Citation Codes

Equivalent Citations

citation codes

Case Number

Miscellaneous Petition No. 388 of 1970

Attorney(S)

R.K.Tankha
M.V.Tamskar

Judges

Bishambhar Dayal, C.J
Shiv Dayal, J.

Acts

Section 17 of the M.P. General Sales Tax Act. The M.P. General Sales Tax Act
provisions similar to Section 22 of the M.P. General Sales Tax Act
Section 17(3) of the Madhya Pradesh General Sales Tax Act.
Sub-section (3) of Section 9 of the Central Act
Section 17(3) of the M.P. General Sales Tax Act.
Central Provinces and Berar Sales Tax Act
MADHYA PRADESH GENERAL SALES TAX ACT
Sub-sections (1) and (3) of Section 17
Section 9(3) of the Central Act
Sub-section (2) of Section 22
Sub-section (3) of Section 17
Sub-section (3) of Section 9
M.P. General Sales Tax Act
CENTRAL SALES TAX ACT
Rule 15 of the Rules

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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

Four writ petitions were filed by M/s. Jiwanrnal Sons Private Limited challenging imposition of penalty under Section 17(3) of the Madhya Pradesh General Sales Tax Act. The petitions are connected and relate to four different periods:

Miscellaneous Petition No. 388 of 1970 — year 1962-63 (the leading case whose facts are described);
Miscellaneous Petition No. 387 of 1970 — year 1963-64;
Miscellaneous Petition No. 73 of 1970 — year 1964-65;
Miscellaneous Petition No. 74 of 1970 — year 1965-66.

The common factual matrix was that the assessee, a registered dealer, was required by the M.P. General Sales Tax Act to furnish quarterly returns accompanied by a treasury receipted challan showing deposit of tax due according to the return. The petitioner filed returns (including under the Central Sales Tax Act) but, citing financial difficulty, did not deposit the tax in advance before filing in all cases. It is admitted that, in the leading case, the petitioner subsequently deposited Rs. 24,524.70 before actual assessment; assessment dated 1 January 1969 set tax at Rs. 21,308.89 and imposed a penalty of Rs. 1,500 under Section 17(3), making a total assessed amount of Rs. 22,808.89. Because the petitioner had already deposited more than the amount assessed in that case, he was entitled to a refund. In other cases deposits were not more than the assessed amount but the petitioner did deposit in accordance with his return prior to assessment. At the time these writ petitions were filed, no notice demanding deposit of the assessed amount had been served on the petitioner.

Legal Issues Presented

Whether penalty under Section 17(3) of the M.P. General Sales Tax Act can be imposed where a registered dealer has filed the statutory return but did not, at the time of filing, produce the treasury receipted challan required by Rule 15 (i.e., whether failure to accompany a return with the challan amounts to failure to file a return within the meaning of Section 17(3)).
Whether, for the purpose of imposing penalties or applying machinery under the Central Sales Tax Act, the State law to be used is the law in force at the time the Central Act came into force (legislation by reference) or the State law in force for the period for which assessment is made ("for the time being").
Whether two of the petitions (Nos. 73 and 74 of 1970) should be rejected as barred by delay because they were not filed within the usual 90 days after the last order in revision.

Arguments of the Parties

Petitioner's Arguments

Section 17(3) penalizes complete failure to furnish a return; it does not penalize defects in the manner of filing a return (such as failing to accompany the return with a treasury receipted challan). Sub-section (1) specifies the manner of filing; Sub-section (3) speaks only to failure to furnish the return.
Rule 15 requires a return and states the challan shall accompany the return, but the challan is distinct from the return; failure to submit the challan with the return cannot be equated with failure to file the return itself.
Section 22 contains special provisions relating to deposit of tax and prescribes that tax due according to the return shall be deposited before filing (s.22(2)), allows subsequent deposit where under-calculation is discovered (s.22(3)), and provides for notice-based recovery and penalty (s.22(4)(i) and s.22(4-A)); therefore, penalties for non-deposit are regulated by Section 22 and cannot be inferred from Section 17(3).
Imposing penalty for not depositing advance tax is unreasonable where an assessee may over-estimate liability (here the assessee deposited Rs. 24,524.70 while assessed liability was Rs. 21,308.89), and penal provisions must be strictly construed in favour of the assessee.
Relied on Viswa and Co. v. State of Gujarat (A.I.R. 1967 Guj. 19) — though the Court notes the Gujarat decision concerned provisions similar to Section 22 rather than Section 17.
Argued (separately) that under the Central Sales Tax Act the machinery of assessment should be the State law in force when the Central Act came into force (legislation by reference), relying on Madras High Court decisions (D.H. Shah & Co. and State of Madras v. M. Angappa Chettiar & Sons).

Respondent / Department's Arguments

The department contended that because the returns filed were not accompanied by the treasury receipted challan in Form VI (as required by Rule 15), it could not be said that a proper return had been filed; thus, within the meaning of Section 17(3) no return had been filed and penalty could be imposed.
The State also argued that two of the writ petitions (Nos. 73 and 74 of 1970) were delayed (not filed within the usual 90 days after the last order in revision) and therefore should be rejected on the ground of delay.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Viswa and Co. v. State of Gujarat, A.I.R. 1967 Guj. 19	Authority relied on by petitioner concerning penalty for non-deposit under provisions similar to Section 22.	The Court observed that the Gujarat case was different in that penalty there had been imposed under provisions similar to Section 22 (and not under Section 17, which was under consideration here) and therefore did not require further discussion for deciding these cases.
D.H. Shah & Co. v. State of Madras, [1967] 20 S.T.C. 146 (Madras High Court)	Madras High Court decision accepting the principle that the machinery of assessment under the Central Act should be the State law applicable when the Central Act came into force (legislation by reference).	The Court expressly disagreed with this principle as applied by the Madras decisions and declined to follow them on that point, explaining that Sub-section (3) of Section 9 of the Central Act refers to the machinery "for the time being" in force (i.e., the law in force during the period for which assessment is to be made).
State of Madras v. M. Angappa Chettiar and Sons, [1968] 22 S.T.C. 226 (Madras High Court)	Another Madras decision supporting the same legislation-by-reference principle referenced above.	The Court noted the decision but rejected the contention that the old law on the date the Central Act came into force could be used; it held the Central Act contemplates use of the State law "for the time being" (i.e., the law in force for the assessment period).

Court's Reasoning and Analysis

The Court's analysis proceeded along several lines, applying textual interpretation and statutory structure:

Textual interpretation of Section 17: The Court distinguished Sub-section (1) (which prescribes the manner of furnishing returns) from Sub-section (3) (which provides for penalty where a return is not furnished). The Court concluded that Sub-section (3) penalizes complete failure to file a return, not mere non-compliance with the prescribed manner or absence of an accompanying document (such as the treasury challan).
Interpretation of Rule 15: Rule 15 requires that each return be accompanied by a treasury receipted challan. The Court emphasized the distinction between the return itself and the treasury challan which is required to accompany it. The Court held that failure to submit the challan along with the return cannot be equated with a failure to file the return itself, and therefore does not fall within Section 17(3).
Primacy of Section 22 for deposit-related penalties: The Court analyzed Section 22, noting that it directly governs deposit of tax. Section 22(2) requires deposit of tax due according to the return before filing; Section 22(3) permits subsequent deposit where under-calculation is discovered; Section 22(4)(i) allows the Commissioner to serve notice requiring deposit and specifies not less than 30 days' time; Section 22(4-A) provides for penalty if the amount is not deposited in accordance with such notice. The Court regarded these provisions as a special code for payment of tax and recovery and concluded that, in the presence of these specific provisions (including a requirement of notice before penalty under Section 22), a right to impose penalty for non-deposit should not be inferred from Section 17(3) which deals only with furnishing returns.
Reasonableness and strict construction of penal provisions: The Court observed that imposing penalty for not depositing an estimated advance tax (which the assessee may over-estimate and which may never be finally due) would be unreasonable. As the assessee in the leading case had deposited more than the amount ultimately assessed, a power to punish failure to deposit an advance estimate could not be inferred without clear legislative language. The Court applied the principle that penal provisions are to be strictly construed, and ambiguities resolved in favour of the assessee.
On the "legislation by reference" argument under the Central Act: The Court examined Sub-section (3) of Section 9 of the Central Sales Tax Act and the definition of "sales tax law" in Section 2(i). It found that Sub-section (3) refers to the authorities "for the time being empowered" to assess and collect the State tax and that "sales tax law" means the law "for the time being in force" in the State. The Court read these phrases as meaning the law in force during the period for which the assessment is made (and not the law in force on the date the Central Act came into force). Consequently, the Court rejected the contention that the machinery of assessment must be the old State law in force when the Central Act was enacted.
On delay in filing two petitions: The State's plea of delay as to two petitions (Nos. 73 and 74 of 1970) was considered but the Court refused to dismiss them on that ground because it concluded the assessments of penalty were wholly without jurisdiction and because there is no fixed limitation for filing writ petitions; further, imposition of a large penalty affects fundamental rights and justified hearing despite delay.

Holding and Implications

Final Ruling: All four writ petitions are allowed; the assessments of penalty under Section 17(3) of the M.P. General Sales Tax Act in all four cases are quashed.

Direct consequences and orders made by the Court (as stated in the opinion):

The amount of penalty assessed under Section 17(3) shall not be realised from the petitioner in any of the four cases.
The petitioner will receive costs from the respondents in all four cases.
Counsel's fee of Rs. 100 is allowed, if certified.
The amount of security for costs shall be refunded to the petitioner in all four cases.

The opinion does not discuss any broader doctrine or declare the decision to be a binding precedent beyond the disposition of these cases; it confines its disposition to the direct effect on the parties as above.

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Jiwanmal Sons Private Ltd. v. Deputy Commissioner Of Sales Tax, Jabalpur, And Another

1. The order passed in this writ petition (Miscellaneous Petition No. 388 of 1970) shall also govern the disposal of the connected three writ petitions, namely, Miscellaneous Petitions Nos. 387 of 1970, 73 of 1970 and 74 of 1970, filed by the same company, M/s. Jiwanrnal Sons Private Limited, against the imposition of penalty under Section 17(3) of the Madhya Pradesh General Sales Tax Act. These four writ petitions relate to four different periods. Miscellaneous Petition No. 388 of 1970 relates to the year 1962-63, No. 387 of 1970 relates to the year 1963-64, No. 73 of 1970 relates to the year 1964-65 and No. 74 of 1970 relates to the year 1965-66. Since the material facts which have given rise to the common point in these writ petitions are the same, we are disposing of all the four petitions by one common order, giving the facts of the first case (M.P. No. 388 of 1970) which relates to the year 1962-63. The facts of the remaining three cases are materially the same except in respect of dates and figures which do not affect the point in question.

2. Under the Madhya Pradesh General Sales Tax Act, an assessee, who is a registered dealer, has to submit quarterly returns and before filing a return he has to deposit the amount of tax payable under the Act according to his own return and the treasury receipt in respect of such deposit has to be submitted along with the return. In the present cases the petitioner had to file a return under the Central Sales Tax Act. He filed the relevant returns but, according to him, due to financial difficulties he could not deposit in advance the tax as per his return. It is, however, admitted that subsequently before actual assessment he deposited a sum of Rs. 24,524.70. The assessment was made by order dated 1st January, 1969, and tax was assessed at Rs. 21,308.89. A penalty of Rs. 1,500 was imposed for not having complied with Section 17(3) of the M.P. General Sales Tax Act. Thus a total amount of Rs. 22,808.89 was assessed as tax. The petitioner had already deposited more than this amount as noted above and therefore he was entitled to a refund. In some other cases the deposit made by the petitioner was not more than the amount ultimately assessed, but he did make the deposit according to his return in all the cases before he was actually assessed. In all these cases it is also admitted that no notice for depositing the assessed amount had yet been served on the petitioner when these writ petitions were filed.

3. On these facts the contention of the learned counsel for the petitioner is that penalty under Section 17(3) of the M.P. General Sales Tax Act was not payable. Relevant parts of Sub-sections (1) and (3) of Section 17 are quoted below:

(1)...Every registered dealer shall furnish returns in such form, in such manner, for such period, by such date and to such authority as may be prescribed.

(3) If...a registered dealer fails without sufficient cause to furnish under the said sub-section his return for any period, the Commissioner may...direct him to pay, by way of penalty, a sum not exceeding one-fourth of the amount of the tax which may be assessed...

From the above quotations it will be seen that Sub-section (3) of Section 17 provides for imposition of penalty in case a return is not filed. In Sub-section (1) the manner of filing of the return is provided for in detail. But Sub-section (3) does not make penal any defect in the manner of filing the return. If there is complete failure of filing of return it is penal. But if the manner prescribed is not followed fully, there is no provision that even in that case penalty can be imposed. If that had been the intention of the Legislature, the language would have been very different. It could have been easily provided, that penalty can be imposed if the return is either not filed at all or not filed in the form or in the manner, on such dates and to such authority as may be prescribed.

4. Apart from this the department relied on Rule 15 of the Rules made under the M.P. General Sales Tax Act which provides as follows :

Every registered dealer...shall furnish to the appropriate Sales Tax Officer for each quarter of a year a return in form VIII within 30 days from the expiry of the quarter to which the return relates.... Each of such return submitted shall be accompanied by a treasury receipted challan in form VI in respect of tax due according to return.

The contention on behalf of the department was that since the return when filed was not accompanied by a treasury receipted challan in form VI, it cannot be said that a proper return was filed by the assessee and therefore within the meaning of Section 17(3) it must be held that no return had been filed. We are unable to agree with this contention. Rule 15 makes a clear distinction between the return which has to be filed according to the details mentioned above and the treasury receipted challan, which is merely to accompany the return. The treasury challan is not the return and the failure to submit the challan along with the return cannot possibly amount to a failure to file the return itself.

5. The matter can be looked at from another aspect also. Section 17 deals with the filing of the return and provides for penalty if the return is not filed, while Section 22 deals with the deposit of the tax and provides for penalty in case tax is not deposited under certain circumstances only. Sub-section (2) of Section 22 requires that tax which is due according to the return shall be deposited before the return is filed. Sub-section (3) provides that in case the assessee subsequently finds that by mistake he has under-calculated the tax in his return, he may subsequently deposit the balance due. Sub-section (4)(i) provides for the deposit of tax which is due by such date as may be specified in a notice to be issued by the Commissioner for this purpose and such date (to be specified) shall be "not earlier than 30 days from the date of service of such notice". This tax, for which the Commissioner may serve a notice, includes tax due where returns have been furnished without full payment: [(4)(i)(a)]. This provision clearly means that in case the assessee has not paid full tax before furnishing the return, the deficiency can be demanded by service of notice which notice has to give at least 30 days' time after its service to make the deposit. Sub-section (4-A) then provides for penalty in case the amount is not deposited according to the notice. The provisions of section 22, which deals directly with the deposit of tax and which makes penalty payable only when a notice for deposit has been served and has not been complied with, are special provisions relating to the payment of tax, and in the face of this special provision the right to impose penalty for non-deposit of tax cannot be assumed by inference from Section 17(3) which only deals with the furnishing of returns.

6. From another point of view also imposition of penalty for not having deposited the tax in advance is unreasonable because the assessee may over-estimate his liability of tax which, in fact, may never be due and it would be difficult to ascribe to the Legislature the intention of imposition of penalty on an assessee for not having deposited any such over-estimated tax which has not been assessed and found due. In the case under consideration, it has already been mentioned that the assessee had estimated his liability of tax at an amount of Rs. 24,524.70, while ultimately he was found liable only to pay Rs. 21,308.89 as tax. Unless a very clear and unequivocal language is used by the Legislature, such a power to impose penalty for not having deposited advance tax cannot be inferred. Penal provisions have to be strictly construed and, if ambiguous, are construed in favour of the assessee. We are therefore clearly of opinion that the imposition of penalty under Section 17(3) in these cases is wholly without jurisdiction.

7. Learned counsel appearing for the petitioner relied on a decision of the Gujarat High Court in Viswa and Co. v. State of Gujarat A.I.R. 1967 Guj. 19. The Gujarat case was slightly different as penalty had been imposed under the provisions similar to Section 22 of the M.P. General Sales Tax Act mentioned above and not on the basis of a provision like section 17 of the above act which we have to consider in these cases. We therefore need not say anything further about the Gujarat case.

8. Learned counsel for the petitioner also contended that the Central Sales Tax Act came into force in the year 1956 when, in the area to which these cases relate, the Central Provinces and Berar Sales Tax Act was in force which did not contain any provision like Section 17 of the M.P. General Sales Tax Act. The M.P. General Sales Tax Act came into force in 1959 and the provisions of this Act cannot be utilised for the assessment of penalty under the Central Sales Tax Act. The contention of the learned counsel was that the machinery of assessment and collection contemplated under Section 9(3) of the Central Act would be the machinery available under the State Act in force at the time when the Central Act was passed and not the machinery available during the period for which the assessment was made. He relies upon the principle of legislation by reference. This argument was accepted by the Madras High Court in two decisions: D.H. Shah and Co. v. State of Madras [1967] 20 S.T.C. 146 and State of Madras v. M. Angappa Chettiar and Sons [1968] 22 S.T.C. 226. With due respect to the learned Judges of the Madras High Court who decided those cases, we are unable to agree with this contention. The relevant words of Sub-section (3) of Section 9 of the Central Act may be quoted:

The authorities for the time being empowered to assess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India and subject to any rules made under this Act, assess, collect and enforce payment of any tax....

It will be seen that this sub-section does not incorporate any part of the State legislation by reference. It merely provides that the machinery which is being utilized for the State tax, "for the time being", will also do the work on behalf of the Central Government under the Central Act. The words "for the time being" are very significant. Moreover, the definition of the term "sales tax law" contained in Section 2(i) is as follows :

'Sales tax law' means any law for the time being in force in any State or part thereof which provides for the levy of taxes on the sale or purchase of goods generally or on any specified goods...."

Thus, the words used in Sub-section (3) of Section 9 relating to State law have been made further clear by this definition that they relate to the law which is in force "for the time being", i.e., during the period for which assessment is to be made. In the face of these clear provisions we are unable to agree with the learned Counsel that the old law which was applicable on the date when the Central Sales Tax Act came into force can only be made use of. However, as stated above, on the first point we find the contention of the assessee to be unanswerable.

9. Learned counsel appearing for the State also contended that two of these writ petitions, namely, Miscellaneous Petitions Nos. 73 and 74 of 1970, were not filed within (he usual 90 days after the last order passed in revision and hence those petitions should be rejected on the ground of delay. Since we have come, to the conclusion that the assessment of penalty was wholly without jurisdiction, we do not agree that those petitions should be dismissed merely on the ground of delay. There is no limitation prescribed for filing a writ petition and imposition of a large amount of penalty certainly affects the fundamental rights of the petitioner.

10. The result, therefore, is that all the four writ petitions are allowed, the assessment of penalty under Section 17(3) in all these cases is quashed and we direct that the amount of penalty so assessed shall not be realised from the petitioner in any of these four cases. The petitioner will get his costs from the respondents in all these cases. Counsel's fee Rs. 100, if certified. The amount of security for costs shall be refunded to the petitioner in all the four cases.

Jiwanmal Sons Private Ltd. v. Deputy Commissioner Of Sales Tax, Jabalpur, And Another

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner's Arguments

Respondent / Department's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Jiwanmal Sons Private Ltd. v. Deputy Commissioner Of Sales Tax, Jabalpur, And Another

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