TMI Blog1992 (1) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... ers or orders passed in appeals in so far as they relate to levy of interest. According to the petitioners, the said provision is ultra vires the legislative powers of the State Legislature and also articles 14, 19(1)(g) and 300-A of the Constitution. Section 45(5) is also challenged on the same grounds. At the hearing of these petitions, learned advocates appearing for the petitioners, did not press their contention that section 47(4-A) is ultra vires articles 19(1)(g) and 300-A. No separate submissions were made to show how section 45(5) is violative of any provision of the Constitution. Therefore, what we are required to consider and decide is (a) whether it was beyond the competence of the State Legislature to enact section 47(4-A), (b) whether section 47(4-A) is ultra vires article 14 and (c) what is the correct interpretation of section 47(4-A) as regards the date from which or the period for which interest becomes payable. Section 47(4-A) is challenged on the ground that it has been enacted by the Legislature in colourable exercise of its legislative powers. The learned advocates appearing for the petitioners stated that they were not challenging the legislative competen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty payable by him under section 45. (3) A registered dealer furnishing a revised declaration or revised return in accordance with sub-section (3) of section 40 which revised declaration or revised return shows that a larger amount of tax than already paid is payable, shall first pay into a Government treasury the extra amount of tax. (4)(a) The amount of tax- (i) due where declarations or returns have been furnished without full payment therefor, or (ii) assessed or reassessed for any period under section 41 or section 44 less any sum already paid by the dealer in respect of such period, or assessed under section 19 or 50, and (b) the amount of penalty (if any) levied under section 45 or 46, shall be paid by the dealer or the person liable therefor into a Government treasury by such date as may be specified in a notice issued by the Commissioner for this purpose, being a date not earlier than ten days from the date of service of the notice: Provided that the Commissioner or an appellate authority in an appeal under section 65 may, in respect of any particular dealer or person, and for reasons to be recorded in writing, extend the date of payment, or allow him to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commercial Tax Officer [1981] 48 STC 466, the Supreme Court has pointed out the difference between penalty and interest. As observed by the Supreme Court, penalty ordinarily becomes payable when it is found that an assessee has wilfully violated any of the provisions of the taxing statute. Interest is ordinarily claimed from an assessee who has withheld payment of any tax payable by him and it is always calculated at the prescribed rate on the basis of actual amount of tax withheld and extent of delay in paying it. Such interest is compensatory in character and not penal. Moreover, in Khazan Chand v. State of Jammu and Kashmir [1984] 56 STC 214, the Supreme Court has observed that payment of interest in case of default in payment of tax is a means of compelling an assessee to pay tax by a prescribed date. If we compare section 45 and section 47(4-A) in the light of these observations of the Supreme Court, it becomes clear that section 47(4-A) is not in reality a provision for imposition of penalty. It is a provision for payment of interest by a dealer who does not pay tax within the time prescribed for its payment, or on or before the date specified in the notice issued under su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department without there being any rational nexus with the object sought to be achieved. They also contended that whereas under section 47(4-A), interest becomes payable right from the day following the prescribed period for its payment or on expiry of the date specified in a notice issued under section 54, interest becomes payable to the dealer within 35 days if the amount is required to be refunded by virtue of an order of assessment under section 41 and within 90 days if it becomes payable by virtue of any other order. Thus, there is discrimination not only with respect to the rate of interest but also with respect to the date from which it becomes payable. In support of their contention, the learned counsel first relied upon the decision of the Supreme Court in Associated Cement Co's case [1981] 48 STC 466 wherein it is held that ordinarily interest which is claimed from an assessee who has withheld payment of any tax payable by him is compensatory in character. The learned counsel then relied upon the following observations of the Supreme Court in the case of Khazan Chand [1984] 56 STC 214: ".......... In this connection, it is pertinent to note that under section 10-B o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section was challenged as discriminatory for the reason that it provided for high rate of interest for non-payment of tax even though no such provision existed in any other State legislation. It was challenged as arbitrary or unreasonable on the ground that the rate of interest was very much on the higher side. The Supreme Court also held that payment of interest in case of default in payment of tax is a means of compelling the assessee to pay the tax due by the prescribed date. It is a method adopted by the State for collecting its revenue and that it is for the State to provide by what means payment of tax is to be enforced. The Supreme Court has also observed that it neither lies in the defaulter's mouth to protest against the rate of interest charged to him nor is it open to him to dictate to the State the methods which it should adopt for recovering the amount of tax due by him. If the above quoted observations of the Supreme Court are read along with these observations, it becomes apparent that the support which the learned counsel seek from this decision is really not available to them. On the contrary, provision for payment of interest being a method for collecting or recov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Legislature, to select different rates of tax for different commodities, where the commodities belong to the same class or category, there must be a rational basis for discrimination between one commodity and another for the purpose of imposing tax. In our opinion, there is a difference between a dealer-defaulter who does not pay tax within the prescribed time and the State which has to refund the amount of excess tax paid either voluntarily by the assessee or as a result of an assessment order. Since both of them do not stand on the same footing, different rates of interest and different periods from which it becomes payable, can validly be provided by the Legislature so long as, for some other reasons, they are not arbitrary or unreasonable. The view which we are taking also gets support from the decision of the Supreme Court in Saghir Ahmed v. State of U.P. AIR 1954 SC 728 to which our attention has been drawn by the learned Advocate-General. In that case it is held that mere differentiation does not make a legislation obnoxious to the equal protection clause, and that even when the State ceases to function as a State and engages itself in a trade like ordinary trader, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y much interested in collecting of income-tax. State itself imposes court-fees and there can be nothing objectionable in enacting that the Commissioner of Income-tax should not be under an obligation to pay court-fees under entry 15 of Schedule I of the Court-fees Act when he prefers an application under section 66(2) to the High Court. The object of the levy of court-fees is administration of justice and there is nexus between the basis of classification and the object of the provision in question. Though this decision has no direct bearing on the question raised before us, it does to some extent support the contention raised by the learned AdvocateGeneral. In our opinion, dues of Government of a State being the dues of the entire people of the State, there is a valid basis for differentiation between dues of Government of a State and dues of an individual. Whereas the State Government utilises its funds for public welfare an individual ordinarily uses money for his private purposes. The Legislature was thus justified in treating the State Government as a separate class and providing for a higher rate of interest on the dues of the Government of the State. For these very reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (3) a registered dealer furnishing a revised declaration or revised return has to pay the extra amount of tax as per the revised declaration or revised return. Subsection (4) provides that if the amount of tax (a) due where declarations or returns have been furnished without full payment therefor or (b) assessed or reassessed for any period under section 41 or section 44 less any sum already paid by the dealer in respect of such period or assessed under section 19 or 50 shall be paid by the dealer by such date as may be specified in the notice issued by the Commissioner for this purpose. Thus, the scheme of section 47 as disclosed by these provisions is that only that amount of tax which is shown payable under the declarations or returns is required to be paid by the dealer initially and at that stage he is not expected to pay the tax as may be found due and payable subsequently. The learned counsel also drew our attention to rule 31 which provides for time for payment. Sub-rule (1) provides that every dealer to whom subrule (1-A) does not apply and who is required to furnish the monthly or quarterly return or declaration shall within the period of one month and seven days ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he difference found or assessment or reassessment even from those dealers who have paid tax according to their declarations or returns within the prescribed time and who have paid the difference within the time specified in the notices contemplated by the Act and the Rules. The basis of the petitioners contention is that only that amount of tax, which is shown payable under the declarations or returns, becomes due and payable at the time of filing of the declarations or returns. Under the Act, tax is payable on the sale or purchase of goods liable to be taxed subject to other conditions specified in the Act. In the case of sales tax, taxable event is the sale of goods. Therefore, subject to other conditions being fulfilled sales tax becomes due and payable as soon as the sale takes place. Merely because the stage of payment or collection of tax is postponed, it cannot follow therefrom that the sales tax becomes due and payable only at that stage. It would only mean that the sales tax has to be paid at that stage and not before. Section 47 provides for payment of tax which has already become due and payable. Reading of this section along with rule 37-A makes it clear that the tax wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d who are subsequently found to have made a wrong claim, would be placed in the same position and they would all be liable to pay interest on the amount of tax which they are liable to pay but have not paid as required by sub-section (2) of section 7 of the Act. We are of opinion that this view is in conformity with the legislative intention in enacting section 11B of the Act. " Thus, according to the scheme of the Act what is required to be done by the dealer is to file true and complete declaration or return and pay along with it the proper amount of sales tax becoming due and payable. If he does not pay the correct amount at that time, then it can be said that the State Government is deprived of that much money till the same is paid. Therefore, if the Legislature, with a view to prevent such a situation or to make good the loss likely to be suffered by the State Government, has thought it fit to provide for payment of interest on such amounts, then not only such a provision has to be regarded as reasonable but it will also have to be interpreted in a manner which would achieve that object. We, therefore, hold that on true interpretation, section 47(4-A) does provide for paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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