Madras High Court
Pullicar Mills Ltd. vs Deputy Commercial Tax Officer, ... on 13 January, 1988
Equivalent citations: [1988]70STC194(MAD)
ORDER Swamikkannu, J.
1. This is a petition under article 226 of the Constitution, for the issue of a writ of certiorarified mandamus, calling for the records from the third respondent in his B.P.Rt. No. 4145 of 1980, and to quash the order of the third respondent therein dated 20th November, 1980 and to direct the third respondent to dispose of the revision petition according to law. In the affidavit accompanying the writ petition, it is stated by one Thiru. Krishnaraj, one of the directors of the petitioner-mill, that the petitioner was assessed by the first respondent, the Deputy Commercial Tax Officer, Tiruchengode. The method adopted for the assessment was as contemplated by sub-rules (2) to (7) of rule 18 of the Tamil Nadu General Sales Tax Rules (hereinafter referred to as "the Rules"). The petitioner was enjoying the facility of filing A-2 returns and paying tax on monthly turnover basis as per the said rules. The petitioner was complying with the conditions stipulated by the said rules scrupulously till the assessment year 1976-77. Due to recession in the textile mill industry and due to labour unrest during the assessment year 1976-77, the petitioner-mill was unable to pay the tax for some months within the time stipulated as per sub-rule (2) of rule 18. When the A-2 returns for those months were not filed in time, the first respondent did not proceed as per the mandatory provision in sub-rule (4). Without making an enquiry as stipulated in rule 12, he determined the turnover for those months separately to the best of his judgment and provisionally assessed the tax payable for each of those months immediately after the due dates and, without serving a notice in form B-2 and giving an opportunity to the petitioner to pay the sum demanded within 21 days from the date of service of such notice, raised the demand. The penalty in terms of section 24(3) of the Act is imposed only when the amount of tax is not paid within 21 days as contemplated above. After the close of the year, the first respondent made the final assessment for the assessment year 1976-77 by his order dated 23rd March, 1978 and after deducting the tax already paid, i.e., Rs. 10,10,181, a demand notice in form B-3 was issued for the balance of Rs. 1,687 which the petitioner paid within the time stipulated in the notice. While so, even before that on 18th March, 1978, the petitioner was served with an order imposing a penalty under section 24(3) of the Act for the belated payment of the tax. The amount demanded by way of penalty was Rs. 9,926. The petitioner preferred a revision to the second respondent contending that the penalty in terms of section 24(3) could be imposed only if the amount of tax was not paid within the time stipulated. But the second respondent dismissed the revision stating that section 24(3) was mandatory and hence no interference was called for with the assessment and imposition of penalty. A further revision to the third respondent also was dismissed by the third respondent observing that the payment of penalty under section 24(3) was mandatory and further, the question of preferring a revision did not arise. The order of the third respondent confirming the orders of the second and the first respondents were illegal according to the petitioner and are also untenable constituting errors on the face of the record, and failure to discharge the statutory obligation under the Act.
2. Mr. V. Srinivasan, learned counsel for the petitioner, contended that the order imposing penalty under section 24 of the Act is subject to a revision under section 33 of the Act to the Deputy Commissioner and a further revision to the Commissioner of Commercial Taxes under section 35. The third respondent therefore erred in holding that no revision would lie. The third respondent was in error in stating that a demand under section 24(3) was not an order or proceedings under the Act. The finding of the third respondent that penalty under section 24 was automatically attracted and the levy was mandatory, is another erroneous conclusion arrived at by the third respondent. The process of imposition of penalty is not automatic and it is incumbent on the assessing authority to satisfy himself that the failure to carry out the statutory obligation on the part of the assessee was wilful and designed to evade tax. In this regard, learned counsel for the petitioner relied on the decision reported in Kathiresan Yarn Stores, Salem v. State of Tamil Nadu [1978] 42 STC 121 (Mad.) [FB]; (1978) 91 LW 313 (FB). The main point stressed on behalf of the petitioner is that the penalty under section 24(3) is not mandatory or automatic as considered by the third respondent, but is subject to the discretionary exercise and the conclusion of the third respondent is repugnant to the provisions of the Act and the well-established principles laid down by the Supreme Court reported in Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211; [1972] 83 ITR 26.
3. The decision in Sakthi Sugars Ltd. v. Assistant Commissioner of Commercial Taxes [1985] 59 STC 52 (Mad.) is relied on by the learned counsel for the petitioner for the proposition that rule 18(3) of the Rules, along with the monthly returns, is really in the nature of self-assessment and if the liability to pay interest by way of penalty is fastened only in a case where the tax assessed is not paid within the time specified therefor in the notice of assessment, there will be no question of any notice of assessment in a case which is governed by rule 18(3) of the Rules and the provisions of section 24(3) of the Act cannot be attracted to such a case. This decision is also relied on for the proposition that section 24(3) being a provision which creates a fiscal liability, must be strictly construed, and when the section refers to a notice of assessment, that notice of assessment is the notice which is contemplated by section 12 of the Act read with rule 16 of the Rules which refers to the making of final assessment and contemplates a positive Act on the part of the assessing authority calling upon the dealer to pay the tax which has not been paid, and it is only if, in spite of such notice of assessment, the amount due is not paid, that the liability to pay interest under section 24(3) of the Act can arise. It was also held in the said decision that having regard to the plain terms of section 24(3), any failure on the part of the dealer to pay tax payable under rule 18(3) along with the monthly return, will not automatically attract the liability under section 24(3) of the Act. Thus, if the delay is 1 month and 10 days, the interest payable will not be for two months.
4. In the counter filed on behalf of the respondents, it has been contended as follows :
"The allegations of the petitioner in paras 12 to 16, it is submitted that according to section 33 a revision before the Deputy Commissioner lies against an order passed or proceeding recorded under the Act. The demand of penalty under section 24(3) is automatic. All other allegations of the petitioner are baseless and are legally unsustainable. Its is submitted that the levy of penalty is automatic on the belated payment of tax. The levy of penalty under section 24(3) was for the belated payment. It is submitted that there are absolutely no merits in the allegations of the petitioner in paragraphs 16 to 18 of the affidavit. As already submitted in the foregoing paragraphs, there is no option for any one for the levy of penalty under section 24(3). The action of the respondents is therefore legal and valid." - (sic).
5. The points that arise for determination in the writ petition are :
(1) Whether the contention raised on behalf of the Revenue that a revision lies to the Deputy Commissioner under section 33 and as such, the writ petition is not maintainable, is to be upheld or not ?
(2) Whether the contention raised on behalf of the petitioner that the writ petition is maintainable and the point raised, viz., that in the case of self-assessment section 24(3) is not automatically attracted and that opportunity ought to have been given to the petitioner is tenable, and whether the notice has to be issued by the authorities to the petitioner and whether such a notice is mandatory or not ?
6. So far as the first point is concerned, it is relevant to note that Mr. V. Srinivasan specifically submit that the remedy available with the third respondent had been exhausted by the petitioner and it is only after exhausting that remedy under the enactment, the petitioner has come forward with this writ petition. Therefore, this writ petition is maintainable under the writ jurisdiction under article 226 of the Constitution.
7. As regards the second point, it is submitted by the learned counsel for the petitioner that the petitioner was assessed on the basis of self-assessment from the inception and that for the relevant period, all of a sudden, the authorities concerned have chosen to serve a demand notice without previously issuing a notice under rule 18(3) of the Rules. In paragraphs 3 of the counter-affidavit it is stated that sub-rule (4) of rule 18 contemplates that if no return is submitted within the time or if the returns submitted appear to be incorrect and incomplete, the assessing authority is authorised to hold an enquiry and determine the turnover to the best of judgment, and assess the tax and issue a notice in form B-2 to the dealer. In the instant case, it is seen that this position which is correctly stated as one of the contentions of the Revenue had not been complied with. Therefore, when it is common ground that no enquiry had been conducted as per rule 18(4) of the Rules, necessarily the order that had emanated without such an enquiry being held, is certainly not in accordance with law and as such had necessarily to be quashed. Therefore, the order sought to be quashed is hereby quashed. The writ petition is allowed. The amount paid by way of penalty, viz., Rs. 9,926, is directed to be refunded to the petitioner herein, since the procedure to be followed had not been followed and since it is the basic principle of procedural law that an opportunity as per the provisions has necessarily to be given to the aggrieved person and before issuing the notice as contemplated under rule 18(4) the enquiry conducted and the impugned order passed are all rendered a nullity. In the circumstances, there will be no order as to costs.
8. Writ petition allowed.