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PETITIONER: ASSOCIATED CEMENT CO. LTD.

       Vs.

RESPONDENT: COMMERCIAL TAX OFFICER, KOTA & ORS.

DATE OF JUDGMENT02/09/1981

BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. SEN, A.P. (J) VENKATARAMIAH, E.S. (J)

CITATION:  1981 AIR 1887            1982 SCR  (1) 563  1981 SCC  (4) 578        1981 SCALE  (3)1338

ACT:      Rajasthan Sales  Tax Act  1954 Ss.  7AA,  10,  11B  and Central Sales Tax Act 1956, S. 9-Scope of.      Assessee not depositing the tax in respect of amount of freight at the time of filing original return-Revised return filed  and   tax   deposited-Assessing   authority   whether competent to  impose penalty-Assessee  whether liable to pay interest on the tax due.

HEADNOTE:      The appellant-assessee  a company  manufactured  cement which was  sold partly  in the State of Rajasthan and partly outside the  State. The  sales tax  returns relating  to the sales were  filed by  the assessee under the Rajasthan Sales Tax Act,  1954 and  under the  Central Sales  Tax  Act  1956 before the Assessing Authority for the period August 1, 1973 to July  31, 1974  i.e. for  the assessment year 1974-75. In those returns  the assessee  did not  include in the taxable turnover the  freight charges  paid in  respect of the goods sold under the bonafide impression that freight charges were not to  be so  includible in the taxable turnover in view of certain decisions  rendered  by  the  High  Courts  and  the Supreme Court.      The Supreme  Court on  August 29,  1978 In  Sugar Mills Limited v.  State of  Rajasthan and  others [1979] 1 SCR 276 held that  freight charges formed part of the sale price and were includible  in the taxable turn-over of an assessee and that sales tax was payable thereon.      Coming to  know of  the aforesaid decision the assessee prepared and  filed the  revised returns  in respect  of the assessment year 1974-75 before the Commercial Tax officer on October 20,  1978 including freight charges in the turn-over and also  deposited along with the revised returns, challans showing payment  of the balance of the tax payable under the State Act as well as under the Central Act.      The assessing authority passed two orders of assessment one under section 10(3) of the State Act and the other under section 9 of the Central Act. The former order of assessment levied a  penalty of  Rs. 53,353  under section  7AA of  the State Act  on account  of the  delay in depositing the sales tax payable  in respect of the amount of freight charges and

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also levied  interest of Rs. 85910/under s. 11B of the State Act. In  the latter  order of  assessment a  penalty of  Rs. 1,34,205/- was  levied under  section 7AA  of the  State Act read with  section 9(2)  of the Central Act for the delay in depositing  the  tax  payable  in  respect  of  the  freight charges, and  interest of  Rs. 2,07,174/-  was levied  under section 11  of the  State Act  read with section 9(2) of the Central Act, 564      In the  appeals to  this Court on the question whether: (A) the Assessing Authority was right in imposing penalty on the  assessee  under  the  two  assessment  orders  for  not depositing the  tax in  respect of  the amount of freight at the time  of filing  of the original returns under the State Act and  the Central  Act, and  (B) the  assessee was liable under section  11B of  the State  Act to pay interest on the tax in  respect of  the amount  of freight  for  the  period between the  date of  filing of  the original return and the date when  such tax  was  actually  paid  while  filing  the revised return. ^      HELD: [By The Court]      (A) The levy of penalties for not including the freight charges in  the taxable turnover in the original returns and for not paying the tax in respect of such freight charges is unsustainable and  the two orders of assessment in so far as they levy  penalty are  liable to  be quashed and set aside. [571 B, 589 B]      Cement  Marketing   Company   of   India   Limited   v. Commissioner of  Sales Tax Indore [1980] 1 SCR 1098 referred to.      [per Bhagwati J. dissenting]      B(1) So  long as  the assessee  pays the  amount of tax which according  to him  is due  on the  basis of the return filed by  him, there  would be  no default  on his  part  in complying with  the  obligation  under  sub-section  (2)  of section 7  and there  would be  no liability  on him  to pay interest under section 11B clause (a), because he would have paid the amount of tax quantified by him through the process of self-assessment.  The actual amount of tax payable by the assessee would be determined only when it is assessed by the Assessing Authority  under section  10 and that would not be payable until  the expiration of the period specified in the notice of  demand or thirty days from the date of service of such notice, as the case may be. [584 D-E]      (2) Since  the assessee  deposited the  amounts of  tax which according  to him were due on the basis of the returns actually filed  by him  and the  returns were accompanied by receipts showing  deposit of  such amounts of tax, there was no default on the part of the assessee in paying the amounts of tax payable under sub-section (2) of section 7 within the actual period  allowed and  in the circumstances no interest was payable  by the  assessee under  section 11B clause (a).                                                    [586 F-G]      State of Rajasthan v. Ghasi Lal [1965] 2 SCR 805 relied on.      3. When  the assessment, is made and the tax payable by an assessee  is determined,  the tax  so determined does not become payable  until after  a notice of demand is served by the Assessing  Authority under  section 11  sub-section  (2) read with Rule 31 of the Rajasthan Sales Tax Rules 1955. The assessee is  allowed time  to make  payment up  to the  date specified in  the notice  of demand  and if  no such date is specified, then  within thirty days from the date of service of the  notice. So  long the  assessee pays up the amount of

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the tax  assessed within the time specified in the notice of demand or within thirty days from the date of service of the notice, as  the case  may be, he would not be in default and hence 565 S. 11B clause (b) provides that the assessee would be liable to pay  interest on  the tax  assessed only if the amount of such tax  is not  paid within  the period  specified in  the notice of  demand or  in the  absence of such specification, within thirty  days from  the date Of service of such notice and then  too, the  liability to pay interest would commence not from  the date  of the  assessment,  but  from  the  day commencing after  the end  of the  said period, that is, the period specified in the notice of demand or thirty days from the date of service of such notice, as the case may be. Thus even after  the assessment is made and the tax payable by an assessee is  determined, the  assessee is  not liable to pay interest on  the amount  of such  tax until after the period specified in  the notice  of demand  or in  the absence such specification, thirty  days From the date of service of such notice, have expired. [574 D-H]      4. The language used in sub-section (2) of section 7 is "full amount  of tax  due  on  the  basis  of  return".  The "return" is  the return  Sled by  the  assessee  under  sub- section (1)  of section 7. When sub-section (1) of section 7 requires an assessee to file a return, the return filed must be correct  and proper.  If the  return is  not correct  and proper, the Assessing Authority may not give credence to the return and  may refuse to assess the tax on the basis of the return  and  if  the  Assessing  Authority  finds  that  the assessee has  concealed  any  particulars  from  the  return furnished by  him or  has deliberately  furnished inadequate particulars in  the return  the Assessing Authority may levy penalty on  the assessee  under section  16, sub-section (1) clause (e)  and the  assessee  may  also  be  liable  to  be punished for  an offence  under Section  16, sub-section (3) clause (d)  for making  a false  statement  in  the  return. Whether the  return filed be correct or not, the tax payable by the  assessee under sub-section (2) of section 7 would be the full  amount of  tax due on the basis of the return. The return actually filed by the assessee must be looked into in order to see what is the full amount of tax duo 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.  The plain words of sub-section (2) of  section 7  cannot 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. [576 B-F]      5. 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. How would the assessee know in advance what view the  Assessing   Authority  would  take  in  regard  to  the taxability of  any particular  category of sales or the rate of tax  applicable to  them and deposit the amount of tax on that basis  ?  Even  in  regard  to  the  liability  to  pay interest, it  does not  stand to reason that the legislature should have  subjected the  assessee to  such liability  for non-payment of  an amount of which the liability for payment

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is still to be ascertained. [577 F-G]      6. The  tax payable  under sub-section (2) of section 7 dealt with  in clause  (a) of section 11B cannot, be equated with the  amount of  the tax  assessed forming  the  subject matter of clause (b) of section 11B and hence it must 566 be tax  due on the basis of the return actually filed by the assessee and not on the basis of a correct and proper return which ought to have been filed by him. [578 G-H]      7. The  scheme of  taxation envisaged  in the State Act clearly shows  that it  is only  when the assessment is made and the  period specified  in the notice of demand or in the absence of  such specification, thirty days from the date of service of  such notice  expires, that  the amount of tax as assessed becomes payable by the assessee and its payment can be enforced  by the  Revenue. What  becomes payable  by  the assessee under  sub-section (2)  of section  7 is merely the tax due  on the  basis of  the return  actually filed by the assessee that is, on the basis of self-assessment. [579 F-G]      8. On  a true  construction of  the provisions  of  the State Act  tax becomes  due from the assessee and is payable by  him  only  when  it  is  ascertained  by  the  Assessing Authority under  section 10 or by the assessee under section 7(2). Till  then there is only the liability of the assessee to be  assessed to  tax and no tax can be said to be payable by the  assessee. The  tax payable  is ascertained  when the assessment is  made by the Assessing Authority under section 10 or  when the  assessee himself  quantifies it through the process of  self-assessment under  subsection (2) of section 7. These  two amounts  of tax  may and  in quite a number of cases would  be different  because one is ascertained by the Assessing Authority  through the  process of  assessment and that is why sub-section (4) of section 7 provides that every deposit of tax made under sub-section (2) shall be deemed to be provisional subject to necessary adjustments in pursuance of final  assessment of  tax made  under  section  10.  This provision clearly  contemplates that  the tax  payable under sub-section (2)  of section  7 may be different from the tax assessed  under   section  10   and  it  cannot,  therefore, obviously be  the tax  due on  the basis  of a  correct  and proper return  but must  be the  tax due on the basis of the return actually filed. [580 D-G]      9(i) it is clear from the language of subsection (2) of section 7  that it  is only on the filing of the return that the liability  to pay the tax due on the basis of the return arises. If no return is filed within the prescribed time, it would undoubtedly  constitute a  default attracting  penalty under section 16, sub-section (1) clause (n) but there would be no  liability on  the assessee  to pay  interest  on  the amount of  the tax, because the liability to pay the tax due on the  basis of the return under sub-section (2) of section 7 can  arise only  when the  return is  filed  There  is  no liability on  the assessee  to pay  any amount by way of tax until the return is filed or the assessment is made. [581 H- 582 B]      (ii) It  can neither be held that section 7 sub-section (2) is  attracted even  when no return has been filed. It is clear that  until the  assessee files a return or assessment is made,  no tax  is payable  by the  assessee, because till then there  is only  a liability  to be assessed to tax. The conclusion that  a registered  dealer who  does not file any return at  all as  required by  sub-section (1) of section 7 would still  be liable  to pay  the amount  of tax and if he does not  pay the  same before  the due  date for filing the return, he  would be  liable to  pay interest  under section

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11(b) clause  (a) cannot be accepted. This would be contrary to the decision of this Court in State of Rajasthan v. Ghasi Lal [ 1965] 2 SCR 805.                                                    [582 C-F] 567 [per A.P. Sen and Venkataramiah, JJ]      B(1). The  statutory liability under section 11B arises wherever there  is default  in payment of the tax within the period allowed  by law  irrespective of  any doubt  which an assessee may  be entertaining about the liability to pay the tax. [604 D-E]      State of  Rajasthan v.  Ghasi  Lal  [1965]  2  SCR  805 distinguished.      2.  Tax,  interest  and  penalty  are  three  different concepts. Tax  becomes payable  by an  assessee by virtue of the  charging   provision  in   a  taxing  statute.  Penalty ordinarily becomes payable when it is found that an assessee has willfully  violated any  of the provisions of the taxing statute. Interest is ordinarily claimed from an assessee who has withheld  payment of  any tax  payable by  him and it is always calculated at the prescribed rate on the basis of the actual amount  of tax  withheld and  the extent  of delay in paying it.  It may not be wrong to say that such interest is compensatory In character and not penal. [594 D-F]      3.  Registered  dealers  can  be  classified  into  the following different  classes: (1)  A registered  dealer  who files his  return showing a higher taxable turnover than the actual turnover  which is  ultimately found to be taxable at the time  of regular  assessment  and  who  pays  tax  under section 7(2)  of the  Act on  the basis of the return. (2) A registered dealer  who files  a true  and proper  return and pays tax  on the  basis  of  such  return  within  the  time allowed. (3).  A registered  dealer who  does not  file  any return at  all as  required by  section 7(1) and pays no tax under section  7(2) of the Act. (4). A registered dealer who files a  true return but does not pay the full amount of tax as required  by section  7(2), and;  (5) A registered dealer who files  a return  but wrongly  claims either the whole or any part  of the  turnover as  not taxable  and  pays  under section 7(2)  of the Act that amount of tax, which according to him  is payable,  on the basis of the return. In the case of a  registered dealer  falling under class (1) no question of payment of interest would arise as the amount of tax paid by him  at the  time of  filing the return is much more than what is  actually due  and payable by him under the Act. The extra tax  paid by  him becomes refundable after the regular assessment is  completed in view of section 7(4) of the Act. In the  case of a registered dealer falling under clause (2) also no  question of  payment of interest arises as there is no shortfall in payment of the tax. [594 F-595D]      4. A  fair reading  of section  11 of  the Act suggests that the  Act expects  that all  assessees who are liable to pay sales  tax should  file a  true return within the period prescribed under  sub-section (1)  of section  7 and  should produce  a  treasury  receipt  or  a  receipt  of  any  bank authorised  to   receive  money   on  behalf  of  the  State Government showing that full amount of tax due from them has been paid. [595 H-596 A ]      5. It  is settled law that a distinction has to be made by court  while interpreting  the  provisions  of  a  taxing statute between  charging provisions which impose the charge to tax  and machinery provisions which provide the machinery for the  quantification of  the  tax  and  the  levying  and collection of  the tax so imposed. While charging provisions are construed strictly, machinery sections are not generally

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subject to a rigorous construction. The courts are 568 expected to construe the machinery sections in such a manner that a charge to tax is not defeated. [596 C-D]      India United  Mills  Ltd.  v.  Commissioner  of  Excess Profits Tax,  Bombay [1955] 1 S.C.R. 810, Gursahai Saigal v. Commissioner  of  Income-tax  Punjab  [1963]  3  S.C.R.  893 Commissioner of  Income-tax v.  Mahaliram  Ramjidas,  A.I.R. 1940 P.C. 124 and Whitney v. Commissioners of Inland Revenue [1926] A.C. 37, referred to.      6. If  the words  ’on the basis of return’ occurring in sub-section (2)  of section 7 of the Act are construed as on The basis  of a  true and  proper return which ought to have been filed  under sub-section  (1) of section 7 then all the three classes  of persons  viz (i)  those who have not filed any return at all and who are later on found to be liable to be assessed,  (ii) those  who have  filed a  true return but have not  deposited the  full amount  of tax  which they are liable to  pay and  (iii) those  who filed a return making a wrong claim  that either  the  whole  or  any  part  of  the turnover is  not taxable  and who  are subsequently found to have made  a wrong  claim,  would  be  placed  in  the  same position and they would all be liable to pay interest on the amount of tax which they are liable to pay but have not paid as required by sub-section (2) of section 7 of the Act. This view is  in conformity  with the  legislative  intention  in enacting section 11B of the Act [599 A-C]      7. In  cases to  which section  7(2) of the Act applies interest has to be paid on the tax payable but which has not been paid  from the  last date on which the return has to be filed for  the assessment  year in  question and in cases to which sub-section  (2A) is applicable, from the last date on which the advance tax has to be paid. The amount of interest has however  to be calculated after the actual amount of tax payable is assessed and necessary adjustments are made. [609 B-C]      8. Either  by delaying  the filing of the return or not filing it  all or by filing a return wrongly claiming that a certain part  of the  turnover is  not  taxable  or  by  not disclosing a  part of  the taxable turnover in the return an assessee cannot  escape the  liability to pay interest under section 11B on the amount of tax with held, as a consequence of his  own action  or inaction, from the last date on which it had to be paid as per sub-section (2) or sub-section (2A) of section  7, as  the case  may be, read with the Rules. An assessee cannot  contend that interest does not accrue under section 11B on the tax payable by him where the time to file the return  has elapsed  until the  actually files  a return admitting the liability to pay such talc or until assessment is made. [604 B-D]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal No. 852 of 1980.      From the Assessment orders dated the 30th January, 1980 of the Commercial Tax officer, Spl. Circle Kota, (Rajasthan) for the assessment year 1974-75.      Soli J. Sorabji, B.R. Agarwal and P. G. Gokhale for the Appellants.      S. T. Desai and B. D. Sharma for the Respondents. 569      The Judgment  of A.P.  Sen and  E. S. Venkataramiah JJ. was delivered  by Venkataramiah J. P. N. Bhagwati, J. gave a

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dissenting opinion.      BHAGWATI, J.  I have  had the  advantage of reading the Judgment prepared  by my  learned brother  Venkataramiah J., but despite  the great respect which I have for his learning and erudition,  I find  myself unable to agree with the view taken by  him. The facts giving arise to this appeal are not very  material   because  the   question  which  arises  for consideration is  essentially one  of law,  but the  factual setting  does  help  to  see  the  question  in  its  proper perspective and  hence it  would be  useful to set out a few material facts.      The assessee  is a  public limited  company carrying on business of manufacture and sale of cement. It has a factory for  manufacturing   cement  at  Lakheri  in  the  State  of Rajasthan and it effects sales of cement both inside as well as outside  the State  of Rajasthan. Since some of the sales effected by  the assessee were inside the State of Rajasthan and some  others were  inter-state sales, the assessee filed returns of  sales for  the quarters  comprised in the period 1st August  1973  up  to  31st  July  1974  both  under  the Rajasthan Sales Tax Act 1954 thereinafter referred to as the Stale Act)  and the  Central Sales Tax Act 1956 (hereinafter referred to  as the  Central  Act).  The  assessee  did  not include in  the taxable  turn-over shown  in the returns the amount of  freight paid  in respect  of the goods sold under the bonafide  impression that  the amount of freight did not form part  of the  sale price  and was not includible in the taxable turn-over  of  the  assessee.  This  impression  was carried by  the assessee  in view of certain decisions which had been  given by  some High  Courts as well as the Supreme Court and  particularly the decision of the Supreme Court in Hyderabad Asbestos  Cement  Products  Limited  v.  State  of Andhra Pradesh(1). The assessee paid up for each quarter the full amount  of tax  calculated on  the basis  of the return submitted by  it and  the receipt for such payment was filed along with  the return.  The  amount  of  tax  paid  by  the assessee obviously  did not  include tax  on the  amount  of freight, since  according to  the  assessee  the  amount  of freight did  not  form  part  of  the  sale  price  and  was accordingly not  shown in the returns as forming part of the taxable  turn-over.   Subsequently  however,   the  question whether the  amount of freight formed part of the sale price and was therefore includible in the taxable turn-over of the assessee  so   as  to   be  exigible  to  tax  came  up  for consideration before 570 this Court  in Hindustan  Sugar Mills  Limited v.  State  of Rajasthan and  others(1) and  it was held by this Court that by reason of the provisions of the Cement Control order 1967 which governed  the transactions  of sale  of cement entered into by  the assessee  with the  purchasers, the  amount  of freight formed  part of the sale price within the meaning of the first  part of  the definition of that term contained in section 2  (p) of  the State  Act and  section 2  (h) of the Central Act  and was  includible in the taxable turn-over of the assessee.  As soon  as this  decision was  given by  the Court on 29th August 1978, the assessee immediately prepared revised returns  in respect of the period 1st August 1973 up to 31st  July 1974  showing the amount of freight as forming part of  the taxable turn-over and filed the same before the Commercial Tax officer, Special Circle, Kota on 20th October 1978. The  assessee also  deposited along  with the  revised returns challans  showing payment  of the balance of the tax on the  basis of  the revised returns under the State Act as well as  the Central  Act. Two  orders  of  assessment  were

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thereafter passed  by the  Assessing  Authority,  one  under section 10  sub-section (3)  of the  State Act and the other under section  9 of  the Central  Act. The  former order  of assessment levied  a penalty of Rs. 53,355 under section 7AA of the  State Act  and interest  amounting to  Rs. 85,910.50 under section  11B of the State Act for the delay in payment of the  tax in  respect of the amount of freight under State Act, which  according to  the Assessing  Authority ought  to have been  deposited alongwith  the filing  of the  original returns. Similarly,  the latter  order  of  assessment  also levied a  penalty of  Rs. 1,34,205 under section 7 AA of the State Act read with section 9 sub-section (2) of the Central Act and interest amounting to Rs. 2,07,174 under section 11B of the  State Act read with section 9 sub-section (2) of the Central Act  for the  delay in depositing the tax payable in respect of  the amount of freight under the Central Act. The assessee has  in the  present appeal  preferred with special leave challenged  the  validity  of  both  these  orders  of assessment in  so far  as they  levy penalty and interest on the assessee.      The  first  question  which  arises  for  consideration before us  is whether  the Assessing  Authority was right in imposing penalty  on the  assessee under  the two assessment orders for  not depositing  the tax in respect of the amount of freight  at the  time of  filing of  the original returns under the State Act and the Central Act. My. 571 learned  brother   Venkataramiah  has  held,  following  the decision of  this Court in Cement Marketing Company of India Limited v.  Commissioner of  Sales Tax,  Indore(l) that "the levy of  penalties for  not including the freight charges in the taxable  turn-over in  the original  returns and for not paying the  tax in  respect  of  such  freight  charges,  is unsustainable" and  that the  two orders of assessment in so far as  they levy  penalty on  the assessee are liable to be quashed and  set aside. I entirely agree with the view taken by him  and I  do not  think I  can usefully add anything to what he has said.      The next  question that  arises  for  consideration  is whether the  assessee was  liable under  section II B of the State Act  to pay  interest on  the tax  in respect  of  the amount of  freight for the period between the date of filing of the  original return  and the  date  when  such  tax  was actually  paid   while  filing   the  revised   return.  The contention of  the revenue  was that  the  assessee  was  so liable and  this contention  was sought  to be  supported by relying on  section 2  sub-sections (1)  and (2)  read  with section 11  of the  State  Act.  The  same  provisions  with section 9  sub-section (2)  of the  Central  Act  were  also relied upon  for the  purpose of  sustaining  the  Revenue’s claim for  interest under the Central Act. The determination of the question before us therefore really turns on the true interpretation of section 7 subsection (1) and (2) read with section II B of the State Act. Section 7 of the State Act as it stood at the material time was in the following terms:           "7. Submission  of returns:  (1) Every  registered      dealer, and such other dealer, as may be required to do      so by  the assessing  authority by notice served in the      prescribed manner,  shall furnish  prescribed  returns,      for the prescribed periods, in the prescribed forms, 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

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    fifteen days in the aggregate.           (2) Every such return shall is be accompanied by a      Treasury receipt  or receipt  of any bank authorised to      receive  money  on  behalf  of  the  State  Government,      showing the 572 deposit of the full amount of tax due on the basis of return in the State Government Treasury of bank concerned.      (2A) Notwithstanding  anything contained in sub-section (2).  the  State  Government  may  by  notification  in  the official Gazette  require any  dealer or  class  of  dealers specified therein,  to pay  tax It  intervals  shorter  than those prescribed  under sub-sec[ion  (1). In such cases, the proportionate tax  on the  basis of the last return shall be deposited  at   the  intervals   specified   in   the   said notification in  advance of  the return.  The difference  if any, of  the tax  payable according  to the  return and  the advance tax  paid shall be deposited with the return and the return shall  be accompanied  by the  treasury  receipt,  or receipts, of  any Bank authorised to receive money on behalf of the  State Government,  for the  full amount  of tax  due shown in the return.      (3) If  any dealer discovers any omission, error, or r) 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  sub mission of the next return but not later. Section II  B of  the State  Act during  the relevant period provided inter alia as under: "11B. Interest on failure to pay tax, fee or penalty-      (a)  If the  amount  of  any  tax  payable  under  sub-           sections (2)  and (2A)  of section  7 is  not paid           within the period allowed, or      (b)  If the  amount specified  in any notice of demand,           whether for  tax, fee,  or penalty,  is  not  paid           within the  period specified in such notice, or in           the absence  of such specification, within 30 days           from the  date of  service  of  such  notice,  the           dealer shall  be liable  to pay simple interest on           such amount at one per cent per month from the day           commencing after  the end of the said period for a           period of  three months  and at one and a half per           cent per  month  thereafter  during  the  time  he           continues to make default in the payments; 573           Provided that,  where, as  a result  of any  order                under this Act, the amount, on which interest                was pay  able under  this section,  has  been                reduced,  the   interest  shall   be  reduced                accordingly and  the excess interest paid, if                any, shall be refunded:           Provided further that no interest shall be payable                under this  section on  such amount  and  for                such period  in respect  of which interest is                paid under  the provisions of sections 11 and                14. These are  the two  sections which fall for construction but in order to arrive at their true meaning and legal effect it is necessary to refer to a few other provisions of the State Act. Section  3 is  the charging  section and it creates the liability to  pay tax.  That is  the normal  function  of  a charging section  in a  taxing statute.  But, of  itself, it does not  make the  tax payable  by an  assessee. It is only when  the  tax  which  an  assessee  is  liable  to  pay  is ascertained that  becomes payable  by the  assessee. Now the

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normal mode  by which  the tax  payable by  an  assessee  is ascertained  is  by  the  process  of  assessment  which  is provided in section 10 Sub-section (I) clause (a) of section 10 says that assessment and determination of tax due for any year shall  be made after the returns for all the periods of that year  have become  due. Section  11 then  provides  for payment and  recovery of tax and its provisions in so far as material read inter alia as follows:           "11. Payment  and recovery  of tax:  (I)  The  tax      shall be  payable by  a dealer  on  the  basis  of  the      assessments. F           (2) The  tax paid  by a  dealer shall  be adjusted      against the  judgment determined  as a  result  of  the      assessment under  section 10  and the  balance  of  the      amount shall  be payable by such dealer by such date as      may be  specified in the notice of demand and, where no      such date  is specified,  shall be  paid within  thirty      days from the date of service of the notice.           Provided that the assessing authority may, subject      to  such   conditions  and   restrictions  as   may  be      prescribed, in  respect of  any particular  dealer, and      for reasons to be re corded in writing, extend the date      of such payment and 574      allow such  dealer to  pay the tax due and the penalty,      if any, by instalments.          (3)  In default of the payment of tax payable under      sub-section (1)  or sub-section  (2), the amount of tax      shall be recoverable as an arrear of land revenue.        .... ...... ...... ...... ....  ........ ........ ..          Provided  further that where recovery of tax or any      part thereof is stayed under the preceding proviso, the      amount of  such tax  shall be recoverable with interest      at the  prescribed rate  on the amount ultimately found      due; and  such interest shall be payable on such amount      from the date of tax first become due.’’ When the  assessment is  made and  the  tax  payable  by  an assessee is  determined, the  tax  so  determined  does  not become payable  until after  a notice of demand is served by the Assessing  Authority under  section 11  sub-section  (2) read with Rule 31 of the Rajasthan Sales Tax Rules 1955 made by the  Government of  Rajasthan in  exercise of  the powers conferred under  section 26  of the  State Act  and then the assessee is  allowed time  to make  payment up  to the  date specified in  the notice  of demand  and if  no such date is specified, then  within thirty days from the date of service of the  notice. So  long the  assessee pays up the amount of the tax  assessed within the time specified in the notice of demand or within thirty days from the date of service of the notice, as  the case  may be, he would not be in default and hence section  11 B  clause (b)  provides that  the assessee would be  liable to pay interest on the tax assessed only if . the  amount of  such tax  is not  paid within  the  period specified in  the notice of demand or in the absence of such specification, within  thirty days  from the date of service of such  notice and  then too, the liability to pay interest would commence  not from  the date  of assessment,  but from "the day  commencing after  the end of the said period" that is, the  period specified  in the notice of demand or thirty days from  the date  of service  of such notice, as the case may be.  Thus even  after the assessment is made and the tax payable by  an assessee  is determined,  the assessee is not liable to pay interest on the amount of such tax until after the period  specified in  the notice  of demand  or  in  the absence such  specification, thirty  days from  the date  of

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service of such notice, have expired. 575      Turning now to sub-section (I) of section 7 it requires every A  registered dealer to furnish prescribed returns for the prescribed  period, in  the  prescribed  forms,  in  the prescribed manner  and within  the prescribed  time  to  the Assessing Authority.  It was  not disputed  on behalf of the Revenue that  in the  present case the prescribed returns in the prescribed  forms were furnished by the assessee in time for the  quarter comprised  in the period 1st August 1973 to 31st July  1974, the  only  grievance  in  regard  to  those returns being  that the  amount of  freight was not shown as forming part  of the  taxable turnover.  Sub-section (2)  of section 7  provides  that  every  return  furnished  by  the assessee must  be  accompanied  by  a  receipt  showing  the deposit of  the full  amount of  tax due on the basis of the return and  the  assessee  accordingly  deposited  the  full amount of  tax calculated  on the  basis of  each  quarterly return and filed the receipt showing such deposit along with the return.  Since, according  to  the  view  taken  by  the assessee at  the time  of filing  the original  returns, the amount of  freight did  not form  part of the sale price, it was not  included in  the  taxable  turnover  shown  in  the original returns  and hence  no tax on the amount of freight was deposited  by the  assessee while  filing  the  original returns. It  was only  after the  decision of  this Court in Hindustan Sugar  Mills Limited  Company’s case  (supra) that the assessee  filed revised  returns including the amount of freight in the taxable turnover and deposited the balance of the tax on the basis of the revised returns. The argument of the Revenue  was and that is the argument which has appealed to my  learned brother,  Venkataramiah, that the words "full amount of tax due on the basis of return" in sub-section (2) of section  7 meant  the full amount of tax due on the basis of a  true and  proper return which ought to have been filed by the  assessee and  not the  full amount of tax due on the basis of  the return  actually filed and since the amount of the freight  was  liable  to  be  included  in  the  taxable turnover and  hence in  a true  and proper return, the "full amount of tax due on the basis of return" within the meaning of sub-section  (2) of  section 7  included the  tax on  the amount of  freight and  the assessee therefore ought to have deposited the  same at  the time  of  filing,  the  original returns, and  since the assessee failed to do so, section 11 A clause (a) was attracted and the assessee was liable under that provision  to pay  interest on the tax on the amount of freight which  remained  unpaid  until  the  filing  of  the revised returns.  This argument,  plausible  though  it  may seem, is in my opinion unsustainable. It is plainly contrary to the  language of  sub-section (2)  of section 7 read with section 11B  and is  opposed to the scheme of the State Act. It is also incon- 576 sistent with  the decision of a Bench of five Judges of this Court in  State of  Rajasthan v. Ghasi Lal(1). Indeed I fail to see  how in  the face  of the  decision,  the  Court  can possibly accept the argument of the Revenue.      The language  used in  sub-section (2)  of section 7 is "full amount  of tax  due  on  the  basis  of  return".  The "return" referred  to is  obviously the  return filed by the assessee under  sub-section (1) of section 7. Now it is true that when  sub-section (1) of section 7 requires an assessee to file  a return,  the return  filed must  be  correct  and proper. If  the  return  is  not  correct  and  proper,  the Assessing Authority  may not give credence to the return and

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may refuse  to assess  the tax on basis of the return and if the  Assessing   Authority  finds   that  the  assessee  has concealed any  particulars from  the return furnished by him or has  deliberately furnished inadequate particulars in the return, the  Assessing Authority  may levy  penalty  on  the assesssee under  section 16  sub-section (1)  clause (e) and the assessee  may also  be liable  to  be  punished  for  an offence under  section 16,  sub-section (3)  clause (d)  for making a  false statement  in the  return. But,  whether the return filed  be correct  or not,  the tax  payable  by  the assessee under  sub-section (2)  of section  7 would  be the full amount  of tax  due on the basis of the return. 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.      It may  also be  noted that  the construction contended for on  behalf of the Revenue leads to a serious anomaly. If this construction  were accepted, the tax payable under sub- section (2) of section 7 would be the full amount of tax due on the  basis of  a correct and proper return and that would necessarily be the same as the tax assessed by the Assessing Authority, because what is a correct and 577 proper return  would be  determinable only with reference to the A  assessment ultimately  made. The assessment when made would show  whether the  return  filed  was  correct  and  . proper, it  would be  correct and  proper if it accords with the  assessment  made;  if  it  does  not  accord  with  the assessment, then  to the extent to which it differs it would obviously have to be regarded as incorrect and improper. The consequence of  the construction  suggested on behalf of the Revenue would be thus that the tax payable under sub-section (2) of  section 7  would be  the full  amount of  the tax as assessed, because  that would  represent the  tax due on the basis of  a correct and proper return and the assessee would have t  deposit at  the time of filing the return, an amount equivalent to  the amount  of the  tax as  assessed. If  the assessee fails  to do  so, then  apart from the liability to pay interest  under section  I IB  clause (a),  the assessee would expose himself to penalty under section 16 sub-section (1) clause (n) which provides inter alia that any person who fails to  comply with  any requirement  of the provisions of the State  Act, the  requirement under  sub-section  (2)  of section 7 being to deposit the full amount of tax due on the basis of  return, shall be liable to D penalty in "a sum not exceeding Rs. 1,000 and in the case of continuing default, a further penalty  not exceeding  Rs. 50 for every day of such continuance." This is a consequence which it is difficult to believe  could   ever  have   been   contemplated   by   the legislature. 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.  How would  the assessee know in advance what view  the Assessing  Authority would  take in regard to

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the taxability  of any  particular category  of sales or the rate of tax applicable to them and deposit the amount of tax on that  basis ?  And this would be all the more problematic in the  case of  a statute  like the  sales tax law which is full of complexities and where it may be difficult to assert dogmatically that  a particular view is right or wrong. Even in regard  to the  liability to  pay interest,  it does  not stand to  reason that  the legislature should have subjected the assessee  to such liability for non-payment of an amount of  which   the  liability   for  payment  is  still  to  be ascertained. Moreover,  on the  construction of the Revenue, if the  assessee has not deposited at the time of filing the return an  amount equivalent  to the  full amount of the tax assessed, the  assessee would  be liable  to pay interest on amount remaining  unpaid from  the date  of  filing  of  the return until  payment. But,  as I  have already  pointed out above, when  the assessment  is made  and the tax payable by the 578 assessee is  determined, the  assessee  is  given  time  for payment of  the amount  of the  tax assessed upto the period specified in the notice of demand and in the absence of such specification, within  thirty days  from the date of service of such  notice and it is only if the assessee fails to make payment within  such period  that he  becomes liable  to pay interest on  the amount of the tax assessed to the extent to which it  remains unpaid.  There  is  no  liability  on  the assessee to  pay interest  on the amount of the tax assessed until after  the expiration  of the  period specified in the notice of  demand or thirty days from the date of service of such notice,  as the  case may  be. There  would thus  be  a conflict between  the two  provisions, if  the  construction contended for  on behalf of the Revenue were accepted. Under sub-section (2)  of section  7 read with section 11 B clause (a), the  assessee would  be liable  to pay  interest on the amount of the tax assessed to the extent to which it has not been deposited  at the  time of  filing the  return and such interest would  run continuously from the date of the filing of the return until payment, while under section 11 B clause (b) the  assessee would not be liable to pay interest on the amount of  the tax  assessed during  the period specified in the notice  of  demand  or  in  the  absence  of  such  non- specification during the period of thirty days from the date of service  of such notice. Such a conflict could never have been intended  by the legislature. It is a well-settled rule of interpretation that a statute must be so construed as not to create  any repugnance  between the different provisions, for   it    is   a   basic   assumption   underlying   every interpretational  exercise  that  the  legislature  must  be supposed not  to have  intended to  contradict  itself.  The Court must  always prefer  that interpretation  which avoids repugnancy between  two provisions  of a  statute and  gives full  meaning   and  effect  to  both.  Therefore,  on  this principle of  interpretation also the construction canvassed on behalf  of the  Revenue cannot  be accepted,  as it would create a  direct conflict  between the  provisions of clause (a) and  (b) of  section 11 B. The only way in which clauses (a) and  (b) of  section 11  B can  be read harmoniously and full  meaning  and  effect  can  be  given  to  them  is  by construing  them   as  dealing   with  distinct  matters  or situations. The tax payable under sub-section (2) of section 7  dealt  with  in  clause  (a)  of  section  11  B  cannot, therefore, be  equated with  the amount  of the tax assessed forming the  subject matter of clause (be of section l l and hence it  must be  held to  be tax  due on  the basis of the

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return actually  filed by  the assessee and not on the basis of a  correct and  proper return  which ought  to have  been filed by him. 579      There is  also another angle from which the problem can be A  considered. Clause  (a) of section 11 B postulates tax which, though payable under sub-section (2) of section 7, is not paid  by the  assessee within the time allowed and hence it subjects  the assessee  to liability to interest for non- payment of  such tax.  Now if,  as contended by the Revenue, the tax payable under sub-section (2) of section 7 means the full amount  of tax due on the basis of a correct and proper return which  ought to  have been filed by the assessee, and is, therefore,  equivalent to  the  amount  of  the  tax  as assessed, it  would be  the amount  of the  tax as  assessed which would  be payable  under sub-section  (2) of section 7 and this amount would be payable by the assessee at the time of filing the return, even though ex hypothesi no assessment has taken place. Now it is difficult to appreciate how under the scheme of taxation embodied in the State Act, the amount of tax which is yet to be ascertained through the process of assessment can  be said to be payable by the assessee at the time of  filing the return. If, as contended by the Revenue, it is so payable it is difficult to understand why it should have been  liable to  bear interest  from the date of filing the return  upto the  date of  assessment and  thereafter it should  have  been  freed  from  the  liability  of  bearing interest upto  the period  specified in the notice of demand or thirty  days from  the date  of service of the notice, as the case  may be  and the  rate of interest also should have been made to vary from period to period. Moreover, it is, to my mind,  impossible to  accept  the  proposition  that  the amount of the tax ultimately assessed, which would represent the tax  due on  the basis  of a  correct and  proper return should be  payable by the assessee at the time of filing the return under  sub-section (2)  of section  7. The  scheme of taxation envisaged in the State Act clearly shows that it is only when the assessment is made and the period specified in the  notice   of  demand   or  in   the  absence   of   such specification, thirty  days from the date of service of such notice expires,  that The  amount of tax as assessed becomes payable by  the assessee  and its payment can be enforced by the Revenue. What becomes payable by the assessee under sub- section (2)  of section 7 is merely the tax due on the basis of the return actually filed by the assessee that is, on the basis of self-assessment. G      This position  seems to  be clear  beyond doubt  on  an examination of the scheme of taxation contained in the State Act and  no authority is needed in support of it, but if any authority were  needed, it is to be found in the decision of a Bench  of five  Judges of this Court in State of Rajasthan v. Ghasi Lal (supra). There the 580 question was  whether the  assessee could  be said  to  have failed, without  reasonable cause, to pay the tax due within the time  allowed, when  he paid the tax due on the basis of the quarterly  returns at  the time of filing those returns, but the  returns were  filed long  after the  due dates  for filing the same had expired. The argument of the Revenue was that tax  became due from the assessee under section 3 which is the  charging section and the assessee could not withhold payment of  the same by delaying the filing of the quarterly returns within  the time  prescribed under the State Act and he was therefore liable to pay interest on the amount of the tax as assessed from the date the quarterly returns ought to

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have been  filed and  the  amount  of  the  tax  paid.  This argument of the Revenue was rejected by the Court and Sikri, J. speaking  on behalf  of the  Bench of  five Judges, said: "Till the  tax  payable  is  ascertained  by  the  Assessing Authority under  section 10 or by the assessee under section 7(2), no  tax can be said to be due within section 16(1) (b) of the  Act for  till then  there is  only a liability to be assessed to  tax." These observations show beyond doubt that on a  true construction  of the  provisions of the State Act tax becomes due from the assessee and is payable by him only when it  is "ascertained  by the  Assessing Authority  under section 10  or by  the assessee  under section  7(2)". Until then, there  is only  the liability  of the  assessee to  be assessed to  tax and no tax can be said to be payable by the assessee. The tax payable is ascertained when the assessment is made  by the Assessing Authority under section 10 or when the assessee  himself quantifies  it through  the process of self-assessment under  sub-section (2)  of section  7. These two amounts  of tax  may, and  in quite  a number  of  cases would, be  different  because  one  is  ascertained  by  the assessee himself  by filing  his return  and  the  other  is ascertained by  the Assessing  Authority through the process of assessment  and that  is why sub-section (4) of section 7 provides that  every deposit  of tax  made under sub-section (2) shall  be deemed  to be provisional subject to necessary adjustments in  pursuance of  final assessment  of tax  made under section  10. This  provision clearly contemplates that the  tax  payable under  sub-section (2)  of section  7  may  be different from  the tax  assessed under  section 10  and  it cannot, therefore,  obviously be the tax due on the basis of correct and proper return (because that would necessarily be the same  as the  tax ultimately  assessed under section 10) but must  be the tax due on the basis of the return actually filed.      Mr.  Justice   Venkataramiah  has   in   his   Judgment classified  registered   dealers  into  the  following  five different categories: 581      1.   A registered dealer who files his return showing a           higher taxable  turnover than  the actual turnover           which is  ultimately found  to be  taxable at  the           time of  regular assessment and who pays tax under           section 7(2)  of the  Act  on  the  basis  of  the           return.      2.    A  registered dealer  who files a true and proper           return and  pays tax  on the  basis of such return           within the time allowed.      3.    A  registered dealer who does not file any return           at all as required by section 7(1) and pays no tax           under section 7(2) of the Act.      4.    A  registered dealer  who files a true return but           does not pay the full amount of tax as required by           section 7(2); and      5.   A registered dealer who files a return but wrongly           claims  either  the  whole  or  any  part  of  the           turnover as  not taxable  and pays  under  section           7(2)  of   the  Act  that  amount  of  tax,  which           according to  him is  payable, on the basis of the           return. The learned  Judge has  observed that  if  the  construction contended for  on behalf  of  the  assessee  were  accepted, registered dealers  falling within  categories (3),  (4) and (S) would  be outside  the provision  enacted in sub-section (2) of  section 7  read with  section 11B  clause (a) and no

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interest would  be payable  by them under that provision and that would make clause (a) of section I I "either unworkable or meaningless".  I must, with the greatest respect, confess my inability  to appropriate the line of reasoning which has prevailed with the learned Judge in making this observation. The learned  Judge has  proceeded  on  the  basis  that  the registered dealers  falling within all the three categories, namely, (3),  (4) and (S) are required by sub-section (2) of section 7  to pay  the tax chargeable under section 3 of the State Act  and if  they do  not pay the same within the time allowed, that  is, at the time when the returns are filed or in case  the returns  are-not filed  within  the  prescribed time, then before the expiration of the date when they ought to have  been filed  they would  be liable  to pay  interest under section  11B clause  (a). There,  is, in my opinion, a basic fallacy  underlying this  assumption,  because  it  is clear from the language of sub-section (2) of section 7 that it 582 is only  on the  filing of  the return that the liability to pay the  tax due  on the  basis of  the return arises. If no return  is  filed  within  the  prescribed  time,  it  would undoubtedly constitutes  a default  attracting penalty under section 16,  sub-section (1)  clause (n), but there would be no liability  on the  assessee to pay interest on the amount of the tax, because the liability to pay the "tax due on the basis of  the return’  ’ under sub. section (2) of section 7 can arise  only when  the  return  is  filed.  There  is  no liability on  the assessee  to pay  any amount by way of tax until the return is filed or the assessment is made. This is clear from  the decision  of this  Court  in  the  State  of Rajasthan v.  Ghasi Lal  (supra) where this Court held in so many terms at page 322 of the Report that since the assessee in that case did not file returns till December 19, 1959 and January and March 1960, "section 7(2) could not be attracted till then"  (Emphasis supplied). I fail to understand how in the face  of these  observations made  by a  Bench  of  five judges of  this Court,  it can  ever be  held that section 7 sub-section (2)  is attracted  even when  no return has been filed. It  is clear  from the  observations  in  this  case- observations which  have been  quoted here  as  also  in  an earlier paragraph-that  until the assessee files a return or the assessment  is made,  no tax is payable by the assessee, because "till  then there is only a liability to be assessed to tax  ’. I must therefore regretfully express my liability to accept  the conclusion  reached  by  my  learned  brother Venkataramiah  that   a  registered  dealer  falling  within category 3  who does  not File any return at all as required by sub-section (I) of section 7 would still be liable to pay the amount of tax and if he does not pay the same before the due date  for filing  the return  has expired,  he would  be liable to  pay interest  under section I IB clause (a). That would be  plainly contrary  to the  decision in  State of  p Rajasthan v.  Ghasi Lal (supra) which, being a decision of S Judges of this Court, is binding upon us.      So also  with  regard  to  registered  dealers  falling within category  4, I cannot agree with the view taken by my learned brother  Venkataramiah. He  has reasoned  that if  a registered dealer  files a  return but does not pay the full amount of  the tax  due on  the basis of the return filed by him, the Assessing Authority would be entitled to ignore the return under  sub-rule (4) of Rule 25 and when the return is not taken  cognizance of,  there would  be no  return on the basis of  which interest can be computed. This reasoning is, in my  opinion, fallacious  and if  I  may  say  so  without

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meaning  the   slightest  disrespect,   it   is   based   on misappreciation of  the effect  of sub-rule  (4) of  Rule 25 vis-a-vis sub-section (2) of section 7. Rule 25 583 sub-rule (4) provides that if a return is not accompanied by a receipt  for the deposit of tax as required by sub-section (2) of section 7, the Assessing Authority shall not be bound to take  any cognizance  of the return. If the assessee does not deposit the amount of tax due on the basis of the return and files  the  return  without  making  such  deposit,  the Assessing Authority  is given  the discretion  to ignore the return and to proceed to assess the assessee as if no return were filed.  But, the  Assessing Authority  may, in  a given case, if it so thinks fit, take cognizance of the return for the purpose of assessment, despite the fact That the tax due on the  basis of  the return  has not  been deposited by the assessee as  required by sub-section (2) of section 7. Where the Assessing  Authority chooses  to take  cognizance of the return, there  can be no doubt, even on the reasoning of Mr. Justice Venkataramiah,  that the assessee would be liable to pay the  amount of tax due on the basis of the return and if he fails  to do  so, he  would have  to pay  interest  under section 11  clause (a).  Then merely  because the  Assessing Authority may,  in a  given case,  in the  exercise  of  its discretion, decline  to take  cognizance of  the return,  it does not  mean that  in such  a case  the assessee  would be retrospectively relieved  of his liability to pay the amount of tax  due on  the basis  of the return, on the ground that the  return   filed  by  him  has  become  ’no-return’.  The liability of  the assessee  to deposit the amount of tax due on the  basis of  the return  cannot depend  upon  a  future discretionary event. namely, whether the Assessing Authority chooses to take cognizance of the return or declines to take cognizance of  it. The  only correct  way  of  reading  sub- section (2) of section 7 and sub-Rule (4) of Rule 25 is that whenever a return is led by the assessee, it must under sub- section (2)  of section  7 be accompanied by receipt showing deposit of  the full  amount of  tax due on the basis of the return and  if the  assessee fails  to deposit the amount of the tax  due on  the basis of the return actually filed, the Assessing Authority would have the option under sub-rule (4) of Rule  25 either  to take or not to take cognizance of the return. If  the Assessing  Authority  chooses  not  to  take cognizance of  the return,  it would  proceed to  assess the assessee as  if no  return had  been filed  by him, but that would not  relieve the  assessee of the obligation attaching to him  under sub-section (2) of section 7 of depositing, at the time  of filing the return, the amount of the tax due on the basis  of the return actually filed nor would it condone the breach  of such obligation. If the assessee does not pay the full amount of the tax due on the basis of the return as required subsection  (2) of section 7, he would be liable to pay interest under 584 section  11B   clause  (a),   irrespective  of  whether  the Assessing Authority  chooses  to  act  upon  the  return  or declines to  take cognizance  of it.  The argument which has appealed to  my learned  brother Venkataramiah  that if  the construction put  forward on  behalf of  the  assessee  were accepted, sub-section  (2) of  section 7  would fail  in its application to a registered dealer falling within category 4 is therefore in my opinion not a valid argument and with the greatest respect,  I must confess my inability to accept it. On the construction contended for on behalf of the assessee, the case of a registered dealer falling within category 4 is

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clearly covered by sub-section (2) of section 7 and in fact, it is precisely to cover inter alia a case of this kind that the legislature  enacted sub-section  (2) of  section 7 read with section  11B  clause  (a).  Similarly  the  case  of  a registered dealer  falling within category 5 is also covered by sub-section  (2) of  section 7 and if he does not pay the amount of  tax which  according to  him is  payable, on  the basis of  the return filed by him, he would be liable to pay interest under  section 11B  clause  (a).  So  long  as  the assessee pays  the amount  of tax  which according to him is due on  the basis of the return filed by him, there would be no default  on his  part in  complying with  the  obligation under sub-section  (2) of  section 7  and there  would be no liability on  him to  pay interest  under section 11B clause (a), because he would have paid the amount of tax quantified by him  through the  process of  self-assessment The  actual amount of  tax payable  by the  assessee would be determined only when  it is  assessed by  the Assessing Authority under section  10   and  that  would  not  be  payable  until  the expiration of  the period  specified in the notice of demand or thirty  days from  the date of service of such notice, as the case may be.      I must therefore regret my inability to accept the view taken by  my  learned  brother  Venkataramiah  that  if  the construction contended  for on  behalf of  the assessee were accepted, section  11 clause (a) would become meaningless or unworkable. That  provision  would  have  full  meaning  and effect on  the  construction  canvassed  on  behalf  of  the assessee  and   in  fact   as  pointed   out  above  if  the construction  which  has  appealed  to  my  learned  brother Venkataramiah  were   accepted,  the  consequence  would  be directly contradictory  to the  decision of  this  Court  in State of  Rajasthan v. Ghasi Lal (supra). My learned brother Venkataramiah has  relied strongly  on the  decision of this Court in  Gurshai Saigal  v.  Commissioner  of  Income  Tax, Punjab(l) but I fail to see how this decision can 585 be of  any help in the present case where section 11B clause (a) is  not at all rendered meaningless or unworkable on the construction  suggested  on  behalf  of  the  assessee.  The assessee in that case was sought to be charged with interest under sub-section  (8) of  section 18A  of the Indian Income Tax Act  1922 which  provided that  "where,  on  making  the regular assessment,  the Income-tax  Officer finds  that  no payment  of  tax  has  been  made  in  accordance  with  the foregoing provisions of this section, interest calculated in the manner laid in sub-section (6) shall be added to The tax as determined  on the  basis of the regular assessment." The argument of  the assessee  was that since sub-section (6) of section 18A  provided that where in any year an assessee has paid tax  under sub-section  (2) or  sub-section (3)  on the basis of  his own  estimate and the tax so paid is less than 80% of  the tax  determined on  the  basis  of  the  regular assessment, simple interest at the rate of 6% per annum from the first  day of January in the financial year in which the tax WAS  paid upto the date of such regular assessment shall be payable  by the  assessee and since no payment of tax had been made  by the  asses n  e r, at all in that case it, was not possible  to calculate interest in tile manner laid down in sub-section  (6)  and  no  interest  could  therefore  be charged to  the assessee  under sub-section  (8) of  section 18A. This  argument was  rejected by the Court on the ground that if  the words  "from the  first day  of January  in the financial year  in which the tax was paid" occurring in sub- section (6) of section 18A were to be literally applied in a

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case falling  within sub-section (8) of section 18A where no tax would  have been paid, sub-section (8) would be rendered totally meaningless  and futile.  The Court therefore with a view not  to rendering sub-section (8) of section 18A a dead letter construed  the words in sub-section (6) to mean "from the first  day o, January in the financial year in which the tax ought  to have been paid." This liberty was taken by the Court with  the language  of sub-section (6) of section 18A, because the  Court proceeded  on  the  hypothesis  that  the legislature could  not have intended that sub-section (8) of section 18A  should be  meaningless and unworkable. But here in the  present case  there is  no compelling  necessity  to modify the  words used  in sub-section  (2)  of  section  7, because sub-section  (2) of  section 7 read with section 11B clause (a)  is not rendered meaningless or futile on a plain natural construction of the language used in that provision.      It is  interesting to  compare section 140A sub-section (I) of  the Income  Tax Act, 1961 with section 7 sub-section (2) of  the State  Act.  Sub-section  (I)  of  section  140A provides that where any tax is 586 payable on  the basis of any return required to be furnished under section  139 or  under sec.  148,  after  taking  into account the  amount of  tax, if  any, already paid under any provision of  the Act,  the assessee  shall be liable to pay such tax  before furnishing  the return and the return shall be accompanied  by proof of payment of such tax. Sub-section (3) of  section 140A  then proceeds  to state  that  if  any assessee fails  to pay  the  tax  or  any  part  thereof  in accordance with the provision of sub-section (1), the Income Tax officer  may direct  that a  sum equal to two percent of such tax  or part  thereof, as  the case  may be,  shall  be recovered from  him by way of penalty for every month during which the  default continues.  Can it  possibly be contended that these  two sub-sections  of section  140A refer  to tax payable on  the basis  of a  proper and correct return or in other words  the tax assessed ? It is obvious that these two sub-sections refer only to tax payable on the basis of self- assessment and require such tax to be paid before the filing of the  return and if that is not done, the assessee becomes liable to  pay penalty  for every  month n  during which the default continues.  So also  section 21 j of Income-tax Act, 1961 which provides for payment of interest on under-payment of advance  tax does  not impose  liability for  payment  of interest in  case  or  every  deficiency  but  provides  for payment of  interest only  if the  advance tax  paid is less than 75  per cent of the assessed tax. In the world of human affairs, it  is hardly possible that the advance tax paid by the assessee  or the  tax payable  on  the  basis  of  self- assessment would  always be equivalent to the tax ultimately assessed by the authorities. There is no reason to interpret section  7   sub-section  (2)   differently   from   similar provisions in the Income-Tax Act, 1961.      I am  therefore of  the view  that since  the  assessee deposited the amounts of tax which according to him were due on the  basis of  the returns  actually filed by him and the returns were accompanied by receipts showing deposit of such amounts of  tax, there  was no  default on  the part  of the assessee in  paying the  amounts of  tax payable  under sub- section (2)  of section  7 within  the actual period allowed and in  the circumstances  no interest  was payable  by  the assessee under  section I IB clause (a). I would accordingly allow the  appeal and  set aside  the orders  passed by  the Assessing Authority imposing penalty and levying interest on the assessee under the Slate Act as well as the Central Act.

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The Revenue  will  pay  the  costs  of  the  appeal  to  the assessee. 587 VENKATARAMIAH, J.    The  assessee  M/s.  Associated  Cement Companies Limited  has filed  this appeal  by special  leave under Article  136 of  the Constitution  against the  orders dated January 30, 1980 passed by the Commercial Tax officer, Special Circle,  Kota in  the State of Rajasthan imposing on it a  penalty  of  Rs.  53,335  under  section  7AA  of  the Rajasthan Sales  Tax Act,  1954 (hereinafter  referred to as ’the Act’) and levying interest under section 11B of the Act amounting to  Rs. 85,910.50  and a  further penalty  of  Rs. 1,34,205 under section 7AA of the Act read with section 9(2) of  the   Central  Tax  Act  and  levying  interest  of  Rs. 2,07,174/- under  section 11B  of the  Act read with section 9(2) of  the  Central  Sales  Tax  Act  in  respect  of  the assessment year 1974-75.      The circumstances  under which the above orders came to be passed are these: The assessee has a cement manufacturing factory in  the State  of Rajasthan  at Lakheri.  The cement manufactured at  that factory is sold partly in the State of Rajasthan and  partly outside  that State.  The invoices  of sales are  however, made  and issued  at Ahmedabad and other places. The  sales tax  returns relating  to the  sales were filed under  the Act  and under the Central Sales Tax Act at Kota before  the assessing  authority for the period between August 1,  1973 and  July 31,  1974 i e. the assessment year 1974-75. In  those returns, the assessee had not included in the taxable turnovers the freight charges paid in respect of the goods  in question  in  the  bonafide  belief  that  the freight charges  were not  liable  to  be  included  in  the taxable turnover in view of certain decisions which had been rendered by some of the High Courts and of the Supreme Court and in  particular the  decision of  this Court in Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh.(l) But in,  Hindustan Sugar  Mills etc. v. State of Rajasthan & Ors.(2) this  Court held  that on a true construction of the scheme of  the Cement  Control order,  1967 and the relevant provisions of  the Act and of the Central Sales Tax Act, the freight charges formed part of the sale price and that sales tax was  payable thereon. The above decision was rendered on August 22, 1978. On coming to know of the said decision, the assessee prepared  and filed  the revised returns in respect of the  assessment year  in question i.e. 1974-75 before the Commercial Tax  officer, Special Circle, Kota on October 20, 1978 including  the freight charges in the taxable turnover. The assessee also deposited alongwith the revised returns 588 the balance of the sales tax payable under the Act and under the  Central   Sales  Tax   Act.  Thereafter  the  assessing authority passed  the two  impugned orders of assessment-one under section  10(3) of  the Act and another under section 9 of the  Central Sales  Tax Act.  In the  order of assessment passed under  the Act,  the  assessing  authority  levied  a penalty of  Rs. 53,335/-  under section  7AA of  the Act  on account of  the delay  in depositing a sum of Rs. 1,06,671/- towards sales  tax payable in respect of the freight charges and also levied interest of Rs. 85,9l0.50 under section I IB of the  Act. Similarly  in the assessment order passed under the Central  Sales Tax  Act, a penalty of Rs. 1,34,205/- was levied under  section 7AA  of the Act read with section 9(2) of the Central Sales Tax Act for the delay in depositing the tax payable  in respect  of the  freight charges  and levied interest of  Rs. 2,07,174  under section 11B of the Act read with section  9(2) of  the Central  Sales Tax  Act. In  this

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appeal, we  are only  concerned with  the correctness of the impugned orders in so far as they levy penalty and interest.      The first  question canvassed  before us relates to the levy of  penalties on  the  assessee  under  the  assessment orders for  not paying  the sales  tax payable under the Act and under  the Central  Sales Tax  Act  in  respect  of  the freight charges  which were  declared as  components of sale price by  this Court  in Hindustan Sugar Mill’s case (Supra) on August  22, 1978. The explanation of the assessee for not including the  freight charges  in the taxable turnover was, as mentioned  earlier, that  there was  a  doubt  about  its liability to pay sales tax thereon as the very same question was pending  adjudication before  this Court and that on the facts and  in the  circumstances of  the case,  the assessee could not  be held guilty of filing false returns before the assessing authority.  It was  pleaded that  since  the  non- inclusion of the freight charges in the taxable turnover was a result  of bonafide  belief of the assessee that they were not liable  to be  included in  the  taxable  turnover,  the assessing  authority  should  have  in  its  discretion  not imposed the penalties particularly having regard to the fact that within  two months  after the judgment of this Court in Hindustan Sugar  Mills’ case (supra), the assessee had filed the revised  returns including  the freight  charges in  the taxable turnover  and paid  the sales tax payable in respect of them  even before  the assessing authority had passed the orders of  assessment. We  are of the view that This part of the case  of the  assessee has got to be accepted in view of the decision  of this Court in Cement Marketing Co. Of India Ltd. v. Asstt. Commissioner of Sales Tax, 589 Indore &  Ors.(1) where  under similar  circumstances,  this Court held  A that  the  assessee  therein  which  was  also manufacturer and  dealer in  cement was  not liable to pay a penalty under section 43 of the Madhya Pradesh General Sales Tax Act,  1958 read  with section  9(2) of the Central Sales Tax Act. For the reasons mentioned therein, we hold that the levy of  penalties for  not including the freight charges in the taxable  turnover in  the original  returns and  for not paying the  tax  in  respect  of  such  freight  charges  is unsustainable and  that the impugned penalties are liable to be quashed.      The  next   question  which  arises  for  consideration relates to  the liability  of the  assessee to  pay interest under section  11B of  the Act on the tax paid in respect of the freight  charges for  the period  S between  the date on which it  was payable  under section 7(2) of the Act and the date of payment and the liability to pay interest on the tax payable in  respect of the freight charges under the Central Sales Tax  Act in  accordance with section 9(2) thereof read with section  11B of the Act. The claim of the department is based on  subsections (1)  and (2)  of section  7 read  with section 11B of the Act in the case of interest claimed under the Act and on the aforesaid provisions of the Act read with section 9(2)  of the Central Sales Tax Act in respect of the interest payable  under the  Sales Tax Act. Section 7 of the Act at the relevant point of time read as follows:           "7. Submission  of returns.-(1)  Every  registered      dealer and  such other dealer, as may be required to do      so by  the assessing  authority by notice served in the      prescribed manner,  shall furnish  prescribed  returns,      for the prescribed periods, in the prescribed forms, in      the prescribed manner and within the prescribed time to      the assessing authority:           Provided that  the assessing  authority may extend

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    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 State Government Treasury or      bank concerned. 590           (2A) Notwithstanding  anything  contained  in  sub      section (2),  the State  Government may by notification      in the  official Gazette require any dealer or class of      dealers specified  therein, to  pay  tax  at  intervals      shorter than those prescribed under sub-section (1). In      such cases,  the proportionate  tax on the basis of the      last  return   shall  be  deposited  at  the  intervals      specified in  the said  notification in  advance of the      return. The  difference, if  any, of  the  tax  payable      according to  the return and the advance tax paid shall      be deposited  with the  return and  the return shall be      accompanied by the treasury receipt, or receipts of any      Bank authorised to receive money on behalf of the State      Government, for the full amount of tax due shown in the      return           (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."      Section 11B of the Act during the relevant, period read as under:-      11 B. Interest on failure to pay tax, fee or penalty,-           (a)  If  the  amount  of  any  tax  payable  under           subsections (2)  and (2A) of section 7 is not paid           within the period allowed, or           (b) if  the amount  specified  in  any  notice  of      demand, whether  for tax,  fee, or penalty, is not paid      within the  period specified  in such notice, or in the      absence of  such specification, within 30 days from the      date of  service of  such notice,  the dealer  shall be      liable to  pay simple  interest on  such amount  at one      percent per month from the day commencing after the end      of the  said period for a period of three months and at      one and a half percent per month 591      thereafter during the time he continues to make default      in the payments;           Provided that,  where, as  a result  of any  order      under this  Act, the  amount,  on  which  interest  was      payable under  this  section,  has  been  reduced,  the      interest shall  be reduced  accordingly and  the excess      interest paid, if any, shall be refunded;           Provided further that no interest shall be payable      under this  section on  such amount and for such period      in  respect   of  which  interest  is  paid  under  the      provisions of sections 11 and 14."      We are  principally concerned  in this  case with  sub- sections (1)  and (2)  of section  7 of the Act. Sub-section (1) of section 7 of the Act requires every registered dealer and such  other dealer,  as may  be required to do so by the

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assessing authority  in the  prescribed  manner  to  furnish returns in  a prescribed form in respect of the n prescribed periods within  the  prescribed  time  furnishing  necessary particulars regarding  his turnover.  The  proviso  to  sub- section (1) of section 7 of the Act authorises the assessing authority to  extend the  date for  the submission  of  such returns by  a period not exceeding 15 days in the aggregate. Sub-section (2)  of section  7 of the Act insists that every such return  shall be accompanied by a 1 Treasury receipt or receipt of  any bank  authorised to  receive money on behalf the State  Government showing the deposit of the full amount of tax  due on  the basis  of return in the State Government Treasury or  bank concerned. Sub-section (4) of section 7 of the Act,  it may  be noticed, provides that 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. Clause (a) of section 11B of the Act authorises the levy of interest on the amount of tax not paid in accordance with sub-sections (2)  and (2A)  of section  7 of  the  Act.  The expression ’prescribed’  is defined  in section  2(1) of the Act. It  states that in the Act unless the context otherwise requires "prescribed"  means prescribed  by rules made under the Act. Section 26 of the Act empowers the State Government to make  rules to  carry out  the purposes of the Act and in particular and  without prejudice  to the  generality of the foregoing power,  such rules  may provide  for  all  matters expressly required  or allowed  by the Act to be prescribed. We have seen earlier that section 7(1) 592 of  the  Act  requires  the  returns  to  be  filed  in  the prescribed manner,  in respect of the prescribed periods and within the prescribed time. Sub-section (5) of section 26 of the Act  lays down  that all  rules made  under that section shall be  published in  the official  Gazette and  upon such publication shall  have effect  as if  enacted  in  the  Act Chapter  VII   of  the   Rajasthan  Sales  Tax  Rules,  1955 (hereinafter referred to as ’the Rules’) framed by the State Government in exercise of its power under the Act deals with the  topic   "Return  of  turnover  and  other  returns  and statements". The relevant part of Rule 25 of the Rules which appears in Chapter VII reads as follows:           "25. Return  of turnover.-(1)  The return referred      to in  sub-section (1)  of section  7 shall  be in form      S.T. 5 and shall be signed by the dealer himself or his      agent, and  shall be  verified in  the manner indicated      therein  and   shall  be  submitted  to  the  assessing      authority concerned.           (2) The  return may be presented personally or may      be sent by post.           (3) The said return shall be filed for such of the      quarters ending with the last day of the month of June,      September, December  and March of every assessment year      if the  ’previous year’  of the dealer ends on the 31st      day of  March of  any year, and in other cases for each      of the  quarters of the year of accounts of the dealer,      and shall be filed not later than 30 days after the end      of the quarter to which it relates:           Explanation.-The quarters  of the year of accounts      of a dealer shall be as follows:           First   quarter-The   period   of   three   months      commencing on the first day of the year of accounts.           Second  quarter-The   period   of   three   months      commencing on  the day  next after the end of the first      quarter.

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         Third   quarter-The   period   of   three   months      commencing on  the day next after the end of the second      quarter.           Fourth quarter-Rest of the year of account.           The months  shall be  calculated according  to the      usage of  the  dealer  whose  year  of  account  is  in      question. 593           (4) If  a return  is not  accompanied by a receipt      for the  deposit of  tax as required by sub-section (2)      of section  7, the  assessing authority  shall  not  be      bound to take any cognisance of the return."      Sub-rule (1)  of Rule 25 of the Rules provides that the return referred  to in  sub-section (1)  of section 7 of the Act shall  be in  form S.T.  5 and  sub-rule (3)  of Rule 25 prescribed the time within which quarterly returns should be filed by  a dealer.  Sub-rule (4)  of Rule  25 of  the Rules provides that  if a  return is  not accompanied by a receipt for the  deposit of  tax as  required by  sub-section (2) of section 7 of the Act, assessing authority shall not be bound to take  any cognisance  of the return. Rule 25 of the Rules which is  framed under  the Act  should be read as a part of the Act itself in view of the express provision contained in sub-section (5)  of section  26 of  the Act,  which declares that all rules made under section 26 shall on publication in the official  Gazette have effect, as if enacted in the Act. That should  be the  effect of  a rule  framed under statute containing a  provision similar  to the provision in section 26(5) of  the Act  can be  gathered from  a decision  of the House of  Lords in  Institute of  Patent Agents  &  Ors.  v. Joseph Lockwood  in which  Lord Herschell,  L.C. Observed at page 360 thus:           "I own  I feel  very great difficulty in giving to      this provision,  that they "shall be of the same effect      as if  they were  contained in  this  Act,"  any  other      meaning than  this, that  you shall for all purposes of      construction or  obligation  or  otherwise  treat  them      exactly as  if they  were in  the Act.  No doubt  there      might be  some conflict  between a rule and a provision      of the Act. Well, there is a conflict sometimes between      two sections  to be  found in the same Act. You have to      try and  reconcile them as best you may. If you cannot,      you have  to determine  which is  the leading provision      and which  the subordinate  provision, and  which  must      give way  to the other. That would be so with regard to      the enactment  and with regard to rules which are to be      treated as if within the enactment."       The  contention of the assessee in the present case is that as  it had  deposited the full amount of tax due on the basis of  the returns filed under sub-section (1) of section 7 of the Act at the time when 594 they were  filed, it  had compiled  with sub-section  (2) of section 7  of the  Act and  that  the  question  of  levying interest on  the amount  of tax  which it  deposited on  the basis of  the revised  returns for  the period  prior to the date of  the revised returns did not arise. On behalf of the department it  is urged  before us  that the  words "on  the basis of  return" occurring  in sub-section (2) of section 7 of the Act must be read as on the basis of a true and proper return in  the context  in which  those words  appear in the statute and  if they  are so read, the assessee is liable to pay interest  on the  deficit amount  of tax  which was made good on  October 20, 1978 for the period between the date on which such  deposit or deposits had to be made under section

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7(1) of  the Act read with Rule 25 of the Rules and the date on which they were actually made.      We are concerned in this case with the liability of the assessee to  pay interest  on the  amount of  tax which  had remained  unpaid   Tax,  interest   and  penalty  are  three different concepts.  Tax becomes  payable by  an assessee by virtue of  the  charging  provision  in  a  taxing  statute. Penalty ordinarily  becomes payable when it is found that an assessee has willfully violated any of the provisions of the taxing statute.  Interest  is  ordinarily  claimed  from  an assessee who  has withheld payment of any tax payable by him and it  is always  calculated at  the prescribed rate on the basis of the actual amount of tax withheld and the extent of delay in  paying it.  It may  not be  wrong to say that such interest is compensatory in character and not penal.      In order to understand the case of the assessee, we may classify the registered dealers into the following different classes:      1.   A registered dealer who files his return showing a           higher taxable  turnover than  the actual turnover           which is  ultimately found  to be  taxable at  the           time of  regular assessment and who pays tax under           section 7(2)  of the  Act  on  the  basis  of  the           return.      2.   A registered  dealer who  files a  true and proper           return and  pays tax  on the  basis of such return           within the time allowed.      3.   A registered  dealer who  does not file any return           at all as required by section 7(1) and pays no tax           under section 7(2) of the Act. 595      4.   A registered  dealer who  files a  true return but           does not pay the full amount of tax as required by           section 7(2) and      5.   A registered dealer who files a return but wrongly           claims  either  the  whole  or  any  part  of  the           turnover as  not taxable  and pays  under  section           7(2)  of   the  Act  that  amount  of  tax,  which           according to  him is  payable, on the basis of the           return.      In the  case of a registered dealer falling under class (1) no  question of  payment of  interest would arise as the amount of  tax paid  by him at the time of filing the return is much  more than  what is  actually due and payable by him under the  Act. The extra tax paid by him becomes refundable after the regular assessment is completed in view of section 7(4) of  the Act. In the case of a registered dealer falling under class  (2) also  no question  of payment  of  interest arises as there is no shortfall in payment of the tax.      If the contention of the assessee urged in this case is accepted, no  interest becomes  payable even  by  registered dealers falling  under classes  3,4 and 5 because (a) in the case of  a registered dealer falling under class (3) who has not filed  any return  at all,  no occasion  would arise  to claim interest  on any  tax ’due  on the basis of return’ as there is  no return  at all. (b) in the case of a registered dealer falling  under class  (4) who files a true return but does not  pay full  amount of  tax under  section  7(2)  the assessing authority  is entitled to ignore it under sub-rule (4) of Rule 25 of the Rules and when the return is not taken cognisance of, there will be no return on the basis of which interest can be computed and (c) in the case of a registered dealer coming  within the purview of class (S) who has filed a return  but has  wrongly claimed  either the  whole or any part of  the turnover  as not taxable and paid under section

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7(2) of  the Act  only that amount of tax which according to him is  payable as  tax as  he would  have paid  whatever is payable on  the basis  of the return. The resulting position would be  that clause  (a) of  section 11B  of the Act which clearly imposes  the liability  on the  assessee who has not paid the  tax due  by him  within the  period allowed by law becomes either  unworkable or meaningless. A fair reading of section I  IB of  the Act suggests that the Act expects that all assessees  who are liable to pay sales tax should file a true return  within the  period prescribed under sub-section (I) of section 7 and should 596 produce  a  treasury  receipt  or  a  receipt  of  any  bank authorised  to   receive  money   on  behalf  of  the  State Government showing that full amount of tax due from them has been paid.      The  argument  pressed  before  us  on  behalf  of  the assessee is  that since  section  7  of  the  Act  does  not expressly say that a registered dealer who has not filed any return or  a person who has claimed that his turnover or any part thereof  is not  taxable and  has not  paid tax  due in respect of  such disputed  turnover should also pay interest on the  tax which  is legitimately due to the Government but withheld by  him, no  interest can  be claimed under section 11B of  the Act  in such  cases. Section  7 of the Act which deals with  the submission  of returns  is  not  a  charging section but  a machinery  section. It  is settled law that a distinction has  to be  made by court while interpreting the provisions of  a taxing  statute between charging provisions which impose  the charge  to tax  and  machinery  provisions which provide  the machinery  for the  quantification of the tax and  the levying  and collection  of the tax so imposed. While charging  provisions are construed strictly, machinery sections  are   not  generally   subject   to   a   rigorous construction. The  courts are  expected  to  cons  true  the machinery sections  in such a manner that a charge to tax is not defeated.  The above  rule of  construction of  a taxing statute has been adopted by this Court in India United Mills Ltd. v. Commissioner of Excess Profits Tax, Bombay  in which section 15  of the  Excess  Profits  Tax  Act  came  up  for consideration. The Court observed in that case thus:           "That section  is, it  should be emphasised, not a      charging  section,  but  a  machinery  section.  And  a      machinery  section   should  be   so  construed  as  to      effectuate the charging section."      The above  principle was  followed  by  this  Court  in Gursahai Saigal  v. Commissioner  of Income-tax,  Punjab  in which is was observed thus:           "Now it  is  well  recognised  that  the  rule  of      construction on  which the assessee relies applies only      to a  taxing provision  and has  no application  to all      provisions in  a  taxing  statute.  It  does  not,  for      example, apply to a provision not 597      creating a  charge for  the tax  but  laying  down  the      machinery for  its calculation  or  procedure  for  its      collection. The  provisions in a taxing statute dealing      with machinery  for assessment  have to be construed by      the ordinary  rules of construction, that is to say, in      accordance with  the clear intention of the legislature      which is to make a charge levied effective."      In deciding  Gursahai Saigal’s  case (supra)  the Court followed the  observations made  by  the  Privy  Council  in Commissioner of  Income-tax v. Mahaliram Ramjidas and by the House  of  Lords  in  Whitney  v.  Commissioners  af  Inland

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Revenue. In the case of Mahaliram Ramjidas (supra) the Privy Council observed:           "The section,  although it  is a  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 construction      should be  preferred which makes the machinery workable      utres valeatpotius quam Pereat."       In  Whitney’s case  (supra),  Lord  Dunedin  made  the following observations:           "My Lords,  I shall  now permit  myself a  general      observation. Once  that  it  is  fixed  that  there  is      liability, it  is antecedently  highly improbable  that      the statute  should not  go on  to make  that liability      effective. A  statute is  designed to  be workable, and      the interpretation  thereof by  a Court  should  be  to      secure that  object, unless  crucial omission  or clear      direction makes  that end  unattainable. Now, there are      three stages  in the  imposition of a tax: there is the      declaration of  liability, that  is  the  part  of  the      statute which  determines what  persons in  respect  of      what  property   are  liable.   Next,  there   is   the      assessment. Liability  does not  depend on  assessment.      That,  exhypothesi,   has  already   been  fixed.   But      assessment particularizes  the exact sum which a person      liable  has   to  pay.  Lastly,  come  the  methods  of      recovery, if  the person  taxed  does  not  voluntarily      pay,"      The circumstances  under which  the above principle was applied by  this Court in Gursahai Saigal’s case (supra) are interesting. That 598 was a  case in  which  an  assessee  who  was  charged  with interest under  sub-section (8) of section 18A of the Indian Income-tax Act,  1922 has  questioned his  liability to  pay interest His contention was that interest payable under sub- section (8)  of section 18A of that Act had to be calculated in the  manner laid  down in  sub-section (6) thereof. Since sub-section 6  of. s.  18A of the Act provided that where in any year  an assessee  had paid tax under sub-section (2) or sub-section (3) thereof on the basis of his own estimate and the tax  so paid  was less  than eighty  per cent of the tax determined  on   the  basis  of  regular  assessment  simple interest at  the rate of six per cent per annum from the 1st day of  January in  the financial  year in which the tax was paid upto  the date of the said regular assessment should be payable by  the assessee  and as  he had not paid any tax at all, it  was urged  that it  was not  possible to  calculate interest in  the manner  laid down  in sub-section  (6). The Court rejected  the contention of the assessee following the decision of  the  Privy  Council  and  the  House  of  Lords referred to  above that  the words  "from  the  Ist  day  of January in  the financial  year in  which the  tax was paid" obviously could  not literally be applied to a case where no tax had  been paid  but since  on a  true construction those words meant  "from the  Ist day  of January in the financial year in which the tax ought to have been paid", the assessee was liable to pay interest. This Court observed:           "It would  not be  doing too  much violence to the      words used  to read  them in  this way The tax ought to      have been  paid on  one or  other of  the dates earlier      mentioned. The  intention was  that interest  should be      charged from  January 1  of the financial year in which      the tax ought to have been paid. Those who paid the tax      but a  smaller amount  and those who did not pay tax at

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    all  would   then  be   put  in   the   same   position      substantially which  is obviously  fair and was clearly      intended. Which  is the  precise financial  year in any      case would  depend on  its facts and this would make no      difference in the construction of the provision."      We are  in respectful  agreement  with  the  method  of approach adopted  by this  Court in  Gursahai Saigal’s  case (supra). It  is the duty of the Court while interpreting the machinery provisions  of a  taxing statute to give effect to its manifest  purpose having a full view of it. Wherever the intention to  impose liability is clear courts ought to have no hesitation  in giving  what we  may call  a common  sense interpretation to  the machinery sections so that the charge does not fail. 599 In the  present case  if we construe the words "on the basis of return"  occurring in sub-section (2) of section 7 of the Act as  on the basis of a true and proper return which ought to have  been filed  under sub-section (1) of section 7 then all the three classes of persons viz. (i) those who have not filed any  return at  all and  who are  later on found to be liable to  be assessed,  (ii) those  who have  filed a  true return but  have not  deposited the full amount of tax which they are  liable to  pay and  (iii) those  who have  filed a return making  a wrong  claim that  either the  whole or any part of the turnover is nat taxable and who are subsequently found to  have made  a wrong  claim, would  be placed in the same position  and they  would all be liable to ply interest on the  amount of  tax which they are liable to pay but have not paid  as required by sub-section (2) of section 7 of the Act. We  are of opinion that this view is in conformity with the legislative  intention in  enacting section  11B of  the Act.      We have  carefully gone  through the  decision of  five learned judges  of this Court in State of Rajasthan and Ors. v. Ghasi  Lal and  we are  humbly  of  opinion  that  it  is distinguishable from  the present  case. In  Ghasi Lal  case (supra), this  Court was  concerned  with  the  question  of sustainability of  penalties imposed  under the  Act and not interest leviable  under section  11B. The relevant facts in that case  were these:  Thee respondent  therein who  was  a dealer within  the meaning  of the Act filed a writ petition in the  High Court  of Rajasthan  challenging the  making of assessment 13  on his  turnover for  the year 1955-56 on the ground that  the Rules which had been published on March 28, 1955 were  invalid. On January 9, 1958 the High Court passed an interim  order stating  that "the  petitioner  will  keep proper accounts  and file  the prescribed  returns but shall not be assessed till further orders". While the petition was pending in  the High  Court, ordinance  No. 5  of  1959  was promulgated  on  November  6,  1959  validating  the  Rules. Thereupon the respondent therein withdrew the writ petition. On December 17, 1959, the Rajasthan Sales Tax Validation Act (Rajasthan Act  43 of  1959)  replaced  the  Ordinance.  The effect of  the ordinance  and  the  Validation  Act  was  to validate the  Rules even if any defect existed in the making of the  Rules. On  December 4,  1959, the  Sales Tax Officer called upon  the respondent  therein to  pay tax  due by him within a  week as  the writ  petition had been withdrawn and dismissed. The  respondent had filed his returns earlier and also had deposited certain amounts towards tax. On April 25, 1960, the Sales Tax 600 Officer made  an assessment  in respect  of  the  accounting period November  3,  1956  to  October  22,  1957  and  also

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proceeded to  impose a  penalty of  Rs. 400/-  under section 16(1) (b)  of the Act. Justifying the imposition of penalty, he observed 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 Deputy  Commissioner of  Sales Tax  (Appeal),  Kota dismissed the  appeal upholding the above penalty. Similarly on December  6, 1960,  the Sales  Tax Officer  assessed  the respondent in  respect of 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  questioned  the  penalties  in  respect  of  the aforesaid two  years before  the High  Court. The High Court quashed them.  Against the  orders of  the High  Court,  the State of  Rajasthan filed two appeals which were disposed of by this  Court by  the judgment  rendered in the above case. The  judgment   of  this   Court  depended   upon  the  true construction of  clause (b)  section 16(1)  of the Act which read:       "16.(1)-If any Person-           (a)  ............................; or           (b)  has without  reasonable cause  failed to  pay                the tax due within the time allowed; or 601           (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 the 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      turn over  and in the cases referred to in clauses (f),      (ff) and (g), a sum not exceeding Rs 100/-".      Sikri, J.  (as he  then was) who delivered the judgment of this Court observed thus :           "In our  opinion, there  has been  no breach of s.      16(1) (b)  of the  Act, and  consequently,  the  orders

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    imposing the  penalties cannot  be sustained. According      to the  terms of section 16(1) (b), there must 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." (underlining by us).      A careful  reading of the above passage shows that this Court held  that section  16(1) (b),  which provided for the imposition of 602 penalty when an assessee had without reasonable cause failed to pay  the  tax  due  within  the  time  allowed,  was  not attracted as  no tax  was due,  within the  terms of section 16(1) (b)  even though it was payable by virtue of section 3 read with  section 5  of the  Act. Now section 11B (a) which provides for  levying interest on failure to pay tax, states that if the amount of any tax payable under sub-sections (2) and (2A)  of section 7 is not paid within the period allowed the dealer shall be liable to pay interest at the prescribed rate during  the time  he continues  to make  default in the payments Section 11B(a) of the Act does not refer to any tax due.      At this  stage it  is necessary  to  refer  to  certain legislative changes that have taken place since the decision in Ghasilal’s  case (supra) was delivered. Section 16(1) (c) as it  stood then has been amended and section 7AA providing for levy  of penalty for failure to furnish returns has been inserted in the Act by Rajasthan Act 11 of 1969. Section 7AA reads thus:-           "7AA. Penalty  for failure  to furnish  returns-If      the  assessing   authority  in   the  course   of   any      proceedings under this Act is satisfied that any dealer      has without  reasonable cause  failed  to  furnish  the      return under  sub-section (1)  of section  7 within the      time allowed,  he may direct that such dealer shall pay      by way  of penalty,  in addition  to the  amount of the      tax, if  any, payable  by him,  a sum  equal to two per      cent of  the tax,  for every  month  during  which  the      default continued  but not  exceeding in  the aggregate      fifty per cent of the tax."      Section 16(1)  as it now stands does not deal with levy of penalty  for not  filing the  prescribed return  as it is provided by  section 7AA  set out  above. It  is also  to be pointed out  that sub section (2A) was inserted in section 7 by Rajasthan  Act 13  of 1963 providing that notwithstanding anything contained in sub-section (2) of section 7 the State Government may  by  notification  in  the  official  Gazette require any  dealer or class of dealers specified therein to pay tax  at intervals  shorter than  those prescribed  under section 7(1).  In such  cases the  proportionate tax  on the basis of  the  last  return  has  to  be  deposited  at  the intervals specified  in the  said notification  in  advance.

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These features  clearly show  that the  tax that  is payable under section  3 read  with section  5 of  the Act has to be paid along- 603 with the return within the time allowed for that purpose and if section  7(2) applies  it has  to be  paid in  advance at stated intervals.  Section 11B  with which  we are concerned was added by Rajasthan Act 11 of 1969. Clause (a) of section 11 states  that if  the amount of any tax payable under sub- sections (2)  and (2A)  of section  7 is not paid within the period allowed  interest at  the prescribed  rate has  to be paid on that amount from the day commencing after the end of the said  period. ’Period  allowed’ means  period allowed by the Act  and the  Rules or  such extended  period under  the proviso to  section 7(1).  It is thus clear that in cases to which section  7(2) of  the Act  applies interest  has to be paid on the tax payable but which has not been paid from the last date  on which  the return  has to  be  filed  for  the assessment year in question and in cases to which subsection (2A) is  applicable, from the last date on which the advance tax has  to be  paid. The amount of interest has no doubt to be calculated  after the  actual amount  of tax  payable  is assessed and necessary adjustments are made. We do not think that in taking the above view we have in any way disregarded the  decision  in  Ghasilal’s  case  (supra)  in  which  the question of payment of interest under section 11B did not at all arise for consideration.      Our learned  Brother Bhagwati,  J. in his opinion while dealing  with   the  applicability  of  section  11B(a)  has observed that  the scheme  of taxation  envisaged in the Act clearly shows  that it  is only  when the assessment is made and specified  in the  notice of demand or in the absence of such specification  thirty days  from the date of service of such notice  expires that  the amount  of  tax  as  assessed becomes payable  by an assessee. With great respect, we have to state  that we depend upon Ghasilal’s case (supra) itself to hold  that for purposes of section 11B(a) the tax becomes payable before  assessment is  made by  virtue of  section 3 read with section 5 and sub-sections (2) and (2A) of section 7 of  the Act  and the Rules framed thereunder, even though, it becomes  due when  return is  filed under section 7(2) or ascertained under  section 10. That a tax can become payable even before  assessment is  also clear from the observations of Sikri,  J. (as he then was) in Ghasilal’s case (supra) to the effect  that "section  3, the charging section read with section 5,  makes tax  payable i.e..  creates a liability to pay the tax .... But, till the tax payable is ascertained by the assessing  authority under section 10 or by the assessee under section 7(2), no tax can be said to be due 604 within section  16(1) (b)  of the Act for till then there is only a liability to be assessed to tax".           (emphasis added)      We are of opinion that either by delaying the filing of the return  or not  filing it  all or  by  filing  a  return wrongly claiming  that a certain part of the turnover is not taxable or  by not disclosing a part of the taxable turnover in the return an assessee cannot escape the liability to pay interest  under  section  11  B(a)  on  the  amount  of  tax withheld, as  a consequence  of his  own action or inaction, from the  last date  on which  it had to be paid as per sub- section (2)  or sub-section  (2A) of  section 7, as the case may be, read with the Rules. An assessee cannot contend that interest does  not accrue  under section  11B(a) on  the tax payable by him where the time to file the return has elapsed

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until he  actually files a return admitting the liability to pay such tax or until assessment is made.      We are  of the  view that the statutory liability under section 11B(a)  arises wherever  there is default in payment of the  tax within the period allowed by law irrespective of any doubt  which an  assessee may  be entertaining about the liability to pay the tax.      It is  not disputed  in this  case that freight charges had to  be included  in the taxable turnover of the assessee mentioned  in   the  returns  that  were  filed  within  the prescribed time  under section  7(1) of the Act and that the tax payable  in respect  of freight charges should have been paid as  required by sub-section (2) of section 7 before the returns were  filed. The  fact that the question relating to the liability of the assessee to pay sales tax in respect of the  freight  charges  was  decided  by  the  Supreme  Court subsequently does  not in  any way affect the question which arises for  consideration in this case. The decision of this Court did  not create  any new  liability. It  only declared that such  a liability was existing at the relevant point of time. Since  it is  clear that  the amount  of  tax  due  in respect of  the freight charges which was payable under sub- section (2)  of section  7 was  not paid  within the  period allowed, section 1 IB is clearly attracted and the liability to pay interest as required by it arises.      On behalf  of  the  State  Government,  an  alternative contention was  urged in  support of the levy of interest on the tax payable in 605 respect of  the freight charges relying upon the new section 11  which   was  substituted  by  the  Rajasthan  Sales  Tax (Amendment) Act,  1979 in  the place of section 11 which was in force  during the  relevant period.  The relevant part of the new section 11B reads thus:           "11B Interest  on  failure  to  pay  tax,  fee  or           penalty .           (1) (a)  Where any  registered dealer or any other      dealer has  furnished returns  but has not paid the tax      as per  return or  within the  time allowed by or under      the provisions  of this  Act, he shall be liable to pay      interest on the whole or that part of the amount of tax      which was  not paid  as per  returns within the time as      aforesaid, at  the rate  of one  and a quarter per cent      per month from the date by which he was required to pay      the tax  by or  under the  provisions of this Act for a      period of  three months  and at one and a half per cent      per month thereafter until the date of payment:           (b) Where  any  registered  dealer  or  any  other      dealer has furnished a revised return as provided under      sub-section (3)  of section  7,  which  revised  return      shows that  amount of tax larger than that already paid      is payable, such dealer shall be liable to pay interest      on the  excess amount  of tax at such rate and for such      period as provided in clause (a) of this sub-section as      if such amount of tax payable as per the revised return      was the amount of tax payable according to the original      return; ... ... .. ...      lt was  contended that  as clauses  (a) and (b) of sub- section (1)  of section 11B extracted above were declaratory in character and merely explained what the Legislature meant by enacting section 11B as it stood before the substitution, the assessee was liable to pay interest on the amount of tax payable in  respect of  freight charges  under clause (b) of sub-section (1)  of the new section 11B. Since we are of the view that the assessee was liable to pay interest on the tax

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in question  under section  11B of the Act as it stood prior to tile  amendment, we  do not  find it necessary to express any opinion  on this  alternative contention urged on behalf of the State Government.      In the  result, we  allow the  appeal in  part and  set aside the  impugned orders  to the  extent they  direct  the assessee to  pay the  penalties. The appeal in so far as the levy of  interest under  the impugned orders is concerned is dismissed. In  view of  the circumstances  of the  case, the parties shall pay and bear their own costs. 606                            ORDER      In accordance  with the  opinion of  the majority,  the appeal is  allowed in  part. The  penalties imposed  on  the assessee under  the impugned  orders of  assessment are  set aside. The  appeal in  so far  as the  levy of  interest  is concerned is  dismissed. The  parties shall  bear their  own costs. N V. K.                               Appeal allowed in part 607