1986 (3) TMI 306 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Extension of time for payment of tax.
2. Levy of penalty under section 36(3) of the Bombay Sales Tax Act, 1959.
3. Conditional vs. unconditional extension of time.
4. Reasonable cause for non-payment of tax within the prescribed time.

Issue-wise Detailed Analysis:

1. Extension of time for payment of tax:
The applicants, registered dealers under the Bombay Sales Tax Act, 1959, were required to file quarterly returns and pay the corresponding taxes. They sought extensions for these payments, which were granted by the respondents. The extensions were granted for the quarters ending 30th September 1967, 31st December 1967, 31st March 1968, and 30th June 1968. These extensions were sometimes conditional, stating that the extension was "without prejudice to levy of penalty by the sales tax department on account of late payment of the tax amount."

2. Levy of penalty under section 36(3) of the Bombay Sales Tax Act, 1959:
The Sales Tax Officer assessed the applicants and levied a penalty under section 36(3) for late payment of taxes. The applicants contested this penalty, arguing that they had paid the taxes within the extended periods granted. The Assistant Commissioner of Sales Tax and the Sales Tax Tribunal upheld the penalty, leading to the question of whether the Tribunal was justified in maintaining the levy of penalty under section 36(3).

3. Conditional vs. unconditional extension of time:
The court analyzed the nature of the extensions granted. For the first, third, and fourth quarters, the extensions were conditional, explicitly stating that the extension was subject to the levy of penalty under section 36(3). For the second quarter, the extension was unconditional, and the applicants paid the tax within the extended period. The court held that for unconditional extensions, no penalty could be levied if the tax was paid within the extended time, as there was no default in payment.

4. Reasonable cause for non-payment of tax within the prescribed time:
The applicants argued that even with conditional extensions, the fact that an extension was granted implied a reasonable cause for non-payment within the original time frame. However, the court held that the conditional extensions explicitly preserved the right to levy penalties, indicating that the question of reasonable cause was not considered at the time of granting the extension. Therefore, the applicants could not claim reasonable cause to avoid penalties under section 36(3).

Judgment:
The court concluded that for the first, third, and fourth quarters, the conditional nature of the extensions justified the levy of penalties under section 36(3). For the second quarter, the unconditional extension meant no penalty could be levied as the tax was paid within the extended period. The court answered the reference accordingly, favoring the department for the first, third, and fourth quarters, and favoring the assessee for the second quarter. There was no order as to costs.