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TMI Blog2002 (4) TMI 928X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. 4.. However, it was brought to the notice of the assessing officer by the audit party that in view of the notification dated March 5, 1971, no concessional rates of tax were applicable on the sale of furniture and, therefore, upon initiation of reassessment proceedings in assessment years 1988-89 and 1989-90, tax in respect of turnover of furniture against C form was reassessed on July 9, 1994 and August 9, 1994 respectively. In respect of assessment year 1990-91, same result was brought by resorting to rectification proceedings and tax was imposed on sale of furniture which has been assessed to too low a rate on regular assessment under section 10. While raising demand for the additional tax on the furniture, interest at the rates prescribed under section 11-B was also levied for each assessment years on the delayed payment of tax with effect from the date the tax was payable under the provisions of the Rajasthan Sales Tax Act, 1954. Thus, demand for Rs. 5,277, Rs. 8,441 and Rs. 6,439 was raised for the assessment years 1988-89, 1989-90 and 1990-91 respectively. 5.. Aggrieved with the levy of interest, the respondent-assessee filed appeals before the Deputy Commissioner (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of liability to pay such tax at the time stated in sub-section (2) or (2-A) of section 7, as the case may be. 9.. In this connection, the learned counsel for the petitioner has placed reliance on Haji Lal Mohd. Biri Works v. State of U.P. [1973] 32 STC 496 (SC), Calcutta Jute Manufacturing Co. v. Commercial Tax Officer [1997] 106 STC 433 (SC), Hindustan Engineering Co. v. Assistant Commissioner (Assessment) [1999] 113 STC 14 (Ker), Sales Tax Officer v. Maruthi Wire Industries Private Limited [1999] 113 STC 19 (Ker), Central Provinces Manganese Ore Co. Ltd. v. Commissioner of Income-tax [1986] 160 ITR 961 (SC) and Ganesh Dass Sreeram v. Income-tax Officer [1988] 169 ITR 221 (SC). 10.. On the other hand, it was contended by the learned counsel for the respondent-assessee that as no tax was found due on the basis of the returns of regular assessments under section 10, the provisions of sub-section (1) of section 11-B of the Act of 1954 cannot be invoked as the additional amount of tax has arisen on account of assessment or reassessment proceedings or rectification proceedings. The provisions of sub-section (2) of section 11-B only govern the cases of levying interest i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 7 of the Act. The amount which he was not required to pay at the time or before the filing of return, cannot be subjected to interest under section 11-B(1) which applies only to case where tax is not paid as per return, when payable by the assessee. This payment can hardly reference to amount which according to assessee is due and not tax due as a result of assessment. 13.. In this connection, the learned counsel for the respondentassessee has placed reliance on decisions of the Supreme Court in State of Rajasthan v. Ghasilal [1965] 16 STC 318 (SC) and J.K. Synthetics Ltd. v. Commercial Taxes Officer [1994] 94 STC 422 (SC) by which the earlier decision of the Supreme Court in Associated Cement Co. Ltd. v. Commercial Taxes Officer [1981] 48 STC 466 (SC) was overruled, while approving the dissenting opinion of P.N. Bhagwati, J; in Frick India Limited v. State of Haryana [1994] 95 STC 188 (SC), following the decision in J.K. Synthetics Ltd.'s case [1994] 94 STC 422 (SC) and the decision of the Punjab and Haryana High Court in Oswal Spinning Weaving Mills Ltd. v. State of Punjab [1996] 103 STC 491. The learned counsel has also placed reliance on another decision of the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date by which he was required to pay the tax by or under the provisions of this Act until the date of payment; (d) .................. (e) .................. (f) Where the liability to pay tax is quantified in respect of a registered dealer or any other dealer,- (i) who has furnished returns for the period for which the tax is quantified; or (ii) who has failed to furnish returns for the whole of the period for which the tax is quantified; or (iii) who has failed to furnish returns for any part of the period for which the tax is quantified; then, in respect of categories (i) and (iii), the difference between the tax quantified and the tax shown payable in the returns and in respect of category (ii), the difference between the tax, quantified and the tax paid, if any, shall in respect of category (i) and (ii) be divided proportionately amongst the periods for which he was required to pay tax by or under the provisions of this Act and in respect of category (iii) be divided proportionately amongst the periods for which he was required to pay the tax by or under the provisions of this Act but has failed to pay such tax, and the amount so determined shall be deemed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not exceed such limit as may be prescribed. (2) Every such return shall be accompanied by a treasury receipt or receipt of any bank authorised to receive money on behalf of the State Government showing the deposit of the full amount of tax due on the basis of return in the Government treasury or bank concerned. (2A) Notwithstanding anything contained in sub-section (2), the State Government may by notification in the Official Gazette require any dealer or class of dealers specified therein, to pay tax at intervals shorter than those prescribed under sub-section (1). In such cases, the tax according to his accounts shall be deposited at the intervals specified in the said notification in advance of the returns and the return shall be accompanied by the treasury receipts or receipts of any bank authorised to receive money on behalf of the State Government for the full amount of tax due shown in the return. (2B) .................. (2C) .................. (3) .................... (4) .................." 17.. Section 11 of the Act of 1954 deals with payment and recovery of tax. The relevant provision of section 11 of the Act of 1954 reads as under: "Section 11. Paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est may be passed up to 31st March, 1990. (3) .................." 19.. The substantive provision regarding levying of interest is contained in clause (a) of sub-section (1) of section 11-B of the Act of 1954, which provides for two contingencies in which interest becomes payable on the amount of tax: firstly where the dealer has furnished the return but has not paid the tax as per return; and secondly, where the dealer has not paid the tax within the time allowed by or under the provisions of the Act. In either case, the dealer is liable to pay interest on the whole or that part of the amount of tax which was not paid as per returns within the time as aforesaid at the rate of two per cent per month from the date by which he was required to pay the tax by or under the provisions of this Act until the date of payment. Like provision has been made in respect of dealer under sub-section (1)(b) of section 11-B who has chosen to file the revised returns making a clear mention that the amount of tax larger than that already paid is payable, such dealer is liable to pay interest on the excess amount of tax at such rate and for such period as provided in clause (a) of this sub-section a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he full amount of tax due according to him on the basis of return in the State Government treasury or bank concerned. That is to say that the requirement of tax which is payable as per assessee's own claim arises at least on the date when the return is filed and the proof of payment of tax should be accompanied with it. 25.. This is apart from the fact that under sub-section (2-A) of section 7 of the Act of 1954, the State Government may by notification in the Official Gazette require any dealer or class of dealers specified therein, to pay tax at intervals shorter than those prescribed under sub-section (1), as we are not concerned with the provisions regarding non-payment of tax under sub-section (2-A) of section 7 of the Act. 26.. Scheme of section 7(2) and (2-A) read by itself only requires payment of tax as per returns which according to assessee is due and cannot have reference to liability to pay tax quantified under any proceedings under the Act, whether by way of regular assessment or provisional or reassessment or by reapplication or any other proceeding referred to in explanation to clause (f) of subsection (1) of section 11-B. The contingencies envisage under clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liable to pay simple interest on such amount at one per cent per month from the day commencing after the end of the said period for a period of three months and at one and a half per cent per month thereafter during the time he continues to make default in the payments: Provided that, where as a result of any order under this Act, the amount, on which interest was payable under this section, has been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded: Provided further that no interest shall be payable under this section on such amount and for such period in respect of which interest is paid under the provisions of sections 11 and 14. " 30.. Under clause (a) of section 11-B, the interest was payable if the amount of any tax payable under sub-sections (2) and (2-A) of section 7 is not paid within the time allowed. Section 7 is part of machinery provision for effectuating the charge of imposition under section 3 of the Act of 1954. From the provision of section 7(2) and (2-A) quoted above, it is clear that every registered dealer is obligated to furnish return of his taxable turnover under section 7(1) periodically. Sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed on the basis of the information regarding turnover and taxable turnover furnished or shown in the return. Therefore, so long as the assessee pays the tax which according to him is due on the basis of information supplied in the return filed by him, there would be no default on his part to meet his statutory obligation under section 7 of the Act and, therefore, it would be difficult to hold that the 'tax payable' by him 'is not paid' to visit him with the liability to pay interest under clause (a) of section 11-B. It would be a different matter if the return is not approved by the authority but that is not the case here. It is difficult on the plain language of the section to hold that the law envisages the assessee to predict the final assessment and expect him to pay the tax on that basis to avoid the liability to pay interest. That would be asking him to do the near impossible." 36.. In coming to this conclusion, the Constitution Bench overruled majority opinion in Associated Cement Co. Ltd. v. Commercial Taxes Officer [1981] 48 STC 466 (SC) and approved the minority opinion of honourable Bhagwati, J., wherein he has said: "...........We must look at the return actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37.. However, both the decisions of the Supreme Court whether in Associated Cement Co. Ltd. case [1981] 48 STC 466, case or J.K. Synthetics Ltd. case [1994] 94 STC 422, arose out of similar dispute prior to substitution of section 11-B in the present form vide Act No. 4 of 1979 with effect from April 7, 1979. In both the cases, the assessee has claimed that freight paid by it on P.O.R. transactions were not part of taxable turnover and, therefore, no tax was paid by the dealer on the amount consisting of freight charges. However, the particulars of such freight charges and claims as not taxable were disclosed in returns. The apex Court finally decided the controversy in Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13, by holding it to be part of taxable turnover. This led to creation of additional demands of tax on such amounts for respective assessment year. Interest under section 11-B(a) was also levied which led to aforesaid two decisions. As noticed above in the first instance, apex Court held in Associated Cement Co. Ltd. case [1981] 48 STC 466 that tax due under section 7(2) and (2-A) means tax assessed on the basis of return for attracting sub-section (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay interest at the rates prescribed by the sub-section. But if he pays the difference of tax within the prescribed time, there is no question of charging interest. If such an interpretation is not placed, and if the Revenue's plea is accepted, serious anomalies would surface." 40. The anomalies to which the court referred were firstly it will render clause (b) of section 11-B read with section 11(2) nugatory and secondly it will result in a defaulter being in better position than a complier of law. 41.. As both the decisions do not concern with the amended provisions which have come into operation on April 7, 1979 and governs the present cases which have arisen thereafter, the scheme of new provision has to be examined afresh. 42.. One such noticeable change that has been brought about in the scheme of levy of interest is that the liability to pay interest is not connected with tax payable under section 7(2) and (2-A) but is related to "tax paid as per return". Thus, section 11-B(1)(a) is delinked with and not restricted in its operation to cases where such tax as is payable according to the assessee as per return filed by him has not been paid in terms of it with provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the liability to pay interest on unpaid tax amount accrued on the dealer in two situations only, viz., (i) failure to pay the tax due under sub-sections (2) and (2A) of section 7 and (ii) failure to pay the tax within the time allowed by the notice of demand or thirty days from the receipt of the notice by the dealer. Section 11-B before its amendment nowhere provided for payment of interest on the unpaid tax amount as found on final assessment from the date of the filing of the return under section 7 of the Act." 44.. The distinction noticed by the apex Court clearly gives out that clause (f) has connected the liability to interest under section 11-B(1)(f) with liability to pay interest on such amount of tax which has not been paid as per return with reference to assessment of tax and delinked it with payment of such tax as is due according to assessee as per his return. 45.. With this change section 11-B(1) and (2) both have to be assigned meaningful interpretation in the aforesaid context. 46. What is the meaning "tax payable as per sub-sections (2) and (2-A) of section 7" has been interpreted to mean, tax as is due according to assessee as per return submitted by him o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .. Obviously this contention keeps out of fiction created under section 11-B(1)(f) that such difference between amount paid and amount quantified is deemed to be payable when tax for the period to which it is related by proportioning it amongst the period. When it was payable, under provisions of the Act considering that tax becomes determined ex hypothesi on occurrence of taxing event and such tax becomes payable as per provisions of the Act in that regard, notwithstanding that actual determination of such tax has to await assessment through machinery provisions. That is only logical conclusion to which legal fiction of payability of tax for the period under section 11-B(1)(f) leads, and must be given effect to and effectuate the purpose of amending section 11-B. 51.. Principle is well-established that where there is created a legal fiction, it must be carried to its logical end to effectuate the object for which such legal fiction is created. 52.. Section 16-B was inserted in the Rajasthan Sales Tax Act, 1954 vide Act No. 3 of 1990 with effect from September 13, 1989. Sub-section (2) of section 16-B refers to the fact that no order for levy of interest is required to be pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d liability does not arise automatically. Such an order may be passed along with the assessment order or rectification order as the case may be or within such period as has been prescribed under section 16-B. The aforesaid scheme of levy of interest leaves no room of doubt that interest is payable on all demands as quantified under the Act for short payment prior to quantification. Interest is payable as per clause (1) of section 11-B for failure to pay such demand within the time allowed under law by deeming such tax to be payable for the periods determined under section 11-B(1)(f). Such interest is payable for the period anterior to quantification of demand. For the period after quantification of the interest becomes payable under section 11-B(2) where any amount of tax remains unpaid after expiry of period specified in notice of demand. 56.. The upshot of above discussion is that in respect of different contingencies envisaged under section 11-B(1), including tax payable on quantification, interest is payable for any amount of tax found due but not paid, for period up to date of quantification of tax, by deeming such quantified tax to have become payable prior to the date of q ..... X X X X Extracts X X X X X X X X Extracts X X X X
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