Andhra HC (Pre-Telangana)
Chitrani Cinema vs Deputy Commercial Tax Officer on 19 February, 1996
Equivalent citations: 1996(3)ALT1129, [1997]106STC498(AP), 1996 A I H C 5105, (1996) 4 ANDHLD 119, (1996) 3 ANDH LT 1129, (1997) 106 STC 498
Author: Syed Shah Mohammad Quadri
Bench: S.S. Mohammed Quadri, Y.V. Narayana
JUDGMENT Syed Shah Mohammad Quadri, J.
1. The petitioner - cinema theatre - a partnership firm, challenges the validity of the proceedings of the respondent in Procs. No. A2/2/87, dated April 25, 1987 by praying for an appropriate write to call for the records relating to it and to quash the same.
2. To appreciate the controversy involved in this writ petition, it would be necessary to notice the following facts :
The petitioner has opted to pay entertainment tax under section 5 of the A.P. Entertainments Tax Act, 1939 (for short, "the Act"). Having regard to the provision of rule 26(a) of the A.P. Entertainments Tax Rules, 1939 (for short, "the Rules"), the tax is payable each week by remitting the same on the Mondays immediately following the week to which the tax relates and if Monday happens to be a holiday, on the next working day. In the event of default in payment of tax as provided under sections 5(8) and 10(1) of the Act, the tax has to be paid along with interest at such rate as may be prescribed. The petitioner says that the abovesaid two provisions were inserted by Act 24 of 1984 with effect from January 1, 1984. But rule 20-A prescribing the rate of interest at Rs. 2 for every one hundred rupees or part thereof was inserted by G.O.Ms. No. 894, Revenue(S) dated July 25, 1985 and was published in the Gazette on August 1, 1985. As such there was no rule, prescribing the rate of interest, in force during the period between September 27, 1984 and December 19, 1985, during which period the petitioner made delayed payments of tax. It appears that the Accountant-General, Audit Party took objection with regard to non-payment of the interest on the belated payment that led the respondents to issue show cause notice to the petitioner on January 20, 1987 calling upon it to explain as to why interest of Rs. 31,710.66, should not be levied for belated remittances of entertainment tax. The petitioner submitted its explanation to the said notice. On consideration of the same, the respondent passed orders dated April 25, 1987 demanding the said amount of Rs. 31,710.66 as interest for belated payment of entertainment tax during the period September 27, 1984 to December 19, 1985. Thereafter, he issued a distraint order dated June 13, 1987 in form I under the Revenue Recovery Act for recovery of the said amount.
3. The respondent filed counter-affidavit stating, inter alia, that the petitioner made belated payments of entertainment tax. Having regard to the provisions of sub-section (8) of section 5 and sub-rule (9) of rule 27 of the Rules, the entertainment tax, not having been paid in time, interest ought to have been paid thereon. As that was not done, the proceedings dated April 25, 1987 were initiated after giving opportunity to the petitioner ordering for payment of interest. It is submitted that payment of interest is mandatory on belated payment and as the rate of interest has been prescribed under rule 20-A of the Rules, the petitioner is bound to pay interest at the prescribed rate. It is, however, added that sections 5(8) and 10(1) of the Act provide levy of interest. Those provisions came into force from January 1, 1984 after deletion of the earlier provision of section 7(4) which provided payment of interest at the rate of Re. 1 for every hundred rupees or part thereof, after the date is specified for the payment of tax. It is further submitted that payment of interest was provided for belated payment even prior to January 1, 1984 and it has been in force after the said date under sections 5(8) and 10(1) of the Act. The rate of interest was prescribed on July 25, 1985 by inserting rule 20-A by G.O.Ms. No. 894 Revenue, dated July 25, 1985 and the said rule was published in the Gazette on August 1, 1985. It is added that the Legislature has power to frame the rules retrospectively under section 16(2-A) of the Act. For these reasons, it is prayed that the writ petition be dismissed.
4. Sri D. Srinivas, learned counsel for the petitioner, submits that during the relevant period when the belated payments were made, rule 20-A was not in force, therefore no interest can be levied for the said period after the insertion of rule 20-A with effect from August 1, 1985 as the rule is not retrospective. He elaborates his submission by bringing it to our notice that section 7(4) which was in force up to March 31, 1984 was deleted and with effect from January 1, 1984 sections 5(8) and 10(1) were inserted. Though on April 7, 1984 the rate of interest prescribed was one rupee for every hundred rupees or part thereof of such amount for each month or part thereof after the date specified for its payment, there was no prescribed rate of interest under the newly inserted sections 5(8) and 10(1) of the Act which alone were in force during the relevant period. He contends that insertion of rule 20-A from August 1, 1985 would not clothe the authorities power to levy interest for the earlier period as the rule has not been brought into effect retrospectively.
5. The learned Government Pleader for Commercial Taxes, on the other hand, contends that the liability to pay interest was in existence before March 31, 1984 as also after that date, therefore the petitioner cannot escape payment of interest on the ground that the rate of interest was prescribed a little later by rule 20-A. Even though rule 20-A does not specifically say that it has come into force from January 1, 1984, having regard to the nature of the provisions, it would be deemed that it has come into force from January 1, 1984 and therefore levy of interest is quite justifiable.
6. On the above submissions, the short question that arises for consideration is whether under rule 20-A, which has come into force from August 1, 1985 interest can be demanded on delayed payments of entertainment tax during the period between September 27, 1984 to December 19, 1985.
7. It would be useful to note here that payment of entertainment tax under section 5 has to be made every week in the prescribed manner. Under sub-rule (9) of rule 27 of the Rules, the tax shall be paid in cash or by means of crossed-cheque or demand draft on the Monday immediately following the week to which the tax relates or if Monday happens to be a holiday, on the next working day. Sub-section (8) of section 5 lays down that where a proprietor fails to pay the amount of tax, such amount of tax shall be recovered with interest calculated, as may be prescribed. Here, it would be proper to notice that before January 1, 1984, sub-section (4) of section 7 enjoined that if the tax due according to the return or the tax assessed under the Act or any instalment thereof, is not paid, within the time specified, the proprietor shall pay by way of interest in addition to the amount of such entertainment tax, additional tax and show tax at the rate of one rupee for every hundred rupees or part thereof such amount for each month or part thereof after the date specified for its payment. The provisions of section 7 were obtained by Act 24 of 1984 with effect from January 1, 1984 and the provisions of sub-section (8) of section 5, referred to above, were inserted by the same Act. So also the provisions of section 10 were amended by the said Act 24 of 1984. Sub-section (1) of section 10 provides thus :
"(1) If the tax assessed or the penalty levied under this Act, or any installments thereof is not paid within the time specified for such payment, the proprietor shall pay interest calculated at such rate as may be prescribed in addition to the amount of such tax or penalty or installments."
8. From a perusal of the above provisions it is evident that installment of entertainment tax, if not paid within the time specified for such payment, the proprietor is liable to pay interest calculated at such rate as may be prescribed in additional to such tax or penalty or installment. Thus, it is clear that the liability to pay interest on belated payment of installment existed even before April 1, 1984 under the omitted section and it continued to exist after the insertion of provisions of sections 5(8) and 10(1) with effect from January 1, 1984. The term "prescribed" is defined by section 3(8) of the Act to mean - prescribed by rules made under this Act. Section 16 of the Act authorises the State Government to make rules for securing the payment of the entertainment tax and generally for carrying into effect the purpose of this Act. Sub-section (2-A) of section 16 which was also inserted by Act 24 of 1984 and which came into force from January 1, 1984 reads thus :
"(2-A) Any rule made under this Act may be made so as to have retrospective effect."
9. Thus, it is obvious that the Government have power to frame rules with retrospective effect.
10. Now, we shall refer to rule 20-A which has been inserted by notification issued in G.O.Ms. No. 894, Revenue, dated 25, 1985 and which was published in the Gazette on August 1, 1985. The said rule reads as follows :
"20-A. Interest on tax or penalty, if not paid by proprietor in time. - If the proprietor fails to pay the amount of tax, payable as required under section 4 or 4-A or 5 of the Act on the due date or if the tax assessed or penalty levied is not paid by any proprietor within the specified time therefor in the notice of demand or in any provision of the Act or rule made thereunder, he shall pay, in addition to the amount of such tax or penalty, interest at the rate of two rupees for every one hundred rupees or part thereof for every month or part thereof from the day/date specified for its payment."
11. A plain reading of the rule makes it clear that default in payment of tax as required under section 4, 4-A or 5 of the Act on the due date of tax assessed or penalty levied, if not by any proprietor within the specified time therefor in the notice of demand or any provision of the Act or Rules made thereunder, renders the proprietor liable to payment of interest at the rate of Rs. 2 for every one hundred rupees or part thereof for every month or part thereof from the day/date specified for its payment. Thus, it following that the liability of the proprietor to pay interest is from the date specified for payment. In the instant case, the liability of the petitioner to pay interest arises at the rate of Rs. 2 per Rs. 100 per month or part thereof from the date the instalment became due under rule 27(a) of the Rules. In our view, the words ".......... from the day/date specified for its payments" in rule 20-A by necessary implication give retrospectivity to the provisions of rule 20-A if the date specified was earlier to the coming into force of the said rule, However, Sri Srinivas relied on the decision in State Of Punjab v. Jullundur Vegetables Syndicate in support of his contention that as the rule does not specify that it came into operation with effect from January 1, 1984, no interest can be charged on the delayed payment of instalment made between January 1, 1984 and August 1, 1985. In that case the question before the Supreme Court was when there was no provision expressly empowering the assessing authority to assess a dissolved firm in respect of its turnover before its dissolution, whether the order of assessment of sales tax for the period before the dissolution was maintainable in law. It was held that as the firm was dissolved before the order of assessment was made, the order of assessment was bad. Subba Rao, J. (as he then was) speaking for the Supreme Court laid down the principle thus :
"In interpreting a fiscal statute the court cannot proceed to make good the deficiencies, if there be any, in the statue. It shall interpret the statue as it stands and in case of doubt it shall interpret it in a manner favourable to the taxpayer. In considering a taxing Act the Court is not justified in straining the language in order to hold a subject liable to tax."
12. The principle laid down above, in our view, has no application to the facts of this case. As already pointed out above, the liability to pay interest on delayed payment of tax existed before the Amendment Act 24 of 1984. By this Act, the Government was empowered to make the rules retrospectively; the language of the amended rule, namely, rule 20-A clearly states that the interest can be levied from the date or dates specified for its payment.
13. In Income-tax Officer, Alleppey v. M. C. Ponnoose it was urged before the Supreme Court that the State Government can invest the Tahsildar with the powers of a Tax Recovery Officer retrospectively. There, the Tahsildar attached properties subsequent to April 1, 1962, i.e., after the commencement of Income-tax Act, 1961, but before the date of notification empowering the Tahsildar to act as TAx Recovery Officer. The action of the Tahsildar in attaching the properties was held to be bad. It was laid down that prior to the date of notification, the Tahsildar had no power of the Tax Recovery Officer to attach the properties and that the notification could not have vested such a power in him from a date anterior to the date of the notification. In our view, that judgment has no application to the facts of the presents case as in this case the liability to pay interest on belated payment of tax, etc., has been imposed under the Act and rule 20-A while prescribing the rate mandates that the proprietor who fails to pay the tax or penalty within the specified time, shall pay interest, in addition to tax or penalty, as the case may be, at the rate of Rs. 2 for every one hundred rupees or part thereof for every month or part thereof from the day/date specified for its payment.
14. In Yemmiganur Spinning Mills Limited v. State of Andhra Pradesh [1976] 37 STC 314 (AP) the question that arose was whether the withdrawals of exemption has to be given effect from the date of issuance of the notification or from the date of granting the exemption. It was held that the earlier orders of the Government in G.O.Ms. No. 167, dated February 9, 1971 under which exemption on sales of hank yarn was granted were in force till the notification withdrawing the exemption was issued in G.O.Ms. No. 437, dated May 18, 1971, so it would be effective and enforceable only from the date of its publication in the Gazette and not from any other date. It was also observed that unless empowered expressly or by necessary implication, a delegatee cannot make a rule or issue a notification with retrospective effect. We have already pointed out that under the Act, the Government has power to issue a retrospective notification. Therefore, the delegated legislation in framing rule 20-A, which by necessary implication has the retrospective effect, cannot be held to be invalid.
15. In Venkateshwara Talkies, Pitapuram v. Deputy Commercial Tax Officer (1977) 2 APLJ 33 the question before the Division Bench of our High Court was, whether the Assistant Commercial Tax Officer or the Deputy Commercial Tax Officer could re-open the assessment already completed before issuance of G.O.Ms. No. 713, dated June 26, 1976 which came into effect from July 1, 1976. It was held that no assessment for the period prior to July 1, 1976 could be made under section 3 of the Act, nor could the officers appointed under rule 26-A which came into effect from July 1, 1976, reassess for any period prior to July 1, 1976. In the absence of any clear words, from which necessary implication would follow, in section 16, which is the section which empowers the State Government to make rules, it was not open to the State Government to make rules, which would have retrospective effect. This and the Yemmiganur Spinning Mills case [1976] 37 STC 314 (AP) were decided before sub-section (2-A) was inserted in section 16 of the Act. After insertion of sub-section (2-A), which empowers the State Government to frame rules by Act 24 of 1984 with effect from January 1, 1984, the Government has power to make rules which have retrospective effect and therefore these judgments have no application.
16. In Nagarathinam Ammal v. Deputy Commercial Tax Officer [1987] 67 STC 464 a Division Bench of the Madras High Court dealt with the assessability of interest on penalty and delayed payment of tax. In that case, the demand of tax was made pursuant to the original order of assessment. That demand was already complied with. Later, a further demand was raised as penalty due in respect of the same assessment year. The writ petition filed by the appellant challenging the demand, was dismissed. On appeal, a Division Bench held that the dealer was liable to pay penalty if he failed to pay the tax in compliance with the notice of assessment. Referring to sub-section (3) of section 24 of the Tamil Nadu General Sales Tax Act, 1959 (as it then stood), the court held that unless there was fresh notice, there could be no liability on the part of the firm. As the appeals against the assessment orders were partly allowed, a fresh notice of demand had to be issued, so, it was only when the assessee failed to comply with the fresh notice, that he could be called a "defaulter" and before issuance of such a fresh notice, there could be no liability on the dealer for payment of penalty under the provisions of the Act and that the department was not entitled to raise the rate of penal interest relying on the amendment made in 1977. It was held that liability to pay penalty or interest was incurred with reference to the assessment year and the date of demand and default and not with reference to the assessment year and the date of demand and default and not with reference to any subsequent period. But in that case levying of penalty or making demand to pay interest itself was not upheld.
17. In Baidyanath Ayurved Bhawan (Pvt.) Ltd. v. Excise Commissioner, U.P. the Supreme Court laid down the principle of interpretation of a taxing provision as follows :
"In interpreting a taxing provision, the courts should not ordinarily concern themselves with the policy behind the provision or even with its impact. In a taxing statute one has to look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used."
18. This principle was laid down relying on the observation of Rowlatt, J., in Cape Brandy Syndicate v. Commissioners of Inland Revenue [1921] 1 KB 64.
19. If we read rule 20-A in the light of the principles noted above, it becomes evident that the interest can be levied at the rate specified therein from the date the instalment became due but was not paid accordingly.
20. From the above discussion it follow that unless there is specific authority to pass retrospective legislation, the subordinate legislation cannot be given effect to retrospectively. The subordinate legislation could be said to have retrospective effect, in the absence of specific words giving retrospective effect, if the words are capable of being construed as retrospective; the mere fact that it affects the period earlier to the passing of the rule, cannot be a ground to hold the subordinate legislation bad in law. In the instant case, the liability to pay interest existed even earlier to the impugned demand. The quantification of interest was provided under the rule by prescribing the rate of interest in rule 20-A which was made after period in question. But the rule read in that context provides that the interest would be payable from the date the tax became due but was not paid. Thus, it is clear that the impugned demand levying interest on delayed payment during the period September 27, 1984 to December 19, 1985 is valid.
21. For the aforementioned reasons, we dismiss the writ petition, but, having regard to the facts and circumstances of the case, we make no order as to costs.
22. Writ petition dismissed.