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TMI Blog1986 (3) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty was imposed because the dealer was an habitual defaulter. The dealer appealed against the imposition of the penalty, but the Assistant Commissioner of Sales Tax dismissed the same. A further appeal to the Sales Tax Appellate Tribunal met the same fate. At the instance of the dealer, the Sales Tax Appellate Tribunal has referred the following question of law for decision by this Court: "Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that the penalty under section 11 of the Bengal Finance (Sales Tax) Act was legally levied?" There were three grounds on which, it was said, that the imposition of the penalty was illegal. The first can be disposed of quite shortly. Section 11(1) of the Act reads as follows: "If no returns are furnished by a registered dealer in respect of any period by the prescribed date, or if the Commissioner is not satisfied that the returns furnished are correct and complete, the Commissioner shall, within eighteen months after the expiry of such period, proceed in such manner as may be prescribed to assess to the best of his judgment the amount of the tax due from the dealer and in making such assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered dealer in respect of any period by the prescribed date", and (ii) "if the Commissioner is not satisfied that the returns furnished are correct and complete". The second half of the sub-section gives the assessing authority power to impose a penalty. But, this power can be exercised only when the first of the two eventualities contemplated by the first half of the sub-section occurs: that is to say, when the returns are not filed by the prescribed date. The power is not available in the second eventuality envisaged. In specifying the quantum of the penalty which can be imposed, the closing words of the sub-section put the limit at one and a half times the "amount of the tax so assessed". The argument of counsel for the dealer is that the words "so assessed" refer to and mean an assessment of the nature of a best judgment. Consequently, he says, if the assessment actually made does not amount to a best judgment, the penalty cannot be imposed. According to him, a best judgment necessarily means an estimate. And, since in the present case the returns and the account books of the dealer were accepted, the assessment could not be styled a best judgment. Hence, the power to impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turns themselves". Under the Act applicable in Delhi, likewise, returns were required to be filed at the prescribed intervals. The tax had to be deposited before the returns were filed. The Sales Tax Acts are largely based on the theory of self-assessment: see Madan Mohan v. District Excise and Taxation Officer, Bhatinda [1964] 15 STC 648 (Punj). If the returns are accepted as correct, it means that the assessment made by the assessee himself is accepted, and no order of assessment is necessary to be made. I think, the Bengal Finance (Sales Tax) Act, 1941, was drafted on that understanding of the scheme of things. I revert to the question what is meant by the words "to the best of his judgment" in section 11(1). In any provision of law, the words used must be interpreted in consonance with the context. Of course, one must start by giving them the meaning which they ordinarily convey; but, if there is any doubt, it is the context which dictates the meaning. Whilst one may seek assistance from dictionaries, lexicons, precedents and statutes in pari materia and so forth, the ultimate principle for determining the meaning of the words is to gather it from the context. As regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord and thereafter the assessing authority has to pass an order of assessment on whatever material there might be or on whatever material the assessee might be able to produce." And, there are observations to the same effect in State of Andhra Pradesh v. Donthala Rajaiah [1960] 11 STC 819 (AP). It would, surely, be a startling proposition that merely because a return is filed late, the assessing authority is bound to hold that it is not correct. There will be many a case of an honest dealer filing a return late due to inadvertence or oversight or circumstances beyond his control. Must his return be rejected as incorrect simply because of the delay? There is no logic in such reasoning. Conversely, if the assessing authority can accept a return filed late as being correct, then he must be able to make an assessment on that basis. Which, then, is the section under which the assessing authority would make such an assessment under the Act? There is no other section available except section 11(1). From which, it follows, that the words "to the best of his judgment" used in section 11(1) are, in the context, intended, also, cover a case where the assessing authority accepts as correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be based on the figures furnished by the assessee, so long as no return was submitted by the assessee under section 12(1), the assessment made by the assessing authority is one made under section 12(2) which is referred to therein as a best judgment assessment. Once the assessment in this case is taken as one made under section 12(2) of the Act, section 12(3) is automatically attracted." Thus, in my opinion, the assessment made by the assessing authority in the present case was "to the best of his judgment" within the meaning of those words as used in section 11(1). Penalty for late filing of returns could, therefore, be imposed under that sub-section. The third argument was that, since a consolidated sum of Rs. 15,000 had been levied as penalty for the late filing of returns for all the four quarters, it was not possible to know what amount of penalty had been levied for the late filing of each particular return, and, thus, to judge whether the limit stated in section 11(1) had been exceeded or not. The fallacy, here, is to equate a return period with the assessment period. The two periods may, or may not, coincide. There is nothing in the Act which suggests that they m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion, this argument of the assessee cannot, in law, be sustained. For these reasons, I would answer the question referred in the affirmative. Having regard to the difficulty of some of the questions involved, I would leave the parties to bear their own costs. J.D. JAIN, J.-The Appellate Tribunal, Sales Tax, Delhi, has referred the following question of law for decision of this Court as envisaged in section 45 of the Delhi Sales Tax Act, 1975 [corresponding to section 21 of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi] (hereinafter referred to as "the Act"). "Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that the penalty under section 11 of the Bengal Finance (Sales Tax) Act was legally levied?" The facts germane to the decision of the aforesaid question succinctly are that the assessee M/s. Bharat Wood Products Co. was a registered dealer under the Act at the relevant time, viz., assessment year 1971-72. It was carrying on the business of sale and purchase of plywood, hard board and laminated sheets. The assessee was required to furnish quarterly returns in respect of its taxable turnover. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority as may be prescribed. (3) Before any registered dealer furnishes the returns required by subsection (2), he shall pay into a Government treasury or the Reserve Bank of India or in such other manner as may be prescribed the full amount of tax due from him under this Act according to such returns, and shall furnish along with the returns a receipt from such treasury or bank showing the payment of such amount.... 11.. If no returns are furnished by a registered dealer in respect of any period by the prescribed date, or if the Commissioner is not satisfied that the returns furnished are correct and complete, the Commissioner shall, within eighteen months after the expiry of such period, proceed in such manner as may be prescribed to assess to the best of his judgment the amount of the tax due from the dealer, and in making such assessment shall give the dealer a reasonable opportunity of being heard, and in the case of failure by a registered dealer to submit in respect of any period a return accompanied by a receipt from a Government treasury or the Reserve Bank of India as required under subsection (3) of section 10, by the prescribed date, the Commissioner may, if he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty if he is not satisfied that the returns are correct and complete even though he can proceed to make assessment to the best of his judgment in such an eventuality also. This vital omission, to my mind, would in itself be enough to repel the contention of the petitioner's counsel that penalty can be levied only when assessment is based on best judgment and not otherwise. There is, however, another important factor to reckon with. It is that apart from section 11 there is absolutely no other provision in the Act which empowers the assessing authority to frame assessment. This section does not in terms speak of the power of the assessing authority to frame assessment when returns are furnished and the amounts due are deposited by an assessee well within time, and the same are found to be correct and complete in all respects. Can it be said to be a case of casus omissus? As a general rule a court of law will not readily read into a statute casus omissus nor has it power to fill any gaps disclosed in an Act. To do so would be to usurp the function of the legislature. Said Lord Atkinson: "The intention of the legislature, however obvious it may be, must, no doubt, in the constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction may sometimes serve as a key to the construction of an ambiguous statutory provision. (see Craies on "Statute Law", 6th Edition, pages 207 and 210). The contention of the learned counsel for the petitioner is that no formal order of assessment is at all necessary when returns are filed in time and the same are accepted as correct by the assessing authority. Argues he that after all the purpose of making an assessment is to quantify the amount of sales tax payable by a dealer and no specific order would be necessary when the returns and the accounts submitted by the dealer are accepted as correct by the assessing authority. To say the least, acceptance of accounts itself amounts to an assessment. Although the expression "assessment" is not defined in the Act but it obviously implies an investigation into and ascertainment of the correctness of the returns and the accounts filed by an assessee. So the process of assessment would evidently involve determination of the quantum of taxable turnover as also the quantum of tax amount, if any, payable by the assessee. Unfortunately the extreme conciseness of the provision contained in first part of the section is responsible for this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment have to be construed by the ordinary rules of construction, that is to say, in accordance with the clear intention of the legislature, which is to make a charge levied effective." (see also Banarsi Debi v. Income-tax Officer, District IV, Calcutta [1964] 53 ITR 100 (SC). I need hardly say that the first part of section 11 simply provides for the procedure and the machinery for the assessment of sales tax. It does not in itself create or fasten liability for payment of sales tax on the assessee. It is section 4 of the Act which deals with incidence of taxation under the Act and fastens liability to pay tax under the Act. Further, section 5 deals with the rates of tax. So, on a mere juxtaposition of the said sections with sections 10 and 11 which provide for payment of tax, furnishing of returns and assessment of sales tax it would be manifest that the first part of section 11 which we are concerned at present cannot strictly speaking be termed as a taxing provision so as to warrant stringent construction. Section 11 would, therefore, cover all cases of assessment of sales tax, whether based on the returns and the accounts furnished by the assessee or made to the best of jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was based on the assessee's account books which are accepted along with other records there can be no ground for making a best judgment assessment, it being well-known that the best judgment assessment has to be on an estimate. In other words, an element of guess-work is bound to be present in best judgment assessment although it must have a reasonable nexus to the available material and the circumstances of each case. To the same effect are the decisions in Bata Shoe Co. P. Ltd. v. Joint Commercial Tax Officer [1968] 21 STC 135 (Mad.) and Deputy Commissioner of Commercial Taxes v. P.V. Perumal Swami [1983] 53 STC 221 (Mad.), which decisions are also under the Madras (Tamil Nadu) General Sales Tax Act, 1959. Assessment was made by the assessing authority in all the said cases under section 12(2) of the said Act which empowers the assessing authority to assess the dealer to the best of its judgment in two events: (i) if no return has been submitted by the dealer under sub-section (1) within the prescribed period, and (ii) if the return submitted by him appears to be incomplete or incorrect. Sub-section (3) of section 12 empowers the assessing authority to levy the penalty only when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said to be one of best judgment. A Division Bench of the Madras High Court answered this question in the affirmative observing that: "We are of the view that the term 'best judgment assessment' is not a term of art. Section 12(2) contemplates making best judgment assessment in two circumstances: (i) if no return is filed by the dealer under section 12(1) within the prescribed period; or (ii) if the return submitted by the dealer is found to be incomplete or incorrect. Therefore, any assessment made under either of the two contingencies mentioned above will have to be taken as a best judgment assessment. When the section itself refers to the assessment made under either of the two contingencies as a best judgment assessment, we will not be justified in interpreting the expression 'best judgment assessment' with reference to the general principle bearing on the question as to when an assessment can be said to be based on best judgment." With all the respect at my command, if I may say so, I do not feel persuaded to subscribe to the reasoning of their Lordships. In legal parlance the expression "best judgment assessment" has come to stay as a definite and precise concept connoti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be linked to best judgment assessment and mere delay on the part of the assessee in filing the return/depositing the amount of tax due without any reasonable cause would be enough per se to warrant imposition of penalty. The decision adverted to above, therefore, can have no bearing on the case on hand in view of the clear distinction in the relevant provisions of the Madras General Sales Tax Act and section 11 of the Act. The learned counsel for the petitioner next submitted that under the provisions of the Act and the Rules made thereunder called "the Delhi Sales Tax Rules, 1951" the returns to be filed by a registered dealer are quarterly, the amounts of sales tax due from the assessee have also to be paid/deposited quarterly before filing the returns and as such a quarter of a year would constitute a unit of assessment for the purpose of sales tax. Consequently the assessing authority, in the instant case, acted illegally in imposing a consolidated penalty of Rs. 15,000 for the whole year even though the delay in filing the returns differed from quarter. Thus, according to him, the levy of consolidated penalty has resulted in prejudice to the petitioner inasmuch as the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every dealer whose liability to pay tax under this Act has ceased under the provisions of sub-section (3), shall, if his gross turnover calculated from the commencement of any year again exceeds the taxable quantum at any time within such year be liable to pay such tax on the expiry of two months from the date on which such gross turnover again first exceeds the taxable quantum on all sales effected after such expiry. On a conjoint reading of these provisions, therefore, it is crystal clear that a dealer incurs liability to pay sales tax if his gross turnover in a year exceeds the taxable quantum and he ceases to be so liable if his gross turnover does not exceed the taxable quantum for three consecutive years but he renders himself liable to pay tax again if his gross turnover exceeds the taxable quantum at any time during a year calculated from the commencement of that year which would obviously mean financial year. Thus, section 4 which, as stated above, deals with incidence of tax leaves no room for doubt that sales tax is a yearly tax and not a quarterly tax as is sought to be made out. This conclusion is further fortified on a perusal of sections 7 and 8. Sub-section (1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve years. Further the liability for assessment under section 11A on account of escaped assessment or under-assessment is also determined in relation to a year. Finally the terminus a quo for commencement of the overall period within which assessment can be made under sub-section (1) or sub-section (2) of section 11 is also the end of the year in respect of which or part of which the assessment is made. This is one side of the picture. As for the other side, which is sought to be highlighted by the learned counsel for the petitioner, section 10 of the Act comes first. As seen above, under sub-section (1) of this section the tax payable under the Act is to be paid at such intervals and in the manner as may be prescribed. The expression "prescribed" means prescribed by rules made under the Act. [See clause (e) of section 2]. Under sub-section (2) of section 10, the dealers are required to furnish returns by such dates and to such authority as may be prescribed. Subsection (3) thereof mandates that a registered dealer shall pay into Government treasury or the Reserve Bank of India in such manner as may be prescribed the full amount of tax due from him under the Act before he furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the registration certificate shall, inter alia, specify the return periods and the intervals at which the tax shall be payable. On a conjoint reading of the aforesaid provisions of the Act and the Rules, it is manifest that they relate to the manner and the procedure for furnishing periodical returns and payment of sales tax due from an assessee on the basis of such returns. They have absolutely no bearing on the basic question whether liability to pay tax is yearly or quarterly. Indeed, an analytical examination of the various rules leaves no room for doubt that while rules 17 and 18 talk of annual returns, rule 20 provides for furnishing quarterly returns and rule 23 empowers the appropriate assessing authority to even order furnishing of monthly returns by a registered dealer. That is why the certificate of registration is required to state the return periods as also the periods for which tax is to be paid by a registered dealer. By its very definition "return period" means the period for which returns are prescribed to be furnished by a dealer and it need not coincide with the assessment period. Obviously these provisions cannot be construed to imply that the liability to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es made thereunder by the Bengal Government, especially sections 4, 5, 7, 8, 10 and 11 of the Act and Rules 17, 19, 21, 24, 30 and 32 of the Bengal Sales Tax Rules, their Lordships held that: "Under the Bengal Finance (Sales Tax) Act, 1941, the tax is annual and the assessment is also annual, though returns may be made by dealers quarterly or half-yearly. It is, therefore, competent for the sales tax authorities to consolidate the demands for four quarters in one assessment proceeding." It may be pertinent to notice here that though rules 30 and 32 of the Bengal Sales Tax Rules specifically provide for assessment of tax payable by a dealer for the whole year but that is in respect of a dealer for whom annual return periods have been prescribed. So the said rules can have possibly no bearing on the proper construction of the provisions of the Act and the Rules as applicable to Delhi. In Mathra Parshad and Sons v, State of Punjab [1962] 13 STC 180 (SC), the appellant was a registered dealer under section 7 of the East Punjab General Sales Tax Act, 1948, and was selling manufactured tobacco. On 1st April, 1954, the Punjab Tobacco Vend Fees Act, 1954, came into force. On 27th Septe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , where provision is made for submission of periodical returns, and such assessments are not provisional. Adjustment may possibly have to be made when the assessment of the final quarter is made, but the taxing authorities are not debarred from determining and assessing the quarterly turnover of tax." The correct legal position which would thus emerge on a consideration of various provisions of the Act and the Rules appears to be that sales tax is a yearly tax even though return periods may vary being annual, quarterly or even monthly. Further, it would be open to the assessing authority if he so deems fit to even assess sales tax on quarterly basis but that would not in any way alter the nature of the sales tax being yearly one because the liability to pay tax accrues on the basis of gross/taxable turnover during a year and not on the footing of gross/taxable turnover during a return period whether it be a year, quarter or a month. Hence, I am of the considered view that the assessing authority is competent to make a single assessment with regard to sales tax payable during a year even though returns are required to be filed quarterly or monthly. Reliance has been placed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... close of the year for which the turnover is proposed to be assessed or reassessed. So the terminus a quo under section 11A of the Act is the close of the year of escaped assessment/underassessment and not the return period. Likewise, assessment can be made under sub-section (2) of section 11 in the case of a dealer who has failed to get himself registered within six years from the date of the year in respect of which or part of which the assessment is made. Hence, these authorities are clearly distinguishable and are of absolutely no avail to the petitioner. I now revert to the contention of the learned counsel for the petitioner that the penalty ought to have been imposed by the assessing authority for each quarter separately having regard to the amount of delay in filing the return for the particular quarter. Cumulative imposition of penalty, according to the learned counsel, is likely to prejudice the mind of the assessing authority inasmuch as combining delay in filing the returns for all the quarters tends to magnify the default beyond proportion and that may perhaps be the reason for imposition of heavy penalty in the instant case. He has also pointed out that no show caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support thereof; and (b) stating the period or the return periods in respect of which assessment is proposed, and he shall fix a date, giving reasonable time for producing such accounts and documents and for considering any objection which the dealer may prefer. Rule 36 lays down that after considering any objection made by the dealer and any evidence produced in support thereof, the assessing authority after giving the dealer an opportunity of being heard, shall assess the amount of tax (if any), and impose a penalty (if any) if he is satisfied that the default in submitting the returns were made without reasonable cause. It is thus abundantly clear that the assessing authority is bound to afford an opportunity to the assessee to be heard before assessing the amount of tax and imposing a penalty on him under section 11(1) of the Act. This is perfectly in conformity with the principle of natural justice. True, there is no specific provision in the Act or the rules for a separate notice to show cause against imposition of the proposed penalty but that would hardly be a ground to render levy of penalty illegal or invalid. Obviously the aforesaid provisions envisage that inviti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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