1966 (10) TMI 143 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the Assessing Authority.
2. Timing of assessment under the Punjab General Sales Tax Act.
3. Imposition of penalty under Section 10(7) before the end of the year.
4. Interpretation of the Supreme Court's decision in M/s. Mathra Parshad and Sons v. State of Punjab.
5. Validity of the earlier Division Bench decision in Mansa Ram Sushil Kumar v. The Assessing Authority, Ludhiana.

Detailed Analysis:

1. Jurisdiction of the Assessing Authority:
The petitioner challenged the jurisdiction of Shri K.K. Opal, the Excise and Taxation Officer, to issue notices under Section 10(7) of the Punjab General Sales Tax Act. However, this ground was not pressed before the court as a Bench of the High Court had already repelled such a contention.

2. Timing of Assessment under the Punjab General Sales Tax Act:
The primary issue was whether the assessment of tax under the Act could be made before the end of the financial year. The petitioner argued that no proceedings for the assessment year 1964-65 could take place prior to the expiry of the year. The court examined the provisions of Sections 4, 5, 10, and 11 of the Act, along with the relevant rules. It was concluded that the scheme of the Act and the statutory rules allowed for the assessment of tax on the basis of quarterly returns submitted by a dealer. The court observed that the unit of assessment could be the period covered by one set of prescribed returns, which might be either a year or any lesser part of a year.

3. Imposition of Penalty under Section 10(7) before the End of the Year:
The court examined whether penalty proceedings under Section 10(7) could be initiated and finalized before the end of the financial year. It was argued by the petitioner that penalty could not be imposed before the assessment was completed. The court found that the language of Section 10(7) allowed for the imposition of penalty even before the expiry of the year. The provision was introduced to prevent the evasion of tax through the maintenance of false and incorrect accounts. The court noted that the proceedings under Section 10(7) could be initiated even before a return was submitted, and the penalty could be imposed based on the amount of tax to which the dealer "is assessed or is liable to be assessed."

4. Interpretation of the Supreme Court's Decision in M/s. Mathra Parshad and Sons v. State of Punjab:
The petitioner relied heavily on the Supreme Court's decision, which stated that sales tax was a yearly tax. The court analyzed the Supreme Court's judgment and found that it primarily dealt with the timing of the exemption notification and not with the timing of the assessment. The High Court concluded that the Supreme Court's observations did not preclude the assessment of tax on a quarterly basis before the end of the financial year.

5. Validity of the Earlier Division Bench Decision in Mansa Ram Sushil Kumar v. The Assessing Authority, Ludhiana:
The Division Bench in Mansa Ram Sushil Kumar had held that assessment could not be made before the end of the year. The present court found that this decision was based on a misinterpretation of the Supreme Court's judgment in M/s. Mathra Parshad and Sons. The court concluded that the earlier Division Bench decision required reconsideration and held that the assessment could be made on a quarterly basis before the end of the financial year.

Conclusion:
The Full Bench answered the referred question in the affirmative, holding that penalty could be imposed on a dealer under Section 10(7) of the Punjab General Sales Tax Act before the end of the year. The court emphasized that the statutory scheme allowed for the assessment of tax on a quarterly basis and that the imposition of penalty was not contingent on the completion of the assessment for the entire year. The earlier Division Bench decision in Mansa Ram Sushil Kumar was found to be based on a misinterpretation of the Supreme Court's decision and was effectively overruled.