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Commissioner Of Sale... v. Brijraj Rameshwar (I...

Supreme Court Of India
Nov 4, 1964
Judgment
Subsequent
References
CaseIQ
Case Information
CITATION CODES
citation codes
CASE NO.

Appeals by Special leave from the Judgment dated 28th February,, 1961, of the Orissa High Court in S.J.C No. 3 of 1959.,Civil Appeals Nos. 832 to 834 of 1963, decided on 4th day of November, 1964.

Attorney(S)

N.S Bindra, Senior Advocate (R.N Sachthey, Advocate, with him).

JUDGES

Justice K. Subba Rao

Justice S.M. Sikri

Justice J.C. Shah

ACTS

Section 24(1) of the Orissa Sales Tax Act, 1947

Section 12(2) or Section 12(4) of the Orissa Sales Tax Act, 1947

Section 12(7) of the Act

Section 12(5) of the Orissa Sales Tax Act, 1947

Section 12(4) of the Act

Section 9 of the Orissa Sales Tax Act, 1947

Section 9(2) of the Act

Section 12(2) of the Act

Section 12(2) of the Orissa Sales Tax Act, 1947

Section 12(5) of this Act

Section 12(5) of the Act

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Smart Summary (Beta)

Factual and Procedural Background

The assessee, Brijraj Rameshwar, began a grocery business at Sambalpur on 22 August 1948. Believing himself liable under the Orissa Sales Tax Act, 1947 (“the Act”), he applied for registration on 22 August 1949, declaring a gross turnover of Rs 5,005 for the preceding year. An Inspector subsequently reported on 11 November 1949 that the turnover did not exceed Rs 5,000, and the department treated the application as filed; however, no intimation of rejection was sent to the assessee.

The assessee sent a reminder on 18 December 1950. On 11 September 1951 the Assistant Sales Tax Officer stated that the earlier application had been cancelled and required a fresh one. A new application dated 18 October 1951 led to the grant of a registration certificate on 2 November 1951.

On 25 November 1953 the Department initiated proceedings under Section 12(5) of the Act for the quarters ending 31-12-1950, 31-03-1951 and 30-06-1951. The Assistant Sales Tax Officer assessed tax and imposed penalties of Rs 5 per quarter. The assessee’s first appeal failed, but the Sales Tax Tribunal annulled the assessments for the first two quarters and modified the third, treating it under Section 12(4) instead of Section 12(5).

At the Commissioner’s instance the Tribunal referred four questions of law to the Orissa High Court under Section 24(1) of the Act. The High Court answered largely in favour of the assessee, holding Section 12(5) inapplicable. The State obtained special-leave appeals to the Supreme Court; the respondent did not appear.

Legal Issues Presented

  1. Whether the assessee’s registration application dated 22-08-1949 was valid and pending until 11-09-1951.
  2. Whether Rule 6 of the Orissa Sales Tax Rules, 1947 permitted an application for registration before the prescribed minimum turnover was actually reached.
  3. (a) Whether a registration certificate granted on an application made after liability accrued remained valid for the entire financial year; (b) whether assessment for the quarter ending 30-06-1951 could proceed under Section 12(5) or only under Sections 12(2) or 12(4).
  4. Whether assessments for the quarters ending 31-12-1950 and 31-03-1951 under Section 12(5) were legal.

Arguments of the Parties

Appellant (State/Commissioner of Sales Tax)

  • The application dated 22-08-1949 was invalid; consequently, it should be ignored.
  • Because the application is a nullity, the assessee “wilfully failed to apply for registration,” satisfying the pre-condition for invoking Section 12(5).
  • The long delay in enquiring about the application (from 1949 until 11-09-1951) constituted evidence of wilful default.

The respondent did not enter appearance; no arguments on his behalf are recorded.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Supreme Court held that even assuming, arguendo, the 22-08-1949 application was invalid, the essential statutory requirement for assessment under Section 12(5) was not met. Section 12(5) authorises assessment only when:

  1. The dealer was liable to pay tax for the relevant period; and
  2. The dealer “wilfully failed to apply for registration.”

The Court emphasised that “wilful” denotes a deliberate omission intended to evade tax. Here, the assessee affirmatively sought registration, acknowledging tax liability and thereby demonstrating no intent to avoid taxation. Any failure to renew or re-file was attributable to the Department’s negligence in not notifying rejection of the first application. Consequently, the factual predicate of wilful failure was absent, rendering Section 12(5) inapplicable.

Given this conclusion, assessments under Section 12(5) for all three quarters were invalid. The Court expressly declined to decide whether Sections 12(2), 12(4) or 12(7) might apply, noting the point was not argued.

Holding and Implications

Appeals Dismissed. The Supreme Court affirmed the High Court’s answers, particularly that assessments could not be made under Section 12(5) because the assessee had not wilfully failed to apply for registration.

Implications: The decision confines the scope of Section 12(5) to cases of deliberate evasion, clarifying that an initial attempt to register—though procedurally defective—negates any inference of wilful default. The ruling impacts only the parties by annulling the disputed assessments and sets no broader precedent beyond interpretation of “wilfully failed” within the Orissa Sales Tax Act.

Show all summary ...

Sikri, J.— These are three appeals by special leave directed against the judgment of the High Court of Orissa in a reference under Section 24(1) of the Orissa Sales Tax Act, 1947, hereinafter referred to as the Act. We may mention that the respondent has not entered appearance.

2. The respondent, Brijraj Rameshwar, hereinafter referred to as the assessee, started a grocery business at Sambalpur on 22-8-1948. Thinking that he was liable to pay tax under the Act, he applied on 22-8-1949, under Section 9 of the Act, to be registered as a dealer. He stated in the application that his gross turnover during the period from 22-8-1948 to 21-8-1949, was Rs 5005. It appears that an Inspector reported on 11-11-1949, that the gross turnover of the assessee did not exceed Rs 5000, and it was the case of the department that on this report the application was filed on 11-11-1949. But no intimation as to this was sent to the assessee. On 18-12-1950, the assessee sent a reminder requesting the officer to grant certificate of registration on the basis of his application, dated 22-8-1949. By letter, dated 11-9-1951, the Assistant Sales Tax Officer informed the assessee that the application filed on 22-8-1949, was cancelled as he was not then liable for registration, and asked him to furnish a fresh application for registration. The assessee then submitted an application, dated 18-10-1951, and on the basis of this application the assessee was granted a registration certificate on 2-11-1951.

3. On 25-11-1953, proceedings under Section 12(5) of the Act were started in respect of three quarters, namely, quarters ending 31-12-1950, 31-3-1951 and 30-6-1951. The Assistant sales Tax Officer, by orders, dated 31-12-1953, assessed the assessee for the quarters ending 31-12-1950 and 31-3-1931. and by order, dated 28-1-1954, assessed the assessee for the quarter ending 30-6-1951. These orders were passed under Section 12(5) of the Act. The Assistant Sales Tax Officer repelled the argument of the assessee that he had not wilfully failed to apply for registration within the meaning of Section 12(5) on the ground that although he was an inhabitant of the town, he failed to enquire earlier than 11-9-1951 about the fate of his application. The Assistant Sales Tax Officer not only assessed him but also levied a penalty of Rs 5 for each quarter. The assessee appealed but failed to convince the Assistant Collector of Sales Tax. On further appeal, however, the Sales Tax Tribunal annulled the assessments for the quarters ending on 31-12-1950, and 11-11-1951. The assessment for the quarter ending 30-6-1951, was modified but upheld and treated as under Section 12(4) of the Act.

4. On the application of the Commissioner of Sales Tax, the Appellate Tribunal referred the following questions to the High Court:

1. Whether in the facts and circumstances of the case the application for registration submitted by the opponent to the Sales Tax Officer, Sambalpur Circle, on 22-8-1949, was valid and was pending till 11-9-1951?
2. Whether Rule 6 of the Orissa Sales Tax Rules, 1947, as it stood at the time of filing the aforesaid application for registration, contemplated application for registration under Section 9 of the Orissa Sales Tax Act, 1947, to be made on a date when the prescribed minimum limit of gross turnover might not have been actually reached?
3. Whether in the facts and circumstances of the case the certificate of registration granted to the opponent on application made subsequent to the date of accrual of his liability to pay tax remained valid for the entire financial year during which the application was made and the registration certificate was granted; and whether proceedings for assessment for the quarter ending on 30-6-1951, which commenced on 23-11-1953, should have been instituted under Section 12(2) or Section 12(4) and not under Section 12(5) of the Orissa Sales Tax Act, 1947?
4. Whether in the facts and circumstances of the case completion of assessment in respect of quarters ending 31-12-1950 and 31-3-1951 under Section 12(5) was illegal?

5. The High Court answered the first question in the affirmative, namely, “that in the facts and circumstances of the case the application for registration submitted by the opposite party to the Sales Tax Officer, Sambalpur Circle, on 22-8-1949, was valid or is to be treated as valid, and was pending till 11-9-1951”.

6. The answer to the second question was in the negative.

7. The High Court answered the first part of the third question in the negative, namely, “that in the facts and circumstances of the case the certificate of registration, granted to the opposite party on application made subsequent to the date of accrual of his liability to pay tax, did not remain valid for the entire financial year during which the application was made and the registration certificate was granted.” The second part of Question 3 was answered thus:

“So, our answer to the second part of Question 3 is that the proceedings for assessment for the quarter ending on 30-6-1951, which commenced on 23-11-1953, should have been instituted under Section 12(2) or Section 12(4) and not under Section 12(5) of the Orissa Sales Tax Act, 1947, and accordingly our answer to the second part of Question 3 is in the affirmative.”

8. Question 4 was answered in the affirmative on the following reasoning:

“In view of our finding that the dealer's application, dated 22-8-1949, was a valid application, the question of assessment under Section 12(5) does not arise, since it contemplates cases of failure to apply for registration without sufficient causes. So our answer to Question 5 is that in the facts and circumstances of the case, completion of assessment in respect of quarters ending 31-12-1950 and 31-3-1951, under Section 12(5) was illegal.”

9. The learned counsel for the appellant, Mr Bindra, submits that the application of the assessee, dated 22-8-1949, for registration, was not a valid application, and that the assessments under Section 12(5) of the Act was valid.

10. It is not necessary to decide the question whether the said application dated 22-8-1949, was a valid application or not, because even if we assume that the application was invalid under Section 9(2) of the Act, we are satisfied that Section 12(5) of the Act did not apply to the facts and circumstances of the case.

11. Section 12(5) reads thus:

“12. (5) If upon information which has come into his possession the Collector is satisfied that any dealer has been liable to pay tax under this Act in respect of any period and has nevertheless wilfully failed to apply for registration, the Collector shall, after giving the dealer a reasonable opportunity of being heard, assess, to the best of his judgment the amount of tax, if any due from the dealer in respect of such period and all subsequent periods and the Collector may direct that the dealer shall pay, by way of penalty, in addition to the amount so assessed, a sum not exceeding one and a half times that amount.”

12. Section 12(5) enables the Collector to assess a dealer if two conditions are satisfied; (a) that the dealer was liable to pay tax in respect of a period, and (2) that he wilfully failed to apply for registration. Mr Bindra contends that on the facts in this case both the conditions are fulfilled. He says that the application, dated 22-8-1949, must be left out of account for it was invalid. If this is treated as non-est it follows that the assessee wilfully failed to apply for registration. He urges that the assessee did not enquire about the fate of his application till 11-9-1951, and this is material on which the assessing authority could well come to the conclusion that the assessee had wilfully failed to apply for registration. We are unable to accede to this contention. The fact that the assessee applied for registration cannot be ignored in determining the question. He, in fact, stated that he was liable to tax under the Act as his gross turnover exceeded Rs 5000. He was not thereby trying to avoid tax, but on the contrary he was telling the Sales Tax Officer that he was liable to be taxed. It is the negligence of the Sales tax Officer in not informing him that his application has been rejected that led him not to file another application. The expression ‘nevertheless wilfully failed to apply for registration' connotes a deliberate failure to apply for registration in order to avoid taxation. We are of the opinion that on the facts of this case it is not established that the assessee wilfully failed to apply for registration. Therefore, it follows that the assessments could not be made under Section 12(5) of the Act.

13. Accordingly we hold that the answer to Question 4 should be in the affirmative. Mr Bindra did not attack any other answer given by the High Court, except perhaps, by inference, the answer to the second part of Question 3, which also involves the applicability of Section 12(5) in respect of the quarter ending 30-6-1961. We need only say that the assessment in respect of this quarter could not be made under Section 12(5). Whether Section 12(2) or Section 12(4) applies or whether Section 12(7) applies was not argued before us and, therefore, we say nothing about this. We should not be taken to endorse the view of the High Court that Section 12(2) or Section 12(4) applied.

14. In the result, the appeals fail and are dismissed.

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