State of Rajasthan & Ors Vs.
Ghasilal  INSC 11 (21 January 1965)
21/01/1965 SIKRI, S.M.
CITATION: 1965 AIR 1454 1965 SCR (2) 805
E 1981 SC1887 (5,9,10,34,38,39,40)
Rajasthan Sales Tax Act, 1955, ss. 7(2),
16(1) (b) and Rajasthan Sales Tax Rules, r. 31--Scope of.
On a petition of the assessee challenging the
validity of Rajasthan Sales Tax Rules, the High Court passed an interim order
that the assessee would keep proper accounts and file the prescribed returns,
but that he should not be assessed till further orders. While the petition was
pending an ordinance was promulgated validating the rules, and the assessee
withdrew the petition. The sales tax officer sent a show cause notice and the
assessee filed the return and deposited tax. The Sales Tax Officer assessed tax
and imposed a penalty under s. 16(1)(b) of the Act and justified and imposition
on the ground that the High Court did not say that the assessee was allowed to
withhold the tax, but that on the contrary the order of the High Court showed
that the assessee should have filed returns in time and according to s. 7(2) of
the Act the Treasury challan of the deposit should have accompanied them. The
assessee's appeal to the Deputy Commissioner of Sales Tax (Appeals) was
The Sales-tax Officer, for a subsequent
period, imposed another penalty on the same grounds. The assessee filed two
writ petitions in the High Court which were allowed. In appeal
HELD : (i) There had been no breach of s.
16(1) (b) of the Act, and consequently the orders imposing the penalties could
not be sustained. [809 H] Till the tax payable was ascertained by the assessing
authority under s. 10, or by the assessee under s. 7(2), no tax could be said
to be due within s. 16(1)(b) of the Act, for, till then there was only a
liability to be assessed to tax. [810 B-C] Rule 31 of the Rajasthan Sales Tax
Rules comes into the picture only when an assessment has been completed. [810
D] (ii) Section 7(2) of the Act could not be attracted till the assessee filed
the returns. [810 F]
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 408-409 of 1964.
Appeal by special leave from the judgment and
order dated February 5, 1963 of the Rajasthan High Court in D.B. Civil Writ
Petitions Nos. 172 and III of 1961.
G. C. Kosliwal, Advocate-General, for the
State of Rajasthan, K. K. Jain and R. N. Sachthey, for the appellant.
R. K. Garg, S. C. Aqarwala, D. P. Singh and
M. K. Ramamurthi, for the respondent.
806 The Judgment of the Court was delivered
by Sikri, J. These two appeals by special leave are directed against the
judgment of the Rajasthan High Court allowing Civil Writ Petitions Nos. 111 and
172 of 1961, and quashing orders of the Sales Tax authorities imposing
penalties on the respondent, Ghasilal, for delay in payment of tax due.
The High Court came to the conclusion that
the penalties had been imposed in violation of Art. 20(1) of the Constitution,
but it is not necessary to deal with this question because we are inclined to
accept the contention raised by the learned counsel for the respondent, Mr.
Garg, that the penalties have been imposed in violation of the relevant
The relevant facts are these. On March 28,
1955, Rajasthan Sales Tax Rules (hereinafter referred to as the Rules) were
published in the Rajasthan Gazette. The Rajasthan Sales Tax Act (hereinafter
referred to as the Act) came into force on April 1, 1955. The respondent filed
Civil Writ Petition, No. 11 of 1958, in the High Court challenging the making
of assessments on the turnover of the respondent for the year 1955-56 on the
ground that the said Rules were invalid. On January 9, 1958, the High Court
passed an interim order that 'the petitioner will keep proper accounts and file
the prescribed returns but he shall not be assessed till further orders'. While
the petition was pending in the High Court, an Ordinance (No. 5 of 1959) was
promulgated on November 6, 1959, validating the Rules. Thereupon the respondent
withdrew Writ Petition No. 1 1 of 195 8. On December 17, 1959 the Rajasthan
Sales Tax Validation Act (Rajasthan Act 43 of 1959) replaced the Ordinance. It
is common ground that the effect of the said Ordinance and the said Act was to
validate the' Rules, even if any defect existed in the making of the Rules. We
may mention that according to the appellant, the said Ordinance and the said
Validating Act were enacted out of abundant caution.
On December 4, 1959, the Sales Tax Officer,
Kotah City Circle, sent a show cause notice to the respondent in the following
"Your writ No. 11 has been dismissed by
the Hon'ble High Court on 23rd November, 1959.
You are, therefore, requested to deposit the
tax due upto date within a week, failing which necessary action according to
law will be taken." This notice was served on the respondent the same day.
The respondent filed a return for the 4th quarter ending October 22, 1957, 807
and Rs. 11, 898.31 was deposited as tax. It appears that on January 8, 1960,
March 5, 1960 and March 19, 1960, he deposited Rs. 28,607 as tax in respect of
the four quarters of the accounting period October 23, 1957 to November 10,
1958. It is not clear from the record whether he filed returns on these dates.
On April 25, 1960, the Sales Tax Officer made an assessment in respect of the
accounting period November 3, 1956 to October 22, 1957, and proceeded to impose
a penalty of Rs. 400 under s. 16(1)(b) of the Rajasthan Sales Tax Act.
He justified the imposition of penalty thus:
"The assessee has not deposited tax of
the quarters on the due date, the tax deposited for 4th quarter is very late,
i.e.,, after two years the assessee was given a notice and in reply to which he
referred the stay order of the Hon'ble High Court granted to him in a writ
petition filed challenging the validity of sales tax rules made under the Act,
the stay order of the Hon'ble High Court does not say that the assessee is
allowed to withhold the tax on the contrary, it directs that the petitioner
(assessee) will keep proper accounts and file prescribed returns but shall not
be assessed. This clearly shows that the assessee should have filed returns in
time and according to section 7(2) the Treasury challan of the deposit should
have accompanied them.
This amounts to contravention of the
mandatory provisions, the writ was dismissed on 23-4-58 sic (23-11-59), even
the amount was not deposited till 17-12-59. This shows that the assessee
withheld the tax intentionally." The respondent appealed to Deputy
Commissioner Sales Tax (Appeals), Kotah, who dismissed the appeal, holding that
the stay order of the High Court did not justify the respondent in not filing
the return and depositing the tax in accordance with s. 7(2) of the Rajasthan
Sales Tax Act.
On December 6, 1960, the Sales Tax Officer
assessed the respondent in respect of the accounting period October 23, 1957 to
November 10, 1958, and imposed a penalty of Rs.
1,000 for not depositing the tax in time on
the same grounds. The respondent then filed a petition (No. III of 1961) under
Art. 226 of the Constitution, on April 3, 1961, challenging the imposition of
penalty in respect of the period November 3, 1956 to October 22, 1957, and on
April 4, 1961, he filed a petition (No. 172 of 1961) challenging the imposition
of penalty in respect of the up.65-5 808 accounting period October 23, 1957 to
November 10, 1958. As we have said before, the High Court allowed the
The learned Advocate-General has raised a
number of points before us and particularly invited us to hold that the High
Court was in error in holding that there has been contravention of Art. 20(1)
of the Constitution, and that the Rules as originally published on March 28,
1955, suffered from no procedural defect in the matter of their promulgation
and duly came into force on April 1, 1955. But we express no opinion one way or
the other on these points as the appeals can be disposed of on a narrow point
of the construction of the Act.
The relevant provisions of the Act read thus
" S. 7(1) Every dealer liable to pay tax shall furnish returns of his
turnover for the prescribed periods in the prescribed form, in the prescribed
manner and within the prescribed time, to the assessing authority.
Provided that the assessing authority may
extend the date for the submission of such returns by any dealer or class of
dealers by a period not exceeding fifteen days in the aggregate.
(2) Every such return shall be accompanied by
a Treasury receipt or receipt of any bank authorised to receive money on behalf
of the State Government showing the deposit of the full amount of tax due on
the basis of return in the Government Treasury or bank concerned.
(3) If any dealer discovers any omission,
error, or wrong statement in any returns furnished by him under sub-section
(1), he may furnish a revised return in the prescribed manner before the time
prescribed for the submission of the next return but not later.
(4) Every deposit of tax made under subsection
(2) shall be deemed to be provisional subject to necessary adjustments in
pursuance of the final assessment of tax made for any year under section 10.
S. 16(1)-If any person(a) has without
reasonable cause failed to get himself registered as required by subsection (1)
of section 6 within the time prescribed; or 809 (b) has without reasonable
cause failed to pay the tax due within the time allowed; or (c) has without
reasonable cause failed to furnish the return of his turnover, or failed to
furnish it within the time allowed; or the assessing authority may direct that
such person shall pay by way of penalty, in the case referred to in clause (a)
in addition to the fee payable by him, a sum not exceeding Rs. 50 and in case
referred to in clause (b), in addition to the amount payable by him, a sum not
exceeding half of that amount, and that in cases referred to in clauses (c) and
(d), in addition to the tax payable by him, a sum not exceeding half the amount
of tax determined; in the case referred to in clause (e), in addition to the
tax payable by him a sum not exceeding double the amount of tax, if any which
would have been avoided if taxable turnover as returned by such person had been
accepted as correct turnover, and in the cases referred to in clauses (f), (ff)
and (g), a sum not exceeding Rs. 1 OO." Mr. Garg contends that there was
no breach of s. 16(1)(b) of the Act. No tax was due till the respondent filed
returns under S. 7(1) of the Act. Section 7(2), which requires a deposit of the
full amount due on the basis of the return was compiled with when the
respondent filed the returns, on December 18, 1959, and in January to March,
1960. There cannot be non-compliance of s. 7(2) unless a return is filed
without depositing the tax due on the basis of the return, and as no return was
filed earlier than December 18, 1959, there had been no violation of the
requirements of s. 7(2).
He further contends that no tax is due till
assessment is made under S. 10 of the Act.
The learned Advocate-General, on the other
hand, urges that tax becomes due because of the charging sections of the Act,
i.e., s. 3 with s. 5. He further contends that a show cause notice had been
given on December 4, 1959, and as there was delay in complying with the notice,
there was breach of s.
16(1)(b) of the Act.
In our opinion, there has been no breach of
s. 16(1)(b) of the Act, and consequently, the orders imposing the penalties
cannot be sustained. According to the terms of s. 16(1)(b), there must 810 be a
tax due and there must be a failure to pay the tax due within the time allowed.
There was some discussion before us as to the meaning of the words 'time
allowed' but we need not decide in this case whether the words 'time allowed'
connote time allowed by an assessing authority or time allowed by a provision
in the Rules or the Act, or all these things, as we are of the view that no tax
was due within the terms of s. 16(1)(b) of the Act. Section 3, the charging
section, read with s. 5, makes tax payable, i.e., creates a liability to pay
the tax. That is the normal function of a charging section in a taxing statute.
But till the tax payable is ascertained by the assessing authority under S.
10, or by the assessee under s. 7(2), no tax
can be said to be due within s. 16(1)(b) of the Act, for till then there is
only a liability to be assessed to tax.
The contention of the learned
Advocate-General that the show cause notice dated December 4, 1959, makes tax
due is without any substance. He was not able to point to any rule or provision
of the Act, under which the show cause notice was issued. It may be that the
assessing authority had in mind r. 31, but that rule comes into the picture
only when an assessment has been completed.
The last contention of the learned
Advocate-General is that the stay order passed by the High Court required the
respondent to submit returns. This, according to him, implied that he had to
submit returns in accordance with law, including S. 7(2). As he had failed to
submit returns and deposit the tax in accordance with the directions of the
High Court, there was a breach of S. 16(1)(b). We are unable to read the stay
order as implying that the respondent was obliged to deposit tax for the stay
order then would be of no utility to the assessee. Apart from that, the
respondent did not file returns till December 1959, and January-March 1960, and
S. 7(2) could not be attracted till then.
We may mention that we are not concerned with
the question whether there has been any breach of S. 16(1)(c).
In the result, the appeals fail and are
dismissed with costs. One set of hearing fee.