Gujarat High Court
Shree Vallabh Glass Works Ltd. vs State Of Gujarat on 11 April, 1991
Author: G.T. Nanavati
Bench: G.T. Nanavati
JUDGMENT S.D. Shah, J.
1. This reference under section 69 of the Gujarat Sales Tax Act, 1969, is made by the Gujarat Sales Tax Tribunal at the instance of the applicant and the following questions of law are referred to us for our decision :
(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the orders of penalty were not unlawful in spite of invocation, mention and consideration of sub-section (3) instead of sub-section (3A) of section 36 of the Bombay Sales Tax Act, 1959, in the assessment proceedings before the learned Sales Tax Officer and the learned Assistant Commissioner of Sales Tax, relating to the assessment period from September 1, 1967 to May 5, 1970 ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the orders of penalty were not unlawful in spite of invocation, mention and consideration of sub-section (5) instead of sub-section (6) of section 45 of the Gujarat Sales Tax Act, 1969, in the assessment proceedings before the learned Sales Tax Officer and the learned Assistant Commissioner of Sales Tax, relating to the assessment period from May 6, 1970 to March 31, 1971 ?
(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the financial stringency pleaded for getting extensions of time and/or instalments for payment of sales tax is not "reasonable cause" to claim immunity from the penalty provided by section 36(3) of the Bombay Sales Tax Act, 1959 or section 45(5) of the Gujarat Sales Tax Act, 1969 ?
2. The applicant is a limited company engaged in the business of manufacturing the items of glass. It was a registered dealer under the provisions of Bombay Sales Tax Act, 1959, as well as under the Gujarat Sales Tax Act, 1969. The applicant did not make the payment of dues on account of sales tax within due time for any of the periods, namely, January 1, 1967 to March 31, 1967, April 1, 1967 to March 31, 1968, April 1, 1968 to March 31, 1969, April 1, 1969 to March 31, 1970 and April 1, 1970 to May 5, 1970. There is no dispute about the fact that the applicant-company was in default of payment of full amount of tax in each of the quarters by not making any payment of tax. The Sales Tax Officer, therefore, levied penalties on amounts under section 36(3) of the Bombay Sales Tax Act, 1959, for the years when the said Act was applicable and under section 45(5) of Gujarat Sales Tax Act, 1969, for the subsequent periods.
3. Being aggrieved by the said order of the Sales Tax Officer the applicant carried the matter in appeal to the Assistant Commissioner of Sales Tax who rejected the said appeals and confirmed the order of the Sales Tax Officer.
4. Not satisfied with the judgment of the Assistant Commissioner of Sales Tax the applicant preferred six appeals to the Gujarat Sales Tax Tribunal and all such appeals were dismissed by the Tribunal by its judgment and order dated March 31, 1981. Dissatisfied with the said judgment and order of the Tribunal the applicant applied for referring the aforesaid questions of law for our decision and said application for reference being granted we are required to decide the aforesaid questions of law.
5. In order to answer the questions Nos. 1 and 2, it is necessary to refer to the relevant provisions of section 36 of the Bombay Sales Tax Act, 1959 and section 45 of the Gujarat Sales Tax Act, 1969. Said sections in so far as they are relevant are reproduced hereinbelow :
Section 36(3) and 36(3A) of Bombay Act of 1959 :
"36(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."
"36(3A). Where a dealer has failed to pay the whole of the amount of tax as required by sub-section (2) of section 38 or the whole of the extra amount of tax as required by sub-section (3) of that section or where in the case of a dealer the amount of tax assessed or reassessed for any period under section 33 or section 35 exceeds the sum already paid by a dealer in respect of such period prior to such assessment or reassessment by more than twenty per cent of the sum so paid, the dealer shall be deemed to have failed to pay the tax to the extent of the difference between the amount payable as aforesaid and the amount paid and the dealer shall pay by way of penalty on the amount of difference a sum calculated in accordance with the provisions of sub-section (3) and the provisions of sub-section (3) shall so far as may be apply thereto."
Section 45(5) and 45(6) of the Gujarat Act :
"45(5). 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 (4) of section 65, 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 per 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 per 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 65 may, remit the whole or any part of the penalty payable in respect of any period."
"45(6). Where a dealer has failed to pay the whole of the amount of tax as required by sub-section (2) of section 47 or the whole of the extra amount of tax as required by sub-section (3) of that section or where in the case of a dealer, the amount of tax assessed or reassessed for any period under section 41 or section 44 exceeds the sum already paid by a dealer in respect of such period prior to such assessment or reassessment by more than twenty per cent of the sum so paid, the dealer shall be deemed to have failed to pay the tax to the extent of the difference between the amount payable as aforesaid and the amount paid and the dealer shall pay by way of penalty on the amount of difference a sum calculated in accordance with the provisions of sub-section (5) and the provisions of sub-section (5) shall, so far as may be, apply thereto."
4. On a perusal of the said provisions it becomes clear that section 36(3) of the Bombay Act is more or less similar to section 45(5) of the Gujarat Act and section 36(3A) of the Bombay Act is more or less similar to section 45(6) of the Gujarat Act.
5. There is no dispute about the fact that the applicant defaulted in making payment of tax due within time. There is also no dispute about the fact that for invoking penalty jurisdiction the Sales Tax Officer had issued notice to the applicant calling upon it to show reasonable cause for default in payment of tax by the due dates. In response to such notice the applicant has appeared and has shown cause for not making payment of tax due within the stipulated time. The applicant has mainly pleaded financial and other hardships suffered by the applicant during the initial years of his establishment as sufficient cause for not making payment of tax due within the due dates. The Sales Tax Officer has taken into consideration the causes shown by the applicant and has, thereafter, passed the order imposing penalty. Mr. Joshi, learned advocate appearing for the applicant, submits that the notice is issued under section 36(3) of the Bombay Act and not under section 36(3A) of the Bombay Act. According to Mr. Joshi sub-section (3A) of section 36 is more onerous and therefore while invoking penalty jurisdiction reference ought to have been made in the notice to sub-section (3A) of section 36 and not to sub-section (3) of section 36 of the Bombay Act. Therefore, he submits that because of wrong mention of sub-section in the notice the ultimate order of penalty passed by the Sales Tax Officer is vitiated and is required to be set aside.
6. We are afraid we cannot accept such a specious contention raised on behalf of the applicant. Firstly, it may be noted that mere wrong mention of provision of the statute in show cause notice would not, as such, vitiate the order passed, if there is power in the authority to pass the order under other provisions of the statute. In the case of Municipal Corporation of the City of Ahmedabad v. Ben Hiraben Manilal reported in AIR 1983 SC 537 notice was issued under section 260(1)(a) of the Bombay Provincial Municipal Corporations Act, 1949, in respect of the unauthorised construction. The court found that in view of the fact that the construction was not made by the noticee but was in existence, section 478 of the said Act could have been invoked. While negating the contention that the notice under section 260 was bad the Supreme Court observed as under :
"It is well-settled that the exercise of a power if there is indeed a power, will be referable to a jurisdiction, when the validity of the exercise of that power is in issue, which confers validity upon it and not to a jurisdiction under which it would be nugatory though the section was not referred, and a different or wrong section of different provisions was mentioned."
7. The Supreme Court also referred to its earlier decision in the case of Nani Gopal Biswas v. Municipality of Howrah reported in AIR 1958 SC 141 and L. Hazari Mal Kuthiala v. Income-tax Officer reported in [1961] 41 ITR 12; AIR 1961 SC 200. In Hukumchand Mills Ltd. v. State of Madhya Pradesh case [1964] 52 ITR 583 (SC); AIR 1964 SC 1329, also same view was reiterated where it was observed that wrong reference to the power under which action was taken by the Government would not per se vitiate that action if it could be justified under some other power under which the Government could lawfully do that act.
8. Similarly, in the case of State of Karnataka v. Muniyalla reported in the AIR 1985 SC 470, Justice Bhagwati (as he then was) of the Supreme Court observed as under :
".... it is now well-settled that merely because an order is purported to be made under a wrong provision of law, it does not become invalid so long as there is some other provision of law under which the order could be validly made. Mere recital of a wrong provision of law does not have the effect of invalidating an order which is otherwise within the power of the authority making it."
9. From the position of law stated hereinabove, in the present case, we find that under section 36(3A) the order of penalty could have been passed by the Sales Tax Officer after giving notice to the applicant, and after providing an opportunity to the applicant to show cause. Instead of mentioning sub-section (3A) of section 36 the Sales Tax Officer has, in the said notice, mentioned sub-section (3) of section 36. Secondly, we find that actually notice was given to the applicant calling upon the applicant to show reasonable cause for default in payment of tax within the stipulated period. Thirdly, the applicant has in reply to said notice appeared, and in fact, shown reasonable cause/causes because of which it committed default in payment of tax. Therefore, it is the case where not only opportunity is given to the applicant to show cause, but pursuant to the said opportunity the applicant has appeared and has shown cause for default in payment of tax within the stipulated time. We, therefore, find that it is not a case where by wrong mention of sub-section of section 36 any prejudice is caused to the applicant or that the applicant is in anyway, misdirected. The object of issuing notice under section 36(3) and sub-section (3A) is that of providing opportunity to the assessee to show reasonable cause for default in payment of tax within the stipulated time. That being the very object of issuance of notice and the applicant having already disclosed his defence or having already shown cause for default in payment of tax we do not think wrong mention of sub-section of section 36 in notice would vitiate the entire penalty proceedings so as to make the order of penalty passed by the Sales Tax Officer unlawful. We are, therefore, of the opinion that the orders of penalty were not, in anyway, vitiated because of wrong mention of sub-section of section 36 of the Bombay Act and of sub-section of section 45 of the Gujarat Act.
10. That takes us to the third question. All the lower authorities have concurrently found that financial stringency pleaded by the applicant was not reasonable cause so as to justify non-payment of tax by the applicant within the stipulated time. However, it is the case of the applicant that it has applied to the Sales Tax Officer for extension of time for making payment of tax due. According to the applicant such extensions were applied for from time to time and such applications were granted. Based on this factum of extensions of time granted by the Sales Tax Officer, Mr. Joshi, learned advocate appearing for the applicant, submits that the lower authorities should have held that there was reasonable cause for non-payment of tax within stipulated time inasmuch as the Sales Tax Officer has extended time for payment of sales tax from time to time. Mr. Joshi in this connection invites our attention to section 38(4) of the Bombay Act and section 47(4) of the Gujarat Act. The said provisions, in fact, refer to the powers of the Commissioner of Sales Tax or an appellate authority to extend the date for payment of tax. When in exercise of such powers time is extended for payment of tax it is expected of the party to pay such tax within the extended time. While in the case before us it is found that the authorities found that the applicant has defaulted to pay the tax within the extended time. Secondly, the authorities have also found that cause of financial stringency put forward by the applicant was not genuine and bona fide. In fact, it is found that the applicant has also collected sales tax from the customers before the delivery of goods was given since the railway receipts were required to be got released from the bank. The applicant having thus collected tax from its customers it cannot put forward the cause of financial stringency as reasonable cause which prevented it from making the payment of tax due within the stipulated time. In fact, the cause pleaded by the applicant is not only not bona fide or genuine but it is found to be jejune and unreal. The lower authorities have, in fact, found that the applicant had already collected tax from the customers, and therefore, it ought to have paid the tax within the stipulated time. It is also required to be noted that at the time of granting extension the Sales Tax Officer has specifically stipulated that the liability to pay penalty incurred because of late payment would continue. In that view of the matter, we do not think that extension of time for payment of tax granted by the Sales Tax Officer would have as such constituted reasonable cause justifying non-payment of tax by the applicant within the stipulated time. We are, therefore, of the opinion that the lower authorities were right in holding that extension of time simpliciter or grant of instalments for payment of sales tax by the Sales Tax Officer does not constitute reasonable cause to claim protection from liability arising under section 36(3) of the Bombay Act and/or under section 45(5) of the Gujarat Act.
11. In the result, we answer all the three questions in the affirmative, i.e., in favour of the State and against the assessee. There shall be no order as to costs.
12. Reference answered in the affirmative.