1986 (3) TMI 325 - HC - VAT and Sales Tax

Issues Involved:
1. Legality of the penalty imposed under section 11 of the Bengal Finance (Sales Tax) Act.
2. Whether penalty proceedings can be initiated simultaneously with assessment proceedings.
3. Interpretation of "to the best of his judgment" in section 11(1).
4. Validity of consolidated penalty for multiple return periods.

Issue-wise Detailed Analysis:

1. Legality of the Penalty Imposed under Section 11:
The main question referred to the High Court was whether the penalty under section 11 of the Bengal Finance (Sales Tax) Act was legally levied. The dealer contended that the penalty was illegal on three grounds, which the court examined in detail.

2. Simultaneous Penalty and Assessment Proceedings:
The dealer argued that penalty proceedings could only commence after an assessment had been made, not simultaneously. However, the court found no basis for this argument in the statute. Section 11(1) implicitly requires that an opportunity be given to the dealer to show "reasonable cause" for the default. The court noted that the Delhi Sales Tax Rules, 1951, adopt a combined procedure for assessment and penalty imposition, as evidenced by Form S.T. XIV. The dealer was given an opportunity to explain the delay, which he availed, thus satisfying the procedural requirements. Therefore, the court held that simultaneous proceedings were permissible.

3. Interpretation of "to the best of his judgment":
The dealer's counsel argued that "to the best of his judgment" implies an assessment based on an estimate, and since the returns and account books were accepted, the assessment could not be termed a "best judgment" assessment. The court, however, clarified that the words "to the best of his judgment" must be interpreted contextually. The court referred to various precedents and concluded that even if returns are filed late, the assessing authority can consider them. The term "best judgment" includes assessments where late returns are accepted as correct. The court cited decisions like Bata Shoe Co. P. Ltd. v. Joint Commercial Tax Officer and R.S. Seth Gopikisan Agrawal and Sons v. C.L. Sharma, which supported this interpretation. Therefore, the court held that the assessment made in this case was "to the best of his judgment," and the penalty could be imposed under section 11(1).

4. Validity of Consolidated Penalty for Multiple Return Periods:
The dealer argued that a consolidated penalty for all four quarters made it impossible to determine if the statutory limit was exceeded for any particular quarter. The court found that the return period and assessment period need not coincide. The Delhi Sales Tax Rules allow for consolidated assessments for multiple return periods. The court cited Commercial Tax Officer, Central Section, West Bengal v. B.C. Nawn & Bros. P. Ltd., which upheld the validity of consolidated assessments. The court noted that the dealer did not demonstrate that the consolidated penalty exceeded the statutory limit when allocated to individual quarters. Therefore, the court concluded that the consolidated penalty was valid.

Conclusion:
The court answered the referred question in the affirmative, holding that the penalty under section 11 of the Bengal Finance (Sales Tax) Act was legally levied. The court emphasized that the assessing authority had the jurisdiction to impose a consolidated penalty for the delay in filing all quarterly returns within the relevant year. The judgment clarified that simultaneous penalty and assessment proceedings are permissible, the term "to the best of his judgment" includes assessments based on late but accepted returns, and consolidated penalties are valid under the Act and rules.

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