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TMI Blog1980 (4) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... the turnover under the Central Act by order of the Assistant Commissioner of Sales Tax dated 12th January, 1972. A revision against this order was dismissed by the Commissioner of Sales Tax on 30th August, 1974. The petitioner then filed two applications for rectification to the Commissioner of Sales Tax drawing attention to the decision of the Supreme Court in Khemka Co. v. State of Maharashtra[1975] 35 S.T.C. 571 (S.C.)., in which it was held that penalty provisions under the State Act were not attracted for assessment of tax under section 9 of the Central Act. The applications for rectification were allowed by order dated 27th July, 1976, passed by the Commissioner of Sales Tax and the penalties imposed for both the periods were cancelled. After the Central Act was amended by the Central Sales Tax (Amendment) Act, 1976, the Assistant Commissioner of Sales Tax by order dated 11th July, 1977, held that the Commissioner's order dated 27th July, 1976, passed in rectification proceedings became inoperative. Recovery proceedings for penalties imposed for both the periods were started against the petitioner. The petitioner then filed this petition under article 226 of the Constitutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment, collection and enforcement of payment of any tax required to be collected under the principal Act in such State; and (ii) any process connected with such assessment, reassessment, collection or enforcement of payment; and (b) that for the purpose of the application of the provisions of such law, the tax under the principal Act shall be deemed to be tax under such law. (2) Notwithstanding anything contained in any judgment, decree or order of any court or tribunal or other authority, all penalties under the general sales tax law of any State imposed or purporting to have been imposed in pursuance of the provisions of section 9 of the principal Act, and all proceedings, acts or things taken or done for the purpose of, or in relation to, the imposition or collection of such penalties, before the commencement of this Act shall, for all purposes, be deemed to be and to have always been imposed, taken or done as validly and effectively as if the provisions of sub-section (1) had been in force when such penalties were imposed or proceedings or acts or things were taken or done and, accordingly,- (a) no suit or other proceedings shall be maintained or continued in or befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Act and the validation provisions in section 9 of the amending Act were made with the object to get over the majority judgment in the Khemka's case(1). The objects and reasons as appended to the Bill read as follows: "Sub-section (2) of section 9 of the Central Sales Tax Act empowers the State sales tax authorities to assess, reassess, collect and enforce payment of Central sales tax. The sub-section also authorises the authorities under the State sales tax laws to exercise all the powers which they have under those laws (including, inter alia, the power to impose penalties) for the purposes of the Central Sales Tax Act also. In Khemka Co. (Agencies) Private Ltd. v. State of Maharashtra[1975] 35 S.T.C. 571 (S.C.). the Supreme Court, by a majority of 3:2, held that the provisions of the State sales tax laws as to penalties do not apply for purposes of the Central sales tax. In view of this judgment, the State Governments are faced with the problem of having to refund the amounts collected in the past by way of penalties. The judgment has also resulted in a vacuum being created in regard to levy of penalties. It is, therefore, necessary to amend section 9 of the Central Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notwithstanding clause in sub-section (2). The view taken by us is further supported by clauses (b) and (c) of sub-section (2). Clause (b) specifically provides that no court, tribunal or other authority shall enforce any decree or order directing the refund of any amount received or realised by way of such penalty. This clause presupposes that the decree or order directing the refund has become ineffective and inoperative because of sub-section (2) and the penalty imposed has become operative. Clause (c) also proceeds upon the same hypothesis when it provides that where any amount which had been received or realised by way of such penalty had been refunded before the commencement of the amending Act and such refund would not have been allowed if the provisions of sub-section (1) of section 9 had been in force on the date on which the order for such refund was passed, the amounts so refunded may be recovered as arrears of tax. It is implicit in this provision that the order directing refund on cancellation of penalty becomes inoperative because of the validating provisions contained in section 9 of the amending Act and the penalty refunded can be recovered back as arrears of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enforcement of the payment of any tax". Section 43 of the State Act corresponds to section 28 of the Income-tax Act, 1922. In dealing with section 28, the Supreme Court in C. A. Abraham v. Income-tax Officer, Kottayam[1961] 41 I.T.R. 425 (S.C.)., observed that penalty "is imposable as a part of the machinery for assessment of tax liability". The court also quoted with approval the observations of Subba Rao, C.J., in Mareddi Krishna Reddy v. Income-tax Officer, Tenali[1957] 31 I.T.R. 678., that "the defaults enumerated therein (section 28) relate to the process of assessment. Section 28, therefore, is a provision enacted for facilitating the proper assessment of taxable income". Abraham's case(1) was quoted with approval by the minority judgment in the Khemka's case(3), at page 585, and it was observed: "The ratio of the decision is that penalty is imposed as part of the machinery for assessment of tax." The insertion of sub-section (2A) in section 9 of the Central Act by the amending Act and the validating provision in section 9 of the said Act have the object of restoring the law laid down by the minority judgment in the Khemka's case[1975] 35 S.T.C. 571 at 585 (S.C.). as is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amcharan v. Sales Tax Officer[1978] 41 S.T.C. 459; 1978 M.P.L.J. 321., a Division Bench of this Court took the view that it is not always necessary to set aside an order imposing penalty when the order relating to assessment of tax is set aside and the proceedings for assessment are remanded. It is pointed out in that case that if it is clear that the tax assessed would not be reduced in the assessment after remand, the appellate authority may not interfere with the penalty imposed. In that case there is a specific finding that there was absolutely no chance of the tax being reduced in the assessment after remand. The case is, therefore, distinguishable. In the instant case, as already pointed out by us, there is every likelihood that the tax would be reduced in the assessment after remand. It was, therefore, necessary to set aside the order of penalty also. 8.. The petition is partly allowed. The order dated 30th August, 1974, passed by the Commissioner in Sales Tax Revision No. 24/R (Central) of 1972-73 is quashed in so far as it maintains the imposition of penalty of Rs. 9,200. The order dated 12th January, 1972, passed by the Assistant Commissioner imposing penalty is also qu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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