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TMI Blog2009 (10) TMI 828X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the writ petition, it would be relevant to mention that the Bihar Value Added Tax Act, 2005, a legislation under entry 54, List II of the Seventh Schedule to the Constitution of India was enacted on June 23, 2005 when it was published in the Gazette of India, Extraordinary dated June 23, 2005 and was enforced with effect from April 1, 2005 repealing the Bihar Finance Act, 1981. The period of dispute which falls for consideration in this writ petition is the assessment year 2005-06. The petitioner filed its return for the assessment year 2005-06 with respondent No. 4, the Deputy Commissioner of Commercial Taxes, Special Circle, Patna and claims to have paid taxes in accordance therewith which statement is not disputed by the respondents. The petitioner also claims to have filed value added tax report in the prescribed form TAR IV on July 25, 2006 and consolidated report of its audit comprising of statement of purchase and sale by its branches situated in different parts of the country including the State of Bihar, in the prescribed form No. TAR I and TAR IV on December 28, 2006. The due date for filing of such audit report is December 31st of each year, as per the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble, a sum by way of penalty equivalent to two per cent. of the tax payable by him under section 36 for every month, or part thereof, of such default." As the report submitted by the petitioner admittedly, did not bear the signature and verification of the accountant as per the provisions of section 54(2) of the Act, a notice came to be issued at the instance of respondent No. 4, the Deputy Commissioner, Commercial taxes on February 16, 2007 in purported exercise under section 54(4) of the Act read with rule 20(1a) of the Rules, requiring the petitioner to show cause as to why penalty be not imposed upon him for violation of the provisions of section 54(2) of the Act, copy whereof is placed at annexure 1 to the writ petition. The petitioner in compliance with the said show-cause notice responded by bringing to the notice of respondent No. 4 that it had already filed the report of its audit in the prescribed form and in the prescribed manner on July 25, 2006 and December 28, 2006 and that it had paid the payable taxes in accordance with the said return. It was also brought to the notice of respondent No. 4 that the said audit report had been prepared by a competent accountant aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e writ petition was initially filed questioning the vires of the provisions of section 54(4) of the Act, when the matter was taken up by this court for hearing on admission and disposal, the arguments advanced by Sri D.V. Pathy, learned counsel appearing on behalf of the petitioner, fell short of the same; rather Mr. Pathy, understandably, endeavoured to persuade us to read down the provisions of section 54(4) of the Act so as to withstand the touchstone of the Constitutional guarantees, particularly fairness and reasonableness. Mr. Pathy referred to statutory forms TAR-III and TAR-IV and submitted that the returns filed on behalf of the petitioner satisfied all requirements and provided all required information. It was contended that the prime object of every taxing statute was to provide foolproof mechanisms to prevent tax evasion and to net and punish tax evaders. It was contended that the Legislature while enacting the provisions of section 54 never intended to punish honest taxpayers. Mr. Pathy referred to paragraphs 4 to 9 of the counter-affidavit filed on behalf of the State and its officials and submitted that even the stand of the respondent-State and its officials is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (2), who came within the purview of the penal provisions. In the same vein, he submitted that such of the dealers like the present petitioner against whom no tax admittedly, was either found payable or was due for the period in question, the proceedings initiated for imposition of penalty in purported exercise of power under section 54(4) of the Act was clearly an abuse of statutory powers and without sanction of law, specially where the defect, if any, in filing the audit report stood rectified on February 15, 2007. Mr. Pathy in continuation of his aforesaid submission tried to persuade us by submitting that following the scheme of the Act and the provisions for filing returns, its scrutiny, self-assessment, escape turnover, etc., and the penal provisions covering such violations, the only interpretation that could be given and the only effect of the provisions of section 54(4) of the Act would be to net the defaulters/tax evaders against whom tax was found payable. It was contended that the legislative intent of the said provisions would never be of penalizing honest taxpayers against whom no tax was found payable. Mr. Pathy, in support of his submission relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g vires of statutory provisions, learned counsel relied upon the judgment of the apex court in Government of Andhra Pradesh v. Laxmi Devi (P) (Smt) reported in [2008] 4 SCC 720 (paras 4 and 6). It was submitted that unless the provision which is put to test before the court, is found to be violative of the constitutional provisions, the opinion should tilt in favour of upholding its validity. He further submits that even in case where two views are possible, the view upholding the constitutionality of the provision should be adopted and every effort should be made to uphold the statute. The learned counsel with reference to the various provisions of the Act relating to the returns provided under section 24, penalty for delayed deposit of tax provided under section 24(10), scrutiny provided under section 25, self-assessment provided under section 26 and escaped turnover as provided under section 32, submits that each and every aspect of a dealer's responsibility has been taken care of by the statute and the provision under challenge is relatable to the consequences flowing from failure on the part of the dealer to submit audit report in the manner and form prescribed under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same was a continuing offence and the petitioner would be liable for penalty until he discharged the onus envisaged under the said provision. In support of his contention learned counsel relied upon a judgment of the apex court in Maya Rani Punj v. Commissioner of Income-tax reported in [1987] 65 STC 416; [1986] 157 ITR 330. The learned counsel for the respondents concluding his arguments submitted that neither the circumstances warrant any interference with the statutory provisions or the orders passed thereunder nor the petitioner has been able to make out any case for such interference and thus this writ petition is fit to be dismissed. Mr. Pathy, in his reply, reiterated his submission and submitted that each and every penal provisions of the Act relatable to returns, scrutiny, deposit of tax, etc., had been provided with the sole object of prevention of tax evasion, penalizing the evaders and for recovery of the same from defaulting dealers. It was contended that the admitted position was that the petitioner had discharged his tax liability and no tax was found due from him and as such following the legislative intent of the penal provisions provided in the Act in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmission that cases of automatic penalty and penalty at the discretion of a statutory authority are different and non-fulfilment of certain conditions of section 54(2), could not attract automatic penalty where substantial compliance had been carried out by the dealer, he refers to the judgment of the apex court in Cement Marketing Co. of India Ltd. v. Assistant Commissioner of Sales Tax reported in [1980] 45 STC 197; [1980] 124 ITR 15. Referring to the case of Guljag India [2007] 9 VST 1 (SC); [2007] 7 SCC 269 with reference to paragraphs 25 and 26, it was submitted that evasion and contravention are two distinct situations and every contravention may not result in evasion of tax. It was submitted that even in the said case the apex court held that object of penal provision is to prevent loss of revenue and to provide a remedy for making up such loss. It was thus submitted that non-filing of audit report within prescribed time in no manner resulted in any loss of revenue to the State in the present case. In an effort to distinguish the judgment relied upon by the State in the case of D. G. Gouse AIR 1980 SC 271 it was submitted that it was a case in which rate of tax was challe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for breach thereof. We noticed that the provisions of section 54(4) in no uncertain terms imposes a penalty upon a defaulting dealer to be paid in addition to "any tax payable" equivalent to two per cent of the "tax payable" for every month or part thereof of "such default". The Explanation provided under section 24(10) shows that default is referable to non-payment of tax by a dealer. Thus whereas breach of section 54(2) is a contravention but it partakes the nature of default only in circumstances where taxes are found payable against the dealer contravening the said provision and the default continues till the taxes so found payable from the dealer together with penalty at the rate of two per cent of such tax payable is paid by the dealer. The submission of Mr. Pathy that the breach of taxing provisions and contravention of procedural provisions cannot be equated and put at the same pedestal appears to be on sound reasoning. A taxing statute could never intend to punish honest and bona fide dealer who has discharged his onus and paid his taxes within the prescribed period. The provisions underlying section 24 relates to submission of returns, payment of tax, interest and penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. No tax has been found payable against the petitioner. The authorities in purported exercise of power under section 54(4) have simply proceeded in a mechanical manner to impose penalty of Rs. 35.75 lac upon the petitioner for committing breach of section 54(2) of the Act. We thus proceed to determine whether the case of the petitioner and like dealers who have discharged their tax liability of the period under consideration, within the prescribed period and against whom no tax has been found due and who have submitted audit reports initially not signed and verified by any accountant as required under section 54(2) but have rectified the said defect within a reasonable period, could be subjected to the penal provisions of section 54(4) of the Act. We have already noticed the language of section 54(4) which in no uncertain terms makes repeated reference to the words "tax payable" and the penalty is to continue for the period of such default. We have also noticed that default is referable to a default arising out of non-payment of tax. Thus non-submission of report in the prescribed form and manner as envisaged under section 54(2) of the Act may be a contravention of the said prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be the consequence of non-submission of audit report in the prescribed form and in the prescribed manner. We have already noticed that the discharge of the said responsibility is not entirely dependent on the dealer but that there is a third party involved, i.e., an accountant who is required to sign and verify the said report and unless the said formalities are completed, the audit report cannot be submitted. A dealer cannot be saddled with penalty for breach of procedure which is not entirely attributed to him but involves a third party. Such being the requirement of law, it has to be held that the report submitted by the dealer in the prescribed form, in terms of the returns submitted by him with no tax found payable for period in question, coupled with the circumstances that an audit report in the prescribed form and manner was filed on February 15, 2007 which was in conformity to the earlier audit report, it would amount to substantial compliance with the provisions and cannot invite any penalty. Our opinion as above, should not in any manner be construed to mean that the provisions of section 54(2) of the Act is an empty formality. Rather we wish to clarify that each dealer w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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