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PETITIONER: CALCUTTA JUTE MANUFACTURING CO & ANR.

       Vs.

RESPONDENT: COMMERCIAL TAX OFFICER & ORS.

DATE OF JUDGMENT:       08/07/1997

BENCH: S. C. SEN, K. T. THOMAS

ACT:

HEADNOTE:

JUDGMENT:                             WITH [Civil Appeal  Nos. 15367/96,  4196/95,  4707/94,  15513/96, 15514/96,  2905/92,   15584-15591/96,  15583/96,   12638/96, 879/92, 11188/95,1904/90,1905/90, 1906//90, 1907/90,1908/90, 4989/91,15593/96,15594/96,15595/96]                       J U D G M E N T THOMAS, J      The question  raised in all these appeals is whether an assessee is  liable to pay interest under section 10A of the Bengal finance (Sales Tax) Act 1941, on the turnover tax for the period  during which  recovery of  the  tax  amount  was stopped by  orders of  the High  Court. West Bengal Taxation Tribunal answered  the said  question against the appellants and hence these appeals by special leave.      For dealing with the aforesaid question, only necessary e facts need  be mentioned. A new provision (section 6B) was included  in  the  Bengal  Finance  (Sales  Tax)  Act  1941, (hereinafter referred  to as  the ‘Act’  for short)  and  an identical provision  was included  in the  West Bengal Sales Tax Act  1954  as  Section  4AAA.  The  effect  of  the  new provision was  that they  imposed a tax on the turnover of a dealer whose  annual aggregate  gross turnover  exceeded Rs. Fifty lakhs.  The provisions  came into  force on  1.4.1979. These appellants  were concerned  with section 6B of the Act and hence,  they filed  writ petitions  before the  Calcutta High Court  challenging    the  validity  of  the  aforesaid provision.  The   High  Court,  on  admission  of  the  writ petitions, granted  interim relief by injuncting West Bengal Government from  collecting such  tax on  the turnover,  but ultimately  the   writ  petitions  were  dismissed  .  thus, liability of  the appellants  to pay  tax  on  the  turnover became conclusive  and appellants  remitted the  tax  amount accordingly. But in the meanwhile, Government of West Bengal yet another  provision as  Section 10A  in the  Act by which interest at  the rate of 2% per month was charged on the tax amount payable  by the  dealer during the period of default. So demands  were made  on the  appellants to pay interest on the tax amount.      Appellants  disputed   their  liability   to  pay  such interest  mainly   on  two  grounds.  First  is  that  since

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appellants have  furnished the  returns and paid full tax as per such  returns they  are not liable to pay interest under section 10A  of the  Act. Second is, even otherwise they are not liable  to pay  interest on  the tax  amount as its non- recovery was  the effect  of the injunction order granted by the High Court.      West  Bengal   Taxation  Tribunal,   before  which  the appellants challenged  the demand  for payment  of interest, dismissed  the   petitions  filed  by  the  appellants.  For considering the  contention of  the appellants  a perusal of Section 10A is necessary. Section 10A of the Act reads thus:           "10A.  Interest   payable   by      dealer.-(1) Where  a registered  or      certified dealer furnishes a return      referred  to   in  section   10  in      respect  of   any  period   by  the      prescribed date  or thereafter  but      fails to  make full  payment of tax      payable in  respect of  such period      by   such    prescribed   date   of      thereafter. but  fails to make full      payment of  tax payable  in respect      of such  period by  such prescribed      date,  he   shall  pay   a   simple      interest at  the rate  of  two  per      centum for  each  English  calendar      month of default from the first day      of such  month next  following  the      prescribed date  up  to  the  month      preceding the month of full payment      of such  tax or  up  to  the  month      prior to  the month  of  assessment      under section 11 in respect of such      period. whichever  is earlier, upon      so  much   of  the  amount  of  tax      payable by  him according  to  such      return remains unpaid at the end of      each such month of default.           Provided   that   where   such      dealer admits  in writing  that the      amount of tax payable in respect of      such period  is an  amount which is      either more  or less than, what has      been originally shown as payable in      the   return    and    where    the      Commissioner is  satisfied  on  the      point  of   such   admission,   the      interest shall  be payable  upon so      much admission,  the interest shall      be payable  upon  so  much  of  the      amount of  tax payable according to      such admission as remains unpaid at      the  end  of  each  such  month  of      default.           (2)  Where   a  registered  or      certified dealer fails to furnish a      return referred to in section 10 in      respect  of   any  period   by  the      prescribed   date   or   thereafter      before the assessment under section      11 in  respect of  such period, and      on such  assessment full  amount of      tax  payable  for  such  period  is      found not  to have been paid by him      by such  prescribed date,  he shall

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    pay a  simple interest  at the rate      of two  per centum for each English      calendar month  of default from the      first  day   of  the   month   next      following the prescribed date up to      the month  preceding the  month  of      full payment of tax for such period      or up  to the  month prior  to  the      month of  assessment under  section      11  in   respect  of  such  period,      whichever is  earlier, upon so much      of the amount of tax payable by him      according  to  such  assessment  as      remains unpaid  at the  end of each      such month of default.           Provided   that    where    an      assessment under section 11 is made      for more  than one  period and such      assessment does not show separately      the tax  payable for  the period in      respect  of   which   interest   is      payable under  this subsection, the      Commissioner shall estimate the tax      payable  for  such  period  on  the      basis  of   such  assessment  after      giving the dealer an opportunity of      being heard.           (3) Where  a dealer  fails  to      make payment  of  any  tax  payable      after  assessment   by   the   date      specified  in   the  notice  issued      under sub-section (3) of section 11      for payment thereof, he shall pay a      simple interest  at the rate of two      per   centum   for   each   English      calendar month  of default from the      first  day   f   the   month   next      following  the  date  specified  in      such  notice   up  to   the   month      preceding the month of full payment      of such  tax or  up  to  the  month      preceding the month of commencement      of  proceedings  under  sub-section      (4) of  section  11,  whichever  is      earlier, upon so much of the amount      of tax  payable by him according to      such notice  as remains  unpaid  at      the  end  of  each  such  month  of      default."      It must be pointed out at the outset itself that nobody has a  case that  appellants are  liable to  pay interest by virtue of  sub-section (3)  thereto. Learned counsel for the appellants however,  contended that  neither are they liable to pay interest under the other two sub-sections because the situation envisaged  in either  of  them  was  non-existent. According to  the counsel,  since appellants  have furnished returns and  paid the  tax, as per such returns, there is no ability to  pay interest  on the  turnover tax  because  sub section (1)    contemplates  a  situation  where  there  was failure to  pay tax in accordance with the returns furnished and sub section (2) contemplates a situation where no return has been furnished at all.      The requirement  in Sub-section  (1) is  " to make full payment of  the  tax  payable"  after  furnishing  a  return referred to  in section  10 of the Act within the prescribed

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date. Two  obligations are  thus implied  therein as  for  a dealer. First  is that  he should  have furnished  a  return within the  prescribed date  in accordance  with  the  terms referred to  in Section  10. Second  is that  he should make full payment  of the  tax payable under law. Sub-section (1) operates in the case of a dealer who had performed the first obligation but  failed to  perform the second obligation. On the other hand sub-section (2) would operate in a case where the  dealer   failed  to   discharge  the  first  obligation mentioned above.      So the  initial aspect  to be considered is whether the first obligation  has been discharged by the appellants If a dealer has  furnished only a truncated return that cannot be regarded as furnishing the return referred to in Section 10. It must  be the  full and accurate return. if a dealer makes just a  statement by  calling  it  a  return  it  cannot  be regarded as the return referred to in section 10 of the Act. It is  a different matter if the dealer would have committed some marginal  errors in  the  return  or  there  were  some mistakes of a minor nature.      Here it  is  admitted  that  the  appellants  have  not mentioned the  amount of turnover or the tax payable thereon in the  return filed  by them. if that be so the consequence is that  they have  failed to  furnish  a  return  which  is "referred to  in section 10" The corollary is that there was failure to  furnish the  return as  envisaged in sub-section (2). Thus,  the liability  to pay  interest commenced  under that sub-section  at the very moment the assessing authority made the assessment under section 11. Interest thereon would start accruing  from the  date prescribed for furnishing the correct return in accordance with section 10.      Learned counsel  for the  appellant, however, contended that since  the appellant  had filed the return according to his own  estimation  of  the  tax  liability  he  cannot  be considered a  defaulter in furnishing the return, In support therefore, learned  counsel pleaded  for  an  interpretation which is less onerous to the assessee.      The state  is empowered  by the  legislature  to  raise revenue through  the mode prescribed in the Act so the State should not be the sufferer on account of the delay caused by the taxpayer  in payment  of the  tax due. The provision for charging interest  would have  been introduced  in order  to compensate  the   State  (or   the  Revenue)  for  the  loss occasioned due  to delay in paying the tax(vide Commissioner of Income  Tax, AP  vs. M. Chandra Sekhar [1985 (1) SCC 283] and Central provinces manganese Ore Co ltd. Vs. Commissioner of Income  tax[1986 (3)  SCC 461]  When interpreting  such a provision in  a taxing  statute a  construction which  would preserve the purpose of the provision must be adopted. It is well settled that in interpreting a taxing statute normally, there  is  no  scope  for  consideration  of  principles  of equity., It  was so  said  by  Rowlatt  J.  in  cape  Brandy Syndicate vs.  Inland Revenue  Commissioners [1921 (1) KB 64 at pages 71].           "In a  taxing Act  one has  to      look  merely  at  what  is  clearly      said. There  is  no  room  for  any      intendment.  There   is  no  equity      about   a    tax.   There   is   no      presumption as to a tax. Nothing is      to be  read in,  nothing is  to  be      implied. one  can only  look fairly      at the language use."      The above  observation has been quoted with approval by a Bench  of three  judges of  this Court  in Commissioner of

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Income Tax,  Madras vs.  Ajax products Ltd. [55 STC 741]. In another decision rendered by a Bench of three Judges of this Court in  The State  of Tamil  Nadu vs.  MK  Kandaswami  and others [-36 STC 191] it has been observed thus:           "In   interpreting    such   a      provision,  a   construction  which      would defeat   its  purpose and, in      effect,  obliterate   it  from  the      statute book should be eschewed. If      more  than   one  construction   is      possible, that  which preserves its      workability and  efficacy is  to be      preferred to  the one  which  would      render it otiose or sterile."      We are  therefore, not  adopting a  construction  which would upset  or  even  impair  the  purpose  in  introducing section 10A in the Act. The return to be filed by the dealer is the  full and correct return as referred to in section 10 and on failure to furnish such a return the liability to pay interest  from   the  prescribed   date  would   arise  when assessment is completed.      Learned counsel  next contended  alternatively that  in view of  the  decision  of  the  Constitution  Bench  in  JK Synthetics Ltd.  Vs Commercial  Taxed Officer  [1994 (4) SCC 276], the  appellants cannot be mulcted with interest on the tax  amount   since  they   were  bonafide   contending  and contesting the  validity of  section 6B  of  the  Act.  This contention warrants serious consideration.      The ration  laid down in the aforesaid decision is that the provision  in a  taxing statute  providing for  levy  of interest on  failure of  the dealer to pay tax due under the particular Act  should not  be strictly construed but should be so  construed as  to effectuate and not defeat the object and purpose  of the  Act, The  constitution bench was called upon to  decide the case on a reference necessitated in view of an apparent conflict between two earlier decision of this Court. Under  Section 11B  of the  Rajasthan Sales  Tax Act, 1954, a dealer was made to pay interest on the amount of tax "payable under  sub-section  (2)  and  sub-section  (2a)  of section 7  if it  is not  paid within the period allowed" JK Synthetics Ltd. filed returns on the premise that the amount of freight  (charged in respect of the sale of cement as per a Cement  Control Order) did not form part of the sale price for the purpose of payment of sales tax. That contention was rejected by  the court  in Hindustan  Sugar Mills Limited vs State of  Rajasthan & Ors. [1978(4) SCC 271. On the strength of the  said decision M/S JK Synthetics Ltd. was required to pay sales  tax on  the sale  price inclusive of the freight. The dispute  then arose  whether the  company should  pay is interest from the date of filing of the returns or only from the date  of determination  of  tax  payable  in  the  final assessment. Revenue  then  contended  that  interest  became payable from the date on which the original return was filed under section  7(2) or 7(2A) of the Rajasthan Sales Tax Act. The said contention was based on another earlier decision of a Bench  of three  Judges of this Court in Associated Cement Company Ltd. Vs. Commercial Tax Officer [1981 (48) STC 466]. A majority  of judges  held in that case that interest would run from  the date  of filing  of returns. Ahmadi J. (as His Lordship then was) speaking for the Constitution Bench in JK Synthetics Ltd. held thus:           "When Section 11-B(a) uses the      expression "tax  payable under sub-      sections (2) & (2-A) of Section 7’,      that  must  be  understood  in  the

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    context    of     the     aforesaid      expressions  employed  in  the  two      sub-sections.    Therefore,     the      expression’ tax  payable’ under the      said two  sub-section is  the  full      amount of  tax due and ’tax due’ is      that amount  which becomes  due  ex      hypothesis  on   the  turnover  and      taxable turnover’ shown in or based      on the  return’. The word "payable"      is  a   descriptive   word,   which      ordinarily means’  that which  must      be paid  or is due, or any be paid’      but its correct meaning can only be      determined if  the context in which      it is  used is  kept in  view.  The      word has been frequently understood      to mean  that  which  may,  can  or      should  be   paid   and   is   held      equivalent to ’due’. Therefore, the      conjoint reading  of Sections  7(1)      (2) &  (2-A) and  11-b of  the  Act      leaves no  room for  doubt that the      expression "tax payable" in Section      11-B of  the Act leaves no room for      doubt  that   the  expression  ’tax      payable’ in  Section 11-B  can only      mean the  full amount  of tax which      becomes due  under sub-section  (2)      and (2-A)  of the Act when assessed      on the  basis  of  the  information      regarding  turnover   furnished  or      shown in  the return. Therefore, so      long as  the assessee  pays the tax      which according  to him  is due  on      the basis  of information  supplied      on the  return filed  by him, there      would be  no default on his part to      meet his statutory obligation under      Section   7   of   the   Act   and,      therefore, it would be difficult to      hold that  the ’tax payable’ by him      ’is not paid’ to visit him with the      liability  to  pay  interest  under      clause(a) of Section 11-B, it would      be a different matter if the return      is not  approved by  the  authority      but that  is not  the case here. It      is difficult  on the plain language      of the section to hold that the law      envisages the assessee to predicate      the final assessment and expect him      to pay  the tax  on that  basis  to      avoid   the    liability   to   pay      interest. That  would be asking him      to do the mere impassable."      Thus, the  majority view expressed in Associated Cement Co. case  was over-ruled  and the  minority view therein was upheld by the constitution Bench.      But the  position here  is  explicitly  distinguishable from the  factual situation  in M/s JK Synthetics ltd. Here, nobody had  doubt that  if section  6B of the Act was called the  tax   was  payable   on  the   turnover.  It   was  the Constitutional Validity  of Section  6B which was challenged by the  appellants in  the earlier writ petitions before the

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Calcutta High  Court and which finally ended up in upholding of it  s validity.  Hence, there  was no   question  of  the assess waiting  for the  determination and  the turnover  as there  was   no  dispute  on  that  aspect.  The  fact  that appellants questioned  the constitutional  validity  of  the charging provision  cannot be equated with a dispute whether the freight paid would also form part of the sale amount. It was a  highly debated  dispute whether  price  amount  would envelope the  freight charges  paid by  the dealer and until the controversy was resolved by the Court in Hindustan Sugar Mills Ltd. vs. The state of Rajasthan [1978 (4) SCC 271] the dealers were justified in excluding the freight charges from sale price.  it was  for that  reason the constitution bench refrained from  mulcting the tax payer with liability to pay interest additionally.  Appellants in these cases have never disputed that  they are  liable to  pay tax  on the turnover under section  6B of the Act even while they focussed on the vires of that provision.      The tax  amount which  they should  have  paid  as  per section 6-B  remained with  the appellant  during the entire period and  they would  have earned  good profit  with  that amount.  The   State,  to   which  the   tax  amount  should necessarily have gone, was not bale to utilize it for public purposes. When  appellants had  the advantage of keeping the amount of  tax without paying it to the State exchequer only because the  High court granted orders restraining the State from recovering that amount from the assessee, no act of the Court shall  cause prejudice  to  any  party.  The  prestine doctrine  couched   in  the   maxim  "actus  curiae  neminem gravabit"  has   ever  remained   a  salutary   and  guiding principle.      The contention  that as  the Courts  granted injunction restraining the  state from recovering the tax amount as per section 6B would raise a presumption that the court was then satisfied of the bona fides of the contention is too fragile for depriving  the state  of the statutory right of interest incorporated in  section 10-A of the Act. Interim orders are passed by the High Court on a variety of considerations, one among being  the strained  financial position  of the person approaching the  court. merely  because  the  court  granted interim orders   it  cannot be  inferred that Court was then satisfied of  a strong  prima facie case for the appellants. On the  contrary, it  is well  neigh settled  that there  is always a  presumption in  favour of  constitutionality of  a legislative act.  The presumption  cannot be  the other  way around.      We, therefore,  concur with  the view taken by the West Bengal Taxation Tribunal and dismiss all these appeals.