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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 ..... e Act ) against whom neither any tax is found payable nor is due, could be subjected to the penal provisions of section 54(4) of the Act for reasons of non-submission of a report of audit in the prescribed form duly signed and verified by an accountant within the meaning of the Chartered Accountant Act, 1949 or by a person entitled to act as an auditor of companies by virtue of the provisions of section 226(2) of the Companies Act, 1956, is the question posed before us. With the consent of the parties the matter has been taken for disposal at the stage of admission itself. The petitioner-company is engaged in the business of manufacture and sale of cement and for that purpose, is registered with the Commercial Taxes Department of the Government of Bihar in its Special Circle, Patna. Before embarking on the issue raised 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 B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to act as an auditor of companies registered in any State: Provided that the Commissioner may, by a notification and for specific reasons to be recorded in writing, extend the date of furnishing such report for a period not exceeding three months from the due date. (3) If the accounts of a registered dealer are not required to be audited in terms of the provisions of sub-section (1), such dealer shall furnish, to the prescribed authority, the accounts and statements mentioned in sub-section (2) of section 52 on or before the 31st day of July of the year following the year to which such accounts or statements relate. (4) If a dealer contravenes the provisions of sub-sections (2) or sub-section (3), the prescribed authority shall, after giving the dealer a reasonable opportunity of being heard, impose on him, in addition to any tax payable, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration before the Commercial Taxes Tribunal, it received a notice issued under the signature of the Assistant Commissioner, Commercial Taxes, Special Circle, Patna requiring him to deposit the balance amount of penalty amount, i.e., Rs. 26,81,406 by March 20, 2009 failing which, coercive measures would be taken for realization of the same. The revision before the Commercial Taxes Tribunal preferred by the petitioner was not being heard by reason of absence of quorum and in this background the present writ petition came to be filed in this court. The petitioner, in addition to seeking a relief for declaration of the provisions of section 54(4) of the Act as violative of the Constitutional provisions and being arbitrary and unreasonable, also assailed the legality and validity of the orders passed by the statutory authorities under the Act. Though the 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, un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pradesh, Delhi, Gujarat and Jharkhand and a maximum of Rs. 1 lac in the States of Rajasthan and Jammu and Kashmir. With reference to the provisions of section 271(b) of the Income-tax Act it was submitted that for identical violations, the said Act provided a penalty at the rate of per cent of the turnover or Rs. 1 lac, whichever was less. It was thus submitted that the penalty at the rate of two per cent of the tax per month under the enactment was highly unreasonable and confiscatory. Our attention was drawn towards the language of the provisions as underlying section 54(4) with particular stress made on the words in addition to any tax payable , and it was submitted that under the scheme of the Act it were only such dealers against whom any tax was found payable or due and who had not filed their audit report in the prescribed manner as required under sub-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 54(4) of the Act. It was contended that as the revision application of the petitioner was pending consideration before the Commercial Taxes Tribunal and which has become functional, the petitioner may be asked to exhaust the remedy available under the Act. The learned counsel further submits that the provisions are constitutionally valid and has been engrafted in the Act in exercise of the plenary powers vested in the Legislature and requires no interference. Learned counsel further submits that the only issue which requires consideration by this court is whether the mandate of section 54 has been discharged by the petitioner and if the conclusion is in the negative then the petitioner is not entitled for any relief and the arguments advanced in this regard do not merit consideration. While advancing his arguments on the scope of judicial review in matters concerning 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005] 7 SCC 615. The learned counsel appearing on behalf of the State, in an effort to distinguish the judgment rendered by the apex court in the case of Hindustan Steel [1970] 25 STC 211 referred to a judgment Chairman, SEBI v. Shriram Mutual Fund reported in [2006] 131 Comp Cas 591 (SC); [2006] 5 SCC 361 (paras 33 to 35) and submits that mens rea has no role in the matter of imposition of penalty and if a person is found to have violated any statutory provisions then he has to suffer the penalty provided in the statute for breach thereof. In support of his submission he relied upon the judgment in Guljag Industries v. Commercial Taxes Officer reported in [2007] 9 VST 1 (SC); [2007] 7 SCC 269 (paras 9, 19 and 24 to 27). It was next contended that as the dealer was conscious that audit report has to be filed in the manner provided under section 54(2) of the Act, the non-filing of the 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 ST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the backdrop of accompanying circumstances. Mr. Pathy responding to the judgment relied upon by the learned counsel appearing on behalf of the State in the case of Government of Andhra Pradesh v. Laxmi Devi (P) (Smt) [2008] 4 SCC 720 referred to paragraphs 28, 46 and 68. He accepts the position that provisions of any enactment, if possible, have to be read in a manner of upholding its constitutionality and stresses on the sentence even if that requires giving strained construction or narrowing down its scope . He submits that a harmonious construction of the provisions of section 54(2) read with section 54(4) would mean that only such of the dealers against whom taxes were due or found payable and who had not submitted audit report in prescribed manner and form, would be held liable for imposition of penalty and not dealers against whom no tax was found due or payable. In support of submission 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 judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 54(2) of the Act enjoins upon a dealer to file audit report in the prescribed manner and in the prescribed form within the prescribed period, i.e., by 31st of December each year. The mode and manner of submission of the audit report requires a signature and verification by a chartered accountant or an accountant or a person appointed to act as such. We have been made to go through the various taxing provisions of the Act and the penal provisions controlling the same for breach thereof. We notice that each of the said provisions endeavours towards collection of revenue and provides mechanism for preventing evasion of the same and consequences resulting from breach thereof. Be it a statute relatable to direct taxes or indirect taxes, each endeavours towards timely collection/protection of the State revenue. The object of each taxing statute is to secure revenue and punish the defaulters/ evaders 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 E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o under the Companies Act, 1956, it certainly cannot entail penal consequences for him specially in circumstances where no taxes have been found due against the said dealer. In addition thereto the dealer has been found to have ensured substantial compliance with the same by filing a report in the prescribed form within the prescribed time, though unsigned. The settled proposition of law that every effort is to be made for upholding a constitutional validity of a taxing provision need not be so strained so as to result in penalizing dealers who are not responsible for any revenue loss to the State but have honestly and timely made contributions to the State revenue. It was strenuously argued on behalf of the petitioner that the petitioner have paid taxes to the tune of over 12.47 crores and the returns of the petitioner has been accepted by the statutory authorities who have found no fault in the same. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re there is contravention and tax is payable, i.e., the dealer is in default . This situation does not require even reading down of the express provisions. However, as the learned counsel appearing on behalf of the petitioner did not choose to seriously assail the validity of the provisions of section 54(4) of the Act, we need not detain ourselves on this issue any further. We proceed to test whether the case of the present petitioner would be covered within the mischief of section 54(4). The words any tax payable appearing in section 54(4) of the Act clearly takes out the class of the tax defaulters/tax evaders from the class of dealers who have discharged their tax liability. The provision is selfeloquent and requires no external aid of interpretation. Once this position is confirmed then the present petitioner sails out of the mischief of the said provision. Question still remains as to what would 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y a public body or public officers and pointed out the specific time when it was to be done, that the Act was directory only and might be complied with after the prescribed time 'Smith v. Jones' [1830] 1B Ad 328 at page 334. In another case 'Bellamy v. Saull' [1863] 32 LJQB 366, the Queen's Bench had to construe section 34 of the Revenue Act, 1861, which enacted that no copy of a bill of sale should be filed in any court unless the original was produced to the officer duly stamped and it was held that the section did not invalidate the registration if the bill was not duly stamped when so produced since the object of the enactment was to protect the Revenue, and this was thought sufficiently attained if the deed was afterwards duly stamped, without going to the extreme of holding the registration void. As the respondents have not disputed the fact that there is no tax payable against the petitioner for the period in question, the case of the petitioner would not be covered by the penal provisions of section 54(4) of the Act and he orders imposing penalty impugned in the writ petition and affirmed by the appellant authority cannot be sustained and have to b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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