9911796707
TMI Blog1961 (8) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and the taxable turnover was shown as Rs. 218-9-0 only for which a tax of Rs. 9-12-6 was paid. The sum of Rs. 9-12-6 was deposited in the treasury on the 2nd November, 1955. It appears that the Commercial Tax Officer by a notice dated the 22nd April, 1955, had fixed 4th August, 1955, as the date of the hearing of the appellant's assessment case for the year ending 31st December, 1954, and by this notice the appellant company was called upon to produce, amongst other documents, 'written declarations of purchasing registered dealers where sales are claimed exempt from tax for having been made to such registered dealers" (Item 8). The date of hearing of the other assessment case for the year ending 31st December, 1955, was fixed as the 21st January, 1957, by a notice dated the 4th September, 1956. In this appeal we are concerned with the assessment case for the year ending 31st December, 1954. The case of the appellant company is that after receiving the notices of the dates fixed for hearing of the assessment cases, the appellant in the 2nd week of January, 1957, started sorting its books and documents and discovered that 147 declaration forms received by the appellant from vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ully, for and on behalf of The Kedarnath Jute Manufacturing Co. Ltd., Babulall & Co., Private Ltd. Sd/-K. D. Jhunjhunwala Director Managing Agents." Below this application, the names of the witnesses to be summoned are set out. It appears however that no order was made by the taxing authority on this application under section 21A of the Act. It is also to be noted that although by notice dated 22nd April, 1955, the Commercial Tax Officer had called upon the appellant to produce at the hearing the declaration forms and other documents mentioned in the said notice, the appellant company did not send any intimation of the alleged loss of the declaration forms until about the 3rd May, 1957. After the assessment order was made on 21/23rd November, 1957, a notice of demand dated the 26th November, 1957, was served on the appellant company calling upon it to pay a sum of Rs. 1,49,776-4-6 as additional tax payable in respect of the sum of Rs. 22,46,006-6-0 for which no exemption was allowed. On 3rd February, 1958. the appellant moved this Court under Article 226 of the Constitution and a rule nisi was issued on that date by P. B. Mukharji, J. But at the final hearing the rule was discharg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther case, the copy of the relevant cash memo or bill, according as the sale is a cash sale or a sale on credit, and a declaration in writing signed by the purchasing dealer or by such other person as may be authorised in this behalf by such dealer that the goods in question are- * * * * (2) A dealer wishing to make a deduction under clause (b) of subrule (1) shall not accept, nor shall the purchasing dealer give, a declaration mentioned in the said clause except in a form obtainable by the purchasing dealer from the appropriate Commercial Tax Officer on application. (3) Every registered dealer shall maintain in a register in Form XXIII true account of every declaration form received from the Commercial Tax Officer and, if any declaration form is lost or destroyed or stolen, he shall report the same to the appropriate Commercial Tax Officer immediately and shall make appropriate entries in the remarks column of the register in Form XXIII. (4) No registered dealer to whom a declaration form is issued by the Commercial Tax Officer shall transfer the same to another person except for the purpose of sub-rule (2)." Now the proviso in section 5(2) (a) (ii) does not deal with the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy of loss of original declaration forms from the custody of the selling dealer, for the purpose of granting exemption. But the Court cannot sully this omission however harsh and unreasonable the result may be. It is possible that in order to prevent objectionable methods being adopted for tax evasion the Legislature thought fit to enact the proviso in section 5(2) (a) (ii) and clause (b) of rule 27A(I) in their present form. But the Court is not concerned with the wisdom or policy of the legislature but its function is to interpret and give effect to the words of the statute. It will not be out of place to refer at this stage to certain observations of the English Court of Appeal in the case of Howard De Walden v. Inland Revenue Commissioners[1942] 1 K.B. 389. Lord Greene, M.R., at page 397 in construing section 18 of the English Finance Act, 1936, observed as follows: "The section is a penal one, and its consequences, whatever they may be, are intended to be an effective deterrent which will put a stop to practices which the Legislature considers to be against the public interest. For years a battle of manoeuvre has been waged between the Legislature and those who are minded to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority to summon witness and to enforce production of documents in the manner laid down in the Code of Civil Procedure, but there is no absolute obligation cast upon the taxing authority to summon witnesses or to call for production of documents simply because a party asks for it. The taxing authority has discretion to summon or not to summon as it thinks fit, but if the discretion is exercised arbitrarily and the party concerned is prejudiced as a result thereof, the Court will certainly grant relief to the party in appropriate cases. But we do not think that in the present case, there was any prejudice caused to the appellant by the taking authorities not dealing with or not making any order on the application, because the declaration forms either original or duplicate (which is equivalent to original) were not forthcoming and both under the proviso to section 5(2) (a) (ii) and under rule 27A (1) (b) the production of the original declaration forms was indispensable in order to entitle the appellant to claim exemption. It was argued that if the taxing authorities had called for the production of the counterfoils of the declaration forms from the purchasing dealers concerned, thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be issued till you hear from the undersigned. This is most urgent. Sd. Illegible Commercial Tax Officer, Lyons Range Charge, 11-4-57". A reference to paragraph 7 of the affidavits affirmed on 2nd September, 1958, by the three persons referred to above, shows that the excuse put forward by these dealers for not issuing duplicate declaration forms was as follows: "I say that the said firm was at all material times and still now is ready and willing to issue duplicate sales tax declaration certificates to the petitioner in respect of the said transaction mentioned in the said annexure, provided sanction and permission is received from the appropriate Sales Tax Authorities to adopt the said course. This is necessary because if we issue a duplicate sales tax declaration certificate without such consent, permission and sanction of the appropriate Sales Tax Authorities we shall not receive the sales tax declaration certificates in replacement of those to be issued by us as duplicate sales tax declaration certificates and as a result thereof we shall have to suffer in business." It is also pointed out by the learned counsel for the appellant with reference to certain unreported decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uin the business. But as has been pointed out already the object of such stringent provision in the taxing statute is, as is well-known, to prevent tax evasion. It is enacted for public interest and for the benefit of the public exchequer. So, because the provision may cause hardship in certain circumstances as for example where the taxpayer is careless or is the victim of some misfortune (as for example where the documents are burnt by fire or otherwise destroyed) does not make the provisions an unreasonable restriction so as to infringe Article 19(1)(g) of the Constitution. Moreover, we are here concerned really with provisions made in exercise of power of taxation. It is well-known that fundamental rights are not immune from taxation and taxation cannot be regarded as abridgement of fundamental rights (Atma Ram Budhia v. State of Bihar[1952] 3 S.T.C; Suppl. 1: A.I.R. 1952 Pat. 359, at 366. and other cases). We, therefore, hold that there is no substance in this contention of the appellant that the proviso in section 5(2)(a)(ii) of the Act or clause (b) of rule 27A (1) infringes Article 19(1)(g) of the Constitution. The learned trial Judge has held that the appellant cannot take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consistently with the established principles of law, to hold that he has lost his right through a provisionary or directory clause which it was impossible for him to comply with". As appears from page 248 of Craies on Statute Law, section 12 of the Entail Improvement (Scotland) Act, 1770, was considered by the House of Lords in this case and the proposition was laid down in the manner I have set out above. In the case before us the loss of the declaration forms has occurred due to carelessness and some fault on the part of the appellant and not by reason of any act of God. So the principle enunciated at page 248 of Craies on Statute Law is of no assistance to the appellant. On behalf of the respondents the learned Advocate-General has contended that the appellant had an alternative remedy to challenge the assessment order by appeals provided under the Bengal Finance (Sales Tax) Act and also by a reference to the High Court and so the writ petition under Article 226 of the Constitution is not maintainable. Reliance is placed on a recent decision of the Supreme Court reported in Abraham v. Income-tax Officer, Kottayam and AnotherA.I.R. 1961 S.C. 609, Paragraph 3. The learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduce or cause to be produced on 21st January, 1957, the accounts and documents including written declarations of purchase of registered dealers if exemption from tax was claimed for sales to such dealers. After a protracted correspondence with the tax authorities to which I shall presently refer, the Commercial Tax Officer heard the company's agent on 21st November, 1957, and assessed its tax liability at Rs. 1,49,776-4-6 for the year ended 31st December, 1954. In computing liability the Commercial Tax Officer disallowed claims to exemption from tax on account of sales to registered dealers to the extent of Rs. 22,46,006-0-6 on the ground that the statutory declaration forms had not been produced in support of such sales. Another item disallowed by the officer related to a claim for exemption to the extent of Rs. 11,00,000. The ground of disallowance was that the declaration forms produced in support of the claim belonged to a particular series which had since become obsolete and invalid. No exemption from tax could accordingly be allowed on such invalid forms. Accordingly, a demand was made for payment of the tax. Similarly, for the period ended 31st December, 1959, to tax amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant's case is that it was entitled to duplicates on the basis of a circular issued by the Commissioner of Commercial Taxes, West Bengal, on 12th July, 1955, to the Secretary, Bharat Chamber of Commerce. It said that in the event of bona fide loss of statutory declaration forms in transit, it would be in order for the purchasing dealers to issue duplicate declaration forms. The issue was subject to certain conditions: first, the forms issued were to be marked "duplicate", secondly, the loss should have occurred in transit and the loss promptly reported to the Commercial Tax Officer concerned and thirdly, appropriate entries were to be made in the register showing the issue of such duplicate forms. The appellant's complaint is that despite the existence of such circular, the purchasing dealers concerned did not issue the duplicates asked for; and the Commercial Tax Officers though approached by the purchasing dealers for permission enabling them to issue such forms, nothing was done by the tax authorities in this regard, and in one case at least, the registered dealer was asked not to issue any duplicate until the dealer heard from the officer concerned. It is said, that in conseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the loss of forms. Insertions also appeared in the Calcutta Gazette between May and August, 1957, notifying that some registered dealers had lost their sales declaration forms. Obviously on receipt of information that such losses had occurred, the Gazette notifications were made at the instance of the department in order to safeguard revenue by preventing abuse of the forms by any kind of fraudulent user. The registered dealers not having been encouraged in the circumstances to issue duplicates, the appellant company applied to the Commercial Tax Officers concerned under section 21A of the Bengal Finance (Sales Tax) Act for appropriate orders on the purchasing dealers to produce their books and documents to prove the sales by the appellant company. A list was attached to the application detailing the documents required which included the counterfoils of the declaration forms issued to the appellant company. Costs for issue of summons for attendance of witnesses were offered to be deposited immediately. The contention was that proof aliunde of such sales would entitle the appellant company to the exemption from tax to which they would otherwise be liable. It does not appear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication had been refused. The question then arises whether the Commercial Tax Officer acted in disobedience or disregard of any satutory provision or acted in violation of the principles of natural justice. There can be no question that the officer concerned acted in a quasi-judicial capacity and was accordingly bound by the provisions of the Act and the statutory rules as well as by the rules of natural justice. Section 21A provides that the Commissioner or a Commercial Tax Officer has the same powers as are vested in a court under the Code of Civil Procedure when trying a suit in respect of certain matters, namely, (a) enforcing the attendance of any person and examining him on oath or affirmation, (b) compelling the production of documents and (c) issuing commissions for the examination of witnesses. The section proceeds to say that a proceeding under the Act before the Commissioner or the Commercial Tax Officer is to be deemed a judicial proceeding within the meaning of sections 193, 228 and 196 of the Indian Penal Code. It has been argued that the proceedings before the Commercial Tax Officers have, by statute, been made to approximate as closely as possible to proceedings b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue, be regarded with complacency or even indifference. The relative provisions of the Act require to be noticed. Section 5 prescribes the rate of tax. Sub-section (2) defines "taxable turnover" and proceeds to say that a dealer who is liable to pay tax would be assessed on his gross turnover which remains after making certain deductions. One of the deductions allowed is on account of sales by a registered dealer of goods of the class or classes specified in his certificate of registeration to another registered dealer for purposes of resale. But the right to deduction is not an unqualified right; it is regulated by a proviso which reads as follows: "Provided that in the case of such sales a declaration duly filled up and signed by the registered dealer to whom the goods are sold and containing the prescribed particulars on a prescribed form obtainable from the prescribed authority is furnished in the prescribed manner by the dealer who sells the goods". This sub-clause (a) (ii) was substituted by section 4 of the Bengal Finance Sales Tax (West Bengal Amendment) Act, 1950. Thus, it is plain that the proviso was engrafted into the statute about nine years after the Act had come i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nths or to a fine. Section 7(4a) (ii) gives power to the Commissioner to demand for good or sufficient reason from a registered dealer reasonable security for the proper custody and use of the forms. The proviso (ii) to subsection (4) of section 11 empowers the Commissioner to order forfeiture of the whole or part of the security deposit, if there has been negligence or wilful default in regard to their proper custody or use. Turning to the rules framed under the Act, one finds further provisions made regulating the custody and use of the forms. Rule 27A(2) says that a dealer wishing to make claim to deduction shall not accept nor shall the purchasing dealer give a declaration except in the form obtainable on application by the purchasing dealer from the appropriate Commercial Tax Officer and not declared obsolete or invalid by the Commissioner. Sub-rule (9) gives power to the Commissioner to notify that declaration forms of a particular series, design and colour to be obsolete and invalid with effect form a Stated date. The registered dealer is forbidden by sub-rule (6) to transfer a declaration form issued to him by the Commercial Tax Officer to any person except for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax authorities charged with the duty of administering the Act. Such authorities are bound by the statute which creates them and the rules which regulate their proceedings. They are also bound by the rules of natural justice when they act in a quasi-judicial capacity. But natural justice provides only for a fair hearing and knows nothing of the technicalities which regulate the reception of secondary evidence. The Commercial Tax Officer was therefore justified in insisting upon the mode of proof enjoined in the statute and he would have contravened its provisions if he had acceded to the appellant's request to accept secondary evidence of the sales. Where the provision of a statute is clear and unambiguous and the direction absolute, it would be wrong to go behind such express provision in search of a palliative to mitigate the rigour of the law. On behalf of the respondents the learned Advocate-General has, in my view, rightly contended that the Commercial Tax Officer would have exceeded his authority if he had taken secondary evidence of the sales in respect of which exemption had been claimed. Reliance was placed on a decision of the Supreme Court in the case of Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attached to it has a limiting effect which restricts the manner of proof of such sales. Without the proviso a registered dealer might prove the sales in any way he liked; but the effect of the proviso clearly is that the claim of exemption becomes admissible only if the sales are proved in the way prescribed. It seems clear enough that the proviso makes the proof purposely rigorous to exclude the possibility of unauthorised exemption. In the case of Howard De Walden v. Inland Revenue Commissioners [1942] 1 K.B. 389., Lord Greene felicitously summed up the position in a similar situation where the question of avoidance of tax liability arose for consideration. It was said that there may be provisions of a penal nature in a taxing statute which are intended to be an effective deterrent and which will put a stop to practices which the legislature considers to be against the public interest. "For years a battle of manoeuvre has been waged between the Legislature and those who are minded to throw the burden of taxation off their own shoulders on to those of their fellow subjects. In that battle the Legislature has often been worsted by the skill, determination and resourcefulness of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndamental right to carry on trade or business, it seems to me clear enough that the proviso does not constitute an unreasonable restriction on its right to carry on trade. The obvious purpose which led to its enactment was to safeguard State revenue. To achieve that object the Act and the Rules enjoin rigorous care in dealing with the declaration forms. No one can be heard to complain that a particular provision of the law constitutes an invasion of fundamental right on the ground that its effect is to compel those who come under the Act to he scrupulously cautious in regard to certain matters where relaxation of vigilance is likely to be fraught with grave consequences to the persons concerned and imperil the State revenue. Indeed it would be a claim of novel right to carry on trade in any way one likes, even in a careless way. If the appellant company has been careless in regard to these forms in spite of the insistent statutory emphasis of their careful custody and use, the company has to suffer. There is, in my view, no substance in the complaint that since the loss of forms was accidental it amounted to abuse of the power of the tax authorities to refuse to hold an enquiry in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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