This order shall also govern disposal of the connected W. P. No. 1443/2002 as common questions of fact and law are involved in the both writ petitions. Only point for consideration is whether, in the facts circumstances of case in hand, respondents were justified in imposing penalty under section 26(4)(a) of the M. P. Commercial Act, 1994?
2. For the sake of convenience, necessary and brief facts may be noticed from the above writ petition. Petitioner is engaged in the manufacture and sale of cement. The basic raw material for manufacture of cement is limestone. For this purpose, petitioner obtained and operating mining leases for the captive consumption of limestone. Petitioner is a dealer and holds a Registration Certificate. On the captive consumption, though petitioner was disputing its liability to pay entry tax under the M. P. Sthaniya Kshetra Me Mai Ke Pravesh Par Kar Adhiniyam, 1976 (hereinafter referred to as 'Entry Tax Act' for short) but after having lost in the High Court and the Supreme Court, now it is no longer in dispute that petitioner is liable to pay entry tax on that score. It is pertinent to point out that by virtue of section 13 of the Entry Tax Act, all machinery provisions of the M. P. Commercial Tax Act, 1994 are applicable such as filing of returns, payment of tax, and assessment proceedings etc. under the Entry Tax Act. It is undisputed that for the period from 1-4-1995 to 31-3-1996, petitioner had filed quarterly returns and paid the Entry Tax according to returns. Assistant Commissioner of Commercial Tax, Ujjain passed the assessment order on 28-4-1999 (Annexure-D). While determining and quantifying the amount of Entry Tax, the assessing authority also imposed penalty under section 26(4)(a) of the Commercial Act, 1994 for the late payment of remaining/differential amount of tax. Feeling aggrieved, petitioner preferred an appeal but without success and thereafter having lost in the revision by the order impugned, these writ petitions have been preferred.
3. Respondents have filed reply to justify the imposition of penalty. It was contended that petitioner being a dealer, failed to pay the due tax, therefore, is liable to pay the penalty.
4. After having heard rival submissions of learned counsel for the parties, this Court is of the view that these petitions deserve to be allowed in view of the following discussion.
5. To appreciate the controversy in the proper perspective, it would be relevant to extract provision of section 26(4)(a). It is reads as under:-
"Section 26. Returns -
(1).....................
(2).....................
(3).....................
(4).....................
(a) If a registered dealer fails without sufficient cause -
(i) to pay the amount of tax payable according to a return for any period in the manner prescribed under sub-section (2) of section 32; or (ii) to furnish his return under sub-section (1) or a revised return under sub-section (3) for any period in the manner or by the date prescribed there under; or
(iii) fails to furnish return, such dealer shall, be liable to pay, in respect of the tax that is payable according to such return or the tax payable for the period relating to such return, interest at the rate of two percent per month from the date the tax so payable had become due to the date of its payment or to the date of assessment, whichever is earlier.
Explanation. - (1) for the purpose of this clause:- (1) where the period of default covers a period less than a month, the interest payable in respect of such period shall be computed proportionately. (2) 'month' shall mean thirty days."
6. It is thus, clear, that penalty as aforesaid, could be imposed if the dealer fails to furnish returns/revised return or pay tax due as per the return in the prescribed manner and or time. Section 32 deals with the payment of tax and other dues. For our purpose, relevant provision of section 32(2) reads as under:-
"Section 32. Payment and recovery of tax and other dues under this Act. -
(1).....................
(2) Before any registered dealer furnishes any return as required by subsection (1) of section 26, he shall pay into a Government Treasury, in the prescribed manner and time the full amount of tax payable according to such return and the amount of interest, if any, payable by him under the provisions of this Act. (3)....................."
7. We do not think that learned counsel for the respondents is not right in submitting that imposition of penalty in the facts and circumstances of the case as aforesaid, is justified in view of the decision of the Constitutional Bench of the Supreme Court in J. K. Synthetics Ltd. vs. Commercial Taxes Officer, reported in (1994) 94 STC 422. Supreme Court considered section 11-B of the Rajasthan Sales Tax Act, 1954 before it's substitution by the Act No. 4 of 1979. In that case the assessee did not include in the taxable turnover the freight charged in respect of cement sold under the Cement Control Order. The controversy was ultimately set at rest by the decision of the Supreme Court in the case of Hindustan Sugar Mills Ltd. vs. State of Rajasthan, (1979) 43 STC 13. After the decision, the assessee paid the differential amount of tax on the sale price of cement inclusive of freight amount. At the time of assessment, taxing authority imposed penalty in the shape of interest under section 11-B notwithstanding the contention of the assessee that it was bona fide omission. Supreme Court held that ordinarily the strict construction is not extended to machinery provisions in taxing statute, but provision by which the authority is empowered to levy and collect interest is a substantive law despite being part of machinery provisions, requires strict interpretation leaning towards subject rather than in favour of Revenue. After elaborate discussion, Their Lordships approved the minority view of Bhagwati J. (as His Lordship then was) and overruled the majority view of Venkataramiah and Sen JJ. in Associated Cement Co. Ltd. vs. CTO, (1981) 4 SCC 578. Ultimately, it was held that if a dealer deposits full amount of tax due before filing of return at the regular intervals, disclosing correct and complete and information in return which has bearing on assessment, it would be difficult to hold that such dealer had not acted bona fide in depositing the tax due as per return so as to visit him with liability to pay interest by way of the penalty on the additional amount of tax payable after the assessment is made. The ratio laid down by the Supreme Court in J. K. Synthetics Ltd., (supra) applies on all its four to the legal provision as well as the factual matrix prevailing in these petitions. As pointed out above, petitioner had paid the tax due as per quarterly returns without suppressing any material information having bearing on the tax liability and after having lost the legal battle, petitioner deposited additional/differential amount of tax before the assessment orders were passed. In view of the prevailing factual and legal scenario, it is difficult to sustain the impugned order.
8. In view of foregoing discussion, these writ petitions are allowed and the orders qua demand to pay interest on the differential/additional amount of tax on account of the subsequent determination of liability, are hereby set aside and both writ petitions are allowed, however without any order as to costs. Order accordingly.
9. Let a copy of this order be kept in record of connected W. P. No. 1443/2002.
Petitions allowed.