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TMI Blog1967 (9) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the writ petitions from which these appeals arise are liable to be struck down and the respondents restrained from levying sales tax on the appellants for the period May 1, 1952 to October 31, 1955. The appellants are a private limited company carrying on business inter alia as dealers in iron and steel materials in Vidarbha region of the Maharashtra State. In that region they have more than one place of business, They registered themselves as dealers under section 8A of the Act and obtained a certificate of registration on August 17, 1947. Their assessment year as shown in their registration certificate is from November 1 to October 31. They were required to submit quarterly returns of their turnovers. They did so till April 30, 1952. Thereafter no returns were submitted. On September 13, 1955, the Assistant Commissioner of Sales Tax, the assessing authority at that time, issued a notice calling upon the appellants to show cause why action should not be taken against them under sections 10(3) and 11(4)(a), on account of their failure to furnish the return for the period Ist January, 1953 to 31st December, 1953. Similar notices were issued to them on October 27, 1955, for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e convenient to set out the circumstances under which section 11A(3) which is said to have brought about the discrimination complained of came to be enacted. The Act is in force ever since 1947. Section 11A as it originally stood was inserted into the Act in 1953. In Bisesar House v. State of Bombay [1958] 60 Bom. L.R. 1395; 9 S.T.C. 654., the question arose whether a notice under section 11(2) initiates a fresh proceeding and if that is so, whether the limitation prescribed under section 11A(1) is attracted to that proceeding. A Full Bench of the Bombay High Court speaking through Chagla, C.J., held that a notice under section 11(2) initiates a fresh proceeding and to such a proceeding the limitation prescribed in section 11A is attracted. From the ratio of that decision it followed that the limitation prescribed under section 11A also governed proceedings under section 11(4)(a). Evidently, to get over the effect of that decision, the Bombay Legislature enacted the Bombay Sales Tax Laws (Validating Provisions and Amendment) Act, 1959 (No. 22 of 1959) which came into force on April 18, 1959. Section 6 of that Act inserted the new sub-section (3) into section 11A and the reason for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of the sale or supply of goods or in respect of the sale or supply of goods in the carrying out of any contract, effected or made during the prescribed period; and the expression "taxable turnover" means that part of a dealer's turnover during such period which remains after deducting therefrom his turnover during that period in respect of the sale of goods declared tax-free under section 6. The definition of the term "year" as provided on section 2(1) to the extent necessary for our present purpose reads: "year' means the twelve months ending on 31st day of March, or, if the accounts of the assessee are made up to any other day in respect of a year ending on any date other than the 3 Ist day of March, then at the option of the assessee the year ending on the day to which his accounts have been so made up........" Section 8 says: "(1) No dealer shall, while being liable to pay tax under this Act, carry on business as a dealer unless he has been registered as such and possesses a registration certificate." Section 8A provides for voluntary registration of a dealer. Sub- section (3) thereof provides that every dealer who has been registered upon an application made under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) does not furnish returns in respect of any period by the prescribed date, or (b) having furnished such returns fails to comply with any of the terms of a notice issued under sub- section (2), or (c) has not regularly employed any method of accounting, or if the method employed is such that, in the opinion of the Commissioner, assessment cannot properly be made on the basis thereof, the Commissioner shall in the prescribed manner assess the dealer to the best of his judgment: Provided that he shall not so assess him in respect of the default specified in clause (a) unless the dealer has been first given a reasonable opportunity of being heard." [Sub-section (5) and (6) are not necessary for our present purpose.] Section 11A provides: "(1) If in consequence of any information which has come into his possession, the Commissioner is satisfied that any turnover of a dealer during any period has been under-assessed or has escaped assessment or assessed at a lower rate or any deduction has been wrongly made there- from, the Commissioner may, at any time within three calendar years from the expiry of such period, after giving the dealer a reasonable opportunity of being heard and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le further provides that no such notice shall be necessary where the dealer, having appeared before the assessing authority, waives such notice. Now we may turn to the questions formulated for decision. As mentioned earlier, the main contention advanced on behalf of the appellants is that sub-section (3) of section 11A has brought about a discrimination between those dealers proceeded against under section 11(4)(a) and those dealt with under section 11A. The contention advanced on behalf of the appellants is that the turnover of a registered dealer who has failed to submit his return and also to deposit the tax due from him, has escaped assessment; the case of such a dealer comes both within section 11(4)(a) as well as section 11A; therefore, he can be dealt with under either of those two provisions. Where section 11A prescribes a period of limitation for a proceeding under that provision, in view of sub-section (3) of section 11A a proceeding under section 11(4)(a) can be initiated at any time; under those circumstances it is open to the authorities to proceed against some of the same class of dealers under section 11(4)(a) and others under section 11A. It was said on their beha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 14 of the Business Profits Tax Act, 1947, this Court held that those words apply equally to cases where a notice was received by the assessee but resulted in no assessment, under-assessment or excessive relief and to cases where due to any reason no notice was issued to the assessee and there was no assessment of his income. Kapur, J., speaking for the majority of Judges in that case, observed (at page 993 of the report) that it is well-settled that an income escapes assessment when the process of assessment has not been initiated as also in a case where it has resulted in no assessment after the completion of the process of assessment. The true scope of the expression "escaped assessment" in section 11A came up for consideration before this Court in Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax, Nagpur [1964] 4 S.C.R. 436; 14 S.T.C. 976.. This is what Subba Rao, J. (as he then was) who delivered the judgment of the majority of the Judges, observed in that regard: "In Commissioner of Income-tax, Bombay v. Pirojbai N. Contractor [1937] 5 I.T.R. 338., the words 'escaped assessment' in the Indian Income-tax Act were defined. It was held therein that the said words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for that year that escaped assessment.' It is not necessary to multiply citations. We, therefore, hold that the expression 'escaped assessment' in section 11A of the Act includes that of a turnover which has not been assessed at all, because for one reason or other no assessment proceedings were initated and therefore no assessment was made in respect thereof." In one of the appeals dealt with in that judgment, i. e., C.A. No. 102 of 1961, this Court had to consider whether a case under section 11(4)(a) also comes under section 11A. The Court answered that question in the affirmative. As seen earlier it was the duty of the appellants not only to submit their quarterly returns but send along with those returns the treasury challans in proof of the payment of the tax admittedly due from them. As they have failed to do so within the prescribed period, it follows that the turnovers in question had escaped assessment. This takes us to the next question whether in the instant case the assessing authority can be said to have been satisfied about the escapement of the assessment as a consequence of any information which had come into his possession. From the notices issued in 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the original order of assessment is not discovered by the Income-tax Officer himself on further scrutiny but it is brought to his notice by another assessee or even by a subordinate or a superior officer, that would appear to be information disclosed to the Income-tax Officer. If the mistake itself is not extraneous to the record and the informant gathered the information from the record, the immediate source of information to the Income-tax Officer in such circumstances is in one sense extraneous to the record. It is difficult to accept the position that while what is seen by another in the record is 'information' what is seen by the Income-tax Officer himself is not information to him. In the latter case he just informs himself. It will be information in his possession within the meaning of section 34. In such cases of obvious mistakes apparent on the face of the record of assessment, that record itself can be a source of information, if that information leads to a discovery or belief that there has been an escape of assessment or under-assessment." The meaning of the word "information" came up again for consideration before a Division Bench of the Kerala High Court in Unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .R. 436; 14 S.T.C. 976. Mr. Bindra, learned counsel for the revenue, contended that a registered dealer has certain advantages over an unregistered dealer; therefore the classification made under the Act is a reasonable classification. To be a valid classification, the same must not only be founded on an intelligible differentia which distinguishes persons and things that are grouped together from others left out of the group but that differentia must have a reasonable relation to the object sought to be achieved. Both section 11(4)(a) and section 11A(1) concern themselves with escaped assessments. The classification suggested has no nexus with that object. That much is established by the decision of this Court in Ghanshyamdas's case [1964] 4 S.C.R. 436; 14 S.T.C. 976. which is binding on us. It is true the State can by classification determine who should be regarded as a class for the purpose of legislation and in relation to a law enacted on a particular subject, but the classification must be based on some real and substantial distinction bearing a just and reasonable relation to the object sought to be attained and cannot be made arbitrarily and without any substantial basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeding in respect of that quarter is also barred by limitation. Now we shall take up the question whether the notices issued in 1955 in respect of the turnovers relating to other quarters were in accordance with law. The notice No. 4519/STN dated 13th September, 1955, reads: "Notice (for 1-1-53 to 31-12-53) dated 13-9-55. No. 4519/STN. D/13-9-55. Form XII (See rule 32) Notice under sub-section (3) of section 10, sub-sections (4)(a) and (5) of section 11, sub-section (1) of section 11A and sub-section (1) of section 22 of the Central Provinces and Berar Sales Tax Act, 1947. Whereas Shri Anandji Haridas and Co. Ltd., Nagpur. You have failed to furnish a return as required by a notice in that behalf served on you under section 10(1) of the Central Provinces and Berar Sales Tax Act, 1947. OR You being a registered dealer have failed to furnish a return for the periods 1-1-53 to 31-12-53 and have thereby rendered yourself liable under section 11(4) to be assessed to the best of judgment: * * * * Further, you are hereby directed to attend in person or by a person authorised by you in writing in that behalf, being a person spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his defect was found only in the notice quoted above and not in the other notices issued in 1955. For the reasons to be mentioned presently, we see no merit in either of these contentions. We are unable to accept the contention of Mr. Gokhale that a notice under section 11(4)(a) or 11A(1) is a condition precedent for initiating proceedings under those provisions or that it is the very foundation for the proceedings to be taken under those provisions. The notice contemplated under rule 32 is not similar to a notice to be issued under section 34(1)(b) of the Income-tax Act, 1922. All that sections 11(4) and 11A(1) prescribe is that before taking proceedings against an assessee under those provisions, he should be given a reasonable opportunity of being heard. In fact, those sections do not speak of any notice. But rule 32 prescribes the manner in which the reasonable opportunity contemplated by those provisions should be afforded to the assessee. The period of 30 days prescribed in rule 32 is not mandatory. The rule itself says that "ordinarily" not less than 30 days' notice should be given. Therefore, the only question to be decided is whether the defects noticed in those notices h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also an escapement of assessment under section 11A(1), a notice issued under section 11(4)(a) would be a valid notice in respect of a proceeding under section 11A(1). In the result, we hold that the assessing authority has no competence to assess the turnovers of the appellants in respect of the quarters commencing from May 1, 1952, and ending with January 31, 1953, as the same is barred by time under section 11A. We further hold that section 11(4)(a) is void as it is violative of Article 14. We accordingly issue a direction to the respondents to refrain from assessing the appellants in respect of those turnovers. In other respects, the appeals fail and they are dismissed. In the circumstances of these cases, we make no order as to costs. BACHAWAT, J.-Sections 11(4), 11(5) and 11A of the C.P. and Berar Sales Tax Act, 1947, are as follows: "11. (4) If a registered dealer- (a) does not furnish returns in respect of any period by the prescribed date, or (b) having furnished such return fails to comply with any of the terms of a notice issued under sub-section (2), or (c) has not regularly employed any method of accounting, or if the method employed is such that, in the opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal, shall be deemed ever to have been applicable to such proceeding or notice. (b) The validity of any such proceeding or notice shall not be called in question merely on the ground that such proceeding or notice was in- consistent with the provisions of sub-sections (1) and (2)." The appellant is a registered dealer. It failed to file returns for the periods 1st May, 1952 to 31st October, 1952, 1st November, 1952 to 31st October, 1953, 1st November, 1953 to 31st October, 1954 and 1st November, 1954 to 31st October, 1955. The Sales Tax Officer, Non-resident Circle, Nagpur, issued four notices to the appellant initiating proceedings under sections 10(3), 11(4), 11A(1) and 22(1) of the Act. The appellant filed a writ petition in the High Court challenging the notices and asking for an order restraining the respondents from taking steps under the notices and making assessments or levying penalties in respect of the aforesaid periods. The High Court dismissed the application. From this order, the appellant has preferred the present appeals. Notices under section 22C(1) can be issued only in the course of any proceedings under the Act. As no proceedings were pending agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 11(4) are not barred by limitation and are not invalid. The argument then is that section 11(4)(a) offends Article 14 of the Constitution in two ways. Firstly, it is said that it is open to the Sales Tax Authorities to proceed at their sweet will either under section 11(4)(a) or under section 11A(1) against a registered dealer for his failure to file returns and the principle of Shree Meenakshi Mills Ltd. v. Sri A.V. Visvanatha Sastri and Another [1955] 1 S.C.R. 787; 26 I.T.R. 713. is invoked. We find no merit in this contention. Section 11(4)(a) specially provides for the initiation of proceedings against a registered dealer who has not furnished returns in respect of any period by the prescribed date. Having made this special provision, the Legislature must be taken to have intended that in a case falling under section 11(4)(a) the Sales Tax Authorities must proceed against the registered dealer under section 11(4)(a) and not under section 11A(1). The special provision must be taken silently to exclude all cases falling within it from the purview of the more general provision. Moreover, if a statute is capable of two constructions, that construction should be given which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a statutory obligation to file returns without any notice being served upon him and to pay the full amount of tax due from him before furnishing the return (sections 10 and 12). A dealer who has registered himself under the Act admits his liability to furnish returns whereas a dealer who has not registered himself makes no such admission. A registered dealer has certain advantages under the Act which are denied to an unregistered dealer. Section 2(j)(a)(ii) exempts from tax sales of a registered dealer of goods specified in his certificate of registration as being intended for use by him as raw materials in the manufacture of goods for sale by actual delivery in the State for consumption therein. An unregistered dealer cannot get the benefit of this exemption. Moreover, section 2(j)(a)(ii) exempts from tax sales to a registered dealer of goods declared by him in the prescribed form as being intended for resale by him by actual delivery in the State for consumption therein. The sales to an unregistered dealer are not so exempt. Consequently, a registered dealer can buy his goods from the producer or the wholesaler at a cheaper price and has thus an economic advantage over an unregi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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