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TMI Blog1988 (8) TMI 388X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1956 (for short, "the Act") was amended from time to time and one of such amendments was made in 1977 which came into force with effect from 15th December, 1977. This would be relevant for our consideration with respect to few of the cases we are to deal with. Similarly, the Assam Finance (Sales Tax) Rules, as amended in 1968 was published in the Assam Gazette (Part II-A) dated 25th June, 1969. This amendment was given effect retrospectively from 1st January, 1968. This would also be relevant for the purpose of these cases. It is needless to say that a legislation or a statute is enacted to achieve some public purpose and the policy of law and the object sought to be achieved can furnish reliable guidelines for required exercise of discretionary power. It is also very clear that if a statute declares a definite policy, it must have a definite standard for the rule against the delegation of legislative power and also for equality if the standard is reasonable. The Act thus proposes to impose a liability on traders to pay tax on sales of taxable commodities as prescribed in the Schedule to the Act. 4.. These bunches of civil rules have arisen out of demand notices issued by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r returns and paid tax due according to the returns after expiry of prescribed time and in whose cases the assessing authority had accepted the returns and had issued demand notice on them to pay tax and thereafter assessed interest after 2 years on the amount of tax for the period for which such payment was delayed. 7.. One of the moot points as advanced in all these cases relates to levy of interest after completion of assessment and issue of demand notices for payment of such interest. The second significant question which arises in these cases is as to whether after completion of final assessment, the authority could levy interest and issue demand notices for payment of interest without taking recourse to rectification proceedings as provided under section 12 of the Act. In the context of the above the next question would come for consideration as to whether the interest could at all be levied when the final assessment was made for payment of required tax. Admittedly, in several cases no rectification proceeding was resorted to for enhancing the earlier assessment by levying interest. The assessments for payment of taxes in these cases were completed in 1973 and the required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cing the assessment, a refund shall be due to the dealer. (3) Where any such rectification has the effect of enhancing the assessment, a notice of demand shall be issued for the sum payable." One of the main thrust of argument centres round the application of aforesaid provision of section 12(1), relating to the levy of interest without taking recourse to the rectification proceedings of the earlier assessment order. 9.. Now, let us have a cursory glance at the provisions of rules 32A and 32B which have also been challenged as ultra vires and beyond the legislative competence of the State Legislature. Rules 32A and 32B are both amended provisions of the former Rules which were published in the Assam Gazette (Part II-A) dated 25th June, 1969 and brought into force with effect from 1st January, 1968. The provisions of rule 32A prescribe the rate of simple interest that could be levied for failure to submit the return and payment of required tax due by a dealer within the period prescribed under rule 17 of the Rules and of the proviso thereunder. Rule 32A of the Rules runs as follows: "32A. If a dealer does not submit the return and pay the amount of tax due from him within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act on the basis of the return or his account books within the prescribed date, simple interest at the rate of six per cent per annum from the first day of the month next following the said date shall be payable by the dealer upon the amount by which the tax so paid falls short of the amount of tax payable as per his return or account books. If such amount of tax and interest are not paid within thirty days from the date from which the interest is due, simple interest up to a maximum of 24 per cent per annum shall be payable as may be prescribed. (2) Where on making the assessment, the Commissioner finds that a dealer has not maintained the account books properly and thereby he has suppressed the sale of goods in any period, the Commissioner may direct him to pay interest as prescribed in sub-section (1). If the amount of tax payable under the Act has been reduced in appeal or revision, the interest may be calculated on the reduced amount. (3) If any registered dealer does not pay into the Government treasury the amount of tax within the date as provided in sub-section (4) of section 22 or any instalment of the tax within the extended date as per proviso to sub-section (1) of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 15 of the Central Sales Tax Act, 1956 read with article 286 of the Constitution of India and it is beyond the legislative competence of the State Legislature to enact the provisions being not covered by item 54 of List II of the Seventh Schedule to the Constitution to levy such interest to the maximum of 24 per cent per annum in case the amount of tax and interest are not paid within 30 days from the date from which the interest is due. In the aforesaid context it is further submitted by the learned counsel for the petitioners that it suffers from vice of excessive delegation inasmuch as essential legislative function in the matter of fixation of rate of interest has been delegated to the executive without any control or guidelines in this matter. The next ground of attack is as to the validity of rules 32A and 32B of the Assam Finance (Sales Tax) Rules, 1956 as amended. It is submitted by the learned counsel that these two rules as incorporated, namely, 32A and 32B of the amended Rules read with section 22A of the Act are beyond the competence of rule-making power of the State Legislature. Section 22A of the Act provides the levy of interest at 24 per cent per annum. as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That in the present nature of the cases the question of applicability of section 12 of the Act does not arise. According to the learned counsel no rectification proceeding is required to be taken up for levy of interest and the assessing authority is competent to issue the order and demand notice for payment of interest to the dealers who have defaulted to pay due tax for the period for which it becomes due. It is obligatory, as submitted by Mr. Lahiri, on every dealer to submit correct return and also to pay due tax and in failure of which, irrespective of the assessment made for the amount of tax due, the assessing authority can levy interest in a separate proceeding which does not require any rectification of the earlier order of assessment. Therefore, according to the learned counsel, if a rectification proceeding is not taken up, which in fact was not needed in the present nature of the cases, there was no obligation on the part of the authority to issue any prior notice to the dealer to afford an opportunity of being heard. (b) As regards the enhancement of the amount of total tax as assessed earlier it is submitted by Mr. Lahiri that the amount of interest which was levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be made only by rules framed under the Act, no imposition can be made except in accordance with such rules and not by any executive order. A statute may authorise the executive to vary the list of taxable commodities by addition or deletion, and even to fix rates of taxation. It is clear that the doctrine imposes on the rule-making authority the duty of framing the rules only in conformity to the provisions of the Act under which the rules are framed. If the rules are not warranted by the statute, the rules must be declared ultra vires. Article 265 of the Constitution lays down that no tax shall be levied or collected except by authority of law, and law has been interpreted to mean rules, bye-laws or regulations provided the statute under which these rules, etc., are made, authorises the imposition. Though rules can be declared ultra vires the power of the authority to make such rules, what would be the position if the rules are declared to be part of the statute by using the formula "as if enacted in the Act" within the body of the statute? The English case of House of Lords (Institute of Patent Agents v. Lockwood [1894] AC 347) interpreted these words to exclude the doctrine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not have any effect because the result would have been the same even if notice had been issued. Their Lordships of the Supreme Court, however, held that the High Court was wrong in holding that there was no breach of principle of natural justice and further held that the High Court ought to have quashed the order. It was observed and held: "It will appear from this that the action under section 35 may be taken in favour of the tax-payer without any notice to him but if the action has the effect of enhancing an assessment or reducing the refund, the Income-tax Officer, acting under section 35, must send a notice to the assessee and give him a reasonable opportunity of being heard." This admittedly was not done in these cases. It was incumbent upon the Income-tax Officer to give notice and a hearing to an assessee when the effect of rectification would be the enhancement of the assessment. This view of the Supreme Court was expressed in the context of the similar view as expressed in the case of Sinha Govindji v. Deputy Chief Controller of Imports and Exports reported in [1962] 1 SCR 540. The aforesaid decision has been referred to us in the context of rectification of the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribed under the Act. In the present case it is the admitted position that tax due on the basis of quarterly return was not paid as required by sub-section (3) and the petitioner was, therefore, liable to pay interest on the amount of tax in respect of which default was committed at the rate prescribed in sub-section (2) from the last date prescribed for filing quarterly return under the Act up to the date of payment........" 20.. In Kishan Lal Agarwalla v. Agricultural Income-tax Officer, Assam 1974 ALR 292 this Court had the occasion to deal with the provision of section 19 of the Assam Agricultural Income-tax Act, 1939 which subsequently was amended in 1967. In the said case the proceeding for assessment was initiated by issue of notice under section 19(2) of unamended Act. In that case it was held that when the proceeding was started under unamended provision of section 19 of the Act, the assessment proceeding must be finalised keeping in view the unamended Act. It was further held that in view of section 6 of the Assam General Clauses Act it was quite clear that the assessment proceeding that was started by issuing notice under section 19(2) of the unamended Act would hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e published in the Assam Gazette) cannot be given effect to for the reason that the fixation of rate of interest cannot have any retrospective effect. Reference can be made to a decision of this Court rendered in Hanuman Match Works [1982] 50 STC 295; (1982) 1 GLR 181. All such questions were raised in the said case. It was a case under the Assam Finance (Sales Tax) Act and the Rules. In that case rule 46A which was inserted by an amendment in 1971 was given retrospective effect on and from 1st January, 1968. It was held in that case that the statute does not authorise a rule-making authority to give a rule retrospective effect. 22.. Here in this case the provisions of rules 32A and 32B of the Rules were published on 25th June, 1969 by giving a retrospective effect from 1st January, 1968. For this, though the Rules would not become invalid, but the retrospective operation would alone be ineffective. Therefore, the new Rules must be deemed to have started operating on and from 25th June, 1969 and not retrospectively from 1st January, 1968. Therefore, the cases for the period ending 24th June, 1969 would not be covered by new provisions of rules 32A and 32B. It may further be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it will be apparent that the levy of interest is part of the process of assessment. Although section 143 and section 144 do not specifically provide for the levy of interest and the levy is, in fact, attributable to sub-section (8) of section 139 or section 215, it is nevertheless a part of the process of assessing the tax liability of the assessee........" 25.. In the present cases at hand, there is no dispute that in case of default as prescribed under the aforesaid relevant provisions of law for submission of return or for non-payment of full tax due, the interest begins to accrue on unpaid amount of tax. But while the assessment was completed in the year 1973 even for the period ending for a particular quarter, it was known to the assessing authority that the dealer was liable to pay interest for such default of payment of due tax. But the assessing authority failed to assess interest along with due assessment of tax though in the assessment form a separate column for assessment of interest under section 22A of the Act has been prescribed. The demand notice was issued after completion of assessment of due tax, but no interest was claimed. After about 2 years of completio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of assessment. But in some cases it was not done. When the provisions of section 12 of the Act was not followed the demand notices issued to the affected dealers are liable to be quashed. Therefore, we quash those demand notices issued to the dealers in not following the procedure under section 12 of the Act for rectification of the order of assessment with the demand of interest enhancing the total amount of tax payable by the dealer for the particular period. However, the assessing authority may take up rectification proceedings in case of those affected dealers if those are not otherwise barred and if there is no other impediment under the Act and the Rules. We have already held that the provisions of the Act and the Rules cannot have any retrospective operation and it would only be effective on and from the date it was notified in the Assam Gazette on 25th June, 1969 and not from 1st January, 1968. Therefore, no interest would be leviable under the Rules in case of those dealers to whom demand notices were issued for the period ending 31st March, 1968, 30th September, 1968 and 31st March, 1969 except the liabilities as imposed under section 22A of the Act. We also accor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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