State Taxation Tribunal - West Bengal
V.J. Suraiya vs Additional Commissioner, Commercial ... on 14 September, 2001
Equivalent citations: [2002]127STC575(TRIBUNAL)
JUDGMENT
B.K. Lala, Judicial Member
1. This is an application under Section 8 of the West Bengal Taxation Tribunal Act, 1987 praying for a declaration that the Ordinance issued amending the provisions of the West Bengal Sales Tax (Settlement of Dispute) Act, 1999 (hereinafter referred to as "the Act, 1999") is unconstitutional and ultra vires and also for setting aside the impugned order dated August 4, 2000 passed by respondent No. 1.
2. The additional tax of the petitioner for the period 4 quarters ending ASO Vado 30th, 2043 G.D. was assessed to Rs. 10,436.60 and additional interest Rs. 23,898.44. An appeal against the order of assessment was preferred on May 5, 1997 before the Assistant Commissioner, the respondent No. 2, disputing the assessment of tax though to avoid payment of further interest full amount of tax and interest was deposited. During pendency of the appeal, the Act, 1999 came into force on and from the 1st day of July, 1999. The conditions for settlement under the Act, 1999 are that the arrear tax may ' be settled on payment of 33 per cent of the tax in dispute and/or interest in dispute or 5 per cent tax in dispute whichever is lower. The petitioner, therefore, submitted an application on August 4, 1999 praying for settlement of the dispute raised in the appeal regarding assessed tax of Rs. 10,436.60 and interest levied thereon accepting 33 per cent of the tax due and interest as payable and claimed refund of the balance amount. The said application filed on August 4, 1999 was kept pending till it was finally disposed of on January 20, 2000.
3. During pendency of the said application, the Government of West Bengal in the meantime promulgated an Ordinance, West Bengal Sales Tax (Settlement of Dispute) (Amendment) Ordinance, 1999 (hereinafter referred to as "the Ordinance, 1999") which was given effect on and from 10th November, 1999. Certain provisions of the Act, 1999 were amended with retrospective effect, i.e., from 1st day of July, 1999. The result of such retrospective amendment is that the amount paid in excess than the amount settled, shall virtually stand forfeited inasmuch as the higher amount shall have to be accepted for settlement.
4. The designated authority in terms of the amended provision of the Act 1999, accordingly passed an order on August 4, 2000 refusing the prayer for refund of the excess amount paid by the petitioner. The order of refusal of the designated authority is highly illegal inasmuch as, an applicant who actually did not pay any amount of the disputed tax before filing an application under Section 5 shall have to pay only (33 per cent plus 5 per cent, i.e., 33 per cent of such disputed tax and interest at 5 per cent of disputed tax to settle the dispute whereas, another applicant who had paid in full the disputed amount of tax with interest, just like this petitioner, would not be allowed to get refund of the amount paid in excess to that of 38 per cent under the amended provisions of the Act. The Ordinance, 1999 promulgated with retrospective effect is, therefore, unconstitutional, ultra vires and violative of the principle of natural justice.
5. The further case of the petitioner is that the principle of promissory estoppel is applicable in the present case since as per the assurance given under the statute to pay only 33 per cent of tax and further 5 per cent of tax or amount of interest whichever is less, the petitioner intended to settle the dispute and filed application under Section 5 of the Act, 1999, otherwise no such application would have been filed.
6. An affidavit-in-opposition has been filed on behalf of the respondents denying all the material allegations made in the application contending, inter alia, that it is for the petitioner to establish that the Ordinance, 1999 is ultra vires and unconstitutional. It is denied that the principles of natural justice were violated or that the principles of promissory estoppel are applicable in the present case.
7. It is submitted on behalf of the petitioner that as a bona fide tax-payer he deposited the full amount of assessed tax together with interest, though he challenged the assessment order in an appeal filed on May 5, 1997 which was kept pending for hearing before the Assistant Commissioner, Commercial Taxes. In order to settle the dispute an application therefore, was filed on August 4, 1999 under the provisions of the Act, 1999 during pendency of the appeal. Under Sub-section (2) of Section 6 of the Act, 1999 the dispute is to be settled by the designated authority accepting 33 per cent of the arrear tax and further 5 per cent of tax or interest whichever is less where interest is disputed. The petitioner, therefore, is entitled to get refund of the balance amount of tax and interest which he paid more than 33 per cent plus 5 per cent, i.e., 38 per cent arrear tax with interest. But he was not allowed to get refund of the balance amount since some of the provisions of the Act, 1999 in the meantime were amended by promulgation of an Ordinance giving retrospective effect from July 1, 1999. According to the learned lawyer, such amendment by forfeiting the right of the petitioner to get refund of the excess amount of paid tax and interest is unconstitutional and ultra vires for the reason that the assessee who did not make deposit of any amount of arrear tax would be getting relief by paying only 38 per cent of tax with interest to settle the dispute. Whereas, others, like petitioner, would be deprived from such benefit only because, to show bona fides full amount of tax in dispute was paid before preferring appeal. The Ordinance, 1999 thus, has taken away the right of refund of excess payment made by a taxpayer by giving retrospective effect of the provisions. The Revenue by such Ordinance thus, have become empowered to forfeit the taxes paid in excess. The provisions being confiscatory in nature cannot stand in the eye of law. The said Ordinance of 1999 would, therefore, be declared invalid, so far retrospective application of provision is concerned.
8. Admitting the fact of filing of appeal on May 5, 1997, it is submitted on behalf of the respondents that the petitioner deposited the disputed tax and interest long before the Settlement Act, 1999 came into force. The claim of the petitioner, therefore, cannot be entertained under the provisions of the said Act, 1999. Moreover, the Act, 1999 is silent over the claim of refund of the excess payment. Regarding the constitutional invalidity of the Statute the responsibility lies upon the petitioner to establish it. The principle of promissory estoppel is also not applicable in the present case inasmuch as, there was no representation from the side of the State Government to create any legal relation for making refund of the excess amount, if any, paid by the petitioner. Since he was not liable to pay whole of the amount of disputed tax while preferring the appeal, he is not entitled to get refund of the excess amount. The petitioner, therefore, cannot get any relief in terms of the prayers made in his application. It is also submitted that there was no inordinate delay in disposing of the application dated August 4, 1999 for settlement of the dispute, since it was disposed of on January 20, 2000. The present application, therefore, is liable to be dismissed.
9. On the submissions of both the sides the following points came up for consideration:
(i) Is the petitioner eligible to claim relief under the Act, 1999 ?
(ii) Is the Ordinance promulgated on 10th November, 1999 unconstitutional and ultra vires so far its retrospective operation is concerned with effect from July 1, 1999 ?
(iii) Is the principle of promissory estoppel applicable in this case ?
10. The Section 4 speaks about the eligibility of an applicant to seek relief under this Act, 1999. It provides that an applicant shall be eligible to make application for settlement of dispute in arrear tax, penalty or interest for which assessment has been made and an appeal or revision against the said order is pending on the 31st day of December, 1999 before the appellate or revisional authority. Such application has to be filed according to Sub-section (1) of Section 5 on or before September 30, 1999 or by such later date as the State Government may prescribe by issuing notification. The petitioner, in this case, admittedly, filed an application for settlement on August 4, 1999, i.e., before September 30, 1999 the date fixed under Sub-section (1) of Section 5 and his appeal against the order of assessment was also pending before the appellate authority since May 5, 1997. The petitioner, therefore, fulfilled the necessary conditions for settlement of the dispute as provided under sections 4 and 5 of the Act, 1999. His eligibility for seeking relief under this Act, 1999 therefore, cannot be questioned.
11. On receiving such application it is the duty of the designated authority under Sub-section (1) of Section 6 to verify the correctness of the particulars furnished by the petitioner ordinarily within sixty days and determine the amount payable by the petitioner for the purpose of settlement of arrear tax, penalty or interest in dispute at the rate as specified in Section 7 of the Act, 1999. Since the correctness of the particulars furnished by the petitioner in this case, has not been disputed, the designated authority has to take recourse for the calculation of the amount payable under Section 7 of the Act. Section 7 of the Act, 1999 states as follows:
"7. (1) The amount payable by an applicant for settlement of dispute under this Act shall be determined under Sub-section (2) of Section 6--
(a) where the dispute relates to any arrear tax in dispute, at the rate of thirty-three per centum of the arrear tax in dispute ; or
(b) where the dispute relates to any arrear interest in dispute, at the rate of five per centum of the arrear tax in dispute for the period to which such interest relates, or the amount of the arrear interest in dispute, whichever is less.
(2) The arrear penalty in dispute shall be waived."
Therefore, under Sub-section (2) of Section 7 the penalty in dispute has totally been waived. The settlement, prior to promulgation of the Ordinance, 1999 is to be made on acceptance of 33 per cent of arrear tax in dispute and 5 per cent of arrear tax where interest is in dispute, or arrear interest whichever is less, i.e., the amount payable shall not be more than 38 per cent. While determining the amount payable under Section 7 the designated authority according to the first proviso of Section 6 "shall take into account any amount of arrear tax, penalty or interest in dispute paid by the applicant before making an application under Section 5 and deduct the amount so paid by him from the amount determined as payable by the applicant in this sub-section".
12. Therefore, if an applicant deposits only 33 per cent of arrear tax and further 5 per cent of tax or interest, if interest is disputed whichever is less, he shall be discharged under subsection (1) of Section 8 of the Act, 1999, from his liability to make payment of the balance amount of such arrear tax, penalty or interest in dispute. This benefit has been curtailed promulgating the (Amendment) Ordinance on November 10, 1999 giving retrospective effect on and from July 1, 1999 by amending Section 7 of the Act, 1999 which speaks as follows :
"(1) The amount payable by an applicant for settlement of dispute under this Act shall be determined under Sub-section (2) of Section 6--
(a) where the dispute relates to any arrear tax in dispute, at the rate of thirty-three per centum of the arrear tax in dispute or the actual amount paid in respect of such arrear tax in dispute, whichever is higher ; or
(b) where the dispute relates to any arrear interest in dispute and--
(i) there is also some arrear tax in dispute for the period to which such interest relates, at the rate of five per centum of the arrear tax in dispute for such period, or the amount of the arrear interest in dispute, whichever is less ;
(ii) there is no arrear tax in dispute for the period to which such interest relates, at the rate of five per centum of the arrear interest in dispute."
Thus, by such amendment with retrospective effect, the higher amount of tax if already deposited, shall be accepted for settling the dispute instead of 33 per cent of. arrear tax.
13. The retrospective operation of the amended Section 7 of the Act, 1999 therefore is under attack on the ground of its constitutional validity. The Constitution as such does not contain any prohibition against retrospective legislation. The general principle underlying the legislative power is that once the legislative power is conceded, the Legislatures may exercise the power prospectively or retrospectively. But, the general rules as stated by Halsbury is "all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospective". A retrospective operation, therefore, should not be given to a statute so as to affect, alter or destroy an existing right. The general presumption regarding retrospective taxation is that the Legislature would not attempt to reach into the past without any relevant nexus and only in a case of arbitrary exercise of such power the court is to step in.
14. Taxation law is no exception to the doctrine of equal protection. A taxation law will be struck down as violative under Article 14 of the Constitution, if there is no reasonable basis for classification within same group. In the present case, long before promulgation of Ordinance, 1999, the petitioner deposited full amount of arrear tax and interest in dispute before filing an application under Section 5 praying for settlement of the dispute. He, therefore, acquired right to get the dispute settled by paying only 33 per cent of arrear tax and 5 per cent of arrear tax or interest whichever less and to get refund of the excess amount. But since the amended provisions of Section 7 was given retrospective effect from July 1, 1999, and the petitioner's application was disposed of after promulgation of the Ordinance, the petitioner failed to avail of the benefit of refund. The excess amount of arrear tax deposited by him has become non-refundable. Had the petitioner knew that settlement has to be made by paying the full amount of arrear tax in dispute, he would not have filed the application for settlement of dispute. Because, he is being compelled to pay the full amount of tax disputed in appeal and his pending appeal also is becoming infructuous. He cannot get proper relief after a Certificate of Settlement is issued under subsection (5) of Section 8 of the Act, 1999. Whereas in a case, where a dealer has not deposited any amount of arrear tax in dispute, he is being allowed to settle the dispute only by paying in total 33 per cent of arrear tax and if interest is disputed, 5 per cent of tax or interest whichever less. There is no reasonable basis as it appears, for such classification or differentiation within the same class of tax-payers.
15. In a case Varalakshmi Silk House v. State of Karnataka, reported in [1999] 112 STC 93 (Kar) it was held,--
"Article 14 of the Constitution of India provided that the State shall not" deny to any person equality before the law or the equal protection of laws within the territory of India. It may be observed that differential treatment per se is not violative of Article 14 if there is a reasonable basis for differentiation."
16. In the instant case, we find no reasonable basis in making classification in the same class of tax-payers. A group, though are paying full amount of arrear tax and another group pay nothing before making application under Section 5 of the Act, 1999 yet benefit goes to the latter group depriving former. Thus, there is no equality and uniformity within same class by promulgation of Ordinance. The (Amendment) Ordinance, 1999, thus, has caused discrimination with a deliberate intention for causing discrimination. The retrospective effect given by the (Amendment) Ordinance, therefore, is liable to be struck down.
17. The doctrine of promissory estoppel will be applicable where the Government makes a promise knowing or intending that it would be acted on by the promise and the promisee alters his position acting in reliance on it, the Government would be held bound by the promise. In this case, by legislative enactment, the remedy has been provided for the tax-payers who disputed the assessed tax and preferred appeal or revision. Hence, all the consequences would follow according to the provisions of the Act, 1999. There is no element of promise from the side of the Government. Moreover, it is now well-settled principle that there can be no estoppel against the Government in exercise of its legislative, sovereign or executive power. (Bihar Eastern Gangetic Fishermen Co-operative Society Ltd. v. Sipahi Singh AIR 1977 SC 2149). Therefore, the question of promissory estoppel does not arise in this case.
18. For the reasons discussed above the instant application succeeds and the petitioner is entitled to get relief as prayed for. The retrospective effect given on and from July 1, 1999 by the (Amendment) Ordinance, 1999 is held to be discriminatory and confiscatory and as such is unconstitutional. The impugned order dated August 4, 2000 passed by respondent No. 1 is hereby set aside.
19. The three other applications being Nos. RN-261 of 2000, RN-262 of 2000 and RN-263 of 2000 were filed and heard together with the application being No. RN-260 of 2000. All the three applications though relate to the different period of assessment, i.e., for the period from November 10, 1988 to October 31, 1989, four quarters ending on March 31, 1990 and four quarters ending on March 31, 1995 respectively still the points at issue are same and identical. All the aforesaid three applications are accordingly disposed of in terms of the findings made above along with the present application. No costs.
A. Deb, Technical Member
20. I agree.
P.K. Sen, Chairman
21. I had the privilege of going through the judgment to be delivered by my learned brother and though I fully agree with the reasoning given by my learned brother, I want to add a few more lines for my satisfaction. The Ordinance, under challenge, was promulgated to give some relief specially with regard to settlement of disputes of tax. The purpose for which it was promulgated, will be frustrated if its retrospectivity is upheld. The amendment forfeits the right of the petitioner to get refund of the excess amount of tax paid because of retrospectivity as the petitioner as a bona fide tax-payer paid the entire tax. But as against this a person who did not make payment of any amount of arrear tax would be getting relief by paying only 38 per cent of tax with interest thereon to settle the dispute. Our Constitution has provided for equality before the law and equal protection of the law. Our fathers of the Constitution intended that the law should be protected equally to all. But here is a case where we find that the retrospectivity of the Ordinance under challenge has been consistently creating classification between the bona fide tax-payers and the persons who are yet to pay taxes. The persons who had paid the taxes will not get any relief whereas the persons who did not make any payment of taxes will get the benefit of tax relief by paying only 38 per cent of the tax and interest. This sort of classification was never intended by the fathers of the Constitution and this classification must be termed as unreasonable and unfair.