1981 (2) TMI 203 - HC - VAT and Sales Tax

Issues Involved:

1. Applicability of Section 36(3) of the Bombay Sales Tax Act, 1959.
2. Timing and correctness of tax payment by the applicants.
3. Imposition of penalty by the Sales Tax Officer and its subsequent deletion by the Assistant Commissioner.
4. Revision of the Assistant Commissioner's order by the Deputy Commissioner.
5. Tribunal's upholding of the Deputy Commissioner's order.

Issue-wise Detailed Analysis:

1. Applicability of Section 36(3) of the Bombay Sales Tax Act, 1959:
The core issue was whether the provisions of Section 36(3) of the Bombay Sales Tax Act, 1959, were attracted in the given circumstances. Section 36(3) imposes a penalty if a dealer does not, without reasonable cause, pay tax within the time required by or under the provisions of the Act. The applicants argued that they had paid the full amount of tax according to their return before filing it. The additional amount of Rs. 14,57,382.10 was paid as a result of a determination by the Commissioner of Sales Tax, not because it was due according to the return. The court agreed with this argument, noting that the applicants had acted bona fide and paid the amount without waiting for the Tribunal's decision.

2. Timing and Correctness of Tax Payment by the Applicants:
The applicants filed their return for the quarter April-June 1964 on 7th August 1964, showing the sales of chassis to the Directorate-General of Supplies and Disposals as chargeable to tax at 2 percent based on certificates in form S. The Ministry of Defence constructed the bodies themselves, leading to a determination by the Commissioner that the tax rate should be 10 percent. The applicants paid the additional tax between 27th November 1965 and 11th December 1966. The court noted that the applicants had paid the full amount of tax according to their return and that the subsequent payment was due to a later determination.

3. Imposition of Penalty by the Sales Tax Officer and its Subsequent Deletion by the Assistant Commissioner:
The Sales Tax Officer imposed a penalty of Rs. 3,14,834.67 on the applicants for late payment of the additional tax amount. The Assistant Commissioner deleted this penalty, agreeing with the applicants that they had paid the tax according to their return and that the additional amount was paid after returning the certificates in form S to the Ministry of Defence and collecting the balance tax from them.

4. Revision of the Assistant Commissioner's Order by the Deputy Commissioner:
The Deputy Commissioner issued a notice under Section 57 of the Act, calling upon the applicants to show cause why the Assistant Commissioner's order deleting the penalty should not be revised. On 21st May 1974, the Deputy Commissioner revised the order and imposed a penalty of Rs. 1,60,545, stating that the tax should have been paid upon receipt of the Commissioner's determination order. The Tribunal upheld this order on appeal.

5. Tribunal's Upholding of the Deputy Commissioner's Order:
The Tribunal upheld the Deputy Commissioner's order, reasoning that not imposing a penalty would open the door to mass-scale evasion of tax. However, the High Court found this reasoning flawed, noting that the applicants had paid the tax according to their return and that the additional payment was not due at the time of filing the return. The court emphasized that the applicants' proactive approach in seeking a determination and paying the additional tax without waiting for the Tribunal's decision should not put them in a worse position.

Conclusion:
The High Court concluded that the provisions of Section 36(3) were not attracted in this case. The applicants had paid the full amount of tax according to their return, and the additional amount paid was due to a later determination by the Commissioner. The court answered the referred question in the negative, in favor of the applicants, and against the department. The respondents were ordered to pay the costs of the reference fixed at Rs. 300, and the fee of Rs. 100 paid by the applicants was to be refunded.

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