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TMI Blog1984 (2) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... on No. 228 of 1983, Writ Petition No. 471 of 1980, Writ Petition No. 287 of 1983, Writ Petition No. 344 of 1982, Writ Petition No. 621 of 1982, Writ Petition No. 302 of 1980, Writ Petition No. 624 of 1980, Writ Petition No. 46 of 1983, Writ Petition No. 912 of 1983, Writ Petition No. 558 of 1982, Writ Petition No. 623 of 1983 decided on February 09, 1984 Altaf Ahmed, Advocate, for the respondents. K.K. Venugopal and Anil Dev Singh, Senior Advocates (Satish Vig, S.P. Sharma, L.K. Gupta,Vimal Dave, R.C. Kaushik and Subhash Sharma, Advocates, with them) for the petitioners/appellants. -------------------------------------------------- The judgment of the Court was delivered by MADON, J.-This group of writ petitions and appeals by special leave challenges the constitutional validity of sub-sections (1), (2) and (3) of section 8 of the Jammu and Kashmir General Sales Tax Act, 1962 (J & K Act 20 of 1962), and seeks to quash the orders directing the petitioners and appellants before us (hereinafter for the sake of brevity referred to as "the assessees") to pay interest on the amount of tax due according to the quarterly returns filed by them but not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arged for full month and not for a part of the month. (3) Quarterly tax shall be paid before furnishing a quarterly return but not later than the date prescribed under sub-section (2) of section 7. ..................... (7) Where a dealer furnishes a revised return under sub-section (4) of section 7 and the tax payable is more than the tax paid on the basis of original return, he shall pay the extra tax payable before furnishing the revised return Provided that if the tax already paid is in excess of the tax payable, such excess amount shall be treated to have been paid towards the tax payable for the quarter next following the date of furnishing such revised return. (8) Notwithstanding anything contained in this Act, if a dealer fails to pay the tax payable under this section, the provisions of sub-section (2) of this section, section 16 and section 16-A shall apply mutatis mutandis to the recovery thereof. Explanation (1).-Quarterly tax means the tax payable on the basis of a quarterly return required to be furnished by sub-section (2) of section 7. Explanation (2).-Interest under sub-section (2) of this section on the extra tax payable on the basis of revised retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording to such returns by the prescribed time but the assessing authority had not accepted the returns and had enhanced the amount of tax payable by these dealers and had issued a composite notice of demand calling upon them to pay the amount of tax so enhanced along with interest on it. We are concerned in these petitions and appeals only with dealers who fall under categories (2) and (3) above as also with those dealers who had filed their returns but had not paid the amount of tax due according to such returns by the prescribed time but had paid it later and notices were issued against them calling upon them to pay interest for the period of default before making any order of assessment. We are not concerned in these petitions and appeals with those dealers who fall under categories (1) and (4) above. At the hearing of these petitions and appeals, no arguments whatever were advanced before us in support of the contention that sub-section (1) of section 8 was unconstitutional and the challenge to that sub-section must, therefore, fail. The only contentions which were urged at the hearing were as follows: (1) The charging of interest to the assessees is violative of article 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a law levying a tax on the sale or purchase of goods taking place within the State and making provisions for the collection of such tax, because the constitutional position in this behalf is clear and indisputable. Under clause (1) of article 246 of the Constitution of India, Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule to the Constitution referred to as the "Union List" and under clause (3) of the same article the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II of the Seventh Schedule to the Constitution referred to as the "State List". Taxes on the sale or purchase of newspapers and on advertisements published therein fall under entry 92 of the Union List and taxes on the sale or purchase of goods, other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce fall under entry 92A of the Union List, while taxes on the sale or purchase of goods, other than newspapers, subject to the provisions of entry 92A of List I, fall under entry 54 of the State List. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State of Jammu and Kashmir framed its own Constitution repealing and replacing its earlier Constitution. This new Constitution, called the "Constitution of Jammu and Kashmir", was adopted and enacted by the Costituent Assembly of that State on November 17, 1956. By the Constitution (Application to Jammu and Kashmir) Order, 1954 (C.O. 48), as amended from time to time, the provisions of the Constitution of India as in force on June 20, 1964, and as amended by the Constitution Amendment Acts set out in clause 2 of that Order apply in relation to the State of Jammu and Kashmir subject to the exceptions and modifications set out in the said clause. By sub-clause (6)(a) of clause 2 of the said Presidential Order, clause (1) of article 246 of the Constitution of India is made applicable to the State of Jammu and Kashmir with certain modifications with which we are not concerned, while clause (3) of article 246 is not made applicable to that State. Sub-clause (22) of clause 2 of the said Presidential Order applies List I in the Seventh Schedule to the State of Jammu and Kashmir with the omissions and modifications mentioned in the said sub-clause. These omissions and modifications are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay." It would follow from the above decisions that the power to make a law with respect to a tax comprehends within it the power to levy that tax and to determine the persons who are liable to pay such tax, the rates at which such tax is to be paid and the event which will attract liability in respect of such tax. This is done by the charging sections of the particular tax law. The taxing power of the State will also comprehend within it the power to provide for quantification of the liability of persons made liable to pay the tax. This is done by the provisions relating to assessment. The taxing power will also comprehend within it the power to provide for collection of tax including prescribing the methods of recovery of the amount of tax due if the person liable to pay the tax does not voluntarily pay it. The power to make a law with respect to a tax includes not only what has been set out above but also a power to make provisions in the relevant statute with respect to all matters ancillary and incidental to the levy, assessment, collection and recovery of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll within the legislative power of the State. The challenge to sub-section (2) of section 8 on the ground that the provisions of that sub-section infringe article 14 of the Constitution is a twofold one, namely: (1) that the said sub-section is discriminatory, and (2) that it is arbitrary and unreasonable. Sub-clause (4) of clause 2 of the Constitution (Application to Jammu and Kashmir) Order, 1954, makes article 14 of the Constitution of India applicable to the State of Jammu and Kashmir. With respect to the charge of discrimination, it was submitted that such high rates of interest for non-payment of tax are not to be found in the sales tax law of any other State and therefore, by enacting the said sub-section (2) of section 8 and providing for payment of interest at the rate of two per cent per month when the period of default exceeded three months but did not exceed six months and for interest at the rate of three per cent per month if the default was for a period exceeding six months, dealers in the State of Jammu and Kashmir were hostilely discriminated against as compared with dealers in other States. This argument wholly overlooks the very basis of the scheme of distrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to decide which methods would be most efficacious for this purpose. The provisions of the sales tax law of each State must, therefore, necessarily differ in various respects from the provisions of sales tax laws of other States. If the provisions of the legislation of every State on a particular topic are to be identical in every respect, there is no purpose in including that topic in the State List and it may as will be included in the Union List. Merely because the provisions of a State law differ from the provisions of other State laws on the same subject cannot make such provisions discriminatory. The second part of the challenge under article 14 was with respect to the rates at which interest is payable under sub-section (2) of section 8 on the amount of tax paid after the expiry of the prescribed date of payment. It is true that the rate of two per cent per month and particularly the rate of three per cent per month can be said to be on the high side, but we fail to see how this would render the provisions of that sub-section void or unconstitutional. Providing for payment of interest in case of delayed payment of tax is a method usually adopted in fiscal legislation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -an assumption not warranted by the provisions of the Act. Under the Act, the liability to pay sales tax is cast upon a dealer. This is made clear by section 4 of the Act which is headed "Liability to tax under this Act". The relevant provisions of sub-section (1) of section 4 are as follows: "Subject to the provisions of this Act, every dealer, except the one dealing exclusively in goods declared tax-free under section 5, shall pay for each year tax on his taxable turnover at a rate not exceeding twenty five per cent of such turnover as may be determined by the Government and notified by the Government in the Government Gazette and such tax shall be charged on the sale of goods once only. .............................." Under section 6, a dealer who has become liable to pay under section 4 is prohibited from carrying on business as a dealer until he has been registered in accordance with the provisions of the Act. Clause (g) of section 2 inter alia defines a "dealer" as meaning "any person who carries on (whether regularly or otherwise) the business of selling, purchasing, supplying or distributing goods, directly or indirectly, for cash or for deferred payment, or for commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and not taxed, provided the amount not taxed is paid over to the State or tax on the full amount, that is, including the amount of tax so recovered or collected, is required to be paid along with the quarterly or monthly return, as the case may be, and then at the time of assessment refund of the whole or part of the tax on the amount so collected is given to the dealer. In this connection, a reference was made to section 64-A of the Sale of Goods Act, 1930 [substituted for the original section 64-A by the Sale of Goods (Amendment) Act, 1963], under which unless a different intention appears from the terms of the contract, in the event of any duty of customs or excise on goods or any tax on the sale or purchase of goods being imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods, without stipulation as to the payment of such duty or tax where duty or tax was not chargeable at the time of the making of the contract, or for the sale or purchase of such goods duty paid or tax paid where duty or tax was chargeable at that time, if such imposition or increase so takes effect that the duty or tax or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llow that where he has not been able to recover the amount of tax or sale price from his customers, he is not bound to comply with the statutory requirements of sub-section (3) of section 8 under which he has to pay tax according to the quarterly return furnished by him before the date prescribed for filing such return. The assessees were, therefore, bound to pay the tax due according to the quarterly returns filed by them before filing such returns and the fact that their customers had not paid to them the sale price did not exempt them from their statutory liability in this behalf. The next contention, namely, that the assessing authority was not entitled to impose interest, the amount of which exceeded the amount of tax in respect of which default had been made in paying it by the prescribed date, is equally without any substance. No reason was advanced in support of this contention and we fail to see on what principle the Hindu Law rule of damdupat can be made applicable to a sales tax legislation. The recovery provisions of the Act are meant for speedy and prompt collection of revenue. These provisions are not meant for the benefit of defaulting taxpayers and such defaulters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Under sub-section (8) of section 8, if a dealer fails to pay the tax payable under that section, the provisions of sub- section (2) of section 8 and of sections 16 and 16-A are to apply mutatis mutandis to the recovery thereof. Thus, the provisions of sub-section (2) of section 8 apply when quarterly tax is not paid before furnishing a quarterly return under sub-section (3) of section 8, but by the express terms of sub- section (8) of section 8, the provisions of sub-section (2) of that section will apply to the recovery of quarterly tax not in their entirety but "mutatis mutandis". Under sub-section (1) the tax assessed or any other amount demanded is to be paid within the time specified in the notice of demand. Under sub-section (3), the quarterly tax is to be paid before furnishing the quarterly return but not later than the date prescribed under sub-section (2) of section 7. Thus, by sub-section (3) the time for payment of quarterly tax is not made dependent upon the issuance of a notice of demand and the date for payment to be specified in it but it is statutorily fixed and as under sub-section (8) of section 8 the provisions of sub-section (2) are to apply mutatis mutandis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the length of the period of default. If the default was for a period not exceeding three months, then the interest could only be charged at the rate of one per cent per month and where the default was for a period exceeding three months but not exceeding six months, then the interest which could be charged can only be one per cent per month for the first three months of default and two per cent per month for the remaining period. In the same way, if the default was for a period exceeding six months, interest could be charged only at the rate of one per cent per month for the first three months of default, at the rate of two per cent per month for the next three months of default and at the rate of three per cent per month for the remaining period of default. The grievance made by the assessees is justified and their challenge to the impugned orders on this ground must, therefore, succeed. In the result, though we uphold the constitutionality of sub-sections (1), (2) and (3) of section 8 of the Jammu and Kashmir General Sales Tax Act, 1962, we make the rule issued in each of the writ petitions before us absolute only to the extent that we restrain the State of Jammu and Kashmir fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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