TMI Blog1996 (5) TMI 395X X X X Extracts X X X X X X X X Extracts X X X X ..... for short) and also under the Central Sales Tax Act, 1956. Turnover tax was levied with effect from April 1, 1979 by the newly inserted section 6B of the 1941 Act and section 4AAA of the West Bengal Sales Tax Act, 1954 ("the 1954 Act", for short) which were introduced by the West Bengal Taxation Laws (Second Amendment) Act, 1979. The company became liable to pay the turnover tax, and hence filed a writ petition in the High Court at Calcutta under article 226 of the Constitution of India, challenging the validity of the said amendment Act. On March 4, 1983, the learned single Judge of the High Court passed an interim order restraining the respondents, namely, the Revenue, from imposing and collecting any turnover tax from the company till final disposal of the writ petition on condition that the company would furnish a bank guarantee for 50 per cent of the disputed amount of turnover tax in favour of the Commissioner of Commercial Taxes and would also go on furnishing bank guarantees equivalent to 50 per cent of the turnover tax liability in subsequent years. In terms of that interim order, the company furnished bank guarantees up to the period ending March, 1989, and the same we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de and demand notice is served. 3.. Respondents have resisted this application. Their case in the affidavitin-opposition is that the interim order of the High Court stood vacated (as admitted) with effect from May 23, 1989, and hence there was no restraint on invoking the bank guarantees. The allegation of giving a threat of withholding permits and declaration forms in default of payment of interest, is denied. Under the law, however, the company is liable to pay the interest. Now it has admitted the liability to pay turnover tax and interest thereon, and such admission will be found from annexure "A" to the affidavit-in-opposition which is the company s petition under reference No. 460/89 dated May 20, 1989 to the Commissioner of Commercial Taxes. While admitting those liabilities, the company prayed for instalments at the rate of Rs. 1 lac per month commencing from July, 1989, for payment of turnover tax and after entire turnover tax was cleared, for instalments at the rate of Rs. 50,000 per month for payment of interest. Other material allegations of the applicants are denied. 4.. In the affidavit-in-reply, applicants have claimed that bank guarantees of 50 per cent of turno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he liability to pay interest also accrued from October 1, 1983 when the provisions of section 10A of the 1941 Act came into effect in respect of a return which is incomplete in respect of turnover tax. Mr. Bajoria contended that the judgment of this Tribunal in the Kingsway case [1990] 76 STC 119; [1989] 22 STA 407 proceeded on the footing that provisions regarding interest in section 10A of the 1941 Act are machinery provisions and so there is scope for considering the expression "return" as used in section 10A(1) of the 1941 Act as a return which is full and complete in all respects. Mr. Bajoria contended that in the case of J.K. Synthetics Ltd. v. Commercial Taxes Officer reported in [1994] 94 STC 422, the Supreme Court, in a five Judge Bench very categorically laid down that the provision made in a statute for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjectival law. Mr. Bajoria s next contention was that the Supreme Court in the same case has further laid down that so long as the assessee pays the tax which, according to him, is due on the basis of information supplied in the return filed by him, there would be no def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iability for payment of interest. The validity of turnover tax having been challenged by the company in the High Court and also several other dealers, there will be no liability for showing turnover tax and hence it was not shown in the return and accordingly no turnover tax became due according to the return. Furthermore, in terms of High Court s interim order, no turnover tax could be levied and the question of showing the same in the return or making any payment thereof could not arise. There can be no liability for payment of interest under sub-section (1) of section 10A as the company had paid the "returned tax". Mr. Sumit Kumar Chakraborty s written submission is that the question of payment of interest under sub-section (2) or sub-section (3) of section 10A of the 1941 Act cannot arise in the present case. And the question of payment of interest in sub-section (1) of section 10A cannot also arise as the liability for turnover tax was under challenge and on the face of such challenge the company was not expected to show liability for turnover tax in the return, nor could it pay turnover tax. According to him, tax payable as per return was paid and so interest cannot be charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company s letter on grounds of estoppel or any other equitable doctrine. He has cited a decision reported in [1965] 56 ITR 67 (SC) (Commissioner of Income-tax v. Firm Muar) in support of his contention. 7.. Mr. K.K. Saha, learned advocate for the respondents, has contended that the facts in the case of J.K. Synthetics reported in [1994] 94 STC 422 (SC) are different from the facts of the present case and that, by the interim order dated March 4, 1983, the High Court did not restrain the company from paying turnover tax and, in fact, on the basis of High Court s interim order the company went on furnishing bank guarantee to the extent of 50 per cent of their liability for turnover tax after calculating the same. He has further contended that the provisions regarding turnover tax contained in section 6B of the 1941 Act are statutory provisions and there was nothing before the company to believe bona fide on the face of the statutory provisions that the company was not required to pay turnover tax. Mr. Saha s contention is that the company is squarely liable under sub-section (1) of section 10A of the 1941 Act for not paying due tax in so far as it related to turnover tax. Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, the interest shall be payable upon so much of the amount of tax payable according to such admission as remains unpaid at the end of each such month of default." 9.. We may now note the facts which are not in dispute in the present case. The company like several other dealers challenged, in a writ petition under article 226 of the Constitution of India in Calcutta High Court, the constitutional validity of the provisions regarding turnover tax introduced by the West Bengal Taxation Laws (Second Amendment) Act, 1979 in section 6B and prayed for a declaration that the said provisions are ultra vires of the Constitution of India. On the prayer of the company, an interim order was passed on March 4, 1983 as under: "There will be an interim order of injunction in terms of prayer (g) of the petition till the disposal of the rule. The petitioner No. 1 will furnish bank guarantee for 50 per cent of the disputed turnover tax in favour of the Commissioner of Commercial Taxes. If the Commissioner desires to give any specified form of bank guarantee, he would give the same within one week from the date of communication of this order. The said bank guarantee would be furnished within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our consideration is limited by the facts of the present case. We are required to see whether the law laid down by the Supreme Court in the case of J.K. Synthetics Ltd. [1994] 94 STC 422 is applicable to this case. But before we do so, we may refer to the facts of the case of J.K. Synthetics Ltd. [1994] 94 STC 422. In that case, assessment orders made under the Rajasthan Sales Tax Act, 1954 were under challenge. There the question related to payment of interest on tax on the amount of freight charged in respect of sale of cement under the relevant Cement Control Order. The returns were filed by the appellant on the premises that the amount of freight charged in respect of sale of cement under the said Control Order did not form part of the sale price for the payment of sales tax. The appellant contended that it had raised the contention bona fide having regard to the ratio of the Supreme Court s decision in the case of Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh [1969] 24 STC 487, but the same was rejected by the Supreme Court by its judgment and order dated August 22, 1978 in the case of Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the dealer had not acted bona fide in depositing the tax due on that information before the submission of the return. The Supreme Court has further pointed out that the tax so deposited is to be deemed to be provisional and subject to necessary adjustments in pursuance of the final assessment. About the penalty provisions contained in section 7AA, it was pointed out that the section empowers levy of penalty if the assessing authority is satisfied that a dealer has without reasonable cause failed to furnish the return under section 7(1) within the time allowed. The use of the words "without reasonable cause" clearly implies that if the dealer can show reasonable cause for his lapse, he cannot be visited with the penalty prescribed by section 7AA. To put it differently if reasonable cause is shown by the dealer for the lapse, he cannot be visited with penalty under this provision. This is also suggestive of the fact that the Legislature desired to be harsh with wilful defaulters or those guilty of wilful omission of material information and not with the dealers who failed to supply some information under the bona fide belief that the same was not necessary or those who had failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption of validity of a statutory provision is no longer available and the company was at liberty to pay no turnover tax on the ground that it has been advised (vide letter dated February 23, 1983) that the company was not required to pay turnover tax. There was an interim injunction against the respondents from taking any step on the basis of the statutory provisions regarding turnover tax. But, there was no injunction against payment of turnover tax by the company. On the contrary, the company was asked to furnish bank guarantee for 50 per cent of the disputed turnover tax in favour of the Commissioner of Commercial Taxes. The company was further required to go on furnishing bank guarantee equivalent to 50 per cent of the turnover tax liability in subsequent years till further orders. The company calculated its entire liability of turnover tax and went on furnishing 50 per cent of such tax by bank guarantee. The company had all the informations about its liability of turnover tax, but it chose to remain content by furnishing bank guarantee as per interim order dated March 4, 1983. There was no law nor any decision from any court which could lead the company to a bona fide belief t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f carpets which were exempt from payment of sales tax earlier became liable to sales tax. The applicant obtained an interim order of injunction by which the sales tax authorities were restrained from giving effect to the notification purporting to amend the earlier provision. By the said order, liberty was given to the applicant to submit returns showing the sales of carpets exempted from payment of tax till the disposal of the rule. In terms of the said order, the applicant filed its returns from time to time showing sales of carpets exempt under rule 3, clause (28) of the Rules. In the returns, gross turnover of sales of all goods including the carpets were shown. But the sales of carpets were deducted with reference to rule 3(28) for arriving at the taxable turnover. The notification purporting to amend the existing provision was declared ultra vires. But the sales tax authorities preferred an appeal before a Division Bench. The Division Bench ultimately dismissed the appeal with certain modifications. The judgment of the trial Judge setting aside the impugned notification amending rule 3(28) of the Rules was however set aside and it was held that the applicant was entitled to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company was directed to furnish bank guarantee for 50 per cent of the turnover tax liability. From the said interim order, it cannot be contended that the full payment of turnover tax would have been contrary to that order. The payment of tax due under section 10 of the 1941 Act is to be treated as a provisional payment only and it is subject to necessary adjustments in pursuance of the final assessment by the authority. The company could pay the turnover tax during the pendency of the writ petition before the High Court and claim adjustment or refund if the challenge against the validity of turnover tax was upheld by the court. But that was not done. The provisions regarding interest are statutory provisions and there being no order from any quarter against the running of interest from the time of default, the company cannot now claim that the demand for interest by the respondents is illegal or unauthorised. 14.. In annexure "X" to the affidavit-in-reply, the company has given a chart about the bank guarantees furnished and also about the payment by cheque of turnover tax for the period from 1982 to 1988-89. There is no dispute that some of the bank guarantees furnished by th ..... 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