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TMI Blog2013 (5) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... on 27(1) of the said Act must be the tax which is due “according to a return”. It is obvious that if no return is filed then there could be no tax due within the meaning of section 27(1) of the said Act read with section 21(3) thereof. The tax which is ultimately assessed is the tax which becomes due on assessment and if this tax so assessed is not paid even after the demand is raised then the dealer would be deemed to be in default and would be liable to pay interest under section 27(2) of the said Act. But till such tax is assessed no interest can be levied on such a dealer, who has not filed a return under section 27(1) of the said Act. Thus, it is evident that the impugned order is not in accord with the Constitution Bench decisions of the Supreme Court in Rajasthan v. Ghasilal [1965 (1) TMI 41 - SUPREME COURT OF INDIA]. Thus, writ petition is allowed to the aforesaid extent. - W.P.(C) 1638/1994 - - - Dated:- 21-3-2013 - Badar Durrez Ahmed And R. V. Easwar,JJ. For the Petitioner : Mr Rajesh Jain, Advocate. For the Respondent : None. JUDGMENT Badar Durrez Ahmed, J (Oral) 1. This is an old matter of 1994. It has been specifically listed today ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary demand notice and challans in terms of the said order, which included computation of interest for each of the four quarters of 1980-81 both under the local Act as well as under the central Act. The computation of interest was given as under: Under the Local Act Interest Ist Qr. ₹ 18,14,362.00 IInd ₹ 11,43,682.00 IIIrd ₹ 6,15,795.00 IVth ₹ 5,05,817.00 Under the Central Act Ist Qr. ₹ 3,06,878.00 IInd ₹ 95,308.00 IIIrd ₹ 36,725.00 IVth ₹ 33,096.00 5. Being aggrieved by the said order dated 03.09.1986 the petitioner preferred an appeal before the Sales Tax Appellate Tribunal (hereinafter referred to as the Tribunal‟). The Tribunal disposed of the said appeal by an order dated 31.07.1989. The Tribunal considered three issues: - (a) The dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that since this was a case where the petitioner/ dealer had not filed any return whatsoever, there was no question of levy of interest under section 27(1) of the said Act. He submitted that the provision of interest under section 27(1) would only apply where the petitioner/ dealer failed to pay the tax due as required by section 21(3) of the said Act. He further pointed out that the expression tax due would have reference to section 21(3) of the said Act which required the registered dealer to furnish returns and pay the full amount of tax due from him under the said Act according to such returns . Thus, according to the learned counsel for the petitioner, prior to an assessment, unless and until the dealer filed a return, there could not be any tax due because that would have relation to the amount of tax due according to the return . Since, no return was filed, therefore, there could be no tax due‟ as used in section 27(1) of the said Act. The learned counsel for the petitioner also submitted that while it may seem incongruous that a person who files a return would be liable to pay interest and a person who does not file the return would not be liable to pay an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xxx (3) xxxxxxx xxxxxxxx xxxxxxxx (4) xxxxxxx xxxxxxxx xxxxxxxx (5) If a dealer fails to furnish returns in respect of any period by the prescribed date, the Commissioner shall, after giving the dealer a reasonable opportunity of being heard, assess to the best of his judgment the amount of tax, if any, due from him. xxxxxxx xxxxxxxx xxxxxxxx Section 27 Interest (1) If any dealer fails to pay the tax due as required by sub-section (3) of section 21, he shall, in addition to the tax (including any penalty) due, be liable of pay simple interest on the amount so due at one per cent per month from the date immediately following the last date for the submission of the return under sub-section (2) of the said section for a period of one month thereafter for so long as he continues to make default in such payment or till the date of completion of assessment under section 23 whichever is earlier. (2) When a dealer or a person is in default or is deemed to be in default in making the payment of tax, he shall, in addition to the amounts payable under section 23 or section 24, be liable to pay simple interest on such amount at one per cent per month from the date of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by an assessing authority or time allowed by a provision in the Rules or the Act, or all these things, as we are of the view that no tax was due within the terms of s. 16(1)(b) of the Act. Section 3, the charging section, read with s. 5, makes tax payable, i.e., creates a liability to pay the tax. That is the normal function of a charging section in a taxing statute. But till the tax payable is ascertained by the assessing authority under S. 10, or by the assessee under s. 7(2), no tax can be said to be due within s. 16(1)(b) of the Act, for till then there is only a liability to be assessed to tax. (underlining added) 14. The observations of the Constitution Bench were in respect of the provisions of Rajasthan Sales Tax Act, which are similar to the provisions of Delhi Sales Tax Act, 1975. The decision in Ghasilal (supra) has been summarized by the Supreme Court in J. K. Synthetics Ltd. (supra) as under: - 8. The decision rendered by the Constitution Bench of this Court in the case of Ghasilal turned on the following facts. The Act had come into force on 1-4-1955 while the rules framed thereunder were published in the Rajasthan Government Gazette on 28-3-1955. Ghasilal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired under Section 10, the liability for payment of penalty did not arise. On the other hand the Revenue contended that the liability to pay tax had arisen under Sections 3 and 5 of the Act and the delay in complying with the demand notice entailed imposition of penalty. This Court held: According to the terms of Section 16(1)(b), there must be a tax due and there must be a failure to pay the tax due within the time allowed. i.e., creates a liability to pay tax. That is the normal function of a charging section in a taxing statute. But till the tax payable is ascertained by the assessing authority under Section 10, or by the assessee under Section 7(2), no tax can be said to be due within Section 16(1)(b) of the Act, for till then there is only a liability to be assessed to tax The situation may be different after the introduction of Section 7-A. The contention based on the show-cause notice was brushed aside as one without substance as the learned counsel for the Revenue was unable to show any rule or section under which it was issued. On this line of reasoning this Court upheld the High Court decision and dismissed the appeal. 15. The minority view in Associated Ceme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (2) of Section 7 that it is only on the filing of the return that the liability to pay the tax due on the basis of the return arises. If no return is filed within the prescribed time, it would undoubtedly constitute a default attracting penalty under Section 16, sub-section (1), clause (n), but there would be no liability on the assessee to pay interest on the amount of the tax, because the liability to pay the tax due on the basis of the return under sub-section (2) of Section 7 can arise only when the return is filed. There is no liability on the assessee to pay any amount by way of tax until the return is filed or the assessment is made. This is clear from the decision of this Court in the State of Rajasthan v. Ghasilal where this Court held in so many terms at page 322 of the Report that since the assessee in that case did not file returns till December 19, 1959 and January and March 1960, Section 7(2) could not be attracted till then (emphasis supplied). I fail to understand how in the face of these observations made by a Bench of five Judges of this Court, it can ever be held that Section 7, sub-section (2) is attracted even when no return has been filed. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made to deal with erring dealers and defaulters and these provisions being penal in nature would have to be construed strictly. But the machinery provisions need not be strictly construed. The machinery provisions must be so construed as would enable smooth and effective collection of the tax from the dealers liable to pay tax under the statute. Section 11-B provides for levy of interest on failure of the dealer to pay tax due under the Act and within the time allowed. Should this provision be strictly construed or should it receive a broad and liberal construction, is a question which we will have to consider in determining the sweep of the said provision. We will do so at the appropriate stage but for the present we may notice the thrust of this Court‟s decision in the case of Associated Cement Co. Ltd.? 18. This question has been answered after examining the position in Associated Cement Company Ltd. (supra) in detail as also several other decisions of the Supreme Court. The Constitution Bench concluded that any provision made in a statute for charging and levying interest on delayed payment of tax must be construed as a substantive law and not as an adjectival law a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, any provision made in a statute for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjectival law. So construed and applying the normal rule of interpretation of statutes, we find, as pointed out by us earlier and by Bhagwati, J. in the Associated Cement Co. case, that if the Revenue's contention is accepted it leads to conflicts and creates certain anomalies which could never have been intended by the legislature. 17. Let us look at the question from a slightly different angle. Section 7(1) enjoins on every dealer that he shall furnish prescribed returns for the prescribed period within the prescribed time to the assessing authority. By the proviso the time can be extended by not more than fifteen days. The requirement of Section 7(1) is undoubtedly a statutory requirement. The prescribed return must be accompanied by a receipt evidencing the deposit of full amount of 'tax due' in the state Government on the basis of the return. That is the requirement of Section 7(2). Section 7(2A), no doubt, permits payment of tax at shorter intervals but the ultimate requirement is deposit of the full amount of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that decision and affirm the minority view as laying down the correct law. We must make it clear to avoid any possibility of doubt in future that our view is based on the law as it stood before the amendments effected by Act 4 of 1979. Reference to the provisions of law after the amendments by Act 4 of 1979 are if at all for the limited purpose of comparison and we should not be understood to have expressed any view in regard to them. (underlining added) 19. Finally, the decision of the Supreme Court in Maruti Wire Industries Pvt. Ltd. (supra) is also to be considered. In that case the Supreme Court was considering the provisions of section 23(3) of the Kerala General Sales Tax Act, 1963 (which is similar to section 27 of the Delhi Sales Tax Act, 1975). After setting out the provisions of section 23(3) of the Kerala General Sales Tax Act, 1963, the Supreme Court observed as under: - 4. The present one is not a case where any amount of tax was collected by the appellant and then not deposited. It is an admitted position that the validity of impugned demand depends on the meaning to be assigned to the expression if the tax or any other amount assessed as occurring in Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the return or as to which an order of assessment has been made. 8. In view of the law laid down by the Constitution Bench, we are clearly of the opinion that the liability of the assessee appellant to pay sales tax could have arisen either on return of turnover being filed by way of self-assessment or else on an order of assessment being made. No doubt Rule 27 (7-A) of the Kerala General Sales Tax Rules, 1963 casts an obligation on assessees to file a return of total turnover and taxable turnover accompanied by proof of payment of the amount of tax due within 20 days of the previous quarter but such a return was not filed by the appellant. A failure to file return of taxable turnover may render the assessee liable for any other consequences or penal action as provided by law but cannot attract the liability for payment of penal interest under sub-section (3) of Section 23 of the Act on the parity of reasoning that if a return of turnover would have been filed on the due date then the tax as per return would have become due and payable on that date. (underlining added) 21. From an examination of the aforesaid decisions it is apparent that the expression tax due as appear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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