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1987 Supreme(Mad) 229
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE BELLIE & THE HONOURABLE MR. JUSTICE RAMASWAMI
V. Nagarathinam Ammal - Appellant
Versus
Deputy Commercial Tax Officer, Sankari - Respondent
Case No : W.A. No. 226 of 1981 against W.P. No. 1722 of 1981
Decided On : 04 August 1987
A fresh demand notice is required after the appellate or revisional authority modifies the assessment order, and the original notice of assessment cannot be relied upon for levying penalty under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959.
Headnote:
SALES TAX - Penalty - Levy of penalty under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 - Applicability - Fresh demand notice required after appellate or revisional authority modifies assessment order - Original notice of assessment cannot be relied upon for levying penalty - Demand made in form 29 of Standing Orders not in accordance with law - Penalty cannot be levied retrospectively - Writ appeal allowed.
Fact of the Case:
The petitioner, a partner in a dissolved firm, challenged a demand notice issued by the Deputy Commercial Tax Officer for payment of penalty under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959, on the grounds that a fresh demand notice was required after the appellate or revisional authority modified the assessment order and that the original notice of assessment could not be relied upon for levying the penalty.
Finding of the Court:
The court held that a fresh demand notice should be issued after the appellate or revisional authority had interfered with the assessment order by modifying or otherwise interfering with that order. The original notice of assessment could not be relied upon for the purpose of levying penalty under section 24(3) of the Act. The demand made in form 29 of the Standing Orders issued to the assessing officers by the Board of Revenue was not in accordance with law. The penalty could not be levied retrospectively.
Issues: 1. Whether a fresh demand notice is required after the appellate or revisional authority modifies the assessment order? 2. Whether the original notice of assessment can be relied upon for levying penalty under section 24(3) of the Act? 3. Whether the demand made in form 29 of the Standing Orders is in accordance with law? 4. Whether the penalty can be levied retrospectively?
Ratio Decidendi: 1. A fresh demand notice is required after the appellate or revisional authority modifies the assessment order because the assessee cannot be considered a defaulter unless a demand notice is issued and default has been committed in payment of the amount within the time specified therein. 2. The original notice of assessment cannot be relied upon for levying penalty under section 24(3) of the Act because the penalty is payable for not paying the amount as per the notice of assessment and the original notice of assessment included a larger amount of tax and penalty which were not payable as per the order in appeal. 3. The demand made in form 29 of the Standing Orders is not in accordance with law because it is not a prescribed form under the statutory rules and the assessing authority has not adopted form B-7 which was relied on by the learned Additional Government Pleader. 4. The penalty cannot be levied retrospectively because the penalty or liability to pay interest is incurred with reference to the assessment year and the date of demand and the default and not with reference to any subsequent period that may arise.
Final Decision: The writ appeal was allowed, the demand notice was set aside, and the rule was made absolute. There was no order as to costs.
V. RAMASWAMI, J.
Soundamman Textiles, Komarapalayam, was a partnership firm carrying on business in the manufacture and sale of handloom cloths. For the assessment years 1960-61 to 1963-64, accepting the returns filed by the firm, the Deputy Commercial Tax Officer, Tiruchengode, assessed the firm and collected the tax. Long after that, the assessing officer reopened the assessment for the said years on the ground that certain sale of imported silk yarn and dyes were also liable for sales tax as they were not utilised in the manufacture of handloom cloth. After following the procedure, the assessing officer made a reassessment order on 25th March, 1966 in respect of the assessment year 1960-61 and on 31st March, 1966 in respect of the three assessment years, namely, 1961-62, 1962-63 and 1963-64. The same assessing officer assessed the firm for 1964-65 also on 21st February, 1966. The assessing officer also levied penalties under section 12(3) of the Tamil Nadu General Sales Tax Act, 1959, hereinafter referred to as "the Act", in respect of the assessment years 1960-61 to 1963-64 and under section 16(2) of the Act in respect of the assessment year 1964-65. The firm preferred appeals against the reassessment orders and penalty in respect of the assessment years 1960-61 to 1963-64 and the assessment order and penalty in respect of the assessment year 1964-65 to the appellate authority. Simultaneously, they also filed writ petitions in this Court in W.P. Nos. 1324 of 1966, 1433 of 1966, 739 of 1970, 740 of 1970 and 1377 of 1966. These writ petitions were allowed in part and the order of assessment in respect of each one of the years in so far as it related to the imposition of penalty under section 12(3) of the Act was quashed by a Division Bench of this Court. The assessment in respect of the assessment year 1964-65 in so far as it related to penalty under section 16(2) of the Act was not quashed. In the appeals which were heard by the Appellate Assistant Commissioner, Salem, the Appellate Assistant Commissioner confirmed the assessment by his order dated 14th June, 1971 but set aside the levy of penalty under section 12(3). He, however, confirmed the penalty under section 16(2) of the Act in respect of 1964-65. In so doing, the appellate authority took into account the order of this Court in the writ petitions. It should be mentioned here that the cancellation of levy of penalty by the Appellate Assistant Commissioner was on merits as seen from the order though the High Court's order also was noticed. The petitioner preferred an appeal before the Sales Tax Appellate Tribunal and the appeal was dismissed on 11th May, 1972. In the meantime, on 14th April, 1969, the firm was dissolved and it appears that there was no further transaction subsequent to the period 1964-65. The petitioner herein was one of the partners of the dissolved firm. On 22nd January, 1981, the Deputy Commercial Tax Officer, Sankari, issued a notice to a firm by name O. V. K. Kathiresamurthy and Co., Petrol Bunk, Komarapalayam, in which the petitioner was also a partner, demanding payment of a sum of Rs. 68, 758.84 as due from Soundamman Textiles, the dissolved firm, in which the petitioner was a partner and the tax and penalty claimed therein are detailed below :
"M/s. Soundamman Textiles are in arrears of tax and penalty as detailed below :
Tax Penalty
1960-61 Rs. 13, 176.78 -
1961-62 7, 822.19 -
1962-63 22, 224.28 -
1963-64 20, 194.98 -
1964-65 97.61 5, 343.00
68, 758.84 5, 343.00" *
2. The appellant paid this amount within the time allowed in two instalments on 3rd February, 1981 and 9th February, 1981. However, the Deputy Commercial Tax Officer, again issued a notice in form No. 20 under Standing Order 29, demanding a huge amount of Rs. 1, 52, 301 as penalty payable in respect of the said assessment years under section 24(3) of the Act and that reads as follows :
"To
Messrs. Soundamman Textiles,
Komarapalayam.
Please take notice that you are liable to pay a
