Pyarelal v. State Of Madhya Pradesh And Others

1. This order will dispose of Miscellaneous Petitions Nos. 222 and 223, both of 1969. These petitions under Article 226 of the Constitution are directed against the assessment of sales tax for the years 1963-64 and 1964-65.

2. The petitioner in these petitions is one Pyarelal who is a manufacturer of wooden furniture. In the relevant accounting years the main business of the petitioner consisted of selling the furniture manufactured by him to the Defence Department (M.E.S.) through the Garrison Engineer, Jabalpur, who had given him certain contracts for the supply of furniture. According to the petitioner he did not sell any furniture to the public and the aggregate of payments received by him from the Garrison Engineer constituted his turnover for the relevant years.

In the assessment year 1963-64, the petitioner filed four quarterly returns. The return for the 1st quarter was late by eight days; the return for the 2nd quarter was in time; the return for the 3rd quarter was late by 43 days; and the return for the 4th quarter was in time. The total turnover shown in the returns, which related exclusively to the sales made to the Garrison Engineer, was Rs. 2,00,629.11. Some bills were also submitted by the dealer after the filing of return. The Sales Tax Officer did not accept the accounts of the assessee and made a best judgment assessment. He assessed the total sales to the Garrison Engineer at Rs. 2,91,385.91. He also held that in the absence of proper accounts maintained by the assessee, the possibility of sales to other departments or customers could not be ruled out. The gross turnover of the assessee was, for this reason, determined at Rs. 3,20,000. In addition to the tax assessed on this turnover, the petitioner was made liable to penalties of Rs. 100, Rs. 3,500, Rs. 200 and Rs. 20 respectively under Sections 17(3), 43(1), 27(2) and Rule 69-A of the Madhya Pradesh General Sales Tax Act, 1958. The petitioner went up in revision before the Deputy Commissioner of Sales Tax, who accepted the contention that there was a mistake in assessing the sales made to the Garrison Engineer and reduced the figure of such sales to Rs. 2,32,387.00. But he also held that the petitioner must have been making sales to the public and on that basis the gross turnover was fixed at Rs. 2,40,000. The penalty imposed under Section 43(1) was reduced from Rs. 3,500 to Rs. 1,000. Penalties imposed under other sections were maintained.

In the assessment year 1964-65, the petitioner furnished four quarterly returns. The returns for the first and last quarters were filed in time. The return for the 2nd quarter was late by 11 days and that of the 3rd quarter by 16 days. The total turnover shown in the returns was Rs. 1,34,413 which related exclusively to the sales made to the Garrison Engineer. During the assessment proceedings the petitioner himself produced certificates regarding supplies to the Garrison Engineer, which showed that the total turnover of sales in that respect amounted to Rs. 1,83,905.79. This figure was accepted so far as sales to the Garrison Engineer were concerned; but as the petitioner's accounts were not regularly kept, the Sales Tax Officer assessed the turnover to his best judgment at Rs. 2,50,000. In addition to tax, penalties of Rs. 2,000, Rs. 200, Rs. 20 and Rs. 20 were imposed respectively under sections 43(1), 27(2), 17(3) and rule 69-a of the' act. In revision, the gross turnover was reduced to Rs. 2,25,000. The penalty under Section 43(1) was also reduced to Rs. 1,500, but other penalties were maintained.

It was also contended by the learned Counsel for the petitioner that the Sales Tax Officer did not disclose to him the inspection report of the Inspector and he had no opportunity to meet the adverse allegations contained in it. This argument cannot be accepted. The assessment order in each case was passed long after the receipt of the Inspector's report and there were many hearings in-between on which the petitioner attended. It is unlikely that he did not know the contents of the report. No complaint of this nature was made to the Deputy Commissioner in revision and even in the petitions filed in this Court there is no clear averment that the petitioner had no knowledge of the inspection report and no opportunity to meet it. We are, therefore, not satisfied that the inspection report of the Inspector was utilised by the Sales Tax Officer without affording any opportunity to the petitioner to explain it.

5. The next contention of the learned Counsel for the petitioner was that the imposition of penalty under Section 43(1) was not proper. However, on the findings reached by the Sales Tax Officer and the Deputy Commissioner, there cannot be any doubt that there was deliberate concealment of the turnover and the return furnished was knowingly false. Even the sales made to the Garrison Engineer, which were all known to the petitioner, were not fully disclosed and no explanation was offered for the non-disclosure. In the circumstances, we do not find any ground to interfere with the penalty imposed under Section 43(1).

7. Before a dealer can be made liable to comply with Section 27 it has to be shown that in the previous year his turnover exceeded rupees fifty thousand. There was no evidence to show that in the year 1962-63 the dealer's turnover exceeded rupees fifty thousand and, therefore, it cannot be said to be established that the dealer was obliged to comply with the requirements of Section 27 in 1963-64. The imposition of penalty of Rs. 200 under Section 27(2) for non-compliance with Section 27(1) in the year 1963-64 was clearly erroneous. As regards the year 1964-65, this argument does not apply, for it is admitted that in 1963-64 the turnover exceeded rupees fifty thousand. But then it was argued that Section 27 applies only to retail sales made across the counter and not to sales made in bulk in pursuance of a contract for the supply of goods, such as that was entered into between the petitioner and the Garrison Engineer. We do not agree. The petitioner has admitted in his petition that after the furniture was prepared by him he used to deliver the same to the Garrison Engineer along with his bill and the payment used to be received after the bill was passed. Now, Section 27(1) requires a dealer to deliver to the purchaser a bill or cash memorandum showing the particulars mentioned in Rule 50 for each sale made by him of goods exceeding rupees ten in value and to maintain a counterfoil of each such bill or cash memorandum and to preserve it for a period of not less than three years. There is nothing in this rule to suggest that it does not apply to sales made in pursuance of a contract for supply of goods. Even a seller of goods in bulk like the petitioner can enter in the bills delivered by him to the purchaser the particulars mentioned in Rule 50 and can maintain and preserve counterfoils of the bills. The object behind the section is to facilitate enquiry into the total sales made by a dealer and to prevent tax evasion. That object holds good even when the dealer is not a retail vendor but supplier of goods in bulk. Thus, neither the language of the section, nor the object behind it nor any consideration of practical difficulty in compliance with its requirements goes to suggest that Section 27(1) did not apply to a dealer like the petitioner. We are, therefore, of opinion that the petitioner in not maintaining the counterfoils of the bills of sales made by him in the year 1964-65, made himself liable to penalty under Section 27(2) and the penalty imposed cannot be held to be illegal.

8. The learned Counsel then challenged the imposition of penalty under Section 17(3) on the ground that on a proper construction the Act did not provide any penalty for late filing of return. Section 17(1) requires every registered dealer to "furnish returns in such form, in such manner, for such period, by such dates and to such authority as may be prescribed." By Section 17(3), a registered dealer who "fails without sufficient cause to furnish under the Sub-section [Section 17(1)] his return for any period" makes himself liable to penalty. Now, a return that is submitted late is also one that is furnished under Section 17(1) and, therefore, if a return is submitted late by a dealer, it cannot be said that the dealer has failed to furnish return under Section 17(1). For this reason, a dealer who has merely furnished his returns late cannot be subjected to penalty under Section 17(3). As the petitioner was made liable to penalty for late filing of his returns, it must be held that the penalties imposed under Section 17(3) were unauthorised.

9. The learned Counsel did not challenge the penalty imposed under Rule 69-A.