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PETITIONER: STATE OF RAJASTHAN AND OTHERS

       Vs.

RESPONDENT: GHASILAL

DATE OF JUDGMENT: 21/01/1965

BENCH: SIKRI, S.M. BENCH: SIKRI, S.M. WANCHOO, K.N. HIDAYATULLAH, M. SHAH, J.C. MUDHOLKAR, J.R.

CITATION:  1965 AIR 1454            1965 SCR  (2) 805  CITATOR INFO :  E          1981 SC1887  (5,9,10,34,38,39,40)

ACT: Rajasthan  Sales  Tax  Act, 1955, ss. 7(2),  16(1)  (b)  and Rajasthan Sales Tax Rules, r. 31--Scope of.

HEADNOTE: On  a petition of the assessee challenging the  validity  of Rajasthan Sales Tax Rules, the High Court passed an  interim order that the assessee would keep proper accounts and  file the  prescribed returns, but that he should not be  assessed till  further  orders.  While the petition  was  pending  an ordinance  was  promulgated validating the  rules,  and  the assessee withdrew the petition.  The sales tax officer  sent a  show cause notice and the assessee filed the  return  and deposited  tax.   The  Sales Tax Officer  assessed  tax  and imposed a penalty under s. 16(1)(b) of the Act and justified and imposition on the ground that the High Court did not say that the assessee was allowed to withhold the tax, but  that on the contrary the order of the High Court showed that  the assessee should have filed returns in time and according  to s.  7(2)  of  the Act the Treasury challan  of  the  deposit should have accompanied them.  The assessee’s appeal to  the Deputy  Commissioner of Sales Tax (Appeals)  was  dismissed. The  Sales-tax  Officer, for a  subsequent  period,  imposed another penalty on the same grounds.  The assessee filed two writ  petitions  in the High Court which were  allowed.   In appeal HELD  : (i) There had been no breach of s. 16(1) (b) of  the Act,  and  consequently the orders  imposing  the  penalties could not be sustained. [809 H] Till  the  tax  payable was  ascertained  by  the  assessing authority under s. 10, or by the assessee under s. 7(2),  no tax  could be said to be due within s. 16(1)(b) of the  Act, for, till then there was only a liability to be assessed  to tax. [810 B-C] Rule  31  of the Rajasthan Sales Tax Rules  comes  into  the picture only when an assessment has been completed. [810 D] (ii) Section 7(2) of the Act could not be attracted till the

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assessee filed the returns. [810 F]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 408-409 of 1964. Appeal  by special leave from the judgment and  order  dated February  5, 1963 of the Rajasthan High Court in D.B.  Civil Writ Petitions Nos. 172 and III of 1961. G.   C.   Kosliwal,  Advocate-General,  for  the  State   of Rajasthan, K.  K.   Jain  and  R.  N.  Sachthey,   for   the appellant. R.   K.  Garg, S. C. Aqarwala, D. P. Singh and M.  K.  Rama- murthi, for the respondent. 806 The Judgment of the Court was delivered by Sikri,  J. These two appeals by special leave  are  directed against  the judgment of the Rajasthan High  Court  allowing Civil Writ Petitions Nos.  111 and 172 of 1961, and quashing orders  of the Sales Tax authorities imposing  penalties  on the  respondent, Ghasilal, for delay in payment of tax  due. The High Court came to the conclusion that the penalties had been imposed in violation of Art. 20(1) of the Constitution, but  it is not necessary to deal with this question  because we  are  inclined  to accept the contention  raised  by  the learned  counsel  for  the respondent, Mr.  Garg,  that  the penalties  have  been imposed in violation of  the  relevant statutory provisions. The relevant facts are these.  On March 28, 1955,  Rajasthan Sales Tax Rules (hereinafter referred to as the Rules)  were published in the Rajasthan Gazette.  The Rajasthan Sales Tax Act (hereinafter referred to as the Act) came into force  on April  1, 1955.  The respondent filed Civil  Writ  Petition, No. 11 of 1958, in the High Court challenging the making  of assessments  on the turnover of the respondent for the  year 1955-56 on the ground that the said Rules were invalid.   On January 9, 1958, the High Court passed an interim order that ’the  petitioner  will  keep proper accounts  and  file  the prescribed returns but he shall not be assessed till further orders’.  While the petition was pending in the High  Court, an Ordinance (No. 5 of 1959) was promulgated on November  6, 1959,  validating  the  Rules.   Thereupon  the   respondent withdrew  Writ  Petition No. 1 1 of 195 8. On  December  17, 1959  the Rajasthan Sales Tax Validation Act (Rajasthan  Act 43  of  1959) replaced the Ordinance.  It is  common  ground that  the effect of the said Ordinance and the said Act  was to  validate the’ Rules, even if any defect existed  in  the making  of the Rules.  We may mention that according to  the appellant,  the said Ordinance and the said  Validating  Act were enacted out of abundant caution. On  December  4,  1959, the Sales Tax  Officer,  Kotah  City Circle,  sent a show cause notice to the respondent  in  the following words :               "Your  writ No. 11 has been dismissed  by  the               Hon’ble  High  Court on 23rd  November,  1959.               You  are, therefore, requested to deposit  the               tax due upto date within a week, failing which               necessary  action  according to  law  will  be               taken."               This  notice was served on the respondent  the               same  day.  The respondent filed a return  for               the 4th quarter ending October 22, 1957,               807                and Rs. 11, 898.31 was deposited as tax.   It

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             appears that on January 8, 1960, March 5, 1960               and March 19, 1960, he deposited Rs. 28,607 as               tax  in  respect of the four quarters  of  the               accounting period October 23, 1957 to November               10,  1958.   It is not clear from  the  record               whether  he filed returns on these dates.   On               April 25, 1960, the Sales Tax Officer made  an               assessment in respect of the accounting period               November  3,  1956 to October  22,  1957,  and               proceeded to impose a penalty of Rs. 400 under               s.  16(1)(b) of the Rajasthan Sales  Tax  Act.               He justified the imposition of penalty thus:               "The  assessee  has not deposited tax  of  the               quarters  on the due date, the  tax  deposited               for 4th quarter is very late, i.e.,, after two               years  the assessee was given a notice and  in               reply  to which he referred the stay order  of               the  Hon’ble  High Court granted to him  in  a               writ  petition filed challenging the  validity               of  sales  tax rules made under the  Act,  the               stay order of the Hon’ble High Court does  not               say  that the assessee is allowed to  withhold               the  tax on the contrary, it directs that  the               petitioner   (assessee)   will   keep   proper               accounts and file prescribed returns but shall               not be assessed.  This clearly shows that  the               assessee should have filed returns in time and               according to section 7(2) the Treasury challan               of  the deposit should have accompanied  them.               This amounts to contravention of the mandatory               provisions, the writ was dismissed on  23-4-58               sic  (23-11-59),  even  the  amount  was   not               deposited till 17-12-59.  This shows that  the               assessee withheld the tax intentionally." The  respondent  appealed to Deputy Commissioner  Sales  Tax (Appeals), Kotah, who dismissed the appeal, holding that the stay order of the High Court did not justify the  respondent in  not  filing  the  return  and  depositing  the  tax   in accordance with s. 7(2) of the Rajasthan Sales Tax Act. On  December  6, 1960, the Sales Tax  Officer  assessed  the respondent  in respect of the accounting period October  23, 1957  to  November 10, 1958, and imposed a  penalty  of  Rs. 1,000  for  not  depositing  the tax in  time  on  the  same grounds.  The respondent then filed a petition (No.  III  of 1961) under Art. 226 of the Constitution, on April 3,  1961, challenging  the  imposition of penalty in  respect  of  the period November 3, 1956 to October 22, 1957, and on April 4, 1961, he filed a petition (No. 172 of 1961) challenging  the imposition of penalty in respect of the up.65-5 808 accounting period October 23, 1957 to November 10, 1958.  As we have said before, the High Court allowed the petitions. The  learned Advocate-General has raised a number of  points before us and particularly invited us to hold that the  High Court   was  in  error  in  holding  that  there  has   been contravention  of Art. 20(1) of the Constitution,  and  that the  Rules  as  originally  published  on  March  28,  1955, suffered  from no procedural defect in the matter  of  their promulgation and duly came into force on April 1, 1955.  But we  express no opinion one way or the other on these  points as  the appeals can be disposed of on a narrow point of  the construction of the Act.               The relevant provisions of the Act read thus               " S. 7(1) Every dealer liable to pay tax shall

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             furnish  returns  of  his  turnover  for   the               prescribed periods in the prescribed form,  in               the   prescribed   manner   and   within   the               prescribed time, to the assessing authority.               Provided  that  the  assessing  authority  may               extend  the  date for the submission  of  such               returns by any dealer or class of dealers by a               period  not  exceeding  fifteen  days  in  the               aggregate.               (2)   Every  such return shall be  accompanied               by  a Treasury receipt or receipt of any  bank               authorised  to receive money on behalf of  the               State  Government showing the deposit  of  the               full amount of tax due on the basis of  return               in the Government Treasury or bank concerned.               (3)   If  any dealer discovers  any  omission,               error,  or  wrong  statement  in  any  returns               furnished by him under sub-section (1), he may               furnish  a  revised return in  the  prescribed               manner  before  the time  prescribed  for  the               submission of the next return but not later.               (4)   Every  deposit  of tax made  under  sub-               section (2) shall be deemed to be  provisional               subject to necessary adjustments in  pursuance               of  the final assessment of tax made  for  any               year under section 10.               S.    16(1)-If any person-               (a)   has  without reasonable cause failed  to               get  him self registered as required  by  sub-               section  (1)  of  section 6  within  the  time               prescribed; or               809               (b)   has  without reasonable cause failed  to               pay the tax due within the time allowed; or               (c)   has  without reasonable cause failed  to               furnish the return of his turnover, or  failed               to furnish it within the time allowed; or               the  assessing authority may direct that  such               person  shall  pay by way of penalty,  in  the               case referred to in clause (a) in addition  to               the  fee payable by him, a sum  not  exceeding               Rs. 50 and in case referred to in clause  (b),               in  addition to the amount payable by  him,  a               sum  not  exceeding half of that  amount,  and               that  in cases referred to in clauses (c)  and               (d), in addition to the tax payable by him,  a               sum  not  exceeding  half the  amount  of  tax               determined; in the case referred to in  clause               (e),  in addition to the tax payable by him  a               sum not exceeding double the amount of tax, if               any  which would have been avoided if  taxable               turnover  as returned by such person had  been               accepted as correct turnover, and in the cases               referred  to in clauses (f), (ff) and  (g),  a               sum not exceeding Rs. 1 OO." Mr. Garg contends that there was no breach of s. 16(1)(b) of the  Act.  No tax was due till the respondent filed  returns under  S. 7(1) of the Act.  Section 7(2), which  requires  a deposit  of the full amount due on the basis of  the  return was compiled with when the respondent filed the returns,  on December  18,  1959, and in January to March,  1960.   There cannot be non-compliance of s. 7(2) unless a return is filed without  depositing the tax due on the basis of the  return, and  as no return was filed earlier than December 18,  1959, there had been no violation of the requirements of s.  7(2).

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He  further contends that no tax is due till  assessment  is made under S. 10 of the Act. The learned Advocate-General, on the other hand, urges  that tax becomes due because of the charging sections of the Act, i.e., s. 3 with s. 5. He further contends that a show  cause notice had been given on December 4, 1959, and as there  was delay  in complying with the notice, there was breach of  s. 16(1)(b) of the Act. In  our opinion, there has been no breach of s. 16(1)(b)  of the Act, and consequently, the orders imposing the penalties cannot be sustained.  According to the terms of s. 16(1)(b), there must 810 be a tax due and there must be a failure to pay the tax  due within  the time allowed.  There was some discussion  before us as to the meaning of the words ’time allowed’ but we need not  decide  in this case whether the words  ’time  allowed’ connote  time  allowed  by an assessing  authority  or  time allowed by a provision in the Rules or the Act, or all these things, as we are of the view that no tax was due within the terms  of s. 16(1)(b) of the Act.  Section 3,  the  charging section, read with s. 5, makes tax payable, i.e., creates  a liability to pay the tax.  That is the normal function of  a charging  section  in a taxing statute.  But  till  the  tax payable  is ascertained by the assessing authority under  S. 10, or by the assessee under s. 7(2), no tax can be said  to be due within s. 16(1)(b) of the Act, for till then there is only a liability to be assessed to tax. The contention of the learned Advocate-General that the show cause  notice  dated  December 4, 1959,  makes  tax  due  is without any substance.  He was not able to point to any rule or  provision of the Act, under which the show cause  notice was  issued.  It may be that the assessing authority had  in mind  r. 31, but that rule comes into the picture only  when an assessment has been completed. The last contention of the learned Advocate-General is  that the  stay  order  passed  by the  High  Court  required  the respondent  to  submit  returns.  This,  according  to  him, implied  that  he had to submit returns in  accordance  with law, including S. 7(2).  As he had failed to submit  returns and deposit the tax in accordance with the directions of the High  Court,  there  was a breach of S.  16(1)(b).   We  are unable  to read the stay order as implying that the  respon- dent  was  obliged to deposit tax for the  stay  order  then would  be of no utility to the assessee.  Apart  from  that, the respondent did not file returns till December 1959,  and January-March 1960, and S. 7(2) could not be attracted  till then. We  may mention that we are not concerned with the  question whether there has been any breach of S. 16(1)(c). In  the  result,  the appeals fail and  are  dismissed  with costs.  One set of hearing fee. Appeals dismissed. 811