Ghanshyam Das Vs. Regional Assistant
Commissioner of Sales Tax Nagpur [1963] INSC 171 (16 August 1963)
16/08/1963 SUBBARAO, K.
SUBBARAO, K.
DAS, S.K.
DAYAL, RAGHUBAR AYYANGAR, N. RAJAGOPALA
MUDHOLKAR, J.R.
CITATION: 1964 AIR 766 1964 SCR (4) 436
CITATOR INFO:
R 1967 SC1408 (10,11,12) R 1968 SC 565
(5,9,31,32,33) E 1968 SC 894 (6) R 1970 SC 311 (3) R 1970 SC2057 (9) R 1977 SC
540 (9,10) R 1979 SC1098 (12)
ACT:
Sales Tax-Assessment of turn-over escaping
assessment "Escaped Assessment --Meaning of-Assessment proceedings in
respect of a registered dealer-Commencement of-Central Provinces and Berar
Sales Tax Act, 1947 (XXI of 1947), ss. 10(1), 11-A.
HEADNOTE:
The appellant was a registered dealer
carrying on business in bidis. For the year 1949-50, i.e., for the period from
October 22, 1949 to November 9, 1950 he submitted only one return on October 5,
1950 for one quarter and defaulted in respect of the other quarters. He was
served a notice on August 13, 1954 under s. 11(1) and (2) of the C.P. and Berar
Sales Tax Act, 1947, in respect of the turnover for the said period. Thereafter,
he filed the returns, but in the assessment proceedings he contended inter
alia, that the proceedings before the sales tax commissioner were barred by
time. This contention was rejected and his tax liability was determined. Then
the appellant moved the High Court in writ petition. In the other appeal No.
102/1961, the appellant had not filed any return for the year 1950-51 i.e. for
the period from November 10, 1950 to October 31, 1951.
He was served a notice on October 15, 1954,
under s. 11(4) of the Act. The said notice was within 3 years from October 16,
1951 which fell within the 4th quarter of the concerned year. The appellant
then, filed his returns under protest and contended that the assessment
proceedings Were barred by limitation under s. 11(A) of the Act. This plea was
rejected and his tax liability was determined. The appellant then, filed
another writ petition for a similar relief.
Both the writ petitions were heard together
and the learned single Judge relying on a decision in Firm Sheonarayan Matadin
v. Sales Tax Officer, Raipur, quashed the said assessments. The respondent
then, filed Letters Patent Appeals before the Division Bench and by a common
judgment the orders of the learned single Judge were set aside. In this Court,
the appellant contended : (1) the expression "escaped assessment" in
s. 11-A of the Act would apply also to a case where there was no assessment at
all ; (2) even if the first assessment proceedings were pending before the
appropriate authority, it could only make the assessment within three years
from the date of the commencement of the said proceedings, which would start
only after the appropriate authority issued a notice under s. 10(1) or s. 11(2)
or s. 11(5) of the Act; (3) in the present case no proceedings in respect -of
the said assessment were pending and (4) as only a part of the fourth quarter
in the second appeal falls within three years, 437 the proceedings in respect
of the said entire quarter would be barred under s. 11-A of the Act and, in any
view only the turnover escaped in respect of the period between November 10,
1950 to October 31, 1951 could be assessed. The respondent mainly contended
that whatever may be said in the case of an unregistered dealer, in the case of
a registered dealer the proceedings commence from the date fixed in the
registration certificate within which they said dealer has a statutory
obligation to furnish his return.
Held : (Raghubar Dayal, J. dissenting) : The
expression "escaped assessment" in s. 11-A of the Act includes that
of a turnover which has not been assessed at all, because for one reason or
other no assessment proceedings were initiated and therefore, no assessment was
made in respect thereof.
Commissioner of Income-tax, Bombay v.
Pirojbai' N. Contractor, (1937) 5 I.T.R. 338, Maharaj' Kumar Kamal Singh v. Commissioner
of Income-tax, Bihar and Orissa, [1959] Supp. S.C.R. 10 Maharajadhiraj Sir
Kameshwar Singh v. State of Bihar, [1960] 1 S.C.R. 332, Commissioner of
Income-tax, Bombay v. Narsee Nagsee & Co. [1960] 3 S.C.R. 988 and State of
Madras v. Balu Chettiar, (1956) 7 S.T.C. 519,relied on.
The assessment proceedings under the sales
tax must be held to be pending from the time the said proceedings were
initiated until they were terminated by a final order of assessment. Before the
final order of assessment, it could not be said that the entire turnover or a
part thereof of a dealer had escaped assessment, for, the assessment was not
completed and, if completed, it might be that the entire turnover would be
caught in the net.
In re Lachhiram Basantlal, (1930) I.L.R. 58
Cal. 909 and Rajendra Nath Mukherjee v. Income-tax Commissioner, (1938) L.R. 61
I.A. 10, referred to.
Under sub-section (1) of s. 10, the
Commissioner need not issue a notice to a registered dealer for furnishing the
relevant returns, but a statutory obligation is imposed on the said dealer to
do so by such dates and to such authority as may be prescribed.
In the case of a registered dealer there are
four variations in the matter of assessment of his 'turnover : (1) He submits a
return by the date prescribed and pays the tax due in terms of the said return;
the commissioner accepts the correctness of the return and appropriates the
amount paid towards the tax due for the period covered by the return.
(2) The Commissioner is not satisfied with
the correctness of the return ; he issues a notice to him under s. 11(2), and
makes an enquiry as provided under the Act, but does not finalize the
assessment. (3) The registered dealer does not submit a return; the
Commissioner issues a notice under s. 10(3) and s. 11(4) of the Act. (4) The
registered dealer does not submit any return for any period and the
Commissioner issues notice to him beyond three years.
438 In the case of a registered dealer the
proceedings before the Commissioner starts factually when a return is made or
when a notice is issued to him either under s. 10(3) or under s. 11(2) of the
Act. The acceptance of the contention that the statutory obligation to file a
return initiates the proceedings is to invoke a fiction not sanctioned by the
Act.
Bisesar House v. State of Bombay (1958) 9
S.T.C. 654 and Ramakrishna Ramnath v. Sales Tax Officer, Nagpur, (1960) 11
S.T.C. 811, distinguished.
A statutory obligation to make a return
within a prescribed time does not proprio vigore initiate the assessment
proceedings before the Commissioner; but the proceedings would commence after
the return was submitted and would continue till a final order of assessment
was made in regard to the said return.
In the first case, therefore, the tribunal
had no jurisdiction to issue a notice under s. 11-A with respect to the
quarters other than that covered by return made by the appellant. In the second
case, the Commissioner had jurisdiction to assess the turnover in respect of
the entire fourth quarter, but as it was done without showing separately the
assessment of tax payable in respect of each quarter, this Court cannot confine
the relief to be given to the appellant in these appeals to the period barred
under s. 1 1-A of the Act. The appeals, therefore must be allowed.
Per Raghubar Dayal, J.--The turnover for the
years 1949-50 and 1950-51 could not be said to be turnover which escaped
assessment, within the meaning of that expression in s. 11-A of the Act and
therefore, the notices issued by the Assistant Commissioner of Sales Tax in
1954 under s. 11(2) cannot be said to be notices issued under s. 11-A beyond
the period within which they could have been issued.
The proceedings for the assessment commence
against the registered dealer from the prescribed date for his submitting the
return which he is required to submit by subsection (1) of S. 10. No notice is
necessary to be issued to him for the submitting of the return for the purpose
of assessment. The statute, by the provisions of sub-section, (1) of s. 10,
gives him the required notice to the effect that he is to submit the necessary
returns by the dates prescribed by the rules. The registration certificate
issued to him mentions the period of the dealer's year, the prescribed return
period and the dates by which the dealer had to furnish the returns. The
registered dealer is, in this way, in no worse position than an ordinary dealer
who receives a notice for -submitting the returns by a certain date. In the
case of the unregistered dealer, the proceedings commence by the issue of a
notice under subsection (1) of s. 10.
There is no time limit fixed for the sales
tax officer to take action against the registered dealer under sub-sections (2)
and (4) of s. 11. He does not contravene Art. 14, if he takes action 439
against a registered dealer under sub-section (2) or subsection 4 of s. 11 even
after the expiry of three years from the period whose turnover is to be
assessed.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 101 and 102 of 1961.
Appeals from the order dated December 13,
1957, of the Madhya Pradesh High Court in Letters Patent Appeals Nos. 208 and
207 of 1956 respectively.
J.M. Thakar, H. M. Thakar, O. C. Mathur, J.
B. Dadachanji and Ravinder Narain, for the appellants.
B. Sen and I. N. Shroff, for the respondents.
August 16, 1963. The judgment of S. K. Das,
Acting C.J., K. Subba Rao, N. Rajagopala Ayyangar and J. R. Mudholkar, JJ.
was delivered by Subba Rao, J. Raghubar
Dayal, J. delivered a dissenting Opinion.
SUBBA RAO J.-These two appeals by certificate
raise the question of the true interpretation of the meaning of the expression
"escaped assessment" in S. 11-A of the Central Provinces & Berar
Sales Tax Act, 1947 (XXI of 1947), hereinafter called the Act.
The facts in Civil Appeal No. 101 of 1961 are
as follows:
the appellant is the manager of a joint hindu
family firm carrying on business in bidis. He is registered as a dealer under
S. 8 of the Act. Every registered dealer under the Act is required to furnish
quarterly returns of his turnover within one month from the end of the quarter.
For the year 1949-50, i.e., for the period from October 22, 1949 to November 9,
1950, he submitted a return of his turnover on October 5, 1950 for one quarter
only and made a default in respect of the other quarters. The Assistant
Commissioner of Sales-Tax, Nagpur, issued a notice to the appellant on August
13, 1954 in Form No. 11 under S. 11(1) and (2) of the Act in respect of the
turnover of the firm for the said period. The appellant thereafter filed the
returns for the three quarters in respect of which he had made default, but in
the assessment proceedings he contended, inter alia, that the Assistant
Commissioner could not assess his escaped turnover as he could only do so
within three years from the expiry of the period in respect whereof his
turnover had escaped assessment. The Sales-tax Commissioner rejected the said
contention, proceeded with the assessment and determined the tax liability at
Rs. 15,846.00. Aggrieved by the said order, the appellant filed a petition
under Art.
226 of the Constitution in the High Court of
judicature at Nagpur mainly on the ground that the proceedings before the
Sales-tax Commissioner were barred by time under s. 11-A of the Act.
Civil Appeal No. 102 of 1961 is in respect of
assessment of sales-tax on the turnover of the appellant for the year 1950-51.
The appellant had not filed any return for the whole year. The Assistant
Commissioner of Sales-tax, Nagpur, served a notice on the appellant on October
15, 1954 under s. 11(4) of the Act. The appellant filed his returns and
produced the account-books under protest and also raised objections that the
assessment proceedings were barred by limitation under s. 11-A of the Act. The
Assistant Commissioner rejected his plea of limitation and determined his tax
liability at Rs. 16,537-5-0. The appellant filed another petition under Art.
226 of the Constitution in the said High Court for a similar relief.
Both the petitions were heard together by
Kotwal J. The learned judge, following the decision of a division Bench of that
Court in Firm Sheonarayan Matadin v. Sales-tax Officer, Raipur(1), held that,
as the notices were issued beyond three years from the expiry of the relevant
periods, the Sales-tax Commissioner had no jurisdiction to make the
assessments. On that ground he quashed the said assessments.
The respondent filed Letters Patent Appeals
to a division Bench of the said High Court. On the formation of the State of
Madhya Pradesh, the above appeals were transferred to the Madhya Pradesh High
Court and were heard by a division Bench consisting of Hidayatullah C.J. and
Choudhuri J. The Division Bench held that s. 11-A of the Act could apply only
to a case where there was a final assessment and that in the instant cases the
first assessment proceedings were pending and therefore, the said section had
no application thereto.
In the result, by a common judgment, they set
aside the orders of Kotwal J. Hence the resent appeals.
(1) 1956 S.T.C. 623.
441 Mr. J. M. Thakar, learned counsel for the
appellant raised before us the following four points : (1) The expression
"escaped assessment" in s. 11-A of the Act would apply also to a case
where there was no assessment at all. (2) Even if the first assessment
proceedings were pending before the appropriate authority, the said authority
could only make the assessment within three years from the date of the
commencement of the said proceedings, which, according to him, would start from
the date of issue of notice by the said authority in the manner prescribed by
the Central Provinces & Berar Sales Tax Rules, 1947, hereinafter called the
Rules. (3) In the present case no proceedings in respect of the said
assessments were pending before the said authority. And (4) as only a part of
the fourth quarter in Civil Appeal No. 102 of 1961 falls within three years,
the proceedings in respect of the said entire quarter would be barred under s.
11-A of the Act and, in any view, only the turnover escaped in respect of the
period between October 16, 1951 and October 31, 1951 could be assessed.
Mr. B. Sen learned counsel for the
respondent, controverter the said argument 'and contended that in the case of
registered dealers there was a statutory obligation to make a return and,
therefore, the proceedings must be deemed to be pending from the date an
assessee was bound to make his return and that as the proceedings in the
present case were pending by statutory force, there was no scope for invoking
the provisions of s. 11-A of the Act. In Civil Appeal No.
102 of 1961 he raised the point that a
calendar year in s. 11-A must be calculated from January to December and if so
calculated no part of the fourth quarter would be beyond three years, but he
did not pursue the line of argument.
The main question in the appeals is the true
construction of the provisions of s. 11-A of the Act. The material provisions
thereof may be set out. They read:
Section 11-A (1) : If in consequence of any
information which has come into his possession, the Commissioner is satisfied
that any turnover of a dealer during any period has escaped assessment the
Commissioner may, at any time within three calendar years from the expiry of
such period 29-2 S. C. India/64 442 .........proceed in such manner as may be
prescribed to...assess....the tax payable on any such turnover......."
Under this section if the turnover of a dealer during any period has escaped
assessment, the Commissioner may at any time within three calendar years from
the expiry of such period proceed in the manner prescribed to assess the tax
payable on the said turnover. The crucial expression for the present purpose is
"escaped assessment". What does it mean? Does it include, as learned
counsel for the appellant contends, a case where no assessment has been made at
all or, as learned counsel for the respondent contends, take in only the
post-assessment detection of evasion of tax? This problem has received the
attention of Courts in different contexts.
In Commissioner of Income-tax, Bombay v.
Pirojbai N. Contractor(1) the words "escaped assessment" in the
Indian Income-tax Act were defined. It was held therein that the said words
were wide enough to include cases where no notice under s. 22(2) of the
Income-tax Act had been issued to the assessee and therefore his income had not
been assessed at all under s. 23 thereof. The said view, has been assumed to be
correct by this Court in Maharaj Kumar Kamal Singh V.
Commissioner of Income-tax, Bihar &
Orissa(2) and Maharajadhiraj Sir Kameshwar Singh v. State of Bihar(3) and
extended to cover a case where the first assessment was made in due course but
a part of the income escaped therefore.
This Court, in Commissioner of Income-tax,
Bombay v. Narsee Nagsee & Co.(4), construing the provisions of s. 14 of the
Business Profits Tax Act, 1947, reviewed the law on the subject and came to the
following conclusion :
"All these cases show that the words
"escaping assessment" apply equally to cases where a notice was
received by the assessee but resulted in no assessment at all and to cases
where due to. any reason no notice was issued to the assessee, and, therefore,
there was (1) (1937) 5 I.T.R. 338.
(2) [1959] SUPP. 1 S.C.R. 10.
(3) [1960] 1 S.C.R. 332.
(4) [1960] 3 S.C.R. 988.
443 no assessment of his income." It is
true that the said decisions were given with reference to either s. 34(1) of
the Income-tax Act or s. 14 of the Business Profits Tax Act, but so far as the
present enquiry is concerned the said sections are pari' materia with s. 11A of
the Act. In construing the meaning of the expression "escaped
assessment" in s. 11-A of the Act there is no reason why the said
expression should bear a more limited meaning than what it bears under the said
two Acts. All the three Acts are taxing statutes and the three relevant
sections therein are intended to gather the revenue which has improperly
escaped. A division Bench of the Madras High Court in The State of Madras v.
Balu Chettiar(1) following the decision of a Full Bench of that Court, held
that where an assessee did not file at any time a return of his turnover for a
year and, therefore, there was no assessment made, the turnover escaped
assessment. It was observed therein:
"Whether it was a case of omission or of
deliberate concealment on the part of the assessee, he did not submit any
return. It was his default that led to the escape of the turnover for 1951-52
from assessment to the tax lawfully due. It was the whole of the turnover for
that year that escaped assessment." It is not necessary to multiply
citations. We, therefore, hold that the expression "escaped
assessment" in s. 11-A of the Act includes that of a turnover which has
not been assessed at all, because for one reason or other no assessment
proceedings were initiated and therefore, no assessment was made in respect
thereof.
The next question is whether a turnover could
be said to escape assessment if proceedings in respect of the first assessment
were pending and no final order of assessment was made therein.
In re Lachhiram Basantlal (2) Rankin C.J.
tersely observed :
"Income has not escaped assessment if
there are pending at the time proceedings for the assessment of the assessee's
income which have not yet terminated (1) (1956) 7 S.T.C. 519, 522.
(2) (1930) I.L.R. 58 Cal. 909.
444 in a final assessment thereof".
This dictum laid down a clearly
understandable principle.
How can an escape of a turnover from
assessment be predicated before the assessment is completed? The Judicial
Committee in Rajendra Nath Mukherjee v. Income-tax Commissioner (1) relied upon
this dictum in rejecting the contention to the contrary raised by the assessee
before them, and endorsed the said view. That decision turned upon the
interpretation of s. 34 of the Indian Income-tax Act.
There, Burn & Co., an unregistered firm,
made a return of their total, income on January 13, 1928. On February 25, 1928,
the Income-tax Officer made an assessment on Martin & Co., the partners
whereof purchased the business of Burn & Co., in respect of the combined
incomes returned by Martin & Co. and Burn & Co. The High Court held
that under the income-tax Act the income of the said firms could not be aggregated
and that the income of each must be separately assessed. Thereafter, on
November 8, 1930, an assessment was made on Burn & Co. on their income as
returned by them on January 13, 1928. It was contended that under the
Income-tax Act it was not competent to make any assessment to tax after the
expiry of the year for which the tax was charged except in the cases provided
for under s. 34 of the Income-Tax Act. It was held by the judicial Committee
that the income of Burn & Co. had not escaped assessment within the meaning
of s. 34 of the Income-tax Act. It was observed therein :
"If an assessment is not made on income
within the tax year then that income, they submit, has escaped assessment
within that year, and can be subsequently assessed only under s. 34 with its
time limitation. This involves reading the expression "has escaped
assessment' as equivalent to "has not been assessed". Their Lordships
cannot assent to this reading. It gives too narrow a meaning to the word
"assessment" and too wide a meaning to the word "escaped".
That the word "assessment" is not confined in the statute to the
definite act of making an order of assessment appears from s. 66, which refers
to (1933) 61 IA. 10, 15-16.
445 "the course of any assessment"
To say that the income of Bum & Co., which in January, 1928, was returned
for assessment and which was accepted as correctly returned, though it was
erroneously included in the assessment of Martin & Co., has escaped
assessment in 192728 seems to their Lordships an inadmissible reading. The fact
that s. 34 requires a notice to be served calling for a return of income which
has escaped assessment strongly suggests that income which has already been
duly returned for assessment cannot be said to have "escaped" assessment
Within the statutory meaning." As s. 34 of the Income-tax Act had no
application and as there was no other time limit prescribed or necessarily
implied under that Act, it held that the assessment was not out of time. This
decision is a clear authority for the position that if a return was duly made,
the assessment could be made at any time unless the statute prescribed a time
limit. This can only be for the reason that the proceedings duly initiated in
time will be pending and can, therefore, be completed without time limit. A
proceeding is said to be pending as soon as it is commenced and until it is
concluded. On the said analogy, the assessment proceedings under the Sales-tax
Act must be held to be pending from the time they said proceedings were
initiated until they were terminated by a final order of assessment.
Before the final order of assessment, it
could not be said that the entire turnover or a part thereof of a dealer had
escaped assessment, for the assessment was not completed and if, completed, it
might be that the entire turnover would be caught in the net.
But the more difficult question is, when do
the assessment proceedings under the Act in respect of registered dealer
commence and when do they terminate? -While learned counsel for the appellant contends
that the said proceedings under the Act start only after the appropriate
authority issued a notice under s. 10(1) or s. 11(2) or s. 11(5) of the Act,
learned counsel for the respondent contends that whatever may be said in the
case of an unregistered dealer, in the case of a registered dealer the
proceedings commence from the date fixed in the registration certificate within
which they said dealer has a statutory obligation to furnish his return.
To appreciate the rival contentions it is
necessary to notice the relevant provisions of the Act and the Rules.
Under s. 4 of the Act, every dealer whose
turnover exceeds the specified limits prescribed under sub-section (5) thereof
shall be liable to pay tax in accordance with the provisions of the Act on all
sales effected by him. Under s. 8 no dealer shall, while being liable to pay
tax under the Act, carry on business as a dealer unless he had been registered
as such and possesses a registration certificate.
Part IV of the Rules prescribes the manner in
which a dealer shall get himself registered under the Act. Under s. 8, if the
dealer satisfies the requirements prescribed in that regard, the Sales-tax
Officer grants him a registration certificate in Form II, which specifies the
particulars, such as, the location of the business, the nature of the business
etc. The said Officer enters the name of every dealer registered in a ledger
maintained under s. 9 and issues copies of registration certificates for
exhibition in the places of their business. Under one of the columns in that
Form the period for which and the date on which the return has to be furnished
has to be mentioned. A list of such registered dealer is also published under
r. 17. Under the Act, no dealer, who is liable to pay tax there under, shall
carry on business unless he has been registered as such and possesses a
registration certificate. It is, therefore, clear that registration is mainly
conceived in the interest of revenue, to facilitate collection of taxes and to
prevent the evasion thereof.
Next we come to the provisions dealing with
the manner in which a registered dealer will be assessed to tax. Under s. 10
every registered dealer shall furnish such returns by such dates to such
authority as may be prescribed. Rule 19 prescribes the manner in which such a
return has to be furnished. There under every registered dealer shall furnish
to the appropriate Sales-tax Officer quarterly returns within one calendar
month from the expiry of the quarter to which the return relates and in case he
has more than one place of business in the Province, he, shall submit a
consolidated return for all the 447 places of business and also a return
separately for each of the places of business within two calendar months from
the said date. It also says that each of such returns submitted shall be accompanied
by a treasury receipted chalan in Form V in respect of the tax due according to
the return. In short he has to file a return or returns in the prescribed form
within the prescribed time and also pay the tax payable by him along with the
returns. Under s. 11(1) if the Commissioner is satisfied that the return
furnished by the dealer in respect of a period is correct and complete, he
assesses the dealer on it. If he does not accept it, under cl. (2) thereof he
shall serve the dealer with a notice appointing the place and date for, enquiry
; and after enquiry he shall assess him to tax under r. 3. Rule 31 prescribes
that the notice under s. 11(2) shall be served on the dealer in Form II. It may
be stated that the mention of sub-section (1) in that rule appears to be a
mistake for no notice is contemplated under that sub-section. If the registered
dealer fails to furnish his return under s. 10(1) of the Act in the manner
prescribed within the time prescribed under sub-section (3) thereof, the
Commissioner, after giving a reasonable opportunity of being heard, may impose
on him by way of penalty a sum not exceeding one fourth of the amount of the
tax which may be assessed on him under s. 11. Rule 32, which is an omnibus
provision, says that in such an event, a notice in Form XII has to be issued on
him. Under sub-section (4) of s. 11, if a registered dealer makes the defaults
mentioned therein the Commissioner shall, in the prescribed manner, -assess him
to the best of his judgment. Rule 32 also governs the procedure for making the
said assessment. Rule 33 prescribes the maintenance of a register of cases
instituted under s. 11. Rule 34 gives the form of the order to be made and r.
39 provides for the preparation of assessment record.
At this stage an argument advanced by learned
counsel for the appellant, namely, that under s. 10(1) of the Act the
Commissioner has to give notice in the prescribed manner to a registered
dealer, may be considered. Section 10(1) 1eads :
"Every such dealer as may be required so
to do by 448 the Commissioner by notice served in the prescribed manner and
every registered dealer shall furnish such returns by such dates and to such
authority as may be prescribed." The word "dealer", unless there
is anything repugnant in the subject or context, means any person who carries
on the business of selling or supplying goods and in its wide meaning it
certainly, takes in both a registered dealer and a dealer who has not
registered himself under the Act. The question, therefore, is whether there is
anything repugnant in the subject or context of s. 10 to limit the word
"dealer" in the first part of sub-section (1) to a dealer other than
a registered dealer. Sub-section (1) is in two parts : the first part speaks of
a dealer and the second part of a registered dealer and the sub-section says
that both of them shall furnish the returns. If the dealer in the first part
includes a registered dealer, the mention of "every registered dealer"
in the second part will become redundant, for a registered dealer is included
in the expression "dealer". A construction which would attribute
redundancy to a Legislature shall not be accepted except for compelling
reasons. This redundancy disappears if the expression "dealer" in the
first part excludes a registered dealer mentioned in the second part. This
legislative intention is further made clear by the provisions of ss. 14 and 17
of the Act. Section 14 imposes a duty on every registered dealer or every
dealer on whom notice has been served to furnish returns under sub-section (1)
of s. 10 to keep a true account of the value of goods bought and sold by him ;
and s. 17 imposes a duty on the said two categories of dealers to inform the
prescribed authority regarding changes of business. The distinction between the
two categories of dealers is maintained not only in s. 10 but also in ss. 14
and 17. It is, therefore, clear that under sub-section (1) of s. 10, the
Commissioner need not issue a notice to a registered dealer for furnishing the
relevant returns, but a statutory obligation is imposed on the said dealer to
do so by such dates and to such authority as may be prescribed.
Now coming to the case of a dealer who did
not register himself under the Act, the position is different.
449 There is no statutory obligation cast on
him by any section to submit a return. His is really a case of evasion from his
obligation to get himself registered under the Act.
Section 10(1) enables the Commissioner to
issue a notice to him requiring him to furnish a return in the prescribed
manner. In his case also the same procedure as prescribed in ss. 10(3), 11(1)
and 11.(2) has to be followed in the matter of assessment. But sub-section (5)
of s. 11 introduces a stringent provision to prevent evasion of tax.
Under that sub-section if upon information
the Commissioner is satisfied that any such dealer, who is liable to pay tax
under the Act in respect of any period, has willfully failed to apply for
registration, he shall at any time within three calendar years from the expiry
of such period, after giving the dealer a reasonable opportunity of being
heard, proceed in the manner as may be prescribed to assess to the best of his
judgment the amount of tax due from the dealer in respect of such period and of
subsequent periods. He may also direct the dealer to pay, by way of penalty, in
addition to the amount of tax so assessed a sum not exceeding 11 times that
amount. So in the case of a dealer liable to pay tax, but who has failed to register
himself under the Act, the Commissioner may issue a notice to him under r. 22
and assess him under s. 11 ; and in the case of evasion, on subsequent
information, the Commissioner can assess him within three calendar years from
the expiry of the period in respect of which he was liable to pay tax and for
subsequent years and also impose a penalty on him. It is clear from this
provision that in the case of such a dealer the assessment can be made only
within three calendar years from the expiry of the period in respect whereof he
has been liable to pay tax under the Act. If the contention of learned counsel
for the respondent should prevail, in the case of a registered dealer there
would be no limitation in the matter of assessment, whereas in the case of a
dealer who evaded law, be would have the benefit of three years' limitation.
From the foregoing discussion it is seen that
in the case of a registered dealer there are four variations in the matter of
assessment of his turnover: (1) He submits a 450 return by the date prescribed
and pays the tax due in terms of the said return ; the Commissioner accepts the
correctness of the return and appropriates the amount paid towards the tax due
for the period covered by the return.
(2) The Commissioner is not satisfied with
the correctness of the return ; he issues notice to him under s. 11(2), and
makes an enquiry as provided under the Act, but does not finalize the
assessment. (3) The registered dealer does not submit a return ; the
Commissioner issues a notice under s. 10(3) and s. 11(4) of the Act. And (4)
the registered dealer does not submit any return for any period and the
Commissioner issues notice to him beyond three years. If the return was
accepted and the amount paid was appropriated towards the tax due for the
relevant period, it means that there has been a final assessment in regard to
the said period. If any turnover escaped assessment, clearly it can be reopened
only within the period prescribed in s. 11--A.
In the case where a return has been made, but
the Commissioner has not accepted it, and has issued a notice for enquiry, the
assessment proceedings will certainly be pending till the final assessment is
made. Even in a case where no return has been made, but the Commissioner
initiated proceedings by issuing a relevant notice either under s. 10(3) or
under s., 11(4), the proceedings will be pending thereafter before the
Commissioner till the final assessment is made. But where no return has been
made and the Commissioner has not issued any notice under the Act, how can it
be held that some proceedings are pending before the Commissioner when none
existed as a matter of fact? We are concerned in this case with the last
contingency.
It is manifest that in the case of a
registered dealer the proceedings before the Commissioner starts factually when
a return is made or when a notice is issued to him either under s. 10(3) or
under s. 11(2) of the Act. The acceptance of the contention that the statutory
obligation to file a return initiates the proceedings is to invoke a fiction
not sanctioned by the Act. The obligation can be enforced by taking a suitable
action under the Act. Taking of such an action may have the effect of
initiating proceedings against the defaulter. The de451 fault may be the
occasion for initiating the proceedings, but the default itself proprio vigore
cannot initiate proceedings. Proceedings in respect of the assessment of the
turnover for the relevant period cannot, therefore, be said to be pending
before the Commissioner. Learned counsel for the respondent contends that the
certificate of registration is itself a notice to the registered dealer to
furnish his returns within the prescribed time. Reliance is placed upon Form 11
wherein under the appropriate column the particulars in regard to a dealer's
return and the date which he should submit it are given. The main purpose of
the registration certificate is to localize dealers with taxable turnovers and
to facilitate the collection of taxes. The registration certificate enables the
dealer to carry on the business.
Neither s. 8 which enjoins such registration
on every dealer with taxable turnover nor rule 8 which prescribes the
particulars to be incorporated in a certificate suggests that the certificate
itself is a statutory notice to a dealer. The objects of the certificate and
the statutory notices under the Act are different and the former cannot be
equated with the latter.
Rule 33 provides that the assessing authority
shall maintain a register in Form XIII in which he shall enter the details of
each case initiated under rr. 31 and 32. Rule 31 says that on receipt of a
return or returns required under r. 19, 20 or 22 from any dealer, the assessing
authority shall serve on him a notice in Form XI. Rule 32 prescribes, inter
alia, the manner of assessment under sub-section (3) of s. 10, cl. (a) of
sub-section (4) of s. 11, sub-section (5) of s. 11. Form XII gives the serial
number, taxable turnover as...determined for the relevant years and the date of
issue of notice in Form XI or Form XII. A perusal of the said rules and the
forms discloses that the proceedings in the case of a registered dealer start
only on the receipt of a return or returns required to be furnished under the
rules.
Under r. 33 a register is maintained giving
the details of each case "instituted" under rr. 31 and 32. Rule 34
enacts that a case instituted would be pending till an order of assessment was
made. No doubt it would be pending till a final order of assessment was made by
the highest tribunal or court under the Act.
452 At this stage some of the decisions cited
at the Bar may conveniently be noticed. A Full Bench of the Bombay High Court
in Bisesar House v. State of Bombay(1) held that a notice under sub-section (2)
of s. 11 of the C.P. & Berar Sales Tax Act, 1947, could not be issued more
than three years after the expiry of the period for which it was proposed to
make the assessment ; but an assessment under sub-section (1) of s. 11 could be
made more than three years after the expiry of such period. There, a dealer
made his return and paid the tax, which according to him was due for three
chargeable accounting years. The Commissioner of Sales-tax served notices on
him under s. 11(2) in respect of the first two years more than three years after
the end of the chargeable accounting years. The Court drew a distinction
between sub-sections (1) and (2) of s. 11 and came to the conclusion that in
the former case it was only a :formal appropriation of the amounts paid towards
the tax due and therefore it could be done even after three years, but in the
latter case the issue of notice under s. 11(2) was in a substantial sense an
initiation of proceedings by the Commissioner and his failure to tax these
turnovers would constitute "escaped assessment" within the meaning of
s. 11-A of the Act and therefore it could be reopened only within 3 years
prescribed there under. The learned judges, if we may say so with respect did
not consider the question, in what circumstances assessment proceedings could
be held to be pending? As we have held that the submission of a statutory
return would initiate the proceedings and that the proceedings would be pending
till a final order of assessment was made on the said return, no question of
limitation would arise. A Division Bench of the same High Court, in Ramakrishna
Ramnath v. Sales Tax Officer, Nagpur(2), made a distinction between proceedings
under s. 11(4)(a) and those under s. 11 (2) of the Act in that proceedings
under s. 11(2) are for the purpose of assessment whereas those under s.
11(4)(a) are taken in terrorem and the dealer is penalised by a best judgment
assessment in default of compliance. On that reasoning they held that the
period of (1) (1958) 9 S.T.C. 654.
(2) (1960) 11 S.T.C. 811.
453 limitation prescribed under s' 11-A might
apply to a proceeding under s. 11(2), but no such period of limitation was laid
down in the Act in respect of a proceeding under s.
10(3) or s. 11(4)(a) of the Act. We find it
rather difficult to appreciate the reasoning on which the learned Judges
distinguished the Full Bench decision. But the question of pendency of
proceedings was not raised before the Division Bench and was not considered by
it. For the foregoing reasons we hold that a statutory obligation to make a return
within a prescribed time does not proprio vigore initiate the assessment
proceedings before the Commissioner; but the proceedings would commence after
the return was submitted and would continue till a final order of assessment
was made in regard to the said return.
Now let us apply the said legal position to
the facts of Civil Appeal No. 101 of 1961. The appellant has to submit
quarterly returns and assessments are made on the basis of 'the said returns ;
that is to say, he has to be assessed for his turnover separately in respect of
each quarter.
Therefore, the question of escape of
assessment has to be considered on the ground that each quarter is a separate
period for the assessment. For the year 1949-50 i.e., for the period from
October 22, 1949 to November 9, 1950, he had to submit 4 returns for the four
quarters. But he had submitted only one return on October 5, 1950 for one
quarter. No assessment was made in respect of any of the four quarters. So the
assessment proceedings must be held to be pending before the Commissioner only
in respect of the quarter for which the appellant had made the return. In
respect of the other quarters no proceedings could be said to be pending before
the Commissioner. The Tribunal has no jurisdiction to issue a notice under s.
11-A with respect to the quarters other than that covered by the return made by
the appellant.
So far as Civil Appeal No. 102 of 1961 is
concerned, the appellant had not submitted any returns for the year 1950-51
i.e., for the period from November 10, 1950 to October 31, 1951. The Assistant
Commissioner of Sales-tax issued a notice to him on October 15, 1954 in Form
XII purporting to be under s. 11 (4) of the Act. The said 454 notice was within
3 years from October 16, 1951 which fell within the 4th quarter of the
concerned year. Under s. 11-A of the Act the period of 3 years has to be
calculated from the expiry of the period in regard where to any turnover has
escaped assessment. As the unit of assessment is a quarter, the period in s.
11-A can only mean a quarter and it cannot be further split up into months,
weeks and days. The said period is the fourth quarter and it expired on October
31, 1951. If so, it follows that the Commissioner has jurisdiction to assess
the turnover in respect of the entire fourth quarter as the notice was issued
within three years from the expiry of the said quarter.
But in this case the Commissioner assessed,
the appellant in respect of the turnover of the entire year without showing
separately the assessment of tax payable in respect of each quarter. We,
cannot, therefore, confine the relief to be given to the appellant in these
appeals to the period barred under s. 11-A of the Act. We 'would, therefore set
aside the assessments in, both the appeals giving liberty to the respondent to
make the assessment separately for the periods not barred under s. 11-A of the
Act either because a return was filed, as in the first case or because the last
quarter was within the period of three years, as in the second case.
In the result, the appeals are allowed with
costs throughout.
RAGHUBAR DAYAL, j.--I am of opinion that the
appeals should be dismissed as the turnover for the years 1949-50 and 195051
could not be said to be turnover which escaped assessment, within the meaning of
that expression in s. 11-A of the Central Provinces & Berar Sales Tax Act,
1947 (XXI of 1947), hereinafter called the Act and therefore the notices issued
by the Assistant Commissioner of Sales Tax in 1954 under s. 11 (2) cannot be
said to be notices issued under s.
11-A beyond the period within which they
could have been issued.
It is not disputed that a turnover cannot be
said to have escaped assessment if the proceedings for the assessment of the
sales tax on that -turnover be pending. The question then is whether
proceedings for assessment of-the turnover for these two years were pending
when the im453 pugned notices were issued. To determine this question we have
to see when such proceedings for the assessment ,of the sales tax on the
turnover of a dealer in a certain period commences.
All dealers whose turnover during a year
exceeds the limits laid down in sub-section (5) of s. 4 of the Act are liable
to pay....sales tax in accordance with the provisions of the Act. .....All such
dealers have to get themselves registered and..obtain a registration
certificate : vide s. 8. The registered dealer is required by s. 10(1) to
furnish the prescribed returns by prescribed dates to the prescribed authority.
Rule 19 of the Rules provides for the furnishing to the Sales Tax Officer
quarterly returns in Form IV within one calendar month from the expiry of the
quarter to which the return relates. In certain cases, such a return is to be
submitted within two calendar months. The amount of tax calculated on the turnover
shown in the return is to be deposited in the treasury and the treasury receipt
in Form V is to accompany the return. If the registered dealer furnishes the
necessary return, the Sales Tax Officer can assess on the amount of turnover
shown in the returns in case he considers them to be correct and complete :
vide s. 11(1). If he be not so satisfied he has to serve a notice under
sub-section (2) of s. 11 on the registered dealer to take the various steps he
requires for satisfying him about the correct amount of the turnover and, on
his computing this amount, he has to assess the tax in accordance with
sub-section (3) of s. 11 of the Act.
The Sales Tax Officer can also require an
unregistered dealer to furnish returns by a certain (late, in view of the
provisions of sub-section (1) of s. 10 and, if the dealer submits such returns
he can make the assessment on the basis of the returns if satisfied with their
correctness, or he may serve another notice under s. 11 (2) on the dealer to
take steps to satisfy him about the correct amount of the turnover and, if the
dealer responds to the second notice, he assesses him, after necessary inquiry,
to tax under s. 11 (3).
So far, the procedure for assessment of tax
is the same, both for the registered dealer and the ordinary dealer, in case
both of them furnish the returns of the turn456 over as required by the
provisions of sub-section (1) of s. 10 and also comply, if required, with the
provisions of sub-section (2) of s. 11.
Different procedures, however, have to be
followed if 'the two types of dealers do not file returns or, after filing
returns, do not respond to the notice issued under subsection (2) of s. 11. The
Act does not provide for the Sales Tax Officer's taking steps for the
assessment of the tax on the ground of the unregistered dealer's not complying
with either notice, i.e., when the unregistered dealer does not submit a
return, or, after submitting a return which is not accepted, does not respond
to the notice issued under sub-section (2), of s. 11.
The Sales Tax Officer can however, proceed
against such a dealer under sub-section (5) of s. 11 and will probably do so as
the conduct of the unregistered dealer would tend to confirm the information
which led him to issue notice under s. 10(1) ; but his action will be not on
the ground that the dealer had made default in furnishing the return or had
failed to comply with the notice issued under sub-section (2) of s. 11 but will
be on the ground that according to his information the dealer had been liable
to pay tax under the Act in respect of that period and had, nevertheless, willfully
failed to apply for registration. Under the provisions of sub-section (5) of s.
11 he, after giving the dealer reasonable opportunity of being heard, can proceed
to assess the tax to the best of his judgment within three calendar years from
the expiry of the period in respect of the turnover of which he was liable to
be assessed to tax.
The dealer, in such a case, has not only to
pay the tax assessed, but has to pay the penalty which is not to exceed one and
a half times the amount of the tax assessed. If such a dealer had been one to
whom a notice under subsection (1) of s. 10 had been issued and had failed,
without any sufficient cause, to comply with the requirements of that notice,
he could also be' ordered to pay, by way of penalty, a sum not exceeding
one-fourth the amount of the tax which be assessed on him under s. 11, in view
of the provisions of sub-section (3) of s. 10.
It will be seen that though the Sales Tax
Officer has to proceed to make the assessment within three calendar 457 years
of the period whose turnover was liable to tax, there is no time limit within
which he must -finish the assessment proceeding. They are simply to be started
within the prescribed period of time, but can be finished at any later period.
It may also be noticed here that the 'period
of three years' in sub-section (5) of s. 11 was substituted by the Amending Act
XX of 1953 in place of the expression 'from the commencement of this Act and
thereafter within twelve months' and that s. 11-A which deals with the
assessment of the turnover escaping assessment was also introduced by the same
Act and that these amendments were given retrospective effect from the 1st of
June 1947, the date when the Act originally came into force. Section 11-A
empowers the Sales Tax Officer to proceed to assess or reassess certain
turnover, including turnover which escaped assessment, within three years from
the expiry of that period.
The procedure to be followed against the
registered dealer, in case he does not furnish the return in respect of any
period by the prescribed date-which he is required to do by sub-section (1) of
s. 10-or, having furnished such returns, failed to comply with the notice
issued under sub-section (2) of s. 11, is different. Sub-section (4) of s. 11
empowers the Sales Tax Officer, in such circumstances, to assess the registered
dealer to the best of his judgment, in the prescribed manner. He has, however,
to give a further notice to the registered dealer in case the registered dealer
has not furnished the return at all. The registered dealer can also be made to
pay penalty, if Ms failure to furnish the return is without any sufficient
cause, in accordance with the provisions of sub-section (3) of s. 10.
There is no time limit fixed for the Sales
Tax Officer to take action against the registered dealer under sub-sections (2)
and (4) of s. 11.
The question then is, when do the proceedings
for the assessment of sales tax, commence against the registered dealer? I am
of the view that they commence from the prescribed date for his submitting the
return which he is required to submit by sub-section (1) of s. 10. No notice is
necessary to be issued to him for the submitting of the return for the purpose
of assessment. The statute, 30-2SC India/64 458 by the provisions in
sub-section (1) of s. 10, gives him the required notice to the effect that he
is to submit the necessary returns by the dates prescribed by the rules. The
registration certificate issued to him mentions the period of the dealer's
year, the prescribed return period and the dates by which the dealer had to
furnish the returns. The registered dealer is, in this way, in no worse
position than an ordinary dealer who receives a notice from the Sales Tax
Officer for submitting the returns by a certain date. The object of the notice
to submit a return is nothing but the obtaining of the material for the Sales
Tax Officer to determine the amount of the turnover and, if assessable to tax,
to assess the tax due on that turnover. The notice is a step towards the
proceedings for the assessment of the sales tax. In the case of the
unregistered dealer, the Sales Tax Officer commences the proceedings for
assessment by the issue of a notice under sub-section (1) of s. 10, and, in the
case of a registered dealer, the statute has already fixed the date for the
furnishing of the return and therefore has set in motion the process for the
assessment of the sales tax by the Sales Tax Officer. I do not see any good
reason why the statutory notice to the registered dealer be not considered to
be at par with the notice issued to the ordinary dealer by the Sales Tax
Officer and why it should not be taken to initiate the assessment proceedings
just as the issue of a notice by the Sales Tax Officer would have initiated the
proceedings against the ordinary dealer.
The failure of the registered dealer to
furnish the return enables the Sales Tax Officer to assess the tax to the best
of his judgment, of course, after giving an opportunity to the registered
dealer of being heard. It would be incongruous if the Sales Tax Officer be held
not to have initiated the assessment proceedings against the registered dealer
and yet, on the failure of such a dealer to furnish the returns, to proceed in
the very first instance to assess tax on the dealer to the best of his
judgment. Such a power of taxing to the best of his judgment is an indication
of the fact that the dealer had defaulted in respect of some proceedings
connected with the assessment of tax and thus has made himself liable to tax on
the best judgment basis instead of a tax on the computed amount of turnover ac459
cording to the records. His default lies in his not submitting, the return of
turnover and not depositing the tax due on the turnover shown in the return.
The payment of tax as a result of the statutory notice under s. 10(1) and r. 19
well points to the conclusion that the statutory notice and rule initiate the
assessment proceedings against the registered dealer at least from the date of
the close of the quarter for which the turnover is to be furnished and tax is
to be paid.
The mere fact that the Sales Tax Officer
cannot proceed against an unregistered dealer who, though liable to pay a tax,
did not get himself registered, after the expiry of three years from the period
the -turnover in which was liable to tax, cannot lead to the conclusion that
the Sales Tax Officer cannot take necessary steps to assess a registered dealer
under sub-section (2) and (4) of s. 11 after the expiry of three years from the
period whose turnover he proceeds to assess, for the simple reason that s. 11
or any other provision of the Act does not lay down any such restriction on the
Sales Tax Officer's powers under these sub-sections.
Such a power in the Sales Tax Officer does
not contravene the provisions of Art. 14 of the Constitution. The registered
dealer and the unregistered dealer belong to different classes. The former is
one whose liability to tax is admitted. The other has admitted no such
liability. The Sales Tax Officer can find out about the liability of the
unregistered dealer to tax only by issuing a notice to him under sub-section
(1) of s. 10 when he thinks that such a dealer might be liable to tax. It is
only when the information in his possession is sufficiently strong and
trustworthy as to satisfy him that a certain unregistered dealer is liable to
by sales tax and has willfully failed to apply for registration that he can
take action under subsection (5) of s. 11. The circumstances in which the Sales
Tax Officer can take action against the unregistered dealer are different from
the circumstances in which lie takes action against the registered dealer. I am
therefore of opinion that the Sales Tax Officer does not contravene Art.
14 of the Constitution as contended for the
appellant, if he takes action against a registered dealer under sub-section (2)
or (4) of s. 11 even after the expiry of 460 three years from the period whose'
turnover is to be assessed.
It is to be noticed that the Act, as
originally-enacted, did not have s. 11-A. -That was introduced in 1953 and made
retrospective from June 1, 1947. Amendment was made in 1953 in s. 11 (5) and it
made the period of limitation for proceeding to assess tax three years. No
amendment providing limitation was however made in s. 11(2) and (4) in 1953.
This must be deliberate and indicates the intention of the Legislature not to
limit the period during which action can be taken under s. 11(2) and (4).
The Register of Cases in Form XIII of the
Rules & Forms is for cases instituted under ss.10(3), 11, 11-A and 22-C of
the Act. Its columns do not show when the assessment of tax proceedings
commence. Still its column 14 is meant for 'Amount of penalty imposed, if any,
with relevant section under which it is imposed and reference to defaulters'
list'. This shows that the Sales Tax Officer maintains a list of registered
dealers who had defaulted in not complying with the notices under s. 10(1) or
11(2) or under any other provision which makes the registered dealer liable to
penalty. The maintenance of the defaulters' list indicates that the Sales Tax
Officer initiates proceedings for tax assessment prior to his issuing notices
under s. 10(3) and that this must be after the expiry of the date for
furnishing returns referred to in s. 10(1).
In view of the opinion I have expressed
above, it is not necessary to decide what the precise scope of the expression
'turnover escaping assessment' in s. 11-A is.
It follows that the impugned notices were
properly issued by the Assistant Commissioner of Sales Tax to the appellant and
that these appeals fail. I would accordingly dismiss these appeals with costs.
ORDER BY COURT In accordance with the opinion
of the majority, the appeals are allowed with costs throughout, one hearing
fee.
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