1996 (7) TMI 504 - HC - VAT and Sales Tax

Issues Involved:
1. Imposition of penalty under Section 10(6) of the Punjab General Sales Tax Act, 1948.
2. Levy of interest under Section 11-D of the Punjab General Sales Tax Act, 1948.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 10(6):

The primary issue revolves around whether the Tribunal correctly applied the Supreme Court's interpretation of the phrase "on the basis of return" in the context of penalties imposed under Section 10(6) of the Punjab General Sales Tax Act, 1948. The Supreme Court in A.C.C. Limited, Rajasthan [1981] 48 STC 466 interpreted "on the basis of a true and proper return which ought to have been filed." The Tribunal used this interpretation to construe the words "according to such returns" in Section 10(4) of the Punjab Act.

The assessee, a spinning and weaving mill, failed to file returns and pay taxes for certain periods, leading the Assessing Officer to impose penalties under Section 10(6) for specific months and years. The Tribunal upheld the penalties, but the assessee challenged them, arguing that no tax could be due if no returns were filed.

The Court analyzed Section 10, which outlines the scheme for furnishing returns and paying taxes. Sub-section (4) mandates that a dealer must pay the full amount of tax due according to the returns before filing them. Sub-section (6) allows for penalties if the dealer fails to pay the tax due as per the returns. The Court concluded that penalties under Section 10(6) could only be imposed if there was a failure to pay tax due according to the returns. If no returns were filed, no tax could be said to be due, thus no penalty could be imposed.

2. Levy of Interest under Section 11-D:

The second issue concerns the levy of interest under Section 11-D for non-payment of tax due. The Tribunal again relied on the Supreme Court's interpretation in A.C.C. Limited, Rajasthan, to construe the words "according to such returns" in Section 10(4) of the Punjab Act.

The Court examined Section 11, which deals with charging interest when a dealer fails to pay the tax amount. Sub-section (1) of Section 11-D specifies that interest is payable if the tax due as per Section 10(4) is not paid. The Court noted that "tax due" refers to the amount arising from the return furnished by the dealer. The Supreme Court's decisions in State of Rajasthan v. Ghasilal [1965] 16 STC 318 and J.K. Synthetics Ltd. v. Commercial Taxes Officer [1994] 94 STC 422 were pivotal. These cases established that no tax could be said to be due until the return was filed or the tax was assessed by the authority.

The Court concluded that interest under Section 11-D(1) could only be levied if the tax was not paid according to the returns. Since no returns were filed in this case, no tax could be said to be due, and thus, no interest could be levied under Section 11-D(1). However, interest could be charged under Section 11-D(2) if the tax assessed was not paid after the service of a demand notice.

Conclusion:

The Court answered both questions in the negative, ruling in favor of the assessee. The Tribunal's application of the Supreme Court's interpretation was deemed incorrect. The imposition of penalties and levy of interest were not justified in the absence of filed returns. No costs were awarded.

Reference answered in the negative.

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