Commissioner of Sales Tax, M.P. Indore
& Ors Vs. Radhakrishan & Ors [1978] INSC 202 (6 October 1978)
KAILASAM, P.S.
KAILASAM, P.S.
SINGH, JASWANT KOSHAL, A.D.
CITATION: 1979 AIR 1588 1979 SCC (2) 249
CITATOR INFO:
R 1979 SC1803 (12) RF 1991 SC 101 (22,45,205)
ACT:
Madhya Pradesh General Sales Tax Act
1958-Whether partners can be held liable for the tax assessed against the firm.
Sec. 22(4-A) and Sec. 46(1) (c)-Two different
procedures for enforcing and realizing the assessment- Whether valid-vesting of
discretionary power in the State or public authorities or an officer of high
standing is treated as a guarantee that the powers will be used fairly and with
a sense of responsibility.
HEADNOTE:
The three respondents who were the three
partners of a registered Partnership doing the business of sale of bidis did
not file any sales tax return. They did not get the firm registered under the
Madhya Pradesh General Sales Tax Act 1958. Treating the firm as an unregistered
dealer a best judgment assessment was made by the sales tax officer and demand
notices were accordingly issued. Even so the firm failed to pay the tax.
Thereupon the Commissioner of Sales Tax accorded sanction under section
46(1)(c) of the Madhya Pradesh General Sales Tax Act 1958 for criminal
prosecution of the three respondents.
Their writ petition for quashing the order
for criminal prosecution was granted by the High Court.
On the questions ( 1 ) whether the three
partners can be held liable for the tax assessed against the firm and (2)
whether the sanction given by the Commissioner for Prosecution under sec(ion
46(1)(c) is sustainable in law.
Dismissing the appeal the Court,
HELD: 1. (a) In the absence of a specific
provision in the Act, the partners of the firm cannot be held liable for the
tax assessed on the firm. [38C] (b) A firm in a partnership and a Hindu
undivided family are recognised as legal entities and as such proceedings can
only be taken against the firm or undivided family as the case may be. Neither
the partners of the firm nor the members of the Hindu undivided family will be
liable for the tax accessed against the firm or the undivided Hindu family.
[37H-38A] State of Punjab v. M/s Jullundur Vegetables Syndicate, [1966] 2
S.C.R. 457; Kapur Chand Shrimal v. Tax Recovery Officer, Hyderabad and Ors.,
[1969] l S.C.R. 691: relied on.
(c) The definition of "dealer" in
clause 2(d) of the Act makes it clear that a firm is a separate entity and is a
dealer for the purposes of the Act. A firm under section 7(2) of the Act is
deemed to be a registered dealer. Section 18 provides that the amount of tax
due from a registered dealer shall 34 be assessed separately for each year.
Accordingly the dealer, which is a firm in this case, was assessed and notice
given to the firm [37A-C] (d) In the absence of a specific provision (such as
the one found in S. 18 of the Bombay Sales Tax Act 1959) that where a firm is
liable to pay tax under the Act, the firm and each of its partners shall be
jointly and severally liable for such payment, the partners of a firm cannot be
held liable for the tax assessed on the firm. [38C]
2. (a) The provisions of the Act conferring
different procedures for collection of tax cannot be held to be invalid. [44B]
(b) When power is conferred on high and responsible officers, they are expected
to act with caution and impartiality while discharging their duties and the
circumstances under which they will choose either of the remedies available
should be left to them. The vesting of discretionary power in the State or
public authorities or an officer of high standing is treated as a guarantee
that the power will be used fairly and with a sense of responsibility. [42G]
(c) The guidance will have to be inferred from the policy of the law itself,
that is, if on particular facts of a case the Commissioner in exercise of his
discretion comes to the conclusion that a more drastic remedy should be taken,
the exercise of that option cannot be termed unconstitutional. Courts will be
justified in giving a liberal interpretation to the section in order to avoid
constitutional invalidity and reading down the sections if it becomes necessary
to uphold its validity. [43B, D] (d ) In the present case before a prosecution
can be launched under section 46, it is necessary that the assessee should have
failed to pay the tax due within the time allowed without reasonable cause. The
duty of the Commissioner is, therefore, to be satisfied that the assessee has
failed without reasonable cause and without recourse to prosecution under section
46(1)(c), the tax due cannot be collected' The provisions of section 22(4-A)
can be read as being applicable to cases in which the stringent step of
prosecution is considered not necessary. The option is with the Commissioner
and if he thinks levy of penalty would achieve the purpose of collection of the
tax he can have recourse to the provisions of section 22 (4-A) . Before levying
a penalty under section 22(4-A), the Commissioner shall give reasonable
opportunity of being heard as to why the penalty should not be levied. Reading
the two provisions harmoniously, discretion is given to the Commissioner to
resort to one of the two remedies as the facts of the case may require. In
graver cases he will be justified in taking the drastic remedy and resorting to
prosecution in the criminal court if he is satisfied that such a course is
necessary for the collection of the tax expeditiously. If the discretion is not
properly exercised the Court may be justified in interfering in such cases but
the law cannot be held to be invalid. The present case is a grave case of
failure to pay the tax as repeated reminders went unheeded.
The Commissioner on the facts was fully
justified in coming to the conclusion that resort to prosecution was necessary.
[43E-44A] (e) Taking into account the scheme
of the Act, it can be inferred that a more drastic remedy is to be taken when
such a step is found necessary on the facts of a case. Thus construed the
validity of the section cannot be 35 questioned, but if the facts of a case do not
warrant taking of the graver step and no adequate reasons are found that order
in such circumstances may be found to be invalid.
[44B-C] Maganlal Chaganlal (P) Ltd. v.
Municipal Corporation of Greater Bombay and Ors., [1974] 2 S.C.C. 402, State of
Kerala and Ors. v. C. M. Francis & Co. & Ors., [1961] 12 S.T.C. 119,
Shanti Prasad Jain v. 7 The Director of Enforcement, [1963] 2 S.C.R. 297,
Rayale Corporation (P) Ltd. & Ors. v. Director of Enforcement, New Delhi
[1970] 1 SCR 639; Ram Swarup v. Union of India, A.I.R.
1965 SC 247, Province of Bombay v. Bombay
Municipal Corporation, 73 I.A. 271, R. S. Joshi, S.T.O. Gujarat etc. v. Ajit
Mills Ltd., Ahmedabad & Anr. etc., [1978] 1 SCR 338; referred to.
CRIMINAL APPELLATE JURISDICTION: Criminal
Appeal No. 78 of 1972.
From the Judgment and order dated 16-3-1971
of the Madhya Pradesh High Court in Misc. Petition No. 85/69.
S.K. Gambhir for the Appellant.
H. W. Dhabe and A. G. Ratnaparkhi for
Respondents Nos. 1-3.
The Judgment of the Court was delivered by KAILASAM,
J.-This appeal is by Commissioner of Sales Tax, M.P., Indore and three others
by certificate of fitness granted by the high Court of Madhya Pradesh from the
judgment and order dated 16th March, 1971 in Miscellaneous Petition No. 85 of
1969, whereby the High Court allowed the petition filed by the respondents and
quashed (a) the sanction for criminal prosecution of the respondents accorded
by the commissioner of Sales Tax by his memorandum dated 29th April. 1966 and
(b) the proceedings before the criminal court started under section 46(1) (c)
of the Madhya Pradesh General Sales Tax Act, 1958, in Criminal Case No. 4344 of
1968.
The three respondents are the three partners
of a firm known as M/S. Ramakrishna Ramnath. It is a registered partnership firm.
The firm was engaged in business of sale of bidis and during the relevant
period used to purchase tendu leaves from the dealers. The firm failed to file
any return and get itself registered under the State of Madhya Pradesh. The
firm was treated as unregistered dealer and was assessed to sales-tax on the
basis of the best judgment.
There were three assessment orders. The first
was for the period 1-11-1956 to 23-10-1960 by an order dated 26th December,
1964, assessing the firm at Rs. 16,380 and imposing a penalty of Rs. 5,000. The
second order related to the period 21-10-]960 to 8-11-1961 and was dated 20th
36 December, 1964. The firm was assessed to Rs. 8,080 and a penalty. Of Rs.
2,000 was imposed. The third order was dated 20th December, 1964 and was for
the period 9-11-1961 to 28- 10-1962. The assessment against the firm was for
Rs. 8,000 and a penalty of Rs. 2,000 was imposed. The demand notices were
issued in the forms prescribed in the name of the firm by the Sales Tax
officer. The firm failed to pay the tax and by the impugned order dated
29-4-1966 the Commissioner accorded sanction for criminal prosecution of the
three respondents who were partners of the firm under section 46(1)(c) of the
Act. A challan was filed on 9th December, 1968 and a criminal Case No. 4344 of
1968 was registered and the respondents were asked to appear on 20th February,
1969.
On 17th February, 1969 the respondents filed
writ petition out of which the present appeal arises For quashing the order of
sanction for criminal prosecution dated 29th April, 1966 given by the
Commissioner of Sales Tax and of the proceedings before the criminal court in
Criminal Case No. 4344 of 1968.
By its judgment dated 16th March, 1971 the
High Court allowed the petition and quashed the sanction for criminal
prosecution given by the Commissioner of Sales Tax and the criminal
proceedings. The High Court considering the general and legal importance of the
question, granted a certificate of fitness to the Commissioner of Sales Tax and
the present appeal is thus before this Court.
Two questions that arise in this appeal are:
(i) whether the three partners can be held liable for the tax assessed against
the firm; (ii) whether the sanction given by the Commissioner for prosecution
under section 46(1)(c) is sustainable in law.
Regarding the first question the High Court
held that the result of non-payment of tax against a firm cannot be visited on
individual partners of the firm. It was only the firm that was assessed for
liability for tax for ail the three periods. In spite of repeated notices the
firm did not pay the assessment or the penalty that was imposed. The notice of
demand in Form 19 prescribed under M.P. General Sales Tax Act, 1958
(hereinafter to be referred as Act) was sent to the firm demanding payment of
the tax and penalty with a direction that the whole sum should be deposited in
the Government treasury within 30 days from the receipt of the notice of the
demand and the treasury receipt in proof of payment of the sum should be
produced before the Sales Tax officer. The dealer received a notice on 6th
January, 1965, but failed to deposit the sum as directed. On these facts the
Inspector of Sales Tax came to the conclusion that the dealer had committed an
offence under section 46 (1) (c) of the Act and accorded sanction under section
46(2) of the Act for prosecuting the three surviving partners of the 37 firm
who are the three respondents herein. The question arises whether under the
circumstances the partners can be prosecuted for the default of payment of tax
and penalty by the firm. 'Dealer' is defined in clause 2(d) of the Act. It
includes under section 2(d) (1) a local authority, a company, an undivided
Hindu family or any society (including a co-operative society), club, firm or
association which carried on such business. This definition makes it clear that
the firm is a separate entity and is a dealer for the purposes of the Act. The
firm under section 7(2) of the Act was deemed to be a registered dealer.
Section 18 provides that the amount of tax due from a registered dealer shall
be assessed separately for each year. Accordingly the dealer, which is a firm
in this case, was assessed and notice given to the firm.
In state of Punjab v. M/s. Jullundur
Vagetables syndicate() this court held that the firm which was assessed to
sales-tax under the East Punjab General Sales Tax was a separate entity under
the Act. The firm was assessed to sales tax in 1953. The order was set aside by
the Financial Commissioner, and proceedings were started for fresh assessment
but by that time the firm was dissolved. The Sales Tax Officer made the
assessment even thought the firm had already been dissolved. The High Court on
a reference held that the firm being a separate entity under the Act, there was
no machinery provided under the Act for assessing a firm after its dissolution
in respect of turnover of business before the dissolution. This Court held that
though under the partnership law a firm is not a legal entity, for the purpose
of sales tax under the Act, it is a legal entity, and therefore, on dissolution
the firm ceases to be a, legal entity and there is no provision in the Act as
it stood in 1953 expressly empowering the assessing authority to assess the
dissolved firm in respect of the turnover before its dissolution. There was no
further scope for assessing the firm which ceases to have legal existence.
In Kapurchand Shrimal v. Tax Recovery Officer
Hyderabad & Ors.,(2) a case arising out of the Income Tax Act, this Court
held that the Legislature having treated a Hindu undivided family as a taxable
entity distinct from individual members constituting it, proceedings for
assessment and recovery of the tax having been taken against the Hindu
undivided family, it was not open to the tax recovery officer to initiate
proceedings against the manager of the Hindu undivided family for his arrest
and detention.
These two cases clearly establish that a firm
in a partnership and a Hindu undivided family are recognised as legal (1)
[1966] 2 S.C.R. 457.
(2) [l969l 1 S.C.R. 691.
38 entities and as such proceedings can only
be taken against the firm or undivided family as the case may be Neither the
partners of the firm nor the members of the Hindu undivided family will be
liable for the tax assessed against the firm or the undivided Hindu family. It
may be noted that section 276(d) of the Income Tax Act specifically includes
all partners within the definition of the word 'firm' and a company includes
directors. In Bombay Sales Tax Act 1959 under section 18 it is specifically
provided that where any firm is liable to pay that under the Act, the firm and
each of the partners of the firm shall be jointly and severally liable for such
payment. In the absence of a specific provision as found in section 18 of the
Bombay Act the partners of the firm cannot be held liable for the tax assessed
on the firm. On this point we agree with the High Court that the partners
cannot be made liable for the tax assessed on the firm.
The second question that arises is whether
the sanction given by the Commissioner is sustainable in law.
The validity of the sanction is questioned on
the ground that under the Sales Tax Act the Commissioner is entitled to pursue
two different procedures for enforcing and realizing the assessment made but as
there is no guidance as, to the circumstances in which he should resort to
either of the two procedures, the provisions regarding grant of sanction is
invalid. The two procedures that are available are under sections 22(4-A) and
46(1)(c) of the Act. Section 22(4-A) runs as follows:
"(4-A) If the tax assessed under this
Act or any of the Acts repealed by section 52 or any other account due under
this Act or any installment thereof is not paid by any dealer or other persons
liable to pay such tax, other amount due or any installment thereof within the
time specified , therefore in the notice of demand or in the order permitting
payment in installments or within the time allowed for its payment by the
appellate or revising authority, the Commissioner may, after giving the dealer
or other person a reasonable opportunity of being heard, direct that such
dealer or person shall, in addition to the amount due, pay, by way of penalty,
a sum equal to:- (a) one per cent of such amount for each month or part thereof
for the first three months after the date specified for its payment; and (b)
one and half per cent of such amount for each month or part thereof subsequent
to the first three months aforesaid." 39 There had been subsequent
amendments by Act 31 of 1975 but A they are not relevant for the purposes of
this case.
Section 22(4-A) was inserted by the M.P. Act
16 of 1965 and was published in the gazette of 3rd April, 1965 and by a
Notification dated 9th April, 1965 was brought into force on 15th April, 1965.
The Notice was given by the Commissioner demanding payment of the tax and
penalty from the firm within 31 days on 4th January, 1965. The period expired
on 5th February, 1965. The sanction for prosecution was given by the
Commissioner on 29th April, 1966. Before the High Court as well as before this
Court both the counsel for the respondents and the State conceded that section
22(4-A) is retrospective in operation and, therefore, sub-section is applicable
to the facts of the case. The sub-section provides that when the amount due is
not paid within the time allowed, the Commissioner may after giving the dealer
a reasonable opportunity of being heard direct that such dealer in addition to
the amount due pay by way of penalty a sum as specified in sub-clauses (a) and (b)
lo sub-section (4-A). The procedure prescribed in section 22(4-A) for
collection of the amount is by levy of a penalty, after giving the dealer a
reasonable opportunity of being heard.
The other procedure that is available to the
Commissioner is by taking proceedings under section 46 of the Act. Section 46
enumerates certain offences and penalties for contravention of some of the
provisions of the Act. We are concerned with section 46(1) (c) which reads as
follows:- "46(1) (c) Whoever, without reasonable cause fails to pay the
tax due within the time allowed, shall, without prejudice to the recovery of
any tax that may be due from him, be punishable with simple imprisonment which
may extend to six months or a fine not exceeding one thousand rupees or with
both, and when the offence is a continuing offence, with a further fine not
exceeding fifty rupees for every day the offence continues." Sub section
(2) provides that no Court shall take cognizance of any offence punishable
under this Act or any rule made there under except with the previous sanction
of the Commissioner. If action is to be taken under section 46, the
Commissioner will have to find that the dealer has failed to pay the tax within
the time allowed and without reasonable cause. The submission of the learned
counsel is that the procedure under section 46 if taken is harsh and more
severe than the one contemplated under section 22(4-A) which enables the
Commissioner to levy a penalty and that too only after giving a reasonable
opportunity of being heard. Before initiating prosecution the 40 Commissioner
is not under an obligation to give any notice to the assessee. Section 47-A was
introduced from 1st January, 1964 by M.P. Act No. 20 of 1964 which provides
that no prosecution for contravention of any provision of this Act or of rules
made there under shall be instituted in respect of the same facts on which a
penalty has been imposed under this Act or the said rules, as the case may be.
By the introduction of section 47-A it is seen that when once proceedings are
taken under section 22(4-A) no prosecution under section 46(1)(c) can be
instituted. The position, therefore, is that the Commissioner is at liberty to
choose only one of the two remedies and the challenge is that one is harsher
than the other and there is no guidance provided to the Commissioner as to
which of the procedure he should adopt in a given case.
An authoritative statement of the Supreme
Court on this point is found in Maganlal Chaganlal (P) Ltd., vs. Municipal
Corporation of Greater Bombay and others.(1) It was observed that one finds it
difficult to reconcile oneself to the position that the mere possibility of
resort to the Civil Court should make invalid a procedure which would otherwise
be valid. It can very well be argued that as long as a procedure does not by
itself violate either Art.
19 or Art. 14 and is thus constitutionally
valid, the fact that procedure is more onerous and harsher than the procedure
in the ordinary civil Courts, should not make that procedure void merely
because the authority competent to take action can resort to that procedure in
the case of some and ordinary civil court procedure in the case of others.
That a constitutionally valid provision of
law should be held to be void because there is a possibility of its being
resorted to in the case of some and the ordinary civil Court procedure in the
case of others somehow makes one feel uneasy and that has been responsible for
the attempts to get round the reasonaning which is the basis in the decision in
Northern India Caterers v. State of Punjab.(2) It was further held that if from
the preamble and surrounding circumstances as well as provisions of the statute
themselves explained and amplified by affidavits necessary guidelines can be
inferred the statute will not be hit by Art. 14. The provisions in revenue
recovery Acts and other Acts creating special tribunals and procedure for
expeditious recovery of revenue and state dues are held to be in public
interest and do not violate Article 14.
Regarding the validity of two remedies for
recovery of sales-tax the Supreme Court in State of Kerala and other v. C. M.
Francis & (1) [1974] S.C.C. 402.
(2) [1967] 3.S.C.R. 399.
41 Co. and others(1) held that if two
remedies are open, both can be re sorted, at the option of the authorities
recovering the amount unless the Statute in express words lays down that one
remedy is to the exclusion of the other.
The two remedies that were available in the
case were, one under section 13 of the Act which provided that if the tax is
not paid it may be recovered as if it were an arrears of land revenue and the
other under section 19 which provided that any person who failed to pay within
the time allowed any tax assessed on him under the Act shall on conviction by
the Magistrate of the First Class be liable to pay fine which may extend to one
thousand rupees. This Court after observing that the question that arose was
whether section 19 should prevail over section 13 of the Act stated that 'both
the sections lay down mode of recovery of arrears of tax and as has already
been noticed by the High Court, lead to the application of process, of recovery
by attachment and sale of movable and immovable properties belonging to the
tax-evader and it cannot be said that one proceeding is more general than the
other, because there is much that is common between them, in so far as mode of
recovery is concerned".
Referring to section 19 the Court observed
that in addition to recovery of the amount, it gives power to the magistrate to
convict and sentence the offender to fine or in default of payment of fine, to
imprisonment and expressed its opinion that neither of the remedies for
recovery is destructive of the other, because if two remedies are open, both
can be resorted to, at the option of the authorities recovering the amount.
This decision supports the contention of the learned counsel for the appellant
that when two remedies, one under section 22 (4-A ) and another under section
46(1) (c) are available, both can be resorted to at the option of the
authorities recovering the amount but for section 47A. In the case referred in
(1961) 12 S.T.C. 119, the two remedies were, one by collection of the amount as
an arrears of land revenue and the other by resorting to prosecution before the
criminal court. In Shanti Prasad Jain v. The Director of Enforcement(2) the
question arose whether discretion left to the executive to choose between two
preliminary procedures was discriminatory. Under section 23A, the Director of
Enforcement may adjudge the matter himself and levy a penalty not exceeding
three times the value of the foreign exchange, in respect of which the
contravention had taken place or Rs. 5,000 whichever is more or he may send it
on to a court if he considers that a more severe penalty than he can impose is
called for whereupon on a conviction by a court, the person is punishable with
imprisonment for two years or fine. The Court observed that under (1) (1961) 12
S.T.C. 119.
(1) [1963] 2 S.C.R. 297.
4-817 SCI/178 42 section 23-D, the necessary
guidance is given in that at any stage of the inquiry the Director of
Enforcement is of opinion that having regard to the circumstances of the case
the penalty which He is empowered to impose would not be adequate he shall
instead of imposing any penalty must make a complaint in writing to the Court.
As sufficient guidance was given regarding circumstances under which cases can
be transferred to the criminal court, the Court held that the power is not
unguided or arbitrary. In Rayale Corporation (P) Ltd. & Ors. vs. Director
of Enforcement, New Delhi(1), this Court following the Shanti Prasad Jain's
case (supra) held that the Director of Enforcement can only file a complaint by
acting in accordance with proviso to section 23D(l) which clearly lays down
that the complaint is only to be filed in those cases where at any stage of the
inquiry the Director of Enforcement comes to the conclusion that, having regard
to the circumstances of the case, the penalty which he is empowered to impose
could not be adequate. 1 Shanti Prasad Jain's case (supra) as well as the
Rayale Corporation's case (supra) there were clear guidelines as to when
prosecution can be resorted to and on that basis the Court held that the power
cannot be said to be unguided. The decision in ( 1961 ) 12 S.T.C. page 119
(supra) was not referred to in the two decisions. In Ram Sarup v. Union of
India & Another(") the question arose as to whether the power under
section 125 of the Army Act which empowered the officer either to try a case by
court-martial or by an ordinary court or by a criminal court, was left entirely
within his discretion without any guidance, was violative of Article 14 of the
Constitution. The Court held that the choice as to which court should try the
accused is left to the responsible military officers under whom the accused is
serving and these officers were to be guided by consideration of the exigencies
of the service, maintenance of discipline in the army, speedier trial, the
nature of the offence and the person against whom the offence is committed.
When power is conferred on high and responsible officers they are expected to
act with caution and impartiality while discharging their duties and the
circumstances under which they will choose either of the remedies available
should be left to them. The vesting of discretionary power in the state or
public authorities or an officer of high standing is treated as a guarantee
that the power will be used fairly and with a sense of responsibility.
It has been held by the Privy Council in
Province of Bombay v. Bombay Municipal Corporation(3) that every statute must
be supposed (1) [1970] 1 S.C.R. 639.
(2) A.I.R. 1965 S.C. 247.
(3) 73 I.A. 271.
43 to be for public good at least in
intention and therefore of few laws can it be said that the law confers
unfettered discretionary power since the policy of law offers guidance for the
exercise of discretionary power. Applying the principles of this decision to
the present case, the guidance will have to be inferred from the policy of the
law itself, that is, if on particular facts of a case the Commissioner who is
an officer of high standing, in exercise of his discretion comes to the
conclusion that more drastic remedy should be taken, the exercise of that
option cannot be termed as unconstitutional. In considering the validity of a
statute the presumption is in favour of its constitutionality and the burden is
upon him who attacks it to show that there has been a clear transgression of
constitutional principles. For sustaining the presumption of constitutionality
the Court may take into consideration matters of common knowledge, matters of
common report the history of the times and may assume every state of facts
which can be conceived. lt must always be presumed that the Legislature
understands and correctly appreciates the need of its own people and that
discrimination. if any, is based on adequate grounds. It is well settled that
courts will be justified in giving a liberal interpretation to the section in
order to avoid constitutional invalidity. These principles have given rise to
rule of reading down the section if it becomes necessary to uphold the validity
of the sections. In the present case it is seen, under section 46 before a
prosecution can be launched, it is necessary that the assessee should have
failed to pay the tax due within the time allowed without reasonable cause. The
duty of the Commissioner is therefore to be satisfied that the assessee has
failed without reasonable cause and without recourse to prosecution under
section 46(1)(c) the tax due cannot be collected. The provisions of section
22(4-A) can be read as being applicable to cases in which the stringent step of
prosecution is considered not necessary. The option is with the Commissioner
and if he thinks levy of penalty would achieve the purpose of collection of the
tax he can have recourse to the provisions of section 22(4-A). Before levying a
penalty under section 22(4-A), the Commissioner shall give reasonable
opportunity of being heard as to why the penalty should not be levied. Reading
the two provisions harmoniously, we are of the view that the discretion is
given to the Commissioner to resort to one of the two remedies as the facts of
the case may require. In graver cases he will be justified in taking the
drastic remedy and resorting to prosecution in the criminal court if he is
satisfied that such a course is necessary for the collection of the tax
expeditiously. If the discretion is not properly exercised the court may be
justified in interfering in such cases but the law cannot be held to be
invalid. In the present case, we have no doubt, it is a grave case 44 of
failure to pay the tax as repeated reminders went unheeded. The Commissioner on
the facts is fully justified in coming to the conclusion that resort to,
prosecution is necessary. On a consideration of the decisions on the point we
are satisfied that there is nothing illegal in conferring different procedures
on the authorities.
Taking into account the scheme of the Act it
can be inferred that a more drastic remedy is to be taken when such a step is
found necessary on the facts of the case. Thus construed the validity of the
section cannot be questioned, but if the facts of the case do not warrant
taking of the graver step and no adequate reasons are found that order in such
circumstances may be found to be invalid.
In R. S. Joshi, S.T.O. Gujarat etc. v. Ajit
Mills Ltd., Ahmedabad & Anr. etc. etc.(') the validity of provisions of the
Act which gave the authority a discretion either to proceed under section 37 or
section 63(1) of the Bombay Sales Tax Act without specific guidelines was
considered. It was pointed out that section 37 provided for levy of penalty and
forfeiture while under section 63(1)(h) the person becomes liable to be
criminally prosecuted for contravening the provisions of section 46 without
reasonable excuse and held that there is no contravention of Article 14.
In the result we hold that the provisions of
the Act conferring different procedures for collection of tax cannot be held to
be invalid. But in view of our finding that the partners cannot be proceeded
with for collection of arrears of the firm this appeal stands dismissed with
costs.
N.V.K. Appeal dismissed.
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