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PETITIONER: FERTILIZER CORPORATION OF INDIA LTD.

       Vs.

RESPONDENT: STATE OF BIHAR

DATE OF JUDGMENT04/12/1987

BENCH: RANGNATHAN, S. BENCH: RANGNATHAN, S. MUKHARJI, SABYASACHI (J)

CITATION:  1988 AIR  361            1988 SCR  (2) 148  1988 SCC  Supl.   73     JT 1987 (4)   549  1987 SCALE  (2)1182

ACT:      Bihar Sales  Tax Act,  1959: ss.  14, 15  & 20  Rebate- Belated returns-Provisions for extension of time not availed of-Returns otherwise  accepted-Penal provision for delay not invoked-Tax deposited  within time-Assessee whether entitled to rebate.      Interpretation  of   Statutes:  Procedural   provision- Interpretation of-Can  be construed liberally so long as the principal object is not frustrated.

HEADNOTE: %      Section 14(1) of the Bihar Sales Tax Act, 1959 requires dealers to  furnish returns  within such  period and to such authority as  may be  prescribed. Rule  10(2) of  the  Bihar Sales  Tax   Rules,  1959  requires  the  assessee  to  file quarterly returns within one calendar month of the expiry of the period  to which  they relate.  Sub-section (3) of s. 14 provides for extension of time for submission of the return. Subsection (2)  of s.  20 requires  dealers to  pay into the Government Treasury the full amount of tax due and furnish a receipt along  with the  return.  Section  15  entitles  the assessee to  rebate in tax on returns furnished under sub-s. (1) of  s. 14 or within extended period. The proviso to sub- s. (2)  of s. 20 entitles a dealer to deduct from the amount of tax  due from  him any  amount which may be admissible as rebate under the provisions of s. 15.      The assessee filed its quarterly returns under s. 14(1) of the Act late by a few days. There was no application made by it to the prescribed authority for extension of time. The assessee, however,  paid the  tax before the due date of the respective returns  and availed  itself  of  the  rebate  by deducting the same while paying the tax due.      The Tribunal held that as the assessee did not file its returns within  the prescribed  period  and  had  sought  no extension, it was not entitled to the rebate. The High Court upheld the view taken by the Tribunal.      Allowing the appeal, 149 ^      HELD: 1. The assessee was entitled to the rebate of tax

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provided for  in s.  15 of  the Bihar  Sales Tax  Act, 1959. [156B]      2. The  condition in  s. 15 referring to a return has a substantive as well as procedural content. The latter should be construed  somewhat liberally  and generously  so long as the principal  object of  the provision  is not  frustrated. [155H; 156A]      C.I.T. v.  Kulu Valley  Transport Co. Pvt. Ltd., [1970] 77 I.T.R.  518; Gursahai  Saigal v. C.l. T. [1963] 48 I.T.R. S.C. 1;  Allen v. Trehearne, [1938] 22 T.C. 15 and C.I.T. v. Mahaliram Ramjidas, [1940] 8 I.T.R. 442. referred to.      3.1 The  object of  s. 15  of the  Act is  to confer  a benefit on an assessee for prompt payment of the tax. In the instant case,  the assessee  had paid the tax before the due dates. The tax paid accords with the tax due on the basis of returns. There  was short  delay only  in the  filing of the returns. [153D-E]      3.2 The  Act does  not set out any particular procedure for obtaining  extention of  time. It does not prescribe any form of application. It does not require that the prescribed authority must pass an order recording his satisfaction that the time  should be extended and granting time. it envisages three consequences  to the  assessee for  failure to  file a return within  the prescribed  time, or  extended time:  (i) loss of  rebate under s. 15, (ii) risk of a penalty under s. 14(4), and (iii) risk of a best judgment assessment under s. 16(4). [154A-D]      3.3 In  the instant  case the  assessing authority  has neither levied a penalty nor made a best judgment assessment nor recorded a finding that the delay was without reasonable cause. From  these circumstances  it is  reasonable to infer that the returns, though filed belatedly, have been accepted and acted  upon by the prescribed authority. An extention of time can  thus be  inferred from the attendant circumstances of the case. [154D-F]      3.4 The  condition precedent  for the  grant of  rebate that the  assessee should  have filed  its return within the prescribed or  extended period,  can, therefore,  be said to have been fulfilled in the present case. [153H; 154A]      Jamuna Floor  & oil  Mills Pvt. Ltd. v. State of Bihar, [1968] 22 S.T.C. 1, approved. 150

JUDGMENT:      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 948-950 of 1975.       From  the Judgment  and order  dated 12.9.1974  of the High Court of Patna in Tax Case Nos. 2 to 4 of 1968.      Harish N.  Salve, Mrs.  A.K. Verma,  Ms. S.  Sethna and Joel Peres for the Petitioner.      D. Goburdhan for the Respondent.      The Judgment of the Court was delivered by      RANGANATHAN, J.  These three  appeals by the Fertiliser Corporation of  India Limited  (hereinafter referred  to  as ’the asses  see’) arise out of its sales tax assessments for the assessment  years 1959-60, 1960-61 and 1961-62 under the Bihar Sales  Tax Act, 1959, (hereinafter referred to as ’the Act’). They  raise a  very short  but interesting  question. regarding the  entitlement of  the assessee to the rebate of tax provided for in section/5 of the Act.      At the  outset, a  reference may be made to the salient portions of  certain relevant provisions of the Act. Section 14(1) provides  that every  registered dealer  shall furnish

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such returns within such period and to such authority as may be prescribed.  The prescribed  authority is  the  Assistant Commissioner  of   Sales  Tax  who  is  also  the  assessing authority. Under  rule 10 of the Rules framed under the Act, the assessee should file quarterly returns. Such returns are to be  filed within  one calendar month of the expiry of the period to  which they  relate.  Sub-section  (3)  of  s.  14 provides for  an extension  of time  for   the filing of the return. It reads:           "If the  prescribed authority  is satisfied that a           dealer is, for reasonable cause, unable to furnish           any return  within the  prescribed period  or  the           period fixed under the proviso to sub-section (1),           the said  authority  may  extend  the  period  for           submission of the return." Section 20  of the  Act requires that, before any registered dealer furnishes  a return under the Act, he should pay into a Government  Treasury the  full amount of tax due under the Act according  to such  return and should also furnish along with the  return a  receipt from  such Treasury  showing the payment of the said amount. S. 15 is the 151 provision entitling  the assessee  to a  rebate. It reads as follows:           "Rebate-A rebate  at the rate of one per centum of           the amount of tax admitted to be due in the return           furnished under  sub-section (1)  of section 14 in           the prescribed manner and within the prescribed or           extended period  shall be  allowed to a registered           dealer who  has paid  such amount according to the           provisions of sub-section (2) of section 20.                Provided  that   where  the   amount  finally           assessed on  the dealer  is less than the admitted           amount, rebate  at the  said rate shall be allowed           only on the amount so assessed: C                Provided further  that the  State  Government           may,  by   notification,  and   subject  to   such           conditions or  restrictions as  may  be  specified           therein, enhance  or reduce  the rate of rebate in           respect of  registered dealers  generally  or  any           class of such dealers " It may be noted that, under the proviso to section 22 of the Act, a  registered dealer  is entitled  to deduct  from  the amount of  tax due  from him  under the Act according to his return any  amount which  may be  admissible as rebate under the provisions of section 15.      In the  present case,  the assessee filed its quarterly returns under  section 14(1)  of the Act but, except for the second  quarter  of  196061,  the  returns  were  all  filed belatedly. To  illustrate, the returns for the second, third and fourth  quarters of  1959-60, were filed by the assessee only on  the 7th November, 1959, 11th February, 1960 and Ist June 1960.  In other  words, the  returns-were late by a few days. It is common ground that there was no application made by the assessee to the prescribed authority for extension of the time  prescribed under  the Act  for the  filing of  the return. The  assessee however, paid the taxes before the due dates of  the respective  returns,  availed  itself  of  the rebate and deducted the same while paying the tax due on the returns filed by it.      The short  question that  arose before  the Tribunal as well as the High Court was whether the assessee was entitled to the  rebate under  section 15. The Tribunal held that the rebate is available to an assessee only if- 152

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    (i) the  tax  on  the  basis  of  returns  is  paid  as prescribed in section 20; and      (ii) the  quarterly returns  of the  assessee ha-d been filed within the prescribed period or extended period. As the  assessee  had  not  filed  its  returns  within  the prescribed period  and, since  the assessee  had  sought  no extension, it was held that the assessee was not entitled to the rebate.  The assessee sought for a reference and, before the High  Court, relied on a decision of the same High Court in Jamuna  Flour &  oil Mills  Pvt. Ltd.  v. State of Bihar, [1968] 22  S.T.C. 1.  The facts  of the case were similar to those of  the present  case and  the assessee  had been held entitled to  the rebate.  It is  sufficient to  extract  the relevant portion of the head note:           "For the  quarter  ending  30th  June,  1961,  the           assessee had  paid the  tax due  before 31st July,           1961, but it actually filed the return only on Ist           August, 1961.  The assessee  was assessed  on  the           basis of  the return submitted by it but its claim           for rebate under section 15 of the Bihar Sales Tax           Act, 1959, was rejected by the taxing authority on           the ground that for the purpose of eligibility for           rebate under  section 15, the assessee must fulfil           two conditions,  viz., (1)  the tax  due  for  the           quarter must  be paid before the end of succeeding           month, and  (2) the  return must  also be filed by           the end  of the  succeeding month:  Held, that the           assessee was  entitled to the rebate under section           15 for the quarter ending 30th June, 1961.                Although the  return was  submitted  one  day           late, as  the assessee  was assessed not under the           best of  judgment  principle  but  on  the  return           submitted by  it, it  must be said that, impliedly           the period  for furnishing the return was extended           by one  day as  permitted by  section  14(3).  The           passing  of   an  express   order  by  the  taxing           authority, regarding  its satisfaction  about  the           existence  of  reasonable  cause  for  failure  to           furnish the  return by  31st July  1961,  was  not           necessary.                on a  proper construction  of section 15 read           with section  20,  the  eligibility  for  claiming           rebate arises  if the amount is paid under section           20(2). That portion of 153           section 15,  which refers  to the filing of return           within  the   prescribed  period,  should  not  be           construed as  a condition  for a  right  to  claim           rebate. The  reference to the return in section 15           is for  the purpose  of ascertaining the amount of           tax admitted  to be  due and  it is  not meant  to           restrict the assessee’s right to claim rebate." The two  judges who  heard the  case of  the  assessee  were divided in  their opinion  on the  question  at  issue.  The matter was,  therefore, referred  to a  larger  bench.  This Bench (by  a majority  of 2  to 1)  took the  same  view  as Tribunal. The  assessee is  in appeal  before us, convassing the correctness of the decision of the Full Bench.      We have given careful thought to the contentions of the counsel tor the parties and the differing views expressed by the Judges  who heard  the above  two cases. We have reached the conclusion  that the  view taken  by the  High Court  in Jamuna Flour  and oil  Mills (Pvt.)  Ltd. v. State of Bihar, [1968]  22  S.T.C.  1,  is  the  better  view  on  a  proper construction  of  the  relevant  statutory  provisions.  The

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object of section 15 of the Act is to confer a benefit on an assessee for  prompt payment  of the tax. In this case there is no  dispute that the assessee had paid the tax before the due dates.  There is  also no  dispute  that  the  tax  paid accords with  the tax  due on the basis of returns. The only question is  whether the  assessee should  be  penalised  by being denied  the rebate due to it because there was a short delay in the filing of the returns.      The  argument  on  behalf  of  the  Revenue  which  has appealed to  the High  Court is  this. Section  15 is  not a taxing  provision   but  one  which  confers  a  benefit  or concession to  assessee. Settled  principles of construction of taxing  statutes require  that such  conditions should be strictly construed. The section lays down two conditions for the grant  of benefit  or concession  of which  one  is  not fulfilled. Though  the assessee  had paid the taxes in time, it had  neither filed returns within the prescribed time nor cared to  obtain an  extension for filing the same. There is no reason  why such an assessee should be shown any leniency and given  a benefit  which  it  does  not  deserve  on  the language of the statute.      Granting the  correctness of  the  above  argument  and assuming that it is also a condition precedent for the grant of rebate  that the  assessee should  have filed  its return within the prescribed or extended period, we think it can be said that the said condition is fulfilled 154 in the  present case.  The return  was admittedly  not filed within the  time prescribed  under s.  14(1).  Has  it  been filed, then,  within the  extended period? In answering this question, certain  features of  the Act  have to  be kept in mind. The  first is  that the  Act  does  not  set  out  any particular procedure  for obtaining  extension of  time.  It does not  prescribe any form of application. It does not say that such application must be filed before the expiry of the prescribed period.  It does  not require that the prescribed authority must pass an order recording his satisfaction that the time should be extended and granting time. The second is that, under the provisions of the Act three consequences are envisaged where  a return is not filed within the prescribed time or extended time:      (i)  the assessee will lose the benefit of rebate under           s. 15;      (ii) the  assessee will run the risk of a penalty under           s. 14(4);      (iii)the assessee  will also  run the  risk of  a  best           judgment assessment under s. 16(4). In the  present case,  the assessing  authority has  neither levied a  penalty nor  made a  best judgment assessment. The assessment orders,  while adverting  to  the  delay  in  the filing of  the returns,  do not  record a  finding that  the delay was  without reasonable Cause. These are circumstances from which,  we think,  it is  reasonable to  infer that the returns, though  filed belatedly,  have  been  accepted  and acted upon by the prescribed authority. We see no reason why an extension  of time  cannot be inferred from the attendant circumstances in this case.      Learned  counsel  for  the  assessee  also  suggests  a different kind  of approach  to  the  issue  before  us.  He submits that all that s. 15 aims at is to grant a tax rebate of 1%  of the  amount of  tax admitted  to be due as per the return filed  by the  assessee. The  further words  used  in section 15 to describe the return, namely, that it should be a return  filed in  the prescribed  manner  and  within  the prescribed or  extended period  are merely words descriptive

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of the  procedure of  filling a  return. The basic condition necessary for  claiming the  tax rebate  is only  that there should be  a valid  return and  that the tax on the basis of the valid  return should  have been paid by the assessee. He submits that  while the  substantive part  of the  condition should be  strictly construed by insisting upon the presence of a  valid return,  the procedural  aspect referred  to can well receive a liberal construction. In the present case, he points out, there is no dispute that the returns 155 filed by  the assessee  were valid.  In fact the assessments have been  made on  the basis  of the returns filed. The tax has been  paid even  before the  submission of  the returns. There is  no suggestion  that the tax paid fell short of the tax due  on the  return. This  is also  not a case where the assessed tax  is much  higher than  the tax  admitted on the basis of  the return. In these circumstances, he argues, the assessee must  be held  to  have  fulfilled  the  conditions prescribed in s. 15.      Learned counsel  for the  assessee referred  to certain decisions in support of such a rule of construction. In C.I. T. v.  Kulu Valley Transport Co. Pvt. Ltd., [1970] 77 I.T.R. 518 the  court had  to  construe  a  provision  intended  to benefit the  assessee. Under  s. 22  (2A) of  the Income-Tax Act, 1922,  a return of loss had to be filed within the time prescribed for  return under s. 22(1) if the assessee wanted to carry  forward the  loss claimed. It was not so filed but was nevertheless  treated as  a valid  return by reading the provisions of section 22(1) and 22(3) of the Act jointly and giving a liberal interpretation to s. 22(2A). In the case of Gursahai Saigal  v. C.I.T.,  [1963] 48  I.T.R.  S.C.  1  the question was  regarding the  charge of interest s. 18A(8) of the same Act. This provision did reveal a lacuna but reading the provision along with s. 18A(6), the Court gave effect to the intendment  of the Legislature. It was explained that s. 18A(8) was not a provision creating a charge of tax but only laying down  the machinery  for its calculation or procedure for its  collection. The  dictum of  Scott L.J.  in Allen v. Trehearne, [1938]  22  T.C.  15  that  machinery  provisions should be interpreted largely and generously in order not to defeat the main object of liability laid down by the statute was referred  to. The  following observations  of the  Privy Council in C.I.T. v. Mahaliram Ramjidas, [1940] 8 I.T.R. 442 were also relied upon:           "The section, although it is part of a taxing Act,           imposes no charge on the subject, and deals merely           with the  machinery of assessment. In interpreting           provisions of  this kind  the rule  is  that  that           construction should  be preferred  which makes the           machinery workable."      Though the  above decisions  arose  under  a  different enactment and  on different  statutory language,  they dealt with  somewhat   analogous  situations  and  furnish  useful guidance here.  They  do  lend  support  to  the  assessee’s contention. It  does  seem  that  the  condition  in  s.  15 referring  to   a  return  has  a  substantive  as  well  as procedural content  and  it  may  not  be  inappropriate  to construe the latter 156 somewhat liberally  and generously  so long as the principal object of the provision is not frustrated.      For these  reasons, we are of the opinion that the High Court should have answered the question, as re-framed by it, in the  negative and  in favour  of the assessee. We approve the decision  in Jamuna Flour & oil Mills Pvt. Ltd. v. State

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of Bihar, [1968] 22 S.T.C. 1 and reverse the decision in the present case.      The appeal is allowed. But, in the circumstances of the case, we make no order as to costs. P.S.S.                                       Appeal allowed. 157