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1970 Supreme(All) 85
Allahbad High Court
R.S.PATHAK,S.TRIVEDI,T.P.MUKERJEE
Sales Tax Commissioner, U.P. - Appellant
Versus
Beharilal Ram Krishna - Respondent
Decided On : 05/13/1970
Standing Counsel, for Applicant; P.M. Agrawal, S.M. Chaturvedi, S.H. Tandon, R.M. Agrawal and S.N. Agrawal, for Opposite Parties.
The requirement of Rule 20-B(a) of the U.P. Sales Tax Rules that the dealer should deposit one-fourth of the exemption fee calculated on his turnover of the previous year within thirty days of the commencement of the year for which he claims exemption is a mandatory provision if exemption is to be granted for the entire assessment year.
Headnote:
U.P. SALES TAX ACT - EXEMPTION FROM TAX - CONDITIONS - DEPOSIT OF EXEMPTION FEE - FAILURE TO DEPOSIT FULL AMOUNT OF FIRST INSTALMENT - EFFECT - REJECTION OF EXEMPTION APPLICATION - JURISDICTION OF ASSESSING AUTHORITY TO DEMAND DEFICIENCY - ASSESSMENT TO TAX UNDER RULE 23 - CONDITIONS.
Fact of the Case:
Six dealers applied for exemption from sales tax under Rule 20-B(a) of the U.P. Sales Tax Rules. Each dealer deposited an amount towards the exemption fee, but the deposits fell short of the true amount required. The Sales Tax Officer rejected the exemption applications and assessed each dealer to sales tax by virtue of Rule 23.
Finding of the Court:
The court held that the requirement of Rule 20-B(a) that the dealer should deposit one-fourth of the exemption fee calculated on his turnover of the previous year within thirty days of the commencement of the year for which he claims exemption is a mandatory provision if exemption is to be granted for the entire assessment year.
Issues: 1. Whether an exemption application in Form V, which is accompanied by deposit of deficit fee (as being not in accordance with Rule 20-B (a) must necessarily be rejected as incompetent, not maintainable or not in order ? 2. Whether the assessing authority has jurisdiction to demand the deficiency in the initial deposit of the fee? If so, must he demand the initial deficiency during the currency of the assessment year before rejecting the exemption application as such ? 3. Whether in case of initial deficit deposit the assessing authority is competent after the expiry of the assessment year, to finalise the exemption case in terms of sub-clauses (h) and (i) of Rule 20-B and then demand the total deficiency ? 4. Whether a default assessment under Rule 23 can be made only upon the failure of the assessee to deposit the deficiency on demand ?
Ratio Decidendi: The court reasoned that the scheme embodied in Rule 20-B envisages the payment of an exemption fee in instalments during the assessment year, followed by the final determination of the true exemption fee at the end of the assessment year with consequential adjustments calling for further payment or refund according as the final exemption fee exceeds or is less than the total amount deposited during the year.
Final Decision: The court answered the questions as follows: 1. In the affirmative. 2. The first part of the question is answered in the negative; no answer is returned to the second part of the question. 3. In the negative. 4. In the negative.
PATHAK, J. :- This reference has been made under Section 11 (1) of the U. P. Sales Tax Act and is in respect of six dealers. The questions referred are:-
"(1) Whether an exemption application in Form V, which is accompanied by deposit of deficit fee (as being not in accordance with Rule 20-B (a) must necessarily be rejected as incompetent, not maintainable or not in order ?
(2) Whether the assessing authority has jurisdiction to demand the deficiency in the initial deposit of the fee? If so, must he demand the initial deficiency during the currency of the assessment year before rejecting the exemption application as such ?
(3) Whether in case of initial deficit deposit the assessing authority is competent after the expiry of the assessment year, to finalise the exemption case in terms of sub-clauses (h) and (i) of Rule 20-B and then demand the total deficiency ?
(4) Whether a default assessment under Rule 23 can be made only upon the failure of the assessee to deposit the deficiency on demand ?"
2. The dealers carry on business in foodgrains. They applied under Rule 20-B (a) of the U. P. Sales Tax Rules for exemption from sales tax, the applications being made on different dates. One of them, M/s. Basdeo Ram Manohar Lal, applied for exemption for the assessment year 1958-59, while the rest applied for exemption for the assessment year 1957-58. With the exemption application each dealer deposited an amount towards the exemption fee purporting to be in compliance with Rule 20-B (a). The Sales Tax Officer took up the exemption applications after the close of the assessment year and holding that the deposit made by each dealer fell short of the true amount which he should have deposited, he rejected the exemption applications and assessed each dealer to sales tax by virtue of Rule 23. The dealers appealed but without success. Thereafter, they applied in revision, and the revision applications were allowed by the Additional Revising Authority who took the view that rule 20-B (a) was merely directory in nature and that the failure to deposit the instalment of the exemption fee contemplated by that provision was not fatal to the exemption applications. He expressed the view that it was open to a dealer to deposit the entire amount of the exemption fee when the fee was finally fixed under Rule 20-B(h). At the instance of the Commissioner of Sales Tax the present reference has been made.
3. A comparative table setting out the amount deposited by each dealer as against the deposit which he should have made is set out below:-
Name of the dealer Initial Deposit with exemption application.
Fee required to be deposited u/s 20-B(a)
1
2 3
Beharilal Rarn Krishna ... Rs. 250.00 Rs. 750.00
Basdeo Ram Manohar Lal ... Rs. 18.00 Rs. 100.00
Girdhari Mal Jai Dayal ... Rs. 150-00 Rs. 250.00
Ramnath Ram Dularey ... Rs. 400.00 Rs. 1000.00
Narain Das Prahlad Ram ... Rs. 75.00 Rs. 250.00
Chandrika Pd. Munni Lal ... Rs. 150.00 Rs. 500.00
4. The essential question before us is whether the exemption applications filed by the dealers were rightly rejected because of the failure of the dealers to deposit the amount of fee required by Rule 20-B (a).
5. Section 4 (1) (b) of the U. P. Sales Tax Act provides for exemption from tax of sales of goods by such persons or class of persons, and on such conditions and on payment of such fees, if any, not exceeding Rs. 8,000/-annually, as may be specified by the State Government by notification in the official gazette. The State Government decided to grant exemption to dealers on the sale of foodgrains by Notification No. ST.6068/ X-1097-56 dated September 30, 1956, on condition that the deafer
"(a) obtains an exemption certificate from the assessing authority on payment of the appropriate annual fee mentioned below:-
(i) Rs. 18 where the turnover does not exceed Rs. 12,000,
..... .... ... .... .... .... ... ... ...
(xii) Rs. 8,000 where the turnover exceeds Rs. 7,00,000, and
(b) o
