Bombay High Court
Shetkari Sahakari Sakhar Karkhana Ltd. ... vs State Of Maharashtra And Others on 11 March, 1996
Equivalent citations: 1996(5)BOMCR111, 1996(1)MHLJ953, 1996 A I H C 2992, (1996) 1 MAH LJ 953, (1996) 102 STC 157, (1996) 2 ALLMR 376 (BOM), (1996) 2 MAHLR 727, (1996) 5 BOM CR 111
Author: A.P. Shah
Bench: A.P. Shah
JUDGMENT A.S. Venkatachala Moorthy, J.
1. By this writ petition, under article 226 of the Constitution of India, the petitioners pray this Court to issue a writ of certiorari calling for the records of the petitioners' case and after satisfying itself as to the legality of the orders dated November 5, 1986 and demand notice dated November 11, 1986 and orders dated October 27, 1987 (exhibits L1 to L9, A1 to A9 and M1 to M9) to quash and set aside the same, and also a writ of prohibition prohibiting and restraining the respondents, their servants and agents from giving effect to and/or continuing to take any steps or proceedings and/or in furtherance of the impugned orders and notices.
2. The facts of the writ petition can be narrated as follows :
The 1st petitioner is a society registered under the Maharashtra Co-operative Societies Act. It is a co-operative sugar factory which is mainly engaged in the manufacture of sugar. The petitioners, inter alia, manufacture spirit and liquor, etc. The State of Maharashtra passed the Maharashtra Purchase Tax on Sugarcane Act, 1962, with a view to levy tax on the purchase of sugarcane for the use in the manufacture or production of sugar including khandasari sugar. As per section 3 of the said Act, tax can be levied on the purchase of sugarcane which is used in manufacture or production of sugar in a factory. The Act also provides the rate of tax that can be levied, but it is made clear therein that in no case the rate so specified shall exceed 2 paise per kg. of sugarcane. The Act came into force in the year 1962 and the petitioners were being subjected to the levy of purchase tax which they had been paying.
3. According to the petitioners during the accounting year July, 1978 to June, 1979, there was a grave depression among the sugar manufacturers as a result of which the petitioners suffered a set-back and this was due to decontrol of the sugar during that period, the price of sugar crashed from Rs. 450 per quintal to Rs. 250 per quintal. Due to the sudden fall in the price of sugar, the petitioners like the other sugar manufacturers were exposed to grave risk of suffering huge losses and possible closure of the business. To save themselves from the imminent danger of disaster, the petitioners and others approached the Government of Maharashtra to assist the petitioners in overcoming this crisis, so that they are able to carry on their business without suffering heavy losses. Appreciating the gravity of situation, the Government of Maharashtra devised a scheme under a Government Resolution, Agriculture and Co-operation Department No. CSK-1076/69742/13-C/CR-489 dated April 7, 1977. With a view to help the sugar factories to tide over the crisis, the Government of Maharashtra issued a G.R. No. SOC. 1279/175 RES-9 dated April 7, 1979 wherein it has been brought out that due to steep fall in sugar prices after the decontrol of sugar on August 16, 1978, the sugar industry has been passing through a difficult phase and the sugar industry has been repeatedly representing to the State Government for some relief in purchase tax, and that considering this, the State Government decided to give certain relief in purchase tax, to sugar factories in the shape of remission of the whole or part of the purchase tax due on sugarcane crushed for manufacture or production of sugar during the period 1978-79 crushing season. In terms of clause 2(1) of the said resolution, the factories like the petitioners were granted a remission of purchase tax at Rs. 8.10 per tonne of sugarcane crushed.
4. The petitioners further submitted that the Government of Maharashtra in its resolution No. CSK/1079/Purchase tax/18748/13-C dated May 16, 1979 gave further relief to the sugar factories including the petitioners and according to which the sugar factories should be charged purchase tax at the rate of Rs. 8.50 per M.T. of sugarcane crushed during 1978-79 and the entire amount due at this rate should be treated as interest-free loan to the factories. It may be stated that the rate of tax on sugarcane per M.T. was Rs. 16.60 and the sum of Rs. 8.10 was remitted under the Government resolution dated April 7, 1979 while the balance of Rs. 8.50 was allowed as interest-free loan under the resolution dated May 16, 1979.
5. It is stated by the petitioners that subsequently, the State Government under its resolution dated June 6, 1979, issued a corrigendum by which in the case of certain class of manufacturers including joint stock sugar factories remission was to be granted for crushing season 1978-79 to the extent of Rs. 8.10 per M.T. and the balance amount of Rs. 8.50 per M.T. was to be treated as loan to the concerned factories which loan was to bear interest at the rate of 6 per cent per annum. This was again reiterated by a subsequent resolution dated March 29, 1980.
6. It is the case of the petitioners that in pursuance of the Government resolution referred to above, viz., dated March 29, 1980, an agreement bond was executed between the petitioners and the Government of Maharashtra and as per the terms of the said agreement bond, the amount of loan sanctioned and payable to the petitioners was to be adjusted towards its dues and arrears of purchase tax through the Accountant-General, Bombay.
7. It is the case of the petitioners that as per clause 16 of the said agreement bond, it was agreed that the loan will be interest-free. Clause 16 of the said agreement bond reads as under :
"The loan will be interest-free. The repayment shall commence after the loans obtained by Karkhana from Industrial Finance Corporation and other loan term financial institutions are fully paid with interest."
According to the petitioners, the substance of all the resolutions referred to and in particular to the agreement bond dated March 1, 1981, executed between the petitioners and the Government of Maharashtra, it is abundantly clear and beyond any doubt that the loan ultimately granted to the petitioners was free of interest. The petitioners would further contend that no interest could at all be imposed on the petitioners in terms of the agreement as also the circulars/instructions issued by the Commissioner.
8. According to the petitioners, the crushing season in their trade commences from November each year and ends on July of the succeeding year. The period now under consideration is July 1, 1978 to September 30, 1979. According to the petitioners, the operation of crushing season in the said accounting period is from November 1, 1978 to July 31, 1979. As per section 6 of the said Act, according to the petitioners, they were liable to file monthly returns in respect of the sugarcane purchased by them during each month. According to them, due to the grave crisis in the sugar industries and also in the context of the negotiations which were going on between the sugar manufacturers and the Government of Maharashtra coupled with their inability to deposit the purchase tax, no returns were filed by the petitioner. However, it is their case that under a bona fide misbelief, they deposited an amount of Rs. 8,57,302.43 under Challan No. 79 dated December 26, 1978, being the amount of purchase tax payable under the said Act for the month of November, 1978. Thereafter, the petitioner would plead that in due course of time the Sugarcane Purchase tax Officer, Sangli, commenced the assessment proceedings and passed orders of assessment all dated October 12, 1981, for the months starting from November, 1978 and ending July, 1979. The said Purchase Tax Officer granted refund of the amount of Rs. 8,57,302.43 paid erroneously by the petitioners for the month of November, 1978 and as regards the remaining months from December, 1978 to July, 1979, no demand was created against the petitioners inasmuch as the purchase tax levied was partly remitted under the Government resolution referred to above and partly treated as a loan. The Purchase Tax Officer, being aware of the scheme devised by the State of Maharashtra for grant of interest-free loan, did not levy any interest in the said assessment orders, nor did he reserve the right to levy interest to any future date.
9. Thereafter the petitioners submitted that the Assistant Commissioner of Purchase Tax (SC), Kolhapur Division, R.V. Sangli, being respondent No. 3 served on the petitioners show cause notices for the months of November, 1978 to July, 1979 all dated February 3, 1983. In the said show cause notices, the Assistant Commissioner of Purchase Tax proposed to levy interest at the rate of 6 per cent from the due date of payment to August 5, 1980, i.e., the date on which actually sugarcane purchase tax is converted into 6 per cent loan. The petitioners in their reply dated August 20, 1986 to the show cause notices raised various objections. The petitioners questioned the jurisdiction of the 3rd respondent and also pointed out clause 16 of the bond dated March 1, 1981, wherein it is stated that the loan is one of interest-free. However, the 3rd respondent, by its order dated November 5, 1986, imposed interest in respect of the months November, 1978 to July, 1979 by rejecting all the submissions and contentions advanced before him.
10. Being aggrieved by the orders of the 3rd respondent, the petitioners filed a revision application before the Commissioner of Purchase Tax, Maharashtra State, Bombay, which was transferred for hearing and final disposal to the Deputy Commissioner of Purchase Tax (SC), Kolhapur Division, Kolhapur. The petitioner reiterated their submissions and pleaded before the Deputy Commissioner of Purchase Tax that on facts as well as in law there was no case for imposition of interest under section 7B of the said Act. The petitioners also brought to the notice of the Deputy Commissioner all the resolutions issued by the Government of Maharashtra as also the terms of the agreement bond entered into between the petitioners and the State of Maharashtra. However the said officer rejected the case of the petitioners and passed the orders dated October 27, 1987, allowing the appeal in part holding that the interest under section 7B of the said Act is to be levied up to March 31, 1980 and not up to the date of adjustment made by the Accountant-General, Maharashtra.
11. Aggrieved by this, the petitioners have now come up before this Court by way of this writ petition under article 226 of the Constitution of India. The learned counsel for the petitioners, in the facts and circumstances of the case, as pleaded by him and narrated supra, put forth two arguments :
(i) The original orders of assessment passed by the Purchase Tax Officer, viz., the respondent No. 4 herein, did not levy any interest under section 7B of the Maharashtra Purchase Tax on Sugarcane Act, 1962 and never deferred imposition of interest to any future date. That being so, the Assistant Commissioner of Purchase Tax (SC), viz., the respondent No. 3 herein, did not have jurisdiction to invoke the revisional power under section 9 of the said Act or in other words the petitioners contended that when the Purchase Tax Officer did not pass any order levying interest, there being in reality, no order in question invoking of jurisdiction of the respondent No. 3 under section 9 of the said Act, is illegal as the condition precedent for invoking powers under section 9 of the said Act is the existence of the order which alone can be subject-matter of revision.
(ii) Even assuming that the 3rd respondent has power under section 9 in the circumstances of this case the demand towards interest created as a result of the orders impugned herein, is illegal, as it is contrary to the agreement dated March 1, 1981, entered into between the petitioners and the 1st respondent.
12. Under section 6 of the Act the petitioners were liable to file monthly returns in respect of sugarcane purchased by them during each month. In the present case, the refund period under consideration is accounting period July 1, 1978 to September 30, 1979. According to the petitioners, the operation of crushing season in the said accounting period is from November 1, 1978 to July 31, 1979. According to the petitioners that due to grave crisis in the sugar industries and also in the context of negotiations which were going on between sugar manufacturers and the Government of Maharashtra, coupled with their inability to deposit the purchase tax, no returns were filed by the petitioners. However, it is seen that in due course of time, the Sugarcane Purchase Tax Officer, Sangli, commenced assessment proceedings and passed orders of assessment all dated October 12, 1981 from the month starting from November, 1978 to ending July, 1979. The Purchase Tax Officer while assessing the petitioners under section 7 of the said Act was fully aware and conversant with the adverse conditions through which the petitioners were passing. As pointed out by the petitioners in the assessment orders passed by him, no interest under section 7 was levied. Similarly, he did not defer the proceedings for imposition of interest at any future date. Now it is the case of the petitioners that the Assistant Commissioner of Purchase Tax is not entitled to invoke his revisional powers under section 9 as that section empowers the Commissioner or any other authority to revise any orders made under the said Act. According to the petitioners, it per se envisages, the existence of the orders which can be subject-matter of revision and in case where the Purchase Tax Officer did not pass an order levying interest, there being, in reality, no order in existence invoking of jurisdiction under section 9, is illegal.
13. The learned counsel for the petitioners to substantiate this submission, drew our attention to section 7B and section 9 of the Act which reds as under :
"7B. (1) If an occupier fails to submit the return as required by sub-section (1) of section 6 or to pay the full amount of tax as required by sub-section (2) of that section, he shall, in addition to the tax and the penalty (if any), pay simple interest on the amount due at the rate of one and one half per cent of the amount for each month from the date immediately following the last day for submission of the return under sub-section (1) of section 6 during the time the occupier continues to make default in the payment of the amount due.
Explanation. - For the purposes of this sub-section, where an occupier fails to submit the return in due time, the amount of tax assessed under sub-section (2) of section 7 shall be deemed to be the amount of tax due from the occupier under sub-section (2) of section 6.
(2) If an occupier fails to pay the amount of tax assessed under sub-section (1) of section 7, or the amount of penalty imposed under section 7A, by the date specified in the notice served upon him by the Commissioner for the purpose, he shall pay simple interest on the amount of tax or penalty due at the rate of one and one half per cent for each month from the date immediately following the date specified in the notice during the time the occupier continues to make default in the payment of the amount due.
(3) The Commissioner or any appellate or revisional authority may, for reasons to be recorded, remit the whole or any part of interest payable by any occupier in respect of any period."
Section 9 of the Act reads as under :
"9(1) Subject to such rules as may be made in this behalf and for reasons to be recorded in writing, the Commissioner, or any other prescribed revisional authority, may, upon an application or of his or its own motion, revise any order (including an order in appeal) made under this Act or any rules made thereunder, by any officer appointed to assist the Commissioner;"
After referring to these two sections, the learned counsel appearing for the petitioners, reiterated his submissions, viz., the Purchase Tax Officer did not levy any interest under section 7B and secondly for the 3rd respondent to invoke section 9, there must be an order. The counsel pointed out the words as found in section 9 "upon an application or of his or its own motion, revise any order" would clearly show that unless there is some order passed by the Purchase Tax Officer, the 3rd respondent, viz., the Assistant Commissioner of Purchase Tax, has no authority or jurisdiction to impose interest.
14. The counsel for the petitioners in this regard would place two decisions for our consideration which, according to him, are very much relevant, though they are under different enactments. First, he cited a decision in the case of Tata Exports Limited v. State of Maharashtra reported in [1995] 98 STC 314 of this Court arising under the Bombay Sales Tax Act. While considering the various provisions, in particular sections 36(2) and 57, this Court held as under :
"............. Thus the power under section 57 can be exercised only to revise any order passed under this Act by any authority subordinate to the revisional authority. In the instant case, there is no order passed under section 36 of the Act by any authority which could have been revised by the revisional authority under section 57 of the Act. No order, has therefore, been passed by the revisional authority under section 57 of the Act. Nor the revisional authority has revised the order of assessment under section 33 of the Act. Had it done so, it could have also levied penalty under section 36(2) of the Act while passing its order in revision of the order of assessment. But that is not the case here. In fact, in the instant case, the Commissioner has issued notice for imposition of penalty under section 36(2) of the Act independent of any revisional proceedings. In our opinion, the Commissioner could not have done so, because the admitted position in this case is that he was not exercising any power of revision. He was not passing any order in revision against any order passed by any authority subordinate to him and hence the imposition of penalty under section 36(2) of the Act was not 'while passing any order in revision'. Power under section 57 and power under section 36(2) of the Act are two independent powers conferred on the revisional authority. In exercise of power under section 57, the revisional authority can only revise an order passed by an officer subordinate to him. But by virtue of the power conferred by section 36(2) of the Act, while passing an order in revision against an order, say for example an order of assessment, it may also levy penalty under section 36(2) of the Act if the conditions precedent for levy of the same specified in that section are found to exist. This he can do in exercise of the power conferred on him by section 36 and not section 57. It is in fact a power given to the revisional authority under that section in addition to its revisional power under section 57 of the Act. It is not a part of the powers of revision conferred under section 57 of the Act. This power appears to have been conferred on the revisional authority to take care of situations, where in the light of orders proposed to be passed in exercise of revisional power, modifying the order of assessment, etc., concealment of turnover is detected which might justify imposition of penalty under section 36(2) of the Act. In such a case, while passing the order in revision under section 57 of the Act, the revisional authority may itself impose penalty under section 36(2) of the Act, though no such penalty had been imposed by the assessing authority while assessing or reassessing the amount of tax."
Secondly he would rely on the decision of the Madras High Court reported in Khemchand Rajkumar v. State of Tamil Nadu reported in [1994] 33 STC 78. That is also a case arising under the Sales Tax Act. In that case, the Division Bench of that High Court held that when the assessing authority has not chosen to exercise its power under section 12(3) for levy of penalty while making the assessment under section 12(2), the Board cannot, in exercise of its revisional power, levy penalty, as there cannot be said to be an order by the assessing authority. The learned counsel pointed out the relevant portion which reads as under :
"....... The assessing authority has not purported to exercise his power under section 12(3) while making the assessment under section 12(2). Though the circumstances of this case may call for the imposition of penalty under section 12(3), the assessing authority has not in fact chosen to invoke his power under section 12(3). What the Board has done is to exercise that power, which the assessing authority should have exercised, but, actually did not exercise. According to the learned Government Pleader, the Board can pass any order in revision which the assessing authority should have passed. But we are of the view that where the assessing authority has failed to pass a statutory order, the Board cannot itself assume the power and pass the original order. If the assessing authority has passed an order, which, according to the Board of Revenue, is erroneous, it can revise that order and pass any order that is deemed fit in the circumstances of the case. But, where the assessing authority has not passed an order, the Board cannot be said to have an order which could be revised in exercise of its suo motu power. In M. Ramaswamy Pillai v. State of Madras [1968] 22 STC 224 (Mad.), it has been held that to attract the revisional jurisdiction under section 32(1) there should be an order either express or implied. In this case, the assessing authority neither in the show cause notice nor in the assessment has proposed to pass any order under section 12(3). In these circumstances, it cannot be said that there is any order by the assessing authority levying penalty either impliedly or expressly. Section 34 specifically refers to 'an order passed' by any authority subordinate to the Board which could be the subject-matter of revision under that section. Therefore, there should be an order passed by a subordinate authority, either express or implied, so as to attract section 34."
We find that there is considerable force in the submissions made by the learned counsel for the petitioners. Admittedly there has been no order passed by the Sugarcane Purchase Tax Officer under section 7B of the Act levying interest. Similarly, we find that for the 3rd respondent to exercise jurisdiction under section 9 (revisional power) and thereby imposing interest himself not by way of revising any order, cannot be said to be in terms of the provisions of the Act, as what is missing is an order. As contended by the learned counsel for the petitioners, such an order is a prerequisite or a pre-condition for the 3rd respondent to invoke section 9 and pass an order. We also find that this Court as well as the Madras High Court while dealing with identical provisions in the Sales Tax Act, took a similar view. Applying with the same ratio, we hold that the orders of the 3rd respondent dated November 5, 1986, marked at exhibits L1 to L9 are without jurisdiction. Consequently, it will follow that the orders of the 2nd respondent dated October 27, 1987 at exhibits M1 to M9 are also without jurisdiction and accordingly all the abovesaid orders are quashed and set aside.
In view of the conclusions arrived above, we find it unnecessary to consider the second argument/submission of the counsel for the petitioners.
Consequently the writ petition succeeds and stands allowed. There shall be no order as to costs. Rule is made absolute.
Certified copy expedited.
15. Writ petition allowed.