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CASE NO.: Appeal (civil) 3009  of  1999

PETITIONER: MARUTI WIRE INDS. PVT. LTD.

       Vs.

RESPONDENT: S.T.O., IST CIRCLE, MATTANCHERRY & ORS.

DATE OF JUDGMENT:       27/03/2001

BENCH: S.P. Bharucha, R.C. Lahoti & Y.K. Sabharwal.

JUDGMENT:

R.C. Lahoti, J. L...I...T.......T.......T.......T.......T.......T.......T..J

   Whether the appellant, an assessee, is liable to pay any penal  interest  on the assessed tax under Section 23(3)  of the  Kerala  General Sales Tax Act, 1963  (hereinafter  the Act,  for short), from the date when return was due  though neither  a  return  was  furnished   nor  any  tax  paid  on self-assessment  basis, is the question arising for decision in this appal.

   Briefly  stated  the relevant facts are as follows.   In April,  1983 the appellant, stationed in Patna, entered into an  agreement with M/s.  Tata Oil Mills Co.  Ltd.  to supply imported  inedible  tallow  to their factory  at  Ernakulam. Accordingly,  the tallow was imported at the Cochin Port and delivered to the buyer.  The appellant did not file a return of the turnover relating to the above-said transaction.  The Sales Tax Officer finalised the assessment on 10.10.1984 and served  the  appellant  on 4.3.1985 with  notice  raising  a demand  of  sales  tax  whereafter the tax  was  paid.   The appellant  was  then served with two notices raising  demand for  payment  of Rs.1,85,882.58p.  as penal  interest  under sub-section  (3)  of  Section 23 of the Act for  the  period 20.5.1983 (the date by which the return of turn-over was due to  be filed accompanied by proof of payment of the tax  due as  per  return) to 25.2.1985.  This demand was impugned  by filing  a  writ petition before the High Court of Kerala  at Ernakulam.   A learned single Judge allowed the petition and quashed  the  said demand.  The State of Kerala preferred  a writ  appeal which has been allowed and the judgment of  the learned  single  Judge  has been set aside.   The  aggrieved appellant has filed this appeal by special leave.

   Sub-section  (3)  of  Section  23 of the  Act  reads  as under:-

   (3)  If  the  tax or any other amount assessed  or  due under  this  Act is not paid by any dealer or  other  person within  the  time prescribed therefor in this Act or in  any rule  made  thereunder  and in other cases within  the  time

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specified  therefor  in the notice of demand, or within  the time  allowed for its payment by the appellate or revisional authority, as the case may be, or if payment is permitted in instalments  by  any  of the authorities empowered  in  this behalf,  any  such  instalment is not paid within  the  time specified,  therefor, 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.

   The  present  one is not a case where any amount of  tax was  collected by the appellant and then not deposited.   It is an admitted position that the validity of impugned demand depends  on the meaning to be assigned to the expression "if the  tax  or  any  other amount assessed  as  occurring  in Section  23(3) of the Act.  According to the appellant there was no order of assessment nor a return of turnover filed by way  of  self assessment in which case it should  have  been accompanied  by  proof  of  payment  of  tax  as  per   self assessment and, therefore, the appellant was not required to pay  tax  unless  and until a demand based on  an  order  of assessment   was  raised  against   it.   According  to  the respondent,  an assessee held liable to payment of sales tax and  not filing a return of turn-over, cannot be placed on a higher  pedestal  than an assessee who files a  return  and, therefore,  a  reasonable  construction  to  be  placed   on sub-section  3  of Section 23 would be that an assessee  not filing  a  return of turnover should be held liable  to  pay penal  interest  with effect from a date on which he  should have  filed  a return of turnover accompanied by payment  of tax even if such return was not actually filed.  The learned counsel  for  the appellant submitted in response  that  the scheme  of  the  Act  as  it  stood  at  the  relevant  time contemplates  a different penal action against such default, i.e.   penalty  under Section 45A of the Act for failure  to submit  the return of turnover which penalty can be as  high as  an  amount  twice the amount of sales  tax  payable  but liability  to  pay  penal  interest cannot be  cast  on  the assessee for such failure when the Act does not specifically provide  for  levy  of penal interest for  failure  to  file return  of turnover.  We find merit in the appellants plea. A  legislative casus omissus cannot be supplied by  judicial interpretative process.

   Shri  G.C.   Sharma,  learned  senior  counsel  for  the appellant  has relied on the Constitution Bench decision  of this  court in J.K.  Synthetics Ltd.  Vs.  Commercial  Taxes Officer, (1994) 94 STC 422 in support of his submission.  In J.K.  Synthetics case, majority opinion in Associated Cement Co.   Ltd.   Vs.  Commercial Tax Officer, (1981) 48 STC  466 (SC)  has  been over-ruled and the minority opinion of  P.N. Bhagwati,  J.  (as His Lordship then was) has been approved. In  Associated Cement Co.s case, the demand for payment  of interest was raised under Section 11B of Rajasthan Sales Tax Act,  1954.  The assessee had submitted returns  accompanied by  receipts  evidencing the payment of tax on the basis  of the  returns.  The freight charges realised by the  assessee were not included in the quantum of taxable turnover.  Later

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on,  law was settled by this court holding that the  freight charges were liable to be included in the figure of turnover whereafter  the  assessee filed a revised  return  including freight charges in the quantum of turnover and also paid the additional  tax.  Question arose, whether interest could  be levied  for the delay in depositing the tax amount relatable to  the  freight charges?  Venkataramiah, J.,  speaking  for himself  and  on  behalf  of A.P.  Sen,  J,  held  that  the expression  on the basis of return should be construed  as on  the basis of a true and proper return and an assessee, who did not file a return or made a wrong plea as to part of the  turnover  being not taxable but subsequently  found  to have  made a wrong claim, would be liable to pay interest on the  amount of tax which the assessee was held liable to pay but  did  not  pay  and  such a  construction  would  be  in conformity with the legislative intention.  Bhagwati, J.  in his  dissenting  opinion  construing  the  expression  full amount of tax due on the basis of the return held:

   .   We must look at the return actually filed  by the  assessee in order to see what is the full amount of tax due on the basis of such return.  It is not the assessed tax nor  is it the tax due on the basis of a return which  ought to  have  been filed by the assessee but it is the  tax  due according to the return actually filed that is payable under sub-section  (2) of section 7.  This provision is really  in the  nature of self-assessment and what it requires is  that whatever  be  the  amount  of  tax   due  on  the  basis  of self-assessment must be paid up along with the filing of the return which constitutes self-assessment.  I fail to see how the  plain  words  of sub-section (2) of section  7  can  be tortured  to  mean  full amount of tax due on the  basis  of return which ought to have been filed but which has not been filed.

                               [emphasis supplied]

   Repelling a similar plea raised on behalf of the Revenue as has been raised before us, Bhagwati, J.  observed that if the  assessee fails to file a return, he exposes himself  to penalty  for such default;  the Legislature could never have intended  that  the  assessee should be liable, on  pain  of imposition  of penalty, to deposit an amount which is yet to be ascertained through assessment.

   The  same  issue which was dealt with by a  three-Judges Bench  of  this court in the case of Associated  Cement  Co. Ltd.  came up for the consideration of Constitution Bench in the  case  of  J.K.  Synthetics Ltd.  (supra).   This  court overruled  the  majority opinion and approving the  minority opinion  in  Associated  Cement  Co.s case  held  that  the provision  by  which the authority is empowered to levy  and collect  interest, even if construed as forming part of  the machinery  provisions, is a substantive law, not  adjectival law,  and interest cannot be recovered by way of damages for wrongful  detention of the amount.  This court further  held that  the  tax payable or tax due is that  amount  which becomes  due  ex-hypothesi  on   the  turnover  and  taxable turnover  shown in or based on the return or as to which  an order of assessment has been made.

   In  view of the law laid down by the Constitution Bench, we  are  clearly  of the opinion that the liability  of  the assessee appellant to pay sales tax could have arisen either

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on  return of turnover being filed by way of self-assessment or else on an order of assessment being made.  No doubt Rule 27 (7A) of the Kerala General Sales Tax Rules, 1963 casts an obligation  on assessees to file a return of total  turnover and  taxable turnover accompanied by proof of payment of the amount of tax due within 20 days of the previous quarter but such  a return was not filed by the appellant.  A failure to file  return  of  taxable turnover may render  the  assessee liable  for  any  other  consequences  or  penal  action  as provided by law but cannot attract the liability for payment of penal interest under sub-section (3) of Section 23 of the Act  on the parity of reasoning that if a return of turnover would  have  been filed on the due date then the tax as  per return would have become due and payable on that date.

   For  the foregoing reasons, the appeal is allowed.   The judgment  of the Division Bench is set aside and that of the learned single Judge is restored.  There will be no order as to the costs.