Madras High Court
Apollo Tubes Limited vs Additional Deputy Commercial Tax ... on 9 July, 1992
JUDGMENT Srinivasan, J.
1. The appellant has been paying sales tax by opting under section 13 of the Tamil Nadu General Sales Tax Act, 1959, hereinafter referred to as "the Act", to submit monthly returns and pay the tax on the basis of the monthly returns. According to the appellant, for the assessment year 1988-89, it claimed a refund of Rs. 5,84,141 as paid in excess, and the said amount shall be adjusted against the monthly sales tax payable by it in respect of the assessment year 1988-89. It claimed the adjustment and paid the balance of tax. The first respondent informed it by letter dated February 22, 1989 that the sales return in respect of which a sum of Rs. 5,84,141 was claimed as refund related to the year 1987-88 and not 1988-89 and therefore it was not entitled to claim an adjustment as against the tax payable in the subsequent year, and called upon the appellant to pay the said amount and an additional sum of Rs. 95,410 as penalty under section 24(3) of the Act. Aggrieved by the said demand, the appellant filed W.P. No. 13523 of 1989. Learned single Judge by order dated October 24, 1989 dismissed the writ petition, holding that the matter was covered by the decision of Division Bench of this Court and the claim for refund made by the appellant had nothing to do with the penalty demanded and it was entirely a different matter for which the appellant should initiate separate proceedings.
2. It is the said order of the leaned single Judge that is challenged in this appeal. The judgment of the Division Bench referred to by the learned Judge is in Sakthi Sugars Ltd. v. Assistant Commissioner of Commercial Taxes [1985] 59 STC 52 (Mad.) which considered the validity of section 24(3) of the Act. Before referring to the relevant portions of the judgment of the Division Bench, it is necessary to set out the relevant provisions of the Act.
3. Section 24(3) as it stood originally read thus :
"If the tax assessed under this Act or any instalment thereof is not paid by any dealer or person within the time specified therefor in the notice of assessment or in the order permitting payment in instalments, the dealer or person shall pay by way of penalty, in addition to the amount due, a sum equal to a sum calculated at the rate of 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."
Section 24(3) was later amended and it read thus :
"If the tax assessed or has become payable under this Act or any instalment thereof is not paid by any dealer or person within the time specified therefor in the notice of assessment or in the order permitting payment in instalments, the dealer or person shall pay by way of interest, in addition to the amount due, a sum equal to a sum calculated at the rate of two per cent of such amount for each month or part thereof after the date specified for its payment."
It was further amended by the Act 78 of 1986 with effect from January 1, 1987 and as the sub-section stands at present, it reads thus :
"(3) On any amount remaining unpaid after the date specified for its payment as referred to in sub-section (1) or in the order permitting payment in instalments, the dealer or person shall pay, in addition to the amount due, interest at two per cent per month of such amount for the entire period of default :
Provided that if the amount remaining unpaid is less than one hundred rupees and the period of default is not more than a month, no interest shall be paid :
Provided further that where a dealer or person has preferred an appeal or revision against any order of assessment under this Act, the interest payable under this sub-section, in respect of the amount in dispute in the appeal or revision, shall be postponed till the disposal of the appeal or revision, as the case may be, and shall be calculated on the amount that becomes due in accordance with the final order passed on the appeal or revision as if such amount had been the subject-matter of the appeal or revision."
The sub-section refers to the date specified for its payment as referred to in sub-section (1). Looking at sub-section (1), it is seen that, save as otherwise provided for in sub-section (2) of section 13, the tax assessed or has become payable under the Act from a dealer or person and any other amount due from him under the Act shall be paid in such manner and in such instalments, if any and within such time as may be specified in the notice of assessment, not being less less than 21 days from the date of service of the notice. The tax under sub-section (2) of section 13 shall be paid without any notice of demand and in default of such payments, the whole of the amount outstanding on the date of default shall become immediately due and shall be a charge on the properties of the person or persons liable to pay the tax or interest under the Act.
4. Section 13(2) is to the following effect :
"In lieu of the tax provisionally determined under sub-section (1), a dealer may, at his option, pay tax in advance during the year on the basis of his actual turnover for each month or for such other periods as may be prescribed. For this purpose, he may be required to furnish returns showing his actual turnover for each month or other periods as may be prescribed and to pay tax on the basis of such returns. The tax under this sub-section shall become due without any notice of demand to the dealer on the date of receipt of the return or on the last due date as prescribed, whichever is later."
For enforcement of section 13(2) rules have been framed and the rule with which we are concerned is rule 18 of the Tamil Nadu General Sales Tax Rules. The relevant parts of rule 18 are sub-rules (1), (2), (3) and (4) and they read as under :
"(1) In lieu of the method of assessment described in the foregoing rules, the dealer may apply to the assessing authority for permission to submit returns and pay tax in accordance with the provisions of sub-rules (2) to (7) of this rule. If the dealer desires that this method of assessment should be applied to him from the beginning of any year he shall intimate his desire in writing to the assessing authority at the time of submitting the return prescribed in rule 9 or sub-rule (2) of rule 15 and, on being permitted, shall submit the returns and pay the tax in accordance with the provisions of sub-rules (7) to (9) of this rule.
(2) Subject to the provisions of sub-rule (5), the dealer shall submit a return in form A-1 showing the total and taxable turnover for each month and the amount or amounts actually collected by him by way of tax or taxes during that month. The return for each month shall be submitted so as to reach the assessing authority on or before the 20th of the succeeding month except for the month of February for which the return shall be submitted so as to reach the assessing authority on or before the 20th of March. Along with the return, he shall also submit proof of payment as specified in sub-rule (1) of rule 55 for the full amount of the tax or taxes payable under any of the section 3, 3A, 4, 5 or 7A for the month to which the return relates after deducting therefrom the amount, if any, claimed as refund due in the month under rule 23.
(3) The return in form A1 so filed shall, subject to the provisions for sub-rule (4), be provisionally accepted. If the return is submitted without proof of payment as specified in sub-rule (1) of rule 55 for the full amount of tax payable after deducting therefrom the amount, if any, claimed as reimbursement or refund due in the month under rule 23, such amount of tax shall become due on the date of receipt of the return or on the last due date as prescribed in sub-rule (2), whichever is later, and shall be recovered in accordance with the provisions of the Act without any notice of demand to the dealer.
(4) If no return is submitted in respect of any month on or before the date specified in sub-rule (2) or before the expiry of the period prescribed in sub-rule (5) or if the return submitted appears to be incorrect or incomplete, the assessing authority shall, after making such enquiry as he considers necessary and after giving the dealer notice as prescribed in rule 12, determine the turnover to the best of his judgment and provisionally assess the tax or taxes payable for the month and shall serve upon the dealer a notice in form B2 and the dealer shall pay the sum demanded at the time and in the manner specified in the notice."
5. Now, we will turn to the relevant observations made by the Division Bench in Sakthi Sugars Ltd. v. Assistant Commissioner of Commercial Taxes [1985] 59 STC 52 (Mad.). One of the contentions urged before the Bench was that section 24(3) was invalid as it did not provide for an opportunity to the person concerned to make his representations before the penalty is imposed on him under the said sub-section. Dealing with this contention, the Division Bench observed thus :
"The learned Advocate-General, therefore, contended that if section 24(3) is properly read, since any action thereunder does not involve penal consequences, there was no question of natural justice or an opportunity to show cause being extended because the assessee knows that he has not deposited the tax, and in case he has deposited beyond the prescribed time, then he knows when he has deposited, and he knows the amount which he was required to deposit, because on assessment, a notice has already been issued to him. Therefore, it was contended that the liability being absolute and merely in the nature of compensatory payment for retaining what rightly belongs to the State, no further enquiry was necessary and no notice need be issued. Thus, according to the learned Advocate-General, the assessee cannot challenge the notices of demand or the demand for interest on the ground of violation of principles of natural justice. The alternative argument was that, if at all the principles of natural justice have to be complied with, then such a requirement on the part of the assessing authority must be read into the section itself.
We have already taken the view that the payment provided for by section 24(3) is compensatory in character and is not penal in nature. If payment demanded under section 24(3) is not a penalty as generally understood, then in our view, no question of affording any opportunity for hearing of the defaulting assessee arises. This is also the view which the Supreme Court has taken on the provision under section 8(2) of the Jammu and Kashmir General Sales Tax Act in a decision rendered earlier in Royal Boot House v. State of J. & K. where the question was, when a tax which was payable along with the quarterly return is not paid and a dealer is required to pay interest for the delayed payment, whether a notice was necessary. We have already quoted section 8(2) of the Jammu and Kashmir General Sales Tax Act earlier. Section 8(3) of the Jammu and Kashmir General Sales Tax Act which dealt with the tax payable with the quarterly return reads as follows :
'..... Quarterly tax shall be paid before furnishing a quarterly return but not later than the date prescribed under sub-section (2) of section 7.' Dealing with this provision and the contention that only when a notice of demand was issued to the dealer by which, the dealer is required to pay the tax due on the basis of quarterly return, and if that is not complied with, interest becomes payable by the dealer, the Supreme Court observed as follows :
'..... This argument is contrary to the language of provisions of sub-section (3) which provides that tax due on the basis of quarterly return shall be paid before the expiry of the last date of filing such return and the amount of tax thus becomes payable at the latest from the expiry of the last date of filing quarterly return. Hence under sub-section (2) the dealer would be liable to pay interest on the amount of such tax from the date when it was payable, i.e., from the expiry of the last date of filing quarterly return of the Act. Of course, sub-section (2) refers to the notice of demand but that obviously relates to sub-section (1) where notice of demand is required to be issued after the assessment of tax is completed and the amount of tax assessed becomes due only after the issue of notice of demand as provided in sub-section (1) but there is no such requirement in the case of payment of tax due on the basis of quarterly return to be filed by the dealer. It is solely governed by sub-section (3). Where the tax due on the basis of quarterly return is not paid before the expiry of the last date of filing such return under the Act, it is not necessary to issue any notice of demand but on the default being committed the dealer becomes liable to pay interest under sub-section (2) on the amount of such tax from the last date of filing quarterly returns prescribed under the Act.' This decision of the Supreme Court is clear authority for the proposition that where the liability is absolute and tax is not paid from the date on which it becomes due, no notice is further necessary to the dealer because the statutory provision itself fastens the liability. Section 24(3) determines the quantum of interest and the rate at which interest is to be paid and no discretion is left to the authority to relieve the defaulting dealer of the liability under section 24(3). Consequently, in our view, the requirement of natural justice must be expressly held to be excluded by the provision under section 24(3) of the Act".
The Division Bench further observed as under :
"We have already pointed out that section 24(3) creates an absolute liability and there is no occasion to exercise any discretion by the taxing officer. All the facts are within the knowledge of the defaulting dealer, and he cannot make any grievance of being required to compensate the State for loss of tax occasioned by the defaulting assessee withholding payment."
6. One of the other contentions dealt with by the Division Bench was whether proceeding covered by rule 18(3) would fall under section 24(3). Having regard to the language of section 24(3) as it stood then, the Division Bench answered it in the negative and held that proceeding falling under rule 18(3) would not be governed by section 24(3). It is the contention of the learned counsel for the appellant that the position is not in any way changed by the amendment brought into force with effect from January 1, 1987. According to him, even after the amendment of section 24(3), proceeding which is governed by rule 18(3) will not fall under section 24(3) and in all such cases, there should be an order of assessment before any penalty is levied. We do not agree with this contention. The language of section 24(3) has been considerably altered by the amendment in 1986. Previously, the sub-section was referring to an assessment and an order of assessment. At present, the sub-section does not refer to any assessment or any proceeding on behalf of the officer for the purpose of passing an order of assessment. On the other hand, the sub-section merely says that on any amount remaining unpaid, after the specified date, the dealer shall pay, in addition to the amount due, interest at 2 per cent per month on such amount for the entire period of default. Even the liability to pay interest is not only automatic, but the section enjoins a liability on the part of the dealer to pay the interest in addition to the amount due by way of tax under section 24(3).
7. Learned counsel submits that on a reading of sub-rules (3) and (4) of rule 18 together, it will be clear that in case where there is no proof of payment of tax of any amount, which is payable under the return, there must be a proceeding for assessment and it is only after an assessment is made, penalty can be imposed. According to him, the case in which a dealer claims refund of certain amounts on account of alleged excess payment made in a prior year, would fall under sub-rule (4). Learned counsel submits that unless proof of payment is submitted along with the return, the return itself is incomplete within the meaning of sub-rule (4).
8. We have already extracted the relevant rules. We are of the view that sub-rule (4) will come into play only if the return is not filed within the date specified or if the return is incorrect or incomplete. Sub-rule (4) will not cover a case where complete return is filed and the only default on the part of the dealer is non-payment of tax or failure to attach proof of payment of tax. In such cases, sub-rule (3) will itself govern. Sub-rule (3) is very clear, inasmuch as it says that in all such cases, tax shall be recovered in accordance with the provisions of the Act without any notice or demand to the dealer. Hence, in the absence of proof of payment of tax, it is open to the department to recover the tax due as per the provisions of the Act. Automatically, the provisions for payment of interest will also come into play, and the department is entitled to recover interest as provided under section 24(3).
9. Learned counsel for the appellant places reliance on the decision in Pullicar Mills Ltd. v. Deputy Commercial Tax Officer [1988] 70 STC 194 (Mad.). The learned single Judge in that case had relied on a paragraph in the counter-affidavit filed by the Revenue in which the provisions of rule 18(4) were referred to. After referring to the said paragraph, the learned Judge has ruled that the Revenue had not complied with the provisions of rule 18(4). The learned Judge did not consider whether sub-rule (4) of rule 18 will cover cases of returns being submitted without proof of payment of tax. If the returns are otherwise complete and the only default on the part of the dealer is non-payment of tax or failure to attach proof of payment of tax, sub-rule (4) will not apply. The position has not been considered by the learned Judge. We are of the view that the decision of the learned single Judge does not in any way help the appellant in the present case.
10. In view of the clear language of rule 18 and section 24(3), we have no doubt that the remedy of the appellant to claim refund is independent of its liability to pay interest under section 24(3) of the Act. Hence, it cannot claim any adjustment as against the tax to be paid by it. Consequently, the view taken by the Revenue in this case is right. There is no merit in the writ petition or in this appeal. The writ appeal is dismissed. There will be no order as to costs.
11. Appeal dismissed.