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TMI Blog1968 (7) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... of law. When the assessee approached the Deputy Commissioner of Sales Tax in revision, by the order dated 22nd September, 1963, the revision was only partially allowed and the Sales Tax Officer was directed to recover the balance due calculating the penalty at 1 per cent. for late payment. When the opponent-firm finally approached the Tribunal in revision, the Tribunal has set aside the order imposing penalty after the date of the assessment order till the communication of the judgment of the Tribunal and has confirmed the rest of the order passed by the Deputy Commissioner, on the ground that during the period the appellate and the revisional authorities granted the stay orders against the recovery of the balance of tax, the assessee committed no default for which it could be penalised. The State has, therefore, required the Tribunal to make the aforesaid reference to this Court. The relevant section which falls for our interpretation is section 16. Sub-clause (4) runs as under: "If the tax is not paid by any dealer within the prescribed time, the dealer shall pay, by way of penalty in addition to the amount of tax, a sum equal to- (i) one per cent. of the amount of tax for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty is attracted is not mere non-payment of tax by the dealer, but his continuance to make a default. The Legislature having provided a penalty which is at such a high rate for the entire period during which non-payment continues, it has advisedly confined the same to those cases where the dealer continues to make a default. It would be revolting to our sense of justice to penalise a person without hearing for default. Even though the hearing has not been specifically provided for in section 16(4), that lacuna would always be filled up by Courts, as an implicit requirement of the principle of natural justice when a person is sought to be penalised. As for the other requirement the Legislature itself was careful enough to make a specific provision that this penalty attaches to cases where default continues and not otherwise. Therefore, the authority which assesses this penalty must find out during what period the assessee has continued to make default and thereafter it can impose penalty within the limits laid down by the statute. The first proviso carves out a further relief in cases where the dealer files an appeal or application for revision and in that case, the appellate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attracts the penal provision. Mr. Mody in this connection also relied upon the decision in A.S.U. Sahigara Co. v. Commercial Tax Officer [1968] 21 S.T.C. 77. , where a Division Bench of the Mysore High Court held that the period of time within which the petitioner could pay the tax without committing the default was extended and, therefore, no penalty could be levied during such period. Applying the aforesaid ratio to the facts of our case, if the ground which attracts penalty is the continuous making of the default by the dealer under section 16(4), it is apparent that during the period when the appellate or the revisional authority granted stay, there would be no question of any default. The penalty did not start running at all during this period because the operation of the order itself had been stayed by the appellate or the revisional authority. The tax authorities ignored this basic fact and, therefore, the Tribunal was justified in correcting this perverse approach and in interfering with the order of imposition of penalty even during this period when actually the stay had been granted. Under sections 30 and 31 the appellate and the revisional authorities are empowered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J., delivered the following judgment on August 12, 1968: In this reference under section 34 of the Bombay Sales Tax Act, 1953 (hereinafter referred to as the Act), at the instance of the State of Gujarat, the following question has been referred by the Sales Tax Tribunal to this Court: "Whether on the facts and in the circumstances of the case penalty under sub-section (4) of section 16 of the Bombay Sales Tax Act, 1953, could be imposed on the opponents for the period for which the payment of dues was excused by the appellate and revisional authority by grant of stay order?" The facts giving rise to this reference are as follows: The opponents herein are a firm registered under the Act and is a registered dealer. The Sales Tax Officer, Enforcement Branch, Ahmedabad, assessed the opponent-firm for the period 1st April, 1954, to 31st March, 1955, by his assessment order. Against the said assessment order the assessee-firm preferred an appeal under section 30 of the Act and the appeal was filed before the Assistant Commissioner of Sales Tax (Appeals), Range II, Ahmedabad. The Assistant Commissioner accepted partially the contentions of the assessee and in some respects reduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee-firm was allowed to prefer an appeal against the assessment order without payment of tax and penalty and the recovery thereof was stayed by the Assistant Commissioner. In the same manner, the Deputy Commissioner also admitted the revision application against the order of the Assistant Commissioner on part-payment of the dues and on furnishing security for the balance and thereafter the Sales Tax Tribunal also admitted the revision application against the order passed by the Deputy Commissioner on giving security without further payment; and both the revisional authorities, viz., the Deputy Commissioner and the Sales Tax Tribunal, had granted stay orders against the recovery of the balance of the tax. These facts are not in dispute before us; but the question is whether in the light of the provision of section 16(4) of the Act, the penalty could be imposed for the period when the stay orders of this kind passed by the appellate and revisional authorities were operative. Section 16 of the Act, as in force at the relevant time, provided as follows: "16. (1) The tax shall be paid in the manner hereinafter provided at such intervals as may be prescribed. (2) Before any regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny, by instalments. (6) Any amount of the tax together with the penalty, if any, which remains unpaid after the date specified in the notice issued under subsection (5) shall be recoverable as an arrear of land revenue." The other sections relevant for the purposes of this judgment are sections 30 and 31 of the Act. Section 30 provided as follows: "30. (1) Within sixty days from the making of an order of assessment either with or without penalty or the passing of any other order under this Act, any person may, in the prescribed manner, appeal to the prescribed authority against such order. (1A) No appeal against the order of assessment, with or without penalty, shall ordinarily be entertained by the prescribed authority unless it is accompanied by satisfactory proof of the payment of the tax with penalty, if any, in respect of which the appeal has been preferred: Provided that the authority may, if it thinks fit, for reasons to be recorded in writing, entertain an appeal against such order, (a) without payment of the tax or penalty, if any, but on furnishing in the prescribed manner security for such amount of the tax and penalty as it may direct; or (b) on proof of pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h penalty, if any, or on payment of such smaller amount, as may be directed and it is in the light of these powers conferred upon the appellate authority or the revisional authority to entertain the appeal or the revision application without the payment of the tax with or without penalty, if any, that we have to read the proviso to section 16(4), which as quoted above, lays down that where the tax has not been paid by any dealer within the prescribed time but the dealer has filed an appeal or an application for revision in respect of such tax, the authority hearing the appeal or the application for revision may direct that the penalty in respect of any period shall be paid at such rate as it may think fit, the rate being not less than one per cent. and not more than two and one-half per cent. of the amount of tax for each month. It is, therefore, clear that the first proviso to section 16(4) confers a power upon the appellate authority and upon the revisional authority to impose penalty in respect of any particular period during which a tax remains unpaid, the rate of penalty being not less than 1 per cent. and not more than 21 per cent. of the amount of tax for each month. It is b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clear from the facts which I have set out just now that it was because of the supersession of the notice of the Commercial Tax Officer by the order of the Government allowing instalments, that the Division Bench came to the conclusion that no default was committed by the assessee concerned and that the default could be said to be committed in respect of each instalment when the instalments allowed by the Government became due. Somnath Iyer, J., delivering the judgment of the Division Bench pointed out at page 79 of the report as follows: "Under section 13 of the Sales Tax Act, a dealer becomes a defaulter when he neglects to make payment of the tax when it becomes due. Since the date on which the tax had to be paid by the petitioner was shifted from the date fixed by the Commercial Tax Officer to the dates of the instalments allowed by Government, the petitioner would have become a defaulter only if there was non-payment of any one of those instalments when they became due, and on such default, the penalty became payable by him under section 13 with respect to the amount in respect of which payment was not made............the grant of instalments by Government effaced the defa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmitted by the assessee when he did not pay the tax during the pendency of the appeal and the pendency of the revision applications first before the Deputy Commissioner and then before the Tribunal. The decision of another Division Bench of the Mysore High Court in B.V. Aswathiah Bros. v. Commercial Tax Officer[1963] 14 S.T.C. 467., is again of not much assistance to us in solving the problem before us because that decision lays down that under the provisions of the Mysore Act and the Rules framed thereunder, an assessee is required to pay the admitted tax and if he underestimates his turnover, no penalty could be levied till the final assessment was made. In my opinion, it is important to bear in mind that under the so-called stay orders first the stay was granted by the Assistant Commissioner and thereafter in the case of the stay orders granted by the Deputy Commissioner and by the Sales Tax Tribunal, there was stay of the recovery of the amount of sales tax due from the assessee-firm for the period 1954-55. It is clear that under section 16(6), any amount of tax together with penalty, if any, which remains unpaid after the dates specified in the notice is recoverable as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore than 2 per cent. of the amount of tax each month. This power of the appellate authority and the revisional authority as set out in the proviso to section 16(4) has to be read in the light of the power given to the appellate authority by the first proviso to section 30(1) and to the revisional authority by rule 37 of the Rules to allow the appeal or application to be filed without the payment of the tax. In my opinion, it is only by the concession that might be granted by the appellate authority under section 30(1) proviso or by the revisional authority under rule 37 of the Rules that the appeal or the revision application can be filed without the prior payment of tax; and the first proviso contemplates that when such tax is not paid by the assessee before filing the appeal or before filing the revision application, the authorities hearing the appeal or the revision application have been empowered to direct levy of the penalty in respect of any period at the rate of not less than 1 per cent. per month and not more than 2 per cent. per month. Under section 16(4)(i), the penalty has to be paid at the rate of 1 per cent. for each month for the first three months after the expiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether the word "default" as used in the phrase "during which he continues to make default in the payment of the tax" means any deliberate withholding of the tax or means mere non-payment of the tax. In the light of the proviso to section 16(4) and in the light of the discretion conferred upon the appellate authority and upon the revisional authority to hear the appeal or revision application without insisting on the prior payment of the tax in respect of which the appeal or the application has been filed, it is clear that in the context in which the word "default" occurs and in view of the scheme of the different sections and rule 37 of the Rules, which I have referred to above, the only meaning that can be attached to the word "default" is non-payment and nothing more. The only effect of the so-called stay orders granted by the Assistant Commissioner, the Deputy Commissioner and the Tribunal was to stay the coercive machinery for the recovery of the tax under section 16(6). That does not mean that the assessee who was given the special concession at the time of filing the appeal or filing the revision without prior payment of the full tax then due from him, was also exonerated fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the Sales Tax Officer and a certain amount was determined as payable by the assessee by way of sales tax but the assessee was aggrieved by the order of assessment and he therefore preferred an appeal to the Assistant Commissioner of Sales Tax under section 30 of the Act. The first proviso to section 30, sub-section (1), provided that no appeal against an order of assessment, with or without penalty, shall ordinarily be entertained by the prescribed authority unless it is accompanied by satisfactory proof of the payment of the tax, with penalty, if any, in respect of which the appeal has been preferred. But the rigour of this provision was mitigated by the second proviso which declared that the prescribed authority may, if it deerns fit, for reasons to be recorded in writing, entertain an appeal against such order without payment of the amount of the tax including penalty, if any, or on proof of payment of such smaller amount as it may direct. The assessee did not make payment of the full amount of tax determined to be due under the assessment order and made an application to the Assistant Commissioner of Sales Tax that the appeal be entertained without insisting on full paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xhibit A collectively, granted stay against the recovery proceedings instituted by the department. The revision application was thereafter heard by the Deputy Commissioner of Sales Tax and on the merits, the assessee did not succeed but so far as penalty was concerned, the Deputy Commissioner of Sales Tax directed that penalty under section 16(4) should be restricted only to one per cent. of the amount of the tax. The assessee then carried the matter in revision to the Tribunal. The Tribunal also, like the revenue authorities, granted an order staying the recovery proceedings against the assessee and admitted the revision application without requiring any further payment of the amount of tax from the assessee. The Tribunal ultimately, when it came to hear the revision application, confirmed the assessment on merits but so far as penalty was concerned, the Tribunal took the view that since stay orders had been granted by the different appellate and revisional authorities, no penalty was leviable on the assessee under section 16(4). The Tribunal accordingly set aside that part of the order which related to the imposition of penalty on the assessee. Hence the present reference at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout full payment thereof, or (b) assessed for any period under section 14 or under section 15 less the sum, if any, already paid by the dealer in respect of such period, or (ii) the amount of the penalty payable under sub-section (4), shall be paid by the dealer into a Government treasury by such date as may be specified in a notice issued by the Collector for the purpose and the date to be so specified shall be not less than thirty days from the date of service of such notice: Provided that the Collector may, in respect of any particular dealer and for reasons to be recorded in writing, extend the date of such payment or allow such dealer to pay the tax due and the penalty, if any, by instalments. (6) Any amount of the tax together with the penalty, if any, which remains unpaid after the date specified in the notice issued under subsection (5) shall be recoverable as an arrear of land revenue." This section, as the marginal note shows, dealt with the subjectmatter of payment and recovery of tax. Sub-section (1) which marks the starting point in the scheme of payment and recovery of tax embodied in this section provided that "the tax shall be paid in the manner hereinaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er make payment of tax within the prescribed time or apply to the Collector for extending the date of payment or allowing the payment to be made by instalments and then comply with the extended date or the dates of instalments. If he did not do so, he would be liable to pay by way of penalty, in addition to the amount of tax, a sum equal to a certain percentage of the amount of tax depending upon how long the default continues. The State would also be entitled to proceed to recover the amount of tax from the assessee as an arrear of land revenue. The assessee in the present case admittedly failed to pay the amount of tax within the prescribed time and proceedings for recovery of the amount of tax were therefore instituted against him by the department. These proceedings were however stayed by the appellate and revisional authorities and there is no question before me in relation to these proceedings. The question arises only in regard to penalty and it is whether, for the period during which the stay orders were operative, penalty could be imposed on the assessee under subsection (4). The condition which attracts the applicability of sub-section (4) is that the tax is not paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult, that is payment of the amount of the tax, which can put an end to the operation of the sub-section. Now this provision would obviously cause great hardship to an assessee who might not be able to pay up the amount of tax by reason of financial stringency or other justifying circumstance. To mitigate this hardship in some measure, in cases where an appeal or a revision application might have been preferred by the assessee, the first proviso to the sub-section provided that the authority hearing appeal or the revision application may direct that the penalty in respect of any period shall be paid at such rate as it may think fit, the rate being not less than one per cent. and not more than two and one-half per cent. of the amount of tax for each month. The authority hearing the appeal or the revision application was thus given the discretion to fix the rate of penalty at a figure less than two and one-half per cent. even in those cases where that rate was otherwise applicable. But the rate could not in any event be less than one per cent. The assessee could, however, in case of genuine difficulty, approach the Collector and the Collector was given power under the second proviso t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax were ostensibly orders of stay, they had the effect of extending the date of payment. But apart altogether from this difficulty I fail to see how the orders staying the recovery proceedings can be regarded as orders extending the date of payment. As a matter of fact the order of stay passed by the Assistant Commissioner of Sales Tax in so many terms says that the order shall not prejudice the penalty leviable under subsection (4). Moreover this argument cannot possibly apply to the order of stay passed by the Tribunal. It was then urged on behalf of the assessee and that was the argument which found favour with the Tribunal and also with Mehta, J.that during the period that the stay orders were operative the assessee could not be said to be continuing to make default. This argument also does not appeal to me. The stay orders granted by the Assistant Commissioner of Sales Tax, the Deputy Commissioner of Sales Tax and the Tribunal did not have the effect of suspending the liability of the assessee to pay the amount of tax. The only effect of the stay orders was that recovery proceedings instituted by the State were stayed. Once the prescribed time was over and the amount of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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