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1984 Supreme(Mad) 464
High Court of Judicature at Madras
THE HONOURABLE CHIEF JUSTICE MR. M. N. CHANDURKAR & THE HONOURABLE MR. JUSTICE SATHIADEV
Sakthi Sugars Limited - Appellant
Versus
Assistant Commissioner of Commercial Taxes, Central Assessment Circle I, Coimbatore, and Others - Respondent
Case No : W.P. Nos. 3160 and 3176 of 1982, 297 to 300 of 1983, 3092 and 3093 of 1982, 310, 311, 5673, 7792, 7793, 7794, 8867, 8906, 9916, 9917, 9918, 10995, 10996, 12004........W.A. No. 1030 of 1984
Decided On : 14 November 1984
Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 is constitutionally valid. Interest under Section 24(3) of the Act does not automatically become payable in the case of a dealer who has not deposited the entire tax which is payable by him on the basis of monthly return submitted as required by Rule 18(3) where the dealer opts for an alternative mode of assessment provided by Rule 18. The liability to pay interest under Section 24(3) of the Act is automatic and no enquiry or hearing is necessary before the liability under that section is enforced. The demand for interest can be challenged by invoking the revisional jurisdiction under Section 33 of the Act. In a case where interest is demanded under Section 24(3) of the Act interest is payable only for the actual period of delay.
Headnote:
The Court held that Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 is constitutionally valid. Interest under Section 24(3) of the Act does not automatically become payable in the case of a dealer who has not deposited the entire tax which is payable by him on the basis of monthly return submitted as required by Rule 18(3) where the dealer opts for an alternative mode of assessment provided by Rule 18. The liability to pay interest under Section 24(3) of the Act is automatic and no enquiry or hearing is necessary before the liability under that section is enforced. The demand for interest can be challenged by invoking the revisional jurisdiction under Section 33 of the Act. In a case where interest is demanded under Section 24(3) of the Act interest is payable only for the actual period of delay.
Fact of the Case:
Several writ appeals and writ petitions were filed challenging the validity of Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as the Act) as well as the validity of the notices of demand issued under Section 24(3) of the Act before it was amended by Act 22 of 1982 with effect from 1st November, 1982 and under Rule 18(3) of the Tamil Nadu General Sales Tax Rules, 1959 (hereinafter referred to as the Rules).
Finding of the Court:
The Court held that Section 24(3) of the Act is constitutionally valid. Interest under Section 24(3) of the Act does not automatically become payable in the case of a dealer who has not deposited the entire tax which is payable by him on the basis of monthly return submitted as required by Rule 18(3) where the dealer opts for an alternative mode of assessment provided by Rule 18. The liability to pay interest under Section 24(3) of the Act is automatic and no enquiry or hearing is necessary before the liability under that section is enforced. The demand for interest can be challenged by invoking the revisional jurisdiction under Section 33 of the Act. In a case where interest is demanded under Section 24(3) of the Act interest is payable only for the actual period of delay.
Issues: 1. Whether Section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 is constitutionally valid? 2. Whether interest under Section 24(3) of the Act automatically becomes payable in the case of a dealer who has not deposited the entire tax which is payable by him on the basis of monthly return submitted as required by Rule 18(3) where the dealer opts for an alternative mode of assessment provided by Rule 18? 3. Whether the liability to pay interest under Section 24(3) of the Act is automatic and no enquiry or hearing is necessary before the liability under that section is enforced? 4. Whether the demand for interest can be challenged by invoking the revisional jurisdiction under Section 33 of the Act? 5. Whether in a case where interest is demanded under Section 24(3) of the Act interest is payable only for the actual period of delay?
Ratio Decidendi: 1. Section 24(3) of the Act is constitutionally valid because it is a machinery provision and consequential to Section 24(1), it referred to "the tax assessed under this Act" because Section 24(1) referred to "the tax assessed under this Act" to be paid in such manner and in such instalments and within such time as may be specified in the notice of assessment. Reading Sections 24(1) and 24(3) it is clear that both these provisions contemplated a process of assessment, i.e., actual determination of the tax payable and the tax had to be paid within the time specified in the notice of assessment. 2. Interest under Section 24(3) of the Act does not automatically become payable in the case of a dealer who has not deposited the entire tax which is payable by him on the basis of monthly return submitted as required by Rule 18(3) where the dealer opts for an alternative mode of assessment provided by Rule 18 because Section 24(3) being a provision which crates a fiscal liability must be strictly construed. It will not, therefore, be possible to accept the argument of the learned Advocate-General that the notice of assessment referred to in Section 24(3) must be so read as to include within it what he described as the statutory notice arising out of the alternative mode of assessment provided by Rule 18(3), which casts an obligation on the dealer to pay the tax payable along with the monthly return. 3. The liability to pay interest under Section 24(3) of the Act is automatic and no enquiry or hearing is necessary before the liability under that section is enforced because any action thereunder does not involve penal consequences, there was no question of natural justice or an opportunity to show cause being extended because the assessee knows that he has not deposited the tax, and in case he has deposited beyond the prescribed time, then he known when he has deposited, and he knows the amount which he was required to deposit, because on assessment, a notice has already been issued to him. 4. The demand for interest can be challenged by invoking the revisional jurisdiction under Section 33 of the Act because there is sufficient revisional jurisdiction of the Deputy Commissioner under Section 33 which appears to us to be sufficiently wide to cover a case where the grievance can be made against an order against which an appeal has not been provided. The power of revision of the Deputy Commissioner vested under Section 33 is, in our view, sufficient to enable any assessee who is aggrieved by a wrong levy of interest, whether with reference to the amount of tax or with reference to the period for which the tax was not paid, to canvass such a grievance before the Deputy Commissioner under Section 33. 5. In a case where interest is demanded under Section 24(3) of the Act interest is payable only for the actual period of delay because on the terms of Section 24(3), it is clear that the taxing authorities are entitled to recover interest only for the actual period of delay in making payment.
Final Decision: The Court held that Section 24(3) of the Act is constitutionally valid. Interest under Section 24(3) of the Act does not automatically become payable in the case of a dealer who has not deposited the entire tax which is payable by him on the basis of monthly return submitted as required by Rule 18(3) where the dealer opts for an alternative mode of assessment provided by Rule 18. The liability to pay interest under Section 24(3) of the Act is automatic and no enquiry or hearing is necessary before the liability under that section is enforced. The demand for interest can be challenged by invoking the revisional jurisdiction under Section 33 of the Act. In a case where interest is demanded under Section 24(3) of the Act interest is payable only for the actual period of delay.
CHANDURKAR, C.J.
These several writ appeals and writ petitions raise a question with regard to the validity of section 24(3) of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as the Act) as well as the validity of the notices of demand issued under section 24(3) of the Act before it was amended by Act 22 of 1982 with effect from 1st November, 1982 and under rule 18(3) of the Tamil Nadu General Sales Tax Rules, 1959 (hereinafter referred to as the Rules). It is not necessary at this stage to refer to the facts in these several cases. Suffice it to mention that in almost all these petitions and appeals, the assessments were regulated by rule 18 of the Rules, and consequently monthly returns in respect of the turnover of the dealers concerned had to be filed accordingly to rule 18 and in cases where the sales tax deposited along with the monthly return had been found to be deficient, notices of demand have been issued demanding penalty under section 24(3) of the Act. The penalty demanded in these notices is in respect of the entire period of one month, whereas the sales tax had already been deposited during the course of a calendar month.
2. In order to appreciate the arguments advanced by the several learned counsel appearing on behalf of the dealers-assesses, it is necessary to briefly outline the scheme of the Act and the Rules.
3. The charging section is section 3, and section 11 provides that the tax under the Act shall be assessed, levied and collected in such manner as may be prescribed. Section 12 deals with the procedure to be followed by the assessing authority and the assessment is on the basis of the prescribed return relating to the turnover submitted in the prescribed manner within the prescribed period. There is a power to make a best judgment assessment under section 12(2). Sub-section (3) of section 12 deals with penalty which reads as follows :
"Section 12. (3) In addition to the tax assessed under sub-section (2), the assessing authority may, in the same order of assessment passed under sub-section (2), or by a separate order, direct the dealer to pay by way of penalty, -
(a) a sum which shall not be less than fifty per cent. but which shall not be more than one hundred and fifty per cent. of the amount of tax due on the turnover that was not wilfully disclosed by the dealer in his return, or
(b) a sum which shall not be less than fifty per cent. but which shall not be more than one hundred and fifty per cent. of the tax assessed in the case of wilful failure to submit a return." *
Under sub-section (4), there is a power in the assessing authority, notwithstanding anything contained in sub-sections (1), (2) and (3), to assess the dealer on the basis of accounts, if the assessing authority is satisfied that the accounts maintained by the dealer are correct and such dealer has either failed to submit the prescribed return or failed to submit the prescribed return within the time as may be prescribed or if the return submitted is found to be incorrect or incomplete. In a case where the assessment is made under sub-section (4), there is power to the assessing authority to levy penalty under sub-section (5), and the extent of the penalty is prescribed in three clauses of sub-section (5). A proviso is enacted in sub-section (5) which provides as follows :
"Provided that no penalty under sub-sections (3) and (5) shall be imposed after a period of five years from the expiry of the year to which the assessment relates and unless the dealer affected has had a reasonable opportunity of showing cause against such imposition." *
Section 16 of the Act deals with assessment of escaped turnover, and in assessing the escaped turnover, a limitation of five years is prescribed, the period of five years commencing from the expiry of the year to which the tax relates, and the assessing authority has the power to make a best judgment assessment of the turnover which has escaped assessment and assess the ta
