1970 (3) TMI 108 - HC - VAT and Sales Tax

Issues Involved:
1. Delay in filing the writ petition.
2. Applicability of penalty provisions under the State Act to assessments made under the Central Act.
3. Interpretation of Section 9(2) of the Central Sales Tax Act, 1956, as amended by Act No. 28 of 1969.

Detailed Analysis:

1. Delay in Filing the Writ Petition:
The respondent argued that the writ petition was filed nearly one and a half years after the impugned notice of demand dated 20th June 1968, and thus suffered from inordinate delay, making it unfit for interference under Article 226 of the Constitution of India. The court did not accept this contention, noting that the recovery proceedings were still pending and the petitioner had approached the court in time through S.T.R.P. No. 22 of 1969. The writ petition was considered a continuation of earlier proceedings, and therefore, it was not rejected on the ground of delay.

2. Applicability of Penalty Provisions:
The petitioner contended that no penalty is leviable under Section 13(2) of the Mysore Sales Tax Act, 1957, in regard to assessments made under the Central Sales Tax Act, 1956. The argument was that the provisions relating to penalty under the State Act are not adopted by Section 9(2) of the Central Act as amended by Act No. 28 of 1969. The petitioner further argued that the levy of penalty is part of substantive law and cannot be implied within procedural provisions relating to tax recovery.

On behalf of the State, it was argued that Section 13(2) of the State Act relates to the mode of recovery of tax and forms part of the procedure expressly adopted by Section 9(2) of the Central Act. Therefore, the rule of strict liability indicated in Section 13(2) of the State Act was automatically attracted.

3. Interpretation of Section 9(2) of the Central Sales Tax Act:
The court examined the relevant provisions of the Central and State Acts, noting that the Central Act was amended retrospectively by the Central Sales Tax (Amendment) Act, 1969. Section 9(2) of the amended Central Act states that authorities empowered to assess, reassess, collect, and enforce payment of any tax under the general sales tax law of the State shall do so on behalf of the Government of India, as if the tax or penalty payable under the Central Act is a tax or penalty payable under the State law.

The court referred to several cases, including D.H. Shah and Co. v. State of Madras and M.M. Mathew v. Second Additional Income-tax Officer, Kottayam, to explore whether the penalty provisions of the State Act could be applied to the Central Act. The court concluded that the provisions relating to penalty in a taxing statute are substantive in character and cannot be considered part of procedural law. Thus, unless explicitly adopted by the Central Act, the penalty provisions of the State Act cannot be applied.

The court also referred to Supreme Court decisions in The Deputy Commissioner of Agricultural Income-tax and Sales Tax v. Aluminium Industries Ltd. and The State of Kerala v. P.P. Joseph and Co., which clarified that the liability to pay tax or penalty must be determined with reference to the Central Act, not the State Act.

Judgment:
The court held that the penalty levied under Section 13(2) of the State Act for default in payment of tax assessed under the Central Act was without authority of law. Consequently, the writ petition was allowed, and the impugned notice of demand dated 20th June 1968, insofar as it related to the levy of penalty, was quashed. The subsequent proceedings demanding penalty were also quashed. No order as to costs was made due to the special circumstances of the case.

Writ petition allowed.

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