neither the amendment made in 1964 nor the one made in 1969 to clause (i) of section 18(1) has retrospective effect. The Supreme Court has set out the law in this connection with remarkable clarity and we can do no better than to quote from the passage in the judgment of the Supreme Court (at page 335 of the aforesaid Report) which runs as follows: "A liability in law ordinarily arises out of an act of commission or an act of omission. When a person does an act which law prohibits him from doing it and attaches a penalty for doing it, he is stated to have committed an act of commission which amounts to a wrong in the eye of law. Similarly when a person omits to do an act which is required by law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess to say that the aforesaid decision of the Supreme Court, with which we respectfully agree, is binding on us. We may mention that similar principles have been laid down by Pathak, J., of the Gauhati High Court in T.K. Roy v. Commissioner of Wealth-tax [1978] 115 ITR 746, a case which was referred to Pathak, J., on a difference between two other learned judges of that Court. Applying the principles laid down by the Supreme Court to that case before us, it is clear that in the case before us also the default of the respondents was a single completed default under sub-section (4) of section 38 of the Bombay Sales Tax Act. The respondent was bound to pay the tax due and the penalty under section 36(2)(c) of the Act on the date specified in the notice of demand. With the consent of parties, we have taken a copy of the said notice of demand dated 6th March, 1973 on record as a part of the paper book and the said notice of demand specifically states that the amount demanded under it had to be paid by 23rd April, 1973. Once the respondent failed to pay that amount on that date without reasonable cause, the default committed by the respondent was complete. The effect of that default on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsection (3) of section 36 were interpreted as set out earlier it might lead to discrimination and render the provisions of sub-section (3) of section 36 liable to challenge under article 14 of the Constitution. Mr. Jetly wanted us to consider the case of two assessees both of whom were assessed for the same assessment year and against whom notices of demand also was issued on the same day. In the case of one assessee the notice might be served at such time that the due date for payment fell before 11th May, 1974 and in the other case the due date fell after 11th May, 1974. Mr. Jetly said that, if the provisions of sub-section (3) of section 36 were interpreted, as we have done, the result would be that the assessee on whom the notice was served at the earlier date would be liable to pay penalty at the lesser rate and the assessee on whom the notice was served on the later date would be liable to pay penalty at a higher rate and this would result in discrimination. In our view, there is no substance in this argument at all. In the first place, in the example given by Mr. Jetly the assessee on whom the notice was served earlier cannot be said to be similarly situated to an asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is that the assessee shall be liable to pay interest at a particular rate, if the assessee does not pay the amount specified in any notice of demand under section 156 within the period provided in sub-section (1) of section 220. This is a provision for payment of interest and it cannot be equated in law with the payment of penalty. In may be that the penalty in a given case might have been fixed with reference to the loss of interest incurred by the Revenue by late payment, but, in law, the notion of a penalty has to be kept distinct from the notion of payment of interest. In the second place, sub-section (2) of section 220 imposes a liability on an assessee which is unconditional and automatic. There is no question of waiver of interest. Nor does any order have to be passed against the assessee for payment of interest. Once the conditions of subsection (1) are satisfied, the assessee is bound in law to pay interest as provided in sub-section (2). This can, in no way, be compared with the imposition of penalty by an order as contemplated in sub-section (3) of section 36 of the Bombay Sales Tax Act. We may point out that the aforesaid decision of the Supreme Court has been consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext in which that word occurs, it means nothing more than non-payment. The sub-section says that if the tax is not paid by any dealer within the prescribed time, the dealer shall pay penalty for each month during which he continues to make default. The use of the word 'continues' indicates that default occurs as soon as the dealer fails to pay the tax within the prescribed time, whether from inability to make payment or otherwise, and for each month during which this default, that is non-payment, continues the dealer is liable to pay penalty........" In our view, the question before the Court in that case was altogether different and the aforesaid observations cannot apply in a case like the case before us. Apart from this, we are bound by the principles laid down in the decision of the Supreme Court in Commissioner of Wealth-tax, Amritsar v. Suresh Seth [1981] 129 ITR 328 (SC), with which we are in respectful agreement, as we have stated earlier and if the observations relied on by Mr. Jetly in the judgment of the Gujarat High Court run counter to the reasoning or the decision of the Supreme Court in the said case, to that extent, the same cannot be regarded as good law. We may ..... X X X X Extracts X X X X X X X X Extracts X X X X
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