Bombay High Court
The Premier Automobiles Limited vs The State Of Maharashtra on 13 March, 1986
Equivalent citations: [1986]63STC456(BOM)
Author: Sujata V. Manohar
Bench: M.H. Kania, Sujata V. Manohar
JUDGMENT Sujata V. Manohar, J.
1. The applicants are registered dealer under the Bombay Sales Tax Act, 1959. For the period 1st July, 1967, to 30th June, 1968, the applicants were required to file quarterly returns under the provisions of the Bombay Sales Tax Act, 1959, read with rule 22(2)(c) of the Bombay Sales Tax Rules. The applicants were thus required to file quarterly returns for the period ending 30th September, 1967, 31st December, 1967, 31st March, 1968, and 30th June, 1968. Under section 38(2) of the Bombay Sales Tax Act, 1959 a registered dealer furnishing returns shall first pay into the Government treasury the whole of the amount of tax due from him according to such returns. The applicants were required to pay in respect of the quarter ending 30th September, 1967, a sum of about Rs. 19 lakhs for payment of tax under the Bombay Sales Tax Act on or before 7th November, 1967. They were also liable to pay for this period Central sales tax of approximately Rs. 14 lakhs on or before the said date. Before the expiry of the said period the applicants by their letter of 31st October, 1967, applied for extension of time for making the said payments. As a result of the said application the applicants were granted time as prayed for. The respondents in their letter of 25th November, 1967, while granting such extension stated as follows : "It has been decided to grant you the instalments asked for without prejudice to levy of penalty by the sales tax department on account of late payment of the tax amount". The applicants were directed to pay Rs. 16,50,000 on or before 15th December, 1967, and Rs. 16,50,000 on or before 15th January, 1968. Similar extensions for payment of tax due and payable as per return were also asked for for the other three quarters and such extension was granted. The applicants paid the tax approximately within the extended period so granted to them though in case of some instalments there is a delay of 4 or 5 days in payment of instalments, even after the extended period.
2. The applicants were assessed by the Sales Tax Officer under section 33 of the Bombay Sales Tax Act, 1959, for the said periods by order of assessment dated 16th October, 1972. The Sales Tax Officer levied a penalty of Rs. 1,07,449.32 under section 36(3) of the said Act on the ground that the dealer had not effected payment of tax in time. Being aggrieved by the assessment order the applicants filed an appeal before the Assistant Commissioner of Sales Tax. Ultimately, after some proceedings which are not relevant for the present reference, the Assistant Commissioner of Sales Tax granted a remission of a sum of Rs. 10,445 and he confirmed the penalty of Rs. 96,704. The matter was ultimately carried to the Sales Tax Tribunal in a second appeal. The Tribunal confirmed the decision of the Assistant Commissioner of Sales Tax. In respect of this decision the following question has been referred to us under section 61(1) of the Bombay Sales Tax Act, 1959.
"Whether, on the facts and in the circumstances of the case, and having regard to the provisions of section 38(4) of the Bombay Sales Tax Act, 1959, the Tribunal was justified in maintaining the levy of penalty under section 36(3) of the Bombay Sales Tax Act, 1959 ?"
3. At this stage it is necessary to set out the details of sales tax payments under the Bombay Sales Tax Act of the assessees for the period 1st July, 1967, to 30th June, 1968.
Details of B.S.T. payments for 1967-68
----------------------------------------------------------------------
Quarter Amount Due Date of Extension
ending due date letter for granted
for extension upto
payment
----------------------------------------------------------------------
(1) JULY- 10,50,000 7.11.67 31.10.67 15.12.67
SEPTEMBER 8,06,900 15.01.68
------------
18,56,900
------------
(2) OCTOBER- 13,00,000 7.02.68 2.2.68 15.02.68
DECEMBER 8,62,136 15.03.68
------------
21,62,136
------------
(3) JANUARY- 13,50,000 7.05.68 22.04.68 15.05.68
MARCH 8,80,863 7.05.68 30.6.68
------------
22,30,863
------------
(4) APRIL- 12,00,000 7.08.68 30.07.68 15.08.68
JUNE 7,37,595 15.10.68
------------
19,37,595
------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Date of Date Cheque No. Voucher Cheque Tender Stamp as per
------------------------------------ A.O.
---------------------------------------------------------------
15.12.67 15.12.67 Not 20.12.67 20.12.67 30B-371240 16.01.68 16.01.68 avail- 19.01.68 19.01.68 31B-309022 able 15.02.68 15.02.68 15.02.68 20.2.68 15.2.68 30B-397651 14.03.68 14.03.68 Not- 25.3.68 14.3.68 30B-407786 available 15.05.68 15.05.68 15.05.68 20.5.68 15.5.68 32B-007515 13.07.68 15.07.68 15.07.68 18.7.68 8.7.68 32B-025392 14.08.68 14.08.68 14.08.68 20.08.68 20.8.68 32B-035680 15.10.68 15.10.68 15.10.68 21.10.68 21.10.68 32B-006926
------------------------------------------------------------------
4. In this chart amounts due under the Central Sales Tax Act for the said period are not set out. Thus for the first quarter ending on 30th September 1967, the applicants were liable to pay an estimated sum of Rs. 18,56,900 as sales tax under the Bombay Act on or before 7th November, 1967. They applied for an extension of time for payment of the same by their letter dated 30th October, 1966 (31st October, 1967). They were granted extension for the payment of the first instalment of Rs. 10,50,000 up to 15th December, 1967, and they were granted extension of time for the payment of the second instalment of Rs. 8,06,900 up to 15th January, 1968. Both these amounts have been paid a few days later than the extended date as per the stamped date on the challan. The order of extension which is dated 25th November, 1967, sets out that the extension of time is granted without prejudice to the levy of penalty by the sales tax department on account of late payments of the tax amount.
5. For the quarter ending 31st December, 1967, the applicants have been given an extension of time from 7th February, 1968 to 15th February, 1968, for the payment of the first instalment of Rs. 13 lakhs and up to 15th March, 1968, for the payment of the second instalment of Rs. 8,62,136. Both these instalments have been accepted in the assessment order as having been paid within the extended time. In the case of these instalments the order granting extension is dated 29th February, 1968. The application for extension was made before the expiry of the original time. The order of 29th February, 1968, grants an unconditional extension of time.
6. For the 3rd quarter ending on 31st March, 1968, the applicants were granted extension from the original date of 7th May, 1968, to the extended date of 15th May, 1968, for the payment of the first instalment of Rs. 13,50,000; while extension was granted up to 30th June, 1968, for the payment of the second instalment of Rs. 8,80,863. The first instalment has been paid within the extended period of time while the second instalment has been paid after the expiry of the extended period of time. The order granting this extension in dated 17th May, 1968. This order is a conditional order. It states, "Your request to pay up the quarterly tax for 31st March, 1968, in 3 instalments is approved subject to the condition that the last instalment is paid by 30th June, 1968 only and that permission to pay up the dues by instalment is subject to penalty leviable under section 36(3) of Bombay Sales Tax Act, 1959, and section 9(3) of the Central Sales Tax Act, 1956." The order refers to three instalments because the reference is to instalments of tax payable both under the Bombay Sales Tax Act and the Central Sales Tax Act.
7. For the quarter ending on 30th June, 1968, time for payment of first instalment of Rs. 12 lakhs was extended from 7th August, 1968 to 15th August, 1968. The time for payment of the second instalment of Rs. 7,37,595 was extended up to 15th October, 1968. These amounts were tendered by cheque within the extended period. As per the assessment order, however, they are shown as paid beyond the extended period. For this quarter also the order dated 7th August, 1968, which grants extension is a conditional order. It sets out that the extension granted is subject to penalty leviable under section 36(3) of the Bombay Sales Tax Act, 1959, and section 9(3) of the Central Sales Tax Act, 1956.
8. Thus the orders of extension of time for the first, third and fourth quarters of the said period are all conditional orders of extension of time, the condition being that such extension of time is subject to payment of penalty inter alia under section 36(3) of the Bombay Sales Tax Act, 1959. The order of extension for the second quarter, however, is an unconditional order.
9. Under section 38, sub-section (2) of the Bombay Sales Tax Act, 1959, a registered dealer is required to pay the whole of the amount of tax due from him according to the return. Under section 38(4)(a)(i), "The amount of tax due where returns have been furnished without full payment thereof ...... shall be paid by the dealer or the person liable therefor into a Government treasury, by such date as may be specified in a notice issued by the Commissioner for this purpose, being a date not earlier than thirty days from the date of service of the notice :
Provided that, the Commissioner .... may, in respect of any particular dealer or person, and for reasons to be recorded in writing, extend the date of payment or allow him to pay the tax or penalty (if any) or the sum forfeited, by instalments". Under section 38(5) any tax, penalty or sum forfeited, which remains unpaid after the date specified in the notice for payment, or after the extended date of payment, and any instalment not duly paid, shall be recoverable as arrears of land revenue.
10. It is an accepted position that the orders of extension of time in the present case were granted under the proviso to section 38(4).
11. Under section 36, sub-section (3) as in force at the relevant time, it was provided as follows :
"(3) If a dealer does not, without reasonable cause, pay tax within the time he is required by or under the provisions of this Act to pay it, he shall, subject to the provisions of sub-section (5) of section 55 pay by way of penalty in addition to the amount of tax, a sum equal to -
(a) one per cent. of the amount of tax for each complete month for the first three months, after the last date by which he should have paid that tax, and
(b) one and one-half per cent. of the amount of tax for each complete month thereafter.
during the time he continues to make default in the payment of tax :
Provided that, the Commissioner may, subject to such conditions as may be prescribed, and an appellate authority in an appeal under section 55, may remit the whole or any part of the penalty payable in respect of any period."
12. Penalty under section 36(3) is leviable when a dealer does not pay tax within the time he is required to pay the same under the provisions of the Bombay Sales Tax Act, 1959. Ordinarily a registered dealer pays tax along with the return. Under section 38, sub-section (4), however, the Commissioner has the power to extend time for payment of tax or to grant instalments. This provision is a statutory provision under the same Act. Therefore, when an order is passed extending time for payment of tax, the applicant is entitled to pay the tax within the extended period under the provisions of the said Act. If such time is extended unconditionally and the dealer pays the tax within the extended time, there can be no question of the penal provisions of section 36(3) being attracted. The dealer has paid his tax within the time he is required to pay the same under the provisions of the said Act. Hence when an order is passed unconditionally extending time for payment of tax, no penalty can be levied under section 36(3) if tax is paid by the dealer within the extended time.
13. In the case of Abdul Shakur Umar Sahigara & Co. v. Commercial Tax Officer, Additional Circle, Mangalore reported in [1968] 21 STC 77 the High Court of Mysore at Bangalore was required to consider a case where the commercial Tax Officer directed the petitioner to pay the tax assessed within 21 days from the date of the notice. Before the expiry of that period the petitioner applied for extension of time for payment of tax by instalments. Initially Government made an order directing the Commercial Tax Officer to allow the petitioner to pay the arrears of tax in six instalments along with the usual penalty. Thereupon the petitioner applied for deletion of the direction relating to penalty from the order. As a result the original order was modified, and the Commissioner of Commercial Taxes was informed by the Government that the petitioner might be allowed to pay tax in instalments and the question of penalty may be considered afterwards. The court held that as a result of this modification the petitioner was allowed to pay the tax in instalments without being subjected to any specific condition. It said that by granting instalments the Government extended time for payment of tax. Such extension clearly negatives the concept of any default. No penalty could be demanded under section 13 of the relevant Sales Tax Act since the petitioner had paid all the instalments as and when they became due.
14. Similarly in the case of Vaikunthrao Rayappa Kamat v. Commercial Tax Officer, Sirsi (N. K. District) the petitioner had obtained a refund of Central sales tax on account of a decision of the Supreme Court which was applicable to him. Thereafter the Central Sales Tax Act was amended retrospectively, resulting in the petitioner being liable to pay the said tax. The petitioner applied for permission to pay back the refunded tax in instalments. Such instalments were granted. The petitioner repaid the said amount within the stipulated period. The Karnataka High Court held that a dealer becomes a defaulter only when he neglects to make payments of tax as and when it becomes due and not otherwise. It also held that the direction by the Government to allow the dealer to pay the tax in instalments would absolve the dealer from being penalised under section 13(2) of the Karnataka Sales Tax Act as the dealer did not make any default in the payment of intalments.
15. Mr. Hemendra Shah, learned counsel for the applicants, also relied upon a case decided by the Allahabad High Court, namely, Ajai Kumar Ashok Kumar v. Sales Tax Officer, Sector II, Kanpur reported in [1972] 30 STC 604. In that case the Commissioner had stayed recovery of tax pending further orders. Even in such a case the Allahabad High Court interpreted the order of stay as an extension of time for payment of tax. The case, however, does not directly deal with an order of extension of time and is not therefore, applicable to the present case. We, therefore, do not express any view on the correctness or otherwise of this decision.
16. For the second quarter ending on 31st December, 1967, there was an unconditional order granting extension of time to the applicants for payment of tax in two instalments. Payments were made by the applicants within the time so extended. There can, therefore, be no question of any failure on the part of the applicants to pay tax for this quarter within the time he was required to pay the same under the Act. No penalty can, therefore, be levied in respect of the tax payable for this quarter.
17. In respect of the other three quarters, however, the orders of extension are conditional. In terms they set out that the extension of time is subject to penalty under section 36(3) of the said Act. In these cases, therefore, the applicants cannot contend that they are not liable to pay penalty under section 36(3) of the Bombay Sales Tax Act by virtue of the orders of extension. Mr. Hemendra Shah, learned counsel for the applicants, contended that even when there is a conditional extension of time it must be held that the dealer had a reasonable cause for non-payment of tax within the prescribed time. Hence penalty could not be levied under section 36(3). Under section 36(3) penalty can be levied only if a dealer, without reasonable cause fails to pay tax within the prescribed time. In our view, since the orders of extension stipulate that penalty is liable to be imposed in spite of extension, there can be no presumption that the dealer had a reasonable cause for non-payment which would absolve him from payment of penalty. The orders show that the question of reasonable cause for non-payment is not examined at all at the stage of granting an extension. The right to levy a penalty under section 36(3) is preserved. Even assuming, however, that there was some reasonable cause for non-payment of tax which resulted in an order of extension being granted, this cause was not such as to absolve the dealer from payment of penalty. Hence the right to levy penalty was retained while granting the extension. A conditional extension of time for payment of tax of this nature therefore does not protect a dealer against imposition of penalty.
18. It is not necessary for us to examine the effect of delay in payment of tax even beyond the extended period. Even payment within the extended period is subject to penalty that may be levied, in view of the nature of the orders of extension. Hence payment beyond the extended period is, a fortiori, subject to the imposition of penalty.
19. In the premises the question is answered as follows :
(i) For the first, third and fourth quarters of the period 1967-68 the question is answered in the affirmative and in favour of the department.
(ii) For the second quarter of the period 1967-68 the question is answered in negative and in favour of the assessee.
20. There will be no order as to costs in the circumstances of the case.
21. Reference answered accordingly.