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Lalta Prasad Khinni Lal v. Asstt. Commissioner (Judl.) Sales Tax, Kanpur And Another .
Factual and Procedural Background
Lalta Prasad Khinni Lal, a Hindu Undivided Family engaged in the manufacture of oils, was assessed to sales tax for the assessment year 1963-64 under the U.P. Sales Tax Act, 1948 (“the Act”). Although the assessee deposited ₹3,153.01 representing the tax it admitted to be due, the Sales Tax Officer enhanced the turnover, thereby increasing the tax liability. An appeal was filed on 21 October 1965—three days before the 30-day limitation period expired—but the full admitted tax was not in fact deposited until 27 May 1966 because of difficulties in encashing a cheque. The Assistant Commissioner (Judicial) rejected the appeal as defective, holding that:
- the appeal could not be “entertained” without proof of deposit of the admitted tax within the limitation period, and
- Section 5 of the Limitation Act could not be invoked to condone that delay.
The assessee’s writ petition under Article 226 challenging this view was dismissed by the Allahabad High Court on identical reasoning. The present appeal to the Supreme Court is by certificate against that High Court judgment.
Legal Issues Presented
- Whether, under Section 9 of the U.P. Sales Tax Act, an appeal that is filed within 30 days but is accompanied by proof of deposit of the admitted tax after that period can nevertheless be entertained once the tax is paid.
- Consequently, whether Section 9(6) of the Act (which applies Section 5 of the Limitation Act) empowers the Appellate Authority to condone the delay resulting from late deposit of the admitted tax.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Janta Cycle and Motor Mart v. Assistant Commissioner (G) III, Sales Tax, Kanpur Range, AIR 1969 All 200 | Full Bench view that “entertain” in Section 9 requires deposit of admitted tax within the limitation period; Section 5 Limitation Act inapplicable to delay in such deposit. | Supreme Court rejected this interpretation as erroneous and declined to follow the Full Bench reasoning. |
| Lakshmiratan Engineering Works Ltd. v. Assistant Commissioner (I), Sales Tax, Kanpur, AIR 1968 SC 488 | Meaning of the word “entertain”: refers to the stage when the court considers the appeal, not when the memorandum is filed. | Used to demonstrate that an appeal becomes “entertainable” once proof of tax payment is produced, even if filed earlier without such proof. |
| Gangadharan Pillai v. Sales Tax Officer (Reserve), Ernakulam (Kerala HC) | Permitting condonation of delay where admitted tax is deposited after the limitation period but before the appeal is considered. | Expressly approved; Court adopted its reasoning in holding that Section 9(6) allows condonation. |
| Raja of Venkatagiri v. CIT, AIR 1957 AP 276 | Under analogous proviso in Income-tax Act, payment of tax is a condition precedent to maintainability, yet delay in filing can be condoned once tax is paid. | Cited to support the view that although payment is a pre-condition, the appellate authority retains power to excuse delay. |
Court's Reasoning and Analysis
The Supreme Court undertook a textual analysis of Section 9 and its provisos:
- The first proviso bars the entertainment of an appeal until satisfactory proof of payment of the admitted tax is produced; it does not stipulate that such payment must occur within the 30-day filing period.
- If proof of payment is furnished after 30 days, the appeal is deemed filed on that later date and, being out of time, becomes subject to Section 9(6), which incorporates Section 5 of the Limitation Act.
- Hence, an appellant may seek condonation of delay for late deposit, and the Appellate Authority has jurisdiction to consider whether “sufficient cause” exists.
- The High Court’s reliance on the Full Bench decision in Janta Cycle misconstrued the Supreme Court’s own judgment in Lakshmiratan Engineering Works; that decision actually supports—rather than negates—the possibility of condonation because “entertain” relates to the stage of hearing, not filing.
Holding and Implications
ALLOWED; High Court judgment set aside; matter remitted for reconsideration by the Appellate Authority.
Immediate Effect: The Appellate Authority must now decide whether to condone the delay in depositing the admitted tax and thereafter hear the assessee’s appeal on merits. Broader Implication: The decision clarifies that under Section 9 of the U.P. Sales Tax Act, late payment of admitted tax does not automatically bar an appeal; the delay may be condoned under Section 9(6), thereby reinforcing procedural flexibility consistent with Section 5 of the Limitation Act.
A.N Grover, J.— This is an appeal by certificate from a judgment of the Allahabad High Court in which the main point involved relates to the provisions of Section 9 of the U.P Sales Tax Act, 1948, hereinafter called the “Act”.
2. The facts lie in a narrow compass. Lalta Prasad Khinni Lal a Hindu undivided family which is the assessee carried on business of manufacturing oils. For Assessment Year 1963-64 it was assessed to sales tax under the Act by an order dated July 28, 1965. The assessee had been filing its quarterly returns and had deposited a sum of Rs 3153.01 which was the admitted amount of its tax liability. The Sales Tax Officer, however, made an assessment enhancing the turnover which resulted in increase of the amount of tax. The assessee filed an appeal on October 21, 1965 which was three days before the period of limitation prescribed for filing the appeal was to expire. There was some difficulty about encashment of a cheque which had been deposited along with the rest of the cash amount towards payment of the amount of tax the liability for which stood admitted. The total payment was not made of the entire amount until May 27, 1966, when the treasury challan was produced. The assessee filed an application under Section 5 of the Indian Limitation Act praying for condonation of delay, if any, in filing the appeal. The Assistant Commissioner (Judicial) Sales Tax rejected the memorandum of appeal as defective on the ground that the deposit of the amount of tax admitted to be due had not been made within the period of limitation and that the delay in doing so could not be condoned under Section 5 of the Limitation Act.
3. The assessee filed a petition under Article 226 of the Constitution in the High Court challenging the order of the Assistant Commissioner (Judicial) Sales Tax. That petition was dismissed on the ground that although the appeal was filed within time, there was delay in making the necessary deposit of the admitted tax and that delay could not be condoned under Section 5 of the Limitation Act.
4. Section 9 of the Act deals with an appeal against an order of assessment. It provides that any dealer objecting to an order under the various sections mentioned in sub-section (1) may within 30 days appeal to such authority as may be prescribed. The proviso to sub-section (1) is material and is set out below:
“Provided that no appeal against an assessment shall be entertained unless it is accompanied by satisfactory proof of the payment of the amount of tax admitted by the appellant to be due or of such instalments thereof as may have become payable:
Provided, secondly, that the Appellate Authority shall not exercise any powers or perform any other function except those conferred on or entrusted to him as such authority.”
Sub-section (6) of Section 9 provides that Section 5 of the Indian Limitation Act 1908 shall apply to appeals under the Act. The relevant Rules may next be reproduced:
“66. (2) The memorandum of appeal shall be accompanied by adequate proof of payment of the fee payable and a certified copy of the order appealed against and the challan showing deposit in the treasury of the tax admitted by the appellant to be due, or of such instalments thereof as might have become payable.
67. (3) If the memorandum of appeal is not in order it may be rejected or be returned after the necessary endorsement on its back about its presentation and return, to the applicant for correction and representation within the time to be fixed by the Assistant Commissioner (Judicial) or be amended then and there.”
A Full Bench of the Allahabad High Court considered the question of the applicability of Section 5 of the Limitation Act to a case where the admitted amount of tax is not deposited by the appellant within the time prescribed for filing the appeal in Janta Cycle and Motor Mart v. Assistant Commissioner (g) III, Sales Tax Kanpur Range AIR 1969 All 200, 1968 All LJ 547. The Full Bench relied on an observation of this Court in Lakshmiratan Engineering Works Ltd. v. Assistant Commissioner (I), Sales Tax, Kanpur AIR 1968 SC 488, (1968) 1 SCR 505 with regard to the meaning of the word “entertain”. According to that decision “entertain” meant the first occasion on which the Court took up the matter for decision. It might be at the admission stage or if by the rules of the Appellate Tribunal the appeals were automatically admitted it would be the time of the hearing of the appeal. The High Court considered that according to the aforesaid decision of this Court when the first proviso is read with the main provision of Section 9(1) of the Act the deposit also had to be made within limitation. The High Court came to the conclusion that Section 9(6) of the Act could not be applied and Section 5 of the Limitation Act was not attracted when the question arose whether the delay in depositing the admitted tax should be condoned.
5. We are wholly unable to comprehend and appreciate the above reasoning or the conclusion of the Allahabad High Court on the point under consideration. It is true that an appeal filed under Section 9 of the Act cannot be entertained by the Appellate Authority unless satisfactory proof is adduced of the payment of tax admitted by the appellant to be due but in a case where the amount of admitted tax is deposited after the period of limitation has expired all that will happen is that the appeal will become entertainable only on the day on which satisfactory proof of payment of that amount is produced. In other words the appeal will be deemed to have been properly filed on the date on which the amount of admitted tax is paid. If that is beyond the period of 30 days the appeal will be barred by time. Section 9(6) will immediately become applicable to that appeal and it will be open to the appellant to apply for condonation of delay under that provision. We are wholly unable to follow the argument that the deposit of the amount of admitted tax must be made within 30 days even though the delay in filing the appeal can be condoned under sub-section (6). A proper and correct reading of Section 9 cannot justify such an approach. If a petition of appeal has been filed without proof of payment of tax accompanying it that appeal can be said to have been preferred only when proof of payment of tax is furnished. Such furnishing of the proof may take place within the period prescribed for preferring the appeal or after the lapse of that period. If the proof of payment of admitted tax is furnished within the period prescribed the appeal must be entertained. If the furnishing of that proof is done after the expiry of the period of limitation the question will arise whether the appeal should be entertained or not. In such cases Section 9(6) will come into operation and the question will arise whether there has been sufficient cause for not preferring the appeal within the statutory period. The correct approach is to treat the appeal as having been preferred on the date on which proof of payment of the tax was furnished and then to see whether under sub-section (6) of Section 9 there was sufficient cause for excusing the delay in preferring the appeal. The decision of the Kerala High Court in Gangadharan Pillai v. Sales Tax Officer (Reserve) Ernakulam is to this effect and we entirely agree with the reasoning and the conclusion therein. In Raja of Venkatagiri v. CIT AIR 1957 AP 276 a division bench of the Andhra Pradesh High Court consisting of Subba Rao, C.J (as he then was) and Bhimasankaram, J. had to consider the provisions of the Indian Income Tax Act 1922 similar to Section 9 of the Act. According to the proviso to Section 30(1) of that Act no appeal lay against an order under sub-section (1) of Section 46 unless the tax had been paid. Sub-section (2) of that section provided that the appeal was to be ordinarily presented within 30 days but the Appellate Assistant Commissioner could admit the same after the expiration of the period if he was satisfied that the appellant had sufficient cause for not presenting it within that period. It was held that the payment of the tax was condition precedent to the maintainability of the appeal. If an appeal was filed, though after the prescribed period of time, the Assistant Commissioner had the jurisdiction to hear the appeal after the tax due was paid. The only possible objection that could have been raised was that the appeal was barred as having been filed beyond the period prescribed by Section 30(2). But the Appellate Authority had the jurisdiction to excuse the delay. The ratio of this decision is that even though the payment of tax was a condition precedent to the maintainability of the appeal the delay could be condoned under Section 30(2) thus treating the appeal as having been filed when the amount of tax was paid.
6. The Allahabad High Court appears to have been greatly influenced by the decision of this Court in Lakshmiratan Engineering Works Ltd. v. Asstt. Commissioner (J.) I, Sales Tax, Kanpur AIR 1968 SC 488, (1968) 1 SCR 505 and by the meaning of the word “entertain” as explained there. We have found considerable difficulty in discovering how that decision could afford any assistance to the respondents in the present case. Indeed according to that decision, the words “no appeal shall be entertained” in the proviso to Section 9 do not denote the filing of the memorandum of appeal but refer to the point of time when the appeal is being considered. Therefore, though the memorandum of appeal filed within time is not accompanied by the treasury chalan showing payment of tax if before the appeal is being considered satisfactory proof of payment of tax is given, then the proviso to Section 9 is satisfied. In the present case when the assessee produced the necessary documents which showed that the deposit of the full amount had been made by May 27, 1966 the appeal became entertainable. It only suffered from the defect that it was barred by time on that date. The assessee could, therefore, apply under Section 9(6) for extending the period of limitation in accordance with Section 5 of the Limitation Act. It is entirely a different matter whether on the facts of the present case, the Appellate Authority would have condoned the delay or not but to say that the Appellate Authority had no jurisdiction to extend the time simply because the amount of admitted tax had been deposited beyond the period of 30 days would be wholly erroneous and would not represent a true and correct view of the provisions of Section 9. It may be pointed out that the case of Lakshmiratan Engineering Works on which the High Court largely relied, did not involve the question of the extension of the period of limitation under Section 9(6). Indeed in our judgment the word “entertain'” in Section 9(1) has hardly any material bearing on the point under consideration.
7. As the Appellate Authority disposed of the appeal on the short ground that it was barred by time and that it had no jurisdiction to extend the period of limitation, this matter will have to go back for reconsideration and redecision of that Appellate Authority. In the result the appeal is allowed and the judgment of the High Court is set aside. The case is remitted to the High Court for making appropriate directions for reconsideration and rehearing of the appeal by the Appellate Authority under the Act. The assessee will be entitled to costs in this Court.
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