TMI Blog1985 (3) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... eal No. 555 of 1975. On 29th September, 1975, a Division Bench of this Court admitted the said writ appeal and thereafter on 10th November, 1975, stayed the recovery on terms. On 9th June, 1978, a Division Bench of this Court dismissed the said writ appeal during which period the petitioner had the benefit of the said stay order. 3. On the termination of the proceedings before this Court, the ACCT to show cause as to why proceedings should not be instituted against it for recovery of taxes outstanding and a penalty of ₹ 36,713.70 thereon that had accrued thereto on the same under the Act. On its failure to show cause or pay the amounts specified in the said notice, the ACCT on 23rd January, 1979 issued a garnishee notice (exhibit B), to Branch Manager of Vijaya Bank, Dharwad, under section 14 of the Act calling upon it to make payment of the amounts standing to the credit of the petitioner towards the taxes and penalty due by it to the State. In this petition under article 226 of the Constitution presented on 15th February, 1979, the petitioner has challenged the validity of section 13(2) of the Act, the show cause notice and the garnishee notice issued by the ACCT (exhibi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larger Bench. 10. In order to appreciate this and the other points also, we consider it useful to briefly notice the scheme of the Act and its material provisions at the threshold. 11. As on 1st November, 1956, on which day the new State of Mysore now called as Karnataka comprising of the areas specified in section 7 of the States Reorganisation Act of 1956 (SR Act) came into being, there were various sales tax enactments referred to in section 40 of the Act regulating the levy and collection of sales tax in the several integrating areas of the State which continued to be in force in the retrospective areas by operation of section 119 of the SR Act. The new State by virtue of the powers derived from article 246(3) of the Constitution and entry No. 57 of List II, State List, of the Seventh Schedule to the Constitution enacted the uniform Act repealing the various enactments that were in force in the several integrating areas of the State. The Act came into force from 1st October, 1957. 12. The Act provides for levy of sales tax which necessarily includes purchase tax and their recoveries. Chapter V of the Act regulates the returns to be filed, assessments to be made, paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount for each month subsequent to the first three months as aforesaid. Explanation. - For purposes of clause (ii), the penalty payable for a part of a month shall be proportionately determined. (2A) Notwithstanding anything contained in sub-section (2), the State Government, may, subject to such conditions as may be prescribed, remit the whole or any part of the penalty payable in respect of any period of any person or class of persons. The scope and ambit of section 13 of the Act has been examined by this Court on more than one occasion. Even otherwise, it is necessary to notice and ascertain the same for a proper appreciation of the challenge made against the same by the petitioner. 15. In Sha Jayantilal Khetsi v. Additional Commercial Tax Officer (1966) 2 Mys LJ 614, a Division Bench of this Court consisting of Hegde and Bhimiah, JJ. (as their Lordships were then), speaking through Hegde, J., interpreting section 13(2) of the Act, as it stood then, expressed thus : As seen earlier, the assessing authority had made a demand for the payment of the tax assessed by its notice dated 13th May, 1964. That demand had to be complied with on or before 3rd June, 1964. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us : It is clear from the section that the penalty is a consequence which flows directly from the statute itself without the necessity of any authority making a specific order imposing or directing payment of penalty. But, all the penalty that accrues is penalty for default in making payment in accordance with sub-section (1) of the section - the payment required under sub-section (1) is of 'the tax under this Act' - the mandate of the section being that the said tax shall be paid in such manner and in such instalments, if any, and within such time, as may be prescribed. In Sterling Construction Training Company v. Commercial Tax Officer, X Circle, Seshadripuram, Bangalore [1973] 32 STC 235 AP (hereinafter referred to as Sterling's case) a Division Bench of this Court consisting of Govinda Bhat, C.J., and Jagannatha Shetty, J., following Sha Jayantilal Khetsi's case (1966) 2 Mys LJ 614 reiterated and reaffirmed the same principle in these words : The Act gives no discretion to authorities under the Act to waive or reduce the penalty. Obligation is case on the defaulting assessee to make payment of the penalty computed in the manner provided by sub-sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case like the one before us, the question whether the assessee had defaulted wilfully or not does not arise for consideration. What is relevant is the factum of the default and not the reason for the same.' In Volkart's case (printed at page 411 supra), a Division Bench of this Court consisting of Venkatachaliah and Rama Jois, JJ., following the earlier cases of this Court in particular in Sterling's case [1973] 32 STC 235 and the ruling of the Supreme Court in Haji Lal Mohd. Biri Works v. State of U.P. [1974]1SCR25 which interpreted section 8(1) and (1A) of the U.P. Sales Tax Act providing for automatic levy of interest in cases of defaults as in section 13 of the Act expressed thus : Thus the amount payable by a defaulter is really the interest payable on the amount of tax withheld by the defaulter and the rate of interest is fixed by the section itself, there being no power in any of the authorities to diminish or extinguish the liability, no order is required to be made and, therefore, no question of preferring an appeal against an order made under section 13(2) of the Act arises. In this case the Division Bench examining the very provision in the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that should be, applying the progressive rule of construction of statutes that has now come to stay, which has been very felicitously expressed by Lord Denning in Seaford Court Estates Limited v. Asher [1949] 2 All ER 155 at page 164 approved by our Supreme Court in State of Karnataka v. Hansa Corporation [1981]1SCR823 and K. P. Varghese v. Income-tax Officer, Ernakulam [1981]131ITR597(SC) and a Full Bench of this Court in C. Arunachalam v. Commissioner of Income Tax ILR (1984) Kant 1387, we are of the view that what is provided in section 13(2) of the Act is only interest and not penalty. 18. Sri Srinivasan has urged that section 13(2) of the Act that does not provide for refund of interest in conformity with the appellate or revisional order made, can only be construed as providing for penalty and not of interest. 19. On this very contention urged in Mutha Manickchand's case [W.P. Nos. 504 and 505 of 1966 decided on 13th March, 1967 (Mys)] the Division Bench expressed thus : 15. We, therefore, reject the argument and hold that even before they amendment, the section would not and did not authorise retention of penalty when it becomes unlawful to retain it by reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on article 19(1)(f) of the Constitution has no merit. We, therefore, reject this challenge of the petitioner. 25. In Mutha Manickchand's case [W.P. Nos. 504 and 505 of 1966 decided on 13th March, 1967 (Mys)] the Division Bench dealing with the very challenge noticing the ruling of the Supreme Court in Kunnathat Thathunni Moopil Nair v. State of Kerala [1961]3SCR77 on which Sri Srinivasan has again placed strong reliance, has rejected the same, in these words : 6. The challenge to the constitutionality of section 13(2) is based solely upon the principles stated by their Lordships of the Supreme Court in the case of Moopil Nair reported in [1961]3SCR77 . The exact principle stated by their Lordships of the Supreme Court in the said case is that a tax or an impost purporting to be a tax directed to be paid in the exercise of the legislative power of taxation would lose the character of a tax, if it actually amounts to expropriation of the very property in respect of which the tax is intended to be or purports to be levied. The uniform rate of land tax proposed to be levied under the Travancore-Cochin Land Tax Act impugned in the said case was shown to have clear possibili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) uniformly provides for a lower rate of interest for the first period of three months and for a higher rate of interest thereafter till payment is made by the defaulting assessee. Section 13(2) that treats the defaulting assessee uniformly cannot, therefore, be condemned as violative of article 14 of the Constitution. 27. What should be the rates of interest to be paid during the first period of three months and thereafter is essentially for the legislature to decide. At any rate, the rates of interest stipulated in section 13(2) of the Act when one has regard to the rates of interest prevailing in the country cannot be characterised as disproportionate, excessive or arbitrary to justify its condemnation under article 14 of the Constitution. 28. For the period from 10th November, 1975, to 9th June, 1978, the petitioner had the benefit of an order to stay in Writ Appeal No. 555 of 1975 subject to his furnishing security. In the present case also, the petitioner has the benefit of a similar order made on 5th April, 1979, which has continued ever since then without any further modification. We are of the view that those stay orders only postponing the liabilities or preventing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which our Constitution-makers felt that there should be uniformity of law throughout the country have been placed by them in the Union List (List I in the Seventh Schedule to the Constitution) conferring exclusive power upon Parliament to make laws with respect thereto, while matters which they felt were of local concern and may require laws to be made having regard to the particular needs and peculiar problems of each State have been assigned to the State Legislatures by placing them in List II of the Seventh Schedule, that is, the State List. Inter-State trade and commerce is a matter which affects all the States in India and thus the whole country. It is for this reason that in the Seventh Schedule to the Constitution the subject of taxes on the sale or purchase of goods taking place in the course of inter-State trade or commerce has been put in List I and made a Union subject. Taxes on the sale or purchase of goods taking place within the State affect only those who carry on the business of buying and selling goods within the State and therefore, this subject has been put in List II of the Seventh Schedule, namely, the State List. Sales tax is the biggest source of revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y complain of the measures adopted by the State to compel him to pay such amount. 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. In this connection, it is pertinent to note that under section 10-B of the Act, where as a result of an order made in appeal or revision, a refund has become due to the dealer or any other person on account of tax or penalty found to have been paid in excess, the State Government is required to pay to such dealer or person simple interest at the rate of 12 per cent per annum on the amount of such refund from the date such payment was made up to the date on which such refund was granted and in case of delay in refunding the excess amount, interest at the rate of 24 per cent per annum if the refund is granted beyond a period of three months but before the expiry of six months from the date of the appellate or revisional order and at the rate of 36 per cent per annum if it is granted thereafter. Thus, under the Act, the same rates of interest apply both to the dealer who has made def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34. Sri Babu has urged that section 13(2A) that confers discretionary power on the executive Government, the highest executive authority, under the Constitution, subject to the rules to be made and to be laid before the legislature does not suffer from the vice of excessive delegation. In support of his contention Sri Babu has strongly relied on the ruling of the Supreme Court in Chinta Lingam v. Government of India [1971]2SCR871 . 35. In Mutha Manickchand's case (W.P. Nos. 504 and 505 of 1966 decided on 13th March, 1967) this Court in examining the validity of section 13(2) of the Act has also noticed the insertion of section 13(2A) by Karnataka Act 3 of 1966 and has upheld section 13 though its validity as such had not been expressly challenged. We have only noticed this as a fact. 36. Section 13(2A) of the Act while conferring power on Government really confers a benefit on assessees or a class of assessees to approach Government and seek for remitting the whole or part of the interest levied or collected or to be collected from them. A beneficial provision cannot be challenged by the beneficiary even if it is unconstitutional [vide Bhikaji Vihswanath Mujumdar v. Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mysore Buildings Tax Act, 1962. 40. On the above discussion, we hold that section 13(2A) of the Act does not suffer from the vice of excessive delegation and is not violative of Article 14 of the Constitution. Re : Point No. IV 41. Sri Srinivasan has urged that if this Court were to strike down section 13(2A) of the Act on the ground it suffers from the vice of excessive delegation, then this Court has no choice except to strike down section 13(2) of the Act, which is inextricably woven into the same and was, therefore, not severable. 42. We have earlier found that section 13(2A) of the Act does not suffer from the vice of excessive delegation and was not violative of article 14 of the Constitution. From this it necessarily follows that point No. IV does not survive for consideration and calls for rejection as such. But, we will also assume that Sri Srinivasan is right and examine this point also. 43. The principles of severability have been explained by the Supreme Court in a large number of cases and it is not necessary to notice all of them or extract the principles stated in all of them. He Harakchand Ratanchand Banthia v. Union of India [1970]1SCR479 the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e have reproduced section 13(2A) of the Act earlier in its entirety. A close examination of section 13(2A) of the Act shows that it is an independent and separate provision conferring power on Government and is not woven into or bound with section 13(2) of the Act. Section 13(2A) of the Act is not inextricably woven into section 13(2) of the Act. Even assuming that we strike down section 13(2A) of the Act, then also section 13(2) of the Act without any doubt can remain on the statute book and enforced. We are, therefore, of the view that there is no merit in this contention of Sri Srinivasan and we reject the same. 45. Before parting with this case, we deem it necessary to point out on the desirability to amend section 13 of the Act. 46. We have earlier found that the term penalty had to be construed as interest . In the neighboring State of Tamil Nadu, that State has suitably amended a similar provision in the Tamil Nadu General Sales Tax Act. We are of the view that a simple amendment to section 13 of the Act by substituting the term interest to penalty would end all this needless litigation before courts. We are of the view that sooner it is done, it would be better ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
