Kerala High Court
Joy Varghese vs State Of Kerala And Ors. on 21 February, 1986
Equivalent citations: [1986]62STC227(KER)
JUDGMENT V.S. Malimath, C.J.
1. The learned single Judge has referred this case to the Division Bench as it involves an important question of law. The question of law that arises for consideration in this case is as to whether a dealer under the Kerala General Sales Tax Act (hereinafter referred to as the Act) incurs liability to pay penalty under Sub-section (3) of Section 23 of the Act on his failure to pay the tax amount on the basis of the return filed by him under Sub-rule (1) of Rule 18 of the Kerala General Sales Tax Rules (hereinafter referred as the Rules).
2. Sub-section (3) of Section 23 of the Act which is relevant for our consideration, may be extracted as follows :
If the tax assessed or any other amount due under this Act, or any instalment thereof is not paid by any dealer or other person within the time specified therefor in the notice of demand or in the order permitting payment in instalments or within the time allowed for its payment by the appellate or revising authority or within the time specified therefor in this Act or in any rule made thereunder, the dealer or other person shall pay, by way of penal interest, in the manner prescribed, in addition to the amount due, a sum equal to-
(a) one per cent of such amount for each month or part thereof for the first three months after the date specified for its payment;
(b) two per cent of such amount for each month or part thereof subsequent to the first three months aforesaid.
It is clear from this statutory provision that it provides for levy of penal interest in circumstances specified therein. Penal interest at the rate specified in Sub-section (3) of Section 23 of the Act becomes payable if the conditions specified therein are satisfied, in addition to the liability specified therein. The liability to pay penal interest gets attracted if the following amounts are not paid within the date specified for its payment:
(i) tax assessed;
(ii) any other amount due under the Act; or
(iii) any instalments thereof.
The penal interest is attracted if the amount is required to be paid within the time specified in the notice of demand and the same is not paid. Liability to pay penal interest also gets attracted if payment by instalments is ordered or time for payment is granted either by the appellate, or the revisional authority and the same is not paid within the time allowed or within the time specified therefor in the Act or the Rules made thereunder.
3. The question that has arisen in this case is in regard to the levy of penal interest under Sub-section (3) of Section 23 of the Act for non-payment of the tax amount as per the return submitted by the dealer in accordance with Sub-rule (1) of Rule 18 of the Rules. Sub-rule (1) of Rule 18 provides that :
Every dealer liable to pay tax under the Act, irrespective of the quantum of his total turnover and every dealer whose total turnover for the year is not less than the minimum specified in Section 5 or Section 5A, shall, on or before the first day of May in every year, submit to the assessing authority of the area in which his principal place of business is situated, a return in form 8 showing the total turnover and taxable turnover for the preceding year, the amounts by way of tax or taxes actually collected during that year and the amounts by way of tax or taxes due on the taxable turnover during that year.
Sub-rule (3) of Rule 18, which is relevant for our purpose, reads :
Every dealer liable to submit a return in form 8 under Sub-rule (1) or (2) shall submit along with the return a receipt from a Government Treasury (or at least note in the return the name of the treasury and the number and the date of the receipt, in which case he shall produce the receipt before the assessing authority whenever required to do so), crossed cheque or crossed demand draft in favour of the assessing authority for the full amount of tax or taxes due for the year on the basis of the return after deducting therefrom the provisional tax, if any, paid already for the year, failing which the assessing authority shall serve upon the dealer a demand notice in form 14 and the dealer shall pay the sum demanded within the time and in the manner specified therein.
Sub-rule (1) of Rule 18 imposes an obligation on the dealer of submitting a return in form No. 8 showing the total turnover and the taxable turnover for the preceding year and the amounts by way of tax due on the taxable turnover during that year. In other words, the dealer is required to make his own assessment and state the total taxable turnover as also the tax payable by him in the return which is required to be submitted in form No. 8 within the specified time. Sub-rule (3) of Rule 18 imposes an obligation on the dealer to submit along with the return evidence regarding payment of tax in accordance with the return submitted by him and further provides for the further steps to be taken in the event of the dealer not paying the tax in accordance with the return submitted by him. In such an event, an obligation has been cast on the assessing authority under Sub-rule (3) of Rule 18 to serve upon the dealer a demand notice in form No. 14. On such demand in form No. 14 being served on the dealer, Sub-rule (3) of Rule 18 provides that the dealer shall pay the sum so demanded within the time specified therein and in the manner specified therein. This brings us to form No. 14 contemplated by Sub-rule (1) of Rule 18.
4. For the sake of convenience, we propose to extract form No. 14, prescribed by the Rules, which is as. follows :
THE KERALA GENERAL SALES TAX RULES, 1963 Form No. 14 Notice to provisional annual demand [See Rules 18(3) and 21(ii)] Assessment No. To ...(dealer) Take notice that on the basis of the return in form No. 8 furnished by you for the year ending...19...you are liable under the Kerala General Sales Tax Act, 1963 (Kerala Act 16 of 1963), to pay tax of Rs... (Rupees...) (in words) only for the year and that after deducting the total amount of the monthly payments made by you towards the tax for the year, in response to the notice of provisional assessment and demand No...dated...and the further tax paid along with the return, you have still to pay a (further) sum of Rs...(Rupees...) (in words) only. This amount shall be paid within thirty days from the date of service of this notice by crossed cheque or crossed demand draft in favour of the undersigned or by remittance into the Government Treasury at... failing which the amount will be recovered as if it were an arrear of land revenue and/or fine imposed by a Magistrate and you will also be liable to pay the penalty prescribed under Sub-section (3) of Section 23.
The above demand is only provisional and any further amount to be paid by you or any refund to be made to you will be communicated after final assessment.Turnover reported in the return form No. 8
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Name of goods Rate of tax Turnover
(1) (2) (3)
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Rs.
---------
Place : Total
Date: ---------
Assessing Authority.
Note:-Where payment is made by cheque, the cheque shall be crossed and shall be such as may be received by the Government Treasury concerned.
It is clear from form No. 14 that it requires that the dealer should be called upon to pay the amount specified therein within 30 days of the service of demand. The consequences of the failure to pay the amount so demanded are expressly stipulated in the form in the following words:
...failing which the amount will be recovered as if it were an arrear of land revenue and/or fine imposed by a Magistrate and...will also be liable to pay the penalty prescribed under Sub-section (3) of Section 23.
It is stated in the form that failure to comply with the requirement of the notice of demand attracts-the consequence of the amount being recovered as arrears of land revenue and/or fine imposed by a Magistrate and that the dealer will also be liable to pay penalty prescribed under Sub-section (3) of Section 23 of the Act. That being the clear effect of the statements in form No. 14, if the dealer to whom notice is issued does not pay the amount specified in the notice of demand within the specified time, the dealer shall incur the liability to pay penalty prescribed under Sub-section (3) of Section 23 of the Act. In other words, the clear implication is that if the dealer complies with the terms of the notice of demand issued in form No. 14, he shall not incur the liability to pay penalty prescribed under Sub-section (3) of Section 23 of the Act. Sub-section (3) of Section 23 of the Act enables the assessing authority to levy penal interest at the specified rates if the tax assessed or any other amount due under the Act are not paid within the time specified either in the notice of demand or within the time specified in the Act or the Rules. The liability to pay tax in accordance with the return submitted by the dealer is fixed by Sub-rule (1) of Rule 18 of the Rules. Sub-rule (3) of Rule 18 imposes an obligation on the part of the dealer to pay tax in accordance with the return submitted by him and to produce evidence in respect thereof along with the said return. Sub-rule (3) further provides that in the event of the dealer not submitting evidence regarding payment of the tax in accordance with the return, the assessing authority shall issue a notice in form No. 8 requiring the dealer to make the payment. Form No. 14 prescribed under the Rules in express terms states that penal interest shall become leviable in the event of the dealer not paying the amount as per the notice of demand issued in form No. 14. It thus becomes clear that failure to make payment is that payment which is required to be made in accordance with the notice of demand contemplated by Sub-rule (3) of Rule 18 of the Rules issued in form No. 14. It is failure on the part of the dealer to make the payment in accordance with the demand in form No. 14 that attracts the liability to pay penal interest under Sub-section (3) of Section 23 of the Act. When the form prescribed under Sub-rule (3) of Rule 18, which in express terms provides that penal interest shall be leviable only if the tax demanded in the notice of demand is not paid, it is impossible to take the view that the dealer becomes liable to pay penal interest for his failure to pay the amount and produce evidence in respect thereof along with the return which he is required to submit under Sub-rule (1) of Rule 18.
5. The learned Government Pleader invited our attention to the decision of the Supreme Court reported in Associated Cement Co. Ltd. v. Commercial Tax Officer, Kota [1981] 48 STC 466 (SC). That was a case in which the Supreme Court was required to examine the scope and effect of Sections 7, 7AA, 10(3), 11B and 26(5) of the Rajasthan Sales Tax Act, 1954, and Rule 25 of the Rajasthan Sales Tax Rules, 1955. The scheme of the said Act and the Rules thereunder are not in part materia with the provisions which fall for consideration in this case. There is no statutory provision corresponding to Sub-rule (3) of Rule 18 of the Rules and form No. 14 in the Rajasthan Sales Tax Act and the Rules, considered by the Supreme Court. Hence no assistance can be derived by the learned counsel for the State from the said decision. Similar is the position in respect of two other decisions relied on by the learned Government Pleader, reported in Royal Boot House v. State of Jammu & Kashmir [1984] 56 STC 212 (SC) and Khazan Chand v. State of fammu & Kashmir [1984] 56 STC 214 (SC). The provisions of the Jammu and Kashmir General Sales Tax Act considered in the said two decisions also do not contain any provisions similar to Rule 18(3) and form No. 14 with which we are concerned in this case and hence no assistance could be derived by the learned Government Pleader from those decisions.
6. Before concluding we must consider the objections raised by the learned Government Pleader to the maintainability of the petition under Article 226 of the Constitution on the ground that the petitioner has an effective and efficacious remedy by way of revision under Section 38 of the Act. The learned counsel for the petitioner submitted that though he has invoked the revisional jurisdiction under Section 38 of the Act, he undertakes to withdraw the revision and the only remedy he wants to pursue is the petition under Article 226 of the Constitution. The learned Government Pleader submitted that there being an alternative remedy available, which is equally efficacious, there is no justification for this Court to exercise its jurisdiction under Article 226 of the Constitution. Sri Dharmadan, the learned counsel for the petitioner, however submitted that there are observations in the judgment of this Court reported in Hajee Mohd. Meera Sahib v. Assistant Commissioner of Sales Tax [1980] 46 STC 134 which are likely to convey the impression that penal interest becomes payable from the date of submission of the return under Rule 18(1) if the amount is not paid along with the return, without any further steps being taken to issue notice of demand as contemplated by Sub-rule (3) of Rule 18 of the Rules. The observations in the said judgment are likely to be understood that way as it has happened in this case. The view which we have now taken is inconsistent with the observations of the learned single Judge. It is obvious that no useful purpose would be served by the petitioner invoking the revisional jurisdiction as the said authority would have been bound by the observations of the learned single Judge in the aforesaid judgment. We are therefore of the opinion that this is a fit case in which notwithstanding the alternate remedy available to the petitioner we should exercise our jurisdiction under Article 226 of the Constitution.
For the reasons stated above, we quash the order made by the assessing authority imposing penal interest under Sub-section (3) of Section 23 of the Act on the petitioner from the date of submission of the return, even though no notice of demand contemplated by Sub-rule (3) of Rule 18 has been issued in this case. In the light of the enunciation of law made in this case, the authorities shall proceed to take appropriate steps in the matter.