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TMI Blog2015 (2) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner to “determine” the amount of money subject to deposit of which he is agreeable to the composition. He cannot close the request for composition merely by conveying the composition money offered is inadequate. He must determine the appropriate amount of money and intimate to the offender giving him requisite time for its deposit. Though for purposes of the present discussion it may be a digression, considering the directions that we intend to issue, it must also be observed here that unlike the scheme of Section 320 of the Code of Criminal Procedure (referable to the general penal law), in case of composition of offences under Section 54 of Delhi Sales Tax Act, the matter does not depend upon the approval of the criminal court which is seized of such prosecution. The composition is brought about and given effect to by the offender and the Commissioner on their own. The terms are settled, formalized and acted upon outside the criminal court. Once the Commissioner accepts the composition on conditions as to which he has reached an appropriate satisfaction, within the sphere of guidance given to him by the law, further “proceedings” before the criminal court (even if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Tribunal by its order dated 16.01.2006, to assume that it was not bound by the views of the Appellate Tribunal, particularly by relegating the case back to the stage of scrutiny of the request for composition on considerations other than that of adequacy of the composition money. - While we affirm the conclusion reached by the Appellate Tribunal in the impugned order dated 07.01.2014 as to the impropriety of the second rejection of the request for composition, we do not uphold the findings that the Commissioner had indulged in “disobedience” or that his order bordered on “contempt”. There is no foundation for such adverse views to be recorded. We must also point out to the Appellate Tribunal that errors do occur and the hierarchy of superior forums (appellate etc.) is provided to bring in corrections. Wrong orders passed by the forum lower in order, unless actuated by malice, do not necessarily undermine “majesty of law” or lower the dignity of superior authorities. - ST.APPL.10/2014 - - - Dated:- 23-2-2015 - Hon'ble Mr. Justice S. Ravindra Bhat And Hon'ble Mr. Justice R.K.Gauba For the Appellant : Mr. H C Bhatia, Spl. Counsel For the Respondent : Mr. Pune ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10) I Delhi 237, inter alia, relying on the decision of Supreme Court in Gammon India Ltd. v. Spl. Chief Secretary Others [2006] 145 STC 1 (SC) setting out its conclusions, with which we respectfully agree and follow, in the following words: we find that the legislature, qua the forum of appeal, has taken a conscious decision on retrospective operation of Delhi VAT Act as regards forum of a second appeal to the High Court by virtue of Section 106(3) and which provision makes it clear that all orders passed under the Delhi Sales Tax Act will be treated as if they have been passed under the Delhi VAT Act. Thus vide Section 106(3) the order passed by the Appellate Tribunal will be an order, not under Section 44 of the Delhi Sales Tax Act, but one under Section 74 of the Delhi VAT Act. The unambiguous language of Section 106(2) can lead to no other conclusion than that the appeal will now lie to the High Court under Section 81 of the Delhi VAT Act even if the order which is passed by the Tribunal is in respect to proceedings which were initiated when the Delhi Sales Tax Act was in force. [emphasis supplied] 5. The questions of law raised in this appeal essentially concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so directing a First Information Report (FIR) to be lodged with the police against the assessee, on the accusation of it having committed offences punishable under Section 50(1)(a) and (j). The assessee challenged the said assessment order by way of appeal but could not succeed. 10. The penal clause contained in Section 50 of Delhi Sales Tax Act, to the extent relevant here, may be noted as under:- 50(1) Whoever- (a) holds, gives, produces or accepts a declaration under the second proviso to clause (a) of sub-section (2) of section 4, or under the first proviso to section 5, which he knows or has reason to believe to be false; or XXX (j) knowingly maintains or produces incorrect accounts, registers or documents or knowingly furnishes incorrect information; or XXX shall be punishable with rigorous imprisonment for a term which may extend to six months or with fine, or with both and where the offence is a continuing one, with a daily fine not exceeding two hundred rupees during the period of the continuance of the offence: (2) Notwithstanding anything contained in sub-section (1), if any person commits an offence under clause (a) or clause (f) or clause (j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.12.2002 and 01.01.2003 for ₹10,00,000/-, ₹4,50,000/- and ₹8,00,000/- respectively with the balance of ₹1,00,000/- having been received through cheque dated 08.02.2003. The Commissioner held that the assessee had not been able to furnish the details of the bank account of the purchasing dealer from which the pay orders had been secured and declined to compound, for the reason that adequate composition amount had not been offered. 15. It must be noted at this stage that the allegations that the ST-1 form purportedly obtained from M/s DD Enterprises, and submitted to Sales Tax authority in respect of the transaction mentioned earlier, is a forged or fabricated document is not being disputed by the assessee. The assessee concedes this to be a fact, its contention being restricted to the claim that he had no knowledge about the forgery and further that it had received the same from the purchasing dealer and had submitted it with the return to the Sales Tax authority under the bona fide belief that it was genuine and true document which had been lawfully issued. Thus, while insisting that there was no criminal intent involved the assessee claims to have m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order passed on 07.03.2006 needs to be noted in extenso as under:- I have heard the arguments advanced by the DR for the revenue ex parte before this Court as well as looked into the case file, Order of the Ld. Tribunal passed by it on 10/1/06 and the Written Submissions received from the Counsel for the applicant on 15/02/06 and kept on record. It may be noted that as per report received from the Ward of the concerned purchasing dealer, the purchasing dealer M/s DD Enterprises had not confirmed the purchases having been made by him from the applicant and also that he had not accepted the fact that the ST-1 form furnished by the applicant before his assessing authority was issued by the purchasing dealer M/s DD Enterprises to the applicant. It is, therefore, a bare fact that the ST-1 form furnished by the applicant before his assessing authority as required under rule 8(1) of the DST Rules, 1975, was not printed under the authority of the Commissioner nor as envisaged u/r 8(2) of the said Rules, it was obtained by the concerned purchasing dealer M/s DD Enterprises from his appropriate assessing authority. As such, the ST-1 form furnished by the applicant at assessment was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue go unpunished and encourage others also to indulge in such acts. 20. It must also be noted that the Commissioner, VAT referred to the office he held as a Court giving the impression it was asserting its position as a quasi-judicial authority with autonomy in matters pertaining to its discretion. 21. The assessee challenged the afore-quoted views of the Commissioner, VAT by way of appeal No. 2/ATVAT/06-07 before the Appellate Tribunal which was allowed by order dated 07.01.2014 taking strong exception by observations to the following effect:- 3. By passing the impugned order, as quoted above, majesty of law has been undermined by the respondent which is a serious matter such a practice is an attempt to derail the process of justice. Such unprecedented orders lead to demoralize, lower the dignity and negate jurisdiction of the court of law. The Tribunal being part of the constitution functionary, its jurisdiction and decisions need to be upheld by the executive, which is binding on the respondent as well, who is a respondent before this Tribunal. The appellant being a bonafide litigant, has approached this Tribunal against the impugned order as appellant and not as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jecting the request for composition, objectionable for the following reasons:- (a) The earlier order of the Tribunal may have used the expression may consider but it was in the nature of a direction which the Commissioner was required to follow; and (b) The rejection of the prayer for composition against the backdrop of the said earlier direction of the Tribunal amounted to disobedience on the part of the Commissioner which was nothing short of contempt , meriting compensation to be awarded. 24. The appellant (VAT Commissioner - hereafter called the Revenue ) is aggrieved with the above-noted directions contending that the question as to whether an offence under the Sales Tax Act was to be compounded or not pertains to the discretion of the authority in which the jurisdiction for the purpose had been vested by the statute and, thus, a direction/mandate for compounding could never have been issued. The Revenue submits that it is for this reason primarily that the Appellate Tribunal in its order dated 16.01.2006 had called upon the Commissioner, Sales Tax only to consider afresh the request of the assessee for composition on modified terms and had refrained from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is pertinent to note that Section 66(4) of Delhi VAT Act describes the role and position of VAT Authorities as under:- 66(4) The powers exercised by the Value Added Tax Authorities for the making of assessments of tax, the computation and imposition of penalties, the computation of interest due or owed, the computation of the entitlement and the amount of any refund, the determination of specific questions under section 84, the making of general rulings under section 85, and the conduct of audit or investigations shall, for the purposes of this Act, be the administrative functions. [emphasis supplied] 30. There is no provision in Delhi Sales Tax Act comparable to Section 66(4) of Delhi VAT Act. Nonetheless, having regard to the scheme of Delhi Sales Tax Act, in general, and the powers or functions conferred or assigned unto various authorities including the Commissioner, Sales Tax thereunder, there is no doubt that in enforcing the law for the Revenue (in the nature of sales tax), the Commissioner, Sales Tax represented the executive arm of the State, though some of the functions exercisable by him may carry trappings of an adjudicatory authority. 31. As would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Sales Tax made into the Government treasury in his name (Section 21). The assessment is finalized by the Commissioner (Section 23) through the delegated authority. It is the responsibility of the Commissioner to take necessary steps (in terms of Section 24), should there be reason to believe that turnover declared in the return by the dealer has escaped assessment to tax. The action for recovery (Sections 25 and 26), including by way of special modes (Section 28) is taken by the Commissioner and where satisfied about the entitlement, refund is granted with his approval (Section 30). He is entrusted with the power to rectify mistakes if any (Section 48), as may have occurred, but, of course, subject to rules of natural justice wherein he must give reasonable opportunity of being heard to the assessee should such rectification be leading to enhancing the tax liability. It is the duty of the Commissioner to guide other Sales Tax Authorities assisting him in the process, inter alia, by determining disputed questions (Section 49). That the Commissioner, Sales Tax represents the interest of revenue is declared clearly by including it in his functions the revisional jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales Tax Authorities appointed for his assistance under Section 9(2). Rule 43 of Delhi Sales Tax Rules prescribes only one condition in this respect, namely, that an investigation into an offence found prima facie committed may not be entrusted to a Sales Tax Authority lower in rank than an Assistant STO. Clearly, however, the option to choose either course (investigation by the police or by other Sales Tax Authority) is a matter of discretion resting with the Commissioner. 39. The power to compound the offence under Delhi Sales Tax Act is vested in the Commissioner by virtue of Section 54. The provision is at the core of this controversy and needs to be quoted verbatim as under:- 54. Composition of offences (1) Subject to such conditions as may be prescribed, the Commissioner may accept, from any person alleged to have committed an offence under section 50 or under any rules made under this Act, either before or after the commencement of the proceedings against such person in respect of such offence, by way of composition for such offence, a sum not exceeding five thousand rupees or where the offence alleged to have been committed is under any of the clauses (a), (b), (c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, but a little later. For the present discussion, it only needs to be noted that the composition of an offence under the law is by the Commissioner, for and on behalf of the revenue, leaving no room for doubt that in dealing with a request for composition (by the assessee) the Commissioner is essentially in the position of an adversary, rather than an adjudicatory authority. 42. Delhi Sales Tax Act also provided for the remedy of appeal. Sections 43 and 44 read as under:- 43. Appeals (1) Any person aggrieved by any order, not being an order mentioned in section 44 passed under this Act or the rules made thereunder, may appeal to the prescribed authority: PROVIDED that where an order, not being an order mentioned in section 44 or made under section 47 is passed by the Commissioner, the person aggrieved may appeal therefrom to the Appellate Tribunal. (3) The Commissioner or any person aggrieved by an order passed in appeal by the prescribed authority may appeal to the Appellate Tribunal against such order. XXX (6) The appellate authority may, after giving the appellant an opportunity of being heard,-- (a) confirm reduce, enhance or annual the assessment (including any penalty im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following rules of natural justice. 46. Thus, on a broad view of the scheme of Delhi Sales Tax Act, it emerges that the Commissioner represents the interest of the Revenue and all action for realization of the tax is through or by him or in his name by other Sales Tax Authorities. At the cost of repetition, it may be said again that in this scheme of things, the Commissioner is an adversary vis- -vis the assessee. Because of the volume of the work involved, the assistance of other Sales Tax Authorities is provided to the Commissioner. Such other authorities exercise the delegated powers. But, having delegated such powers, the Commissioners cannot meddle in the processes involved, except by exercising his supervisory role which includes the revisional jurisdiction (Sections 46 and 47), power to rectify mistakes (Section 48) or determine disputed questions (Section 49). Since he cannot intervene, except while exercising above-noted powers, the other Sales Tax Authorities (though delegates of the Commissioner) are conferred with requisite independence or autonomy in functioning. This is clearly why the Commissioner himself may feel aggrieved by an order passed by other Sales Tax Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he power to accord sanction , requisite for taking cognizance of an offence under the law [Section 52(1)]; (c) Certain powers relating to requisitioning (Section 41) of account book etc. (conferrable on authority not below the rank of Assistant STO); (d) The power of search and seizure (Section 41) (conferrable on authority not lower than STO); and (e) The jurisdiction to determine disputed questions (Section 49), (though conferrable on Additional Commissioner). 51. It is clear that the authority to deal with the request for composition of offence (Section 54) rests solely with the Commissioner and is not delegable. The rationale is simple. The prosecution does not proceed unless the Commissioner accords sanction, which is a jurisdiction he must himself exercise and cannot delegate. 52. It is also clear that an order passed under Section 54 by the Commissioner on the request of an assessee for composition of offence is subject to remedy of appeal before the Appellate Tribunal under Section 43 ( any order, not being an order mentioned in Section 44 ). Section 44, as noted earlier, does not exclude from the purview of remedy, an order passed by the Commissioner under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he new law, the right of the Commissioner to prefer appeal to the Appellate Tribunal has been taken away. It is only an assessee aggrieved by a decision of the Commissioner under Sections 74 (objections against assessment or other orders or decision of the other VAT authorities), 84 (determination of specific questions) or 85 (rulings on general questions involving interpretation etc.) as may prefer an appeal before the Appellate Tribunal. 57. The Delhi VAT Act also provides for offences and criminal penalties (Section 89). A provision similar to the one contained in Section 54 of Delhi Sales Tax Act is included in Delhi VAT Act for compounding of offences in the form of Section 93 which reads as under:- 93 Compounding of offences: (1) The Commissioner may, before the institution of proceedings for any offence punishable under sub-section (4) of section 89 of this Act or under any rules made under this Act, accept from any person charged with such offence by way of composition of offence, a sum not exceeding fifty thousand rupees or a sum not exceeding three times the amount of tax which would thereby have been avoided, whichever is higher. (2) On payment of such sum as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of voluntarily causing hurt (Section 323 IPC), it is the person to whom hurt has caused who is allowed to compound. Similarly, in a case of voluntary restraint or confinement (Sections 341 to 344 IPC), it is the person restrained or confined who is competent to compound. Further in, a case of theft (Section 379 IPC), the owner of the property which was stolen only may agree to forgive and forget and compound the offence. Of course, there are necessary provisions made to cover the disability (minority etc.) or death. The criminal court in seisin of the matter only needs to inquire as to the voluntariness of the move by both sides. Upon satisfaction to that effect being recorded, the court accepts the composition which has the effect of acquittal [Section 320(8) of Code of Criminal Procedure]. In such cases, the criminal court is not expected to go behind the terms of the compromise leading to the compounding of the offence. Undoubtedly, the hallmark is voluntariness of the consent of the victim (person competent) to compound. It is purely his discretion and his call in which respect his hand cannot be forced. 62. But then, the above is the scheme for compounding of offences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 50 of Delhi Sales Tax Act might be compounded. But, in contrast of Section 320(1) of the Code of Criminal Procedure, the Commissioner, Sales Tax while dealing with such requests for composition would not be a person representing a private or personal interest. Being a public functionary, and a custodian of the Revenue s interest, he is expected to deal with such requests not on the basis of whims or caprice, not the least uncanalized or arbitrarily, but in a manner that subserves the best interest of the cause he is expected to espouse. This, indeed, is the spirit of the guidance (in the form of conditions ) provided to the Commissioner by Rule 44(1) read with Section 54(1) of the Delhi Sales Tax Act quoted earlier. 66. As indicated by the provision and Rule referred to above, the move for composition of offence under Delhi Sales Tax Act is initiated by the person sought to be prosecuted. Such applicant makes the offer of composition money. The Commissioner is called upon to examine the said offer on the touchstone of justice and public policy . If the Commissioner is satisfied that in the facts and circumstances, the application for composition deserves to be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offender to pay up accordingly. It may be added that given the scheme of the law, these stages have to be covered in that order. 70. Though for purposes of the present discussion it may be a digression, considering the directions that we intend to issue, it must also be observed here that unlike the scheme of Section 320 of the Code of Criminal Procedure (referable to the general penal law), in case of composition of offences under Section 54 of Delhi Sales Tax Act, the matter does not depend upon the approval of the criminal court which is seized of such prosecution. The composition is brought about and given effect to by the offender and the Commissioner on their own. The terms are settled, formalized and acted upon outside the criminal court. Once the Commissioner accepts the composition on conditions as to which he has reached an appropriate satisfaction, within the sphere of guidance given to him by the law, further proceedings before the criminal court (even if already commenced) for such offence under the special law can not be further proceeded with [Section 54(2)]. 71. To put it simply, the Commissioner, who initiates the prosecution is also authorized by this la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue in the form of three times the tax that would have been evaded. 76. Examined in the light of the position of law noticed above, we find that the authorities below, in the facts and circumstances of the case, have failed to properly deal with the request for composition. 77. The amount of sales tax which would have been evaded, if the fabricated ST-1 form had been accepted, has not been computed at any stage. At least, we are not able to locate any finding of fact in such regard in any of the orders placed before us. It is found from the order dated 16.01.2006 of the Appellate Tribunal that the Commissioner had rejected the request for composition by his order dated 01.06.2005 essentially for the reason adequate composition amount had not been offered. The amount offered with the application for composition initially moved was only ₹50,000/-. Given the quantum of amount subsequently offered, in the course of appeal before the Appellate Tribunal, it is apparent that the initial offer was illusory and so was bound to be rejected in view of Rule 44. But then, the Commissioner failed to carry out his statutory obligation to determine, or intimate, appropriate amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 54 for composition cannot be treated as final or immune from further scrutiny by the appellate authority. It necessarily follows that the Appellate Tribunal scrutinizing such order is competent to pass all such orders as the lower authority (subject to its appellate jurisdiction) is competent to pass. Since the Appellate Tribunal allowed the request for composition on modified terms and remitted the matter to the Commissioner, the latter was bound by the said mandate. 81. We, thus, answer the questions of law formulated by order dated 28.07.2014 and additionally framed in Para 6 above accordingly against the appellant and in favour of the respondent. 82. In this view, it was not correct for the Commissioner, to whom the matter had been remitted by the Appellate Tribunal by its order dated 16.01.2006, to assume that it was not bound by the views of the Appellate Tribunal, particularly by relegating the case back to the stage of scrutiny of the request for composition on considerations other than that of adequacy of the composition money. 83. The order dated 07.03.2006 passed by the Commissioner, VAT in the remand proceedings has been quoted earlier. The considerations on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us, has only added to the loss to the exchequer. 86. Given the fact that no willful conduct was alleged by the Commissioner, Sales Tax in the report of the criminal case, in our view, the modified application of the respondent for composition, as submitted before the Appellate Tribunal at the stage of consideration of appeal No. 75/STT/05-06, deserves to be accepted subject, of course, to confirmation that the composition money offered (₹5,64,000/-) in fact represents the amount three times of the sales tax chargeable on the transaction in question, this insofar as the prosecution for offence under Section 50(1)(a) is concerned. For the other offence under Section 50(1)(j), the amount of ₹5,000/- offered as composition money is the maximum prescribed in law. There is no reason why the composition money thus offered ought not to be accepted. 87. In order that this controversy does not continue to simmer further, we direct as under:- (i) The respondent shall appear before the Commissioner, VAT on 09.03.2015 at 2.30 P.M.; (ii) On the date and time fixed by us, the Commissioner, VAT shall take up the matter at hand and determine if the amount of ₹5 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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