1978 (10) TMI 146 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Imposition of penalty for non-payment of tax under the Kerala General Sales Tax Act.
2. Validity of adjustment of tax payments between the Central Sales Tax Act and the Kerala General Sales Tax Act.
3. Applicability of Sections 59 and 60 of the Indian Contract Act to tax payments.
4. Assessment and collection procedures under the Central and Kerala Acts.

Issue-wise Detailed Analysis:

1. Imposition of Penalty for Non-payment of Tax under the Kerala General Sales Tax Act:

The primary issue was whether the assessee defaulted in paying the sales tax and surcharge under the Kerala Act between 7th May 1969 and 10th March 1970. The assessee had deposited Rs. 2,42,339.56 by 20th April 1967 towards the Central Sales Tax Act. The department issued a notice on 31st December 1968 demanding Rs. 2,14,591.87 under the Kerala Act, payable by 7th May 1969. The assessee requested adjustment of the excess amount towards the Kerala Act tax, which the department did not respond to. The department later found the amount deposited under the Central Act to be in excess and refunded Rs. 2,31,932.39 on 10th March 1970. The assessee paid the Kerala Act tax on 31st March 1970. The court concluded that the assessee was not a defaulter up to 10th March 1970 since the excess amount was available for adjustment.

2. Validity of Adjustment of Tax Payments between the Central Sales Tax Act and the Kerala General Sales Tax Act:

The court observed that the tax liability under the Central and Kerala Acts for the same period of declared goods was essentially a single liability. The excess amount deposited under the Central Act was sufficient to cover the tax due under both Acts. The court held that adjustments could operate as payments and that the assessee's request for adjustment was valid. The department's failure to respond to the adjustment request implied acceptance of the payment by adjustment.

3. Applicability of Sections 59 and 60 of the Indian Contract Act to Tax Payments:

The court discussed the applicability of Sections 59 and 60 of the Indian Contract Act, which deal with appropriation of payments. It concluded that these sections apply to tax payments and that arrears of sales tax are "debts," making the assessee a "debtor." The court disagreed with the earlier Calcutta High Court decision in Ganga Bishun Singh v. Mahomed Jan, which held that these sections did not apply to revenue collections. Instead, it followed the later decision in Jogendra Mohan Sen v. Uma Nath Guha, which held that general principles of law, including Sections 59 and 60, apply to tax payments.

4. Assessment and Collection Procedures under the Central and Kerala Acts:

The court noted that the same authority was responsible for assessments and collections under both Acts. It emphasized the need for simultaneous assessments under both Acts to avoid treating the assessee as a defaulter and imposing penalties. The delay in passing the assessment order under the Central Act contributed to the issue. The court suggested legislative changes to simplify proceedings and avoid unnecessary hardship to taxpayers.

Conclusion:

The appeal was allowed, setting aside the Board of Revenue's order and restoring the Deputy Commissioner's order. The court concluded that the assessee was not a defaulter up to 10th March 1970 and that the penalty imposed was unjustified. The judgment emphasized the need for simultaneous assessments and the applicability of general legal principles to tax payments. The decision was supported by both judges, with additional remarks on the necessity of a humane approach in tax assessments.