Jagannath Dudadhar (M/S.) vs Commissioner Of Sales Tax & Ors.
2000 Latest Caselaw 851 Del

ORDER

Arijit Pasayat, C.J.

1. In this writ petition under Article 226 of the Constitution of India, 1950 (in short 'the Constitution') prayer is for quashing the proceedings initiated as per show cause notices dated 9th July, 1999 and 5th November, 1999 issued by the Sales Tax OfficerRespondent No. 2 and Sales Tax Officer (Enforcement) Respondent No. 3 and penalty notice dated 12th November, 1999 purported to have been issued under Section 56 of the Delhi Sales Tax Act, 1975 (in short the Act).

2. Factual position which is almost undisputed presents some novel features. Petitioner is a dealer registered under the Act. Its business premises were surveyed by the officials of Enforcement Branch on 14th May, 1999. Investigating officers were of the prima facie view that sales have been shown to alleged registered dealers who were nonexistent. Sales in respect of one M/s. Pratham International of Ward No.73 were subjected to further scrutiny and it was noticed that the registration certificate of the said concern had been cancelled earlier. But in the return filed for the quarter ending 30th June, 1999, claim for sales to the registered dealers as made by petitioner included purported sales amounting to Rs. 5,58,42,267/ made to the aforesaid Pratham International, in respect of which one ST 35 form bearing No. 05AA556655 was obtained. As investigation revealed that petitioner had claimed sales to a concern which had already surrendered the registration certificate for cancellation, and which in fact had been cancelled with effect from 1st September, 1997, the ST35 form was tampered with. The form according to the authorities was issued on 1st April, 1998 for utilisation against purchases for the year 1995 96. An FIR was lodged with the police alleging commission of the offence of cheating by filing incorrect particulars in the return. Initially notice under Section 56 was issued on 12th November, 1999 and the petitioner submitted its reply on 15th November, 1999 pointing out that proceedings under Section 56 were misconceived in the absence of any proceedings for assessment. Subsequently, on 22nd November, 1999 after the FIR was registered, an application is stated to have been filed by the petitioner accepting to pay tax of Rs. 61,42,650/ on the turnover with the aforesaid Pratham International. While the petitioner makes a grievance that this application was obtained on a threat of prosecution, according to Revenue this was voluntarily submitted and prayer, inter alia, in the application was for grant of instalments, after making deposit of first amount, for the remaining part of the aforesaid amount. After the petitioner made first payment and gave post dated cheques for the remaining amounts, Sales Tax Officer made a request to the Deputy Commissioner of Police to keep the FIR in hold until further advice. At this stage petitioner came before this Court. By order dated 19th January, 2000 it was directed in CM No. 14280/99 that respondents will not encash any further cheques out of the cheques which were issued by the petitioner on 24th November, 1999 and which were still lying unncashed. Nevertheless some cheques have been encashed. Learned counsel for the petitioner submitted that the entire action is mala fide, vitiated and in any event not sanctioned by any provisions of law. Learned counsel for the Revenue on the other hand submitted that looking at the conduct of the petitioner, the authorities rather took a liberal view in keeping the FIR in hold and in fact part payment was made on the amount of tax relatable to the ST35 form obtained from M/s. Pratham International, after petitioner voluntarily made an offer to pay on becoming aware of the fact that the fraud and manipulation done have been discovered.

3. We shall first deal with the question whether action under Section 56 which was initiated could be so taken. The aforesaid provision reads as under :

   "56. Penalty for concealment of sales or furnishing inaccurate    particulars or making false representations: 
 

   (1) If the Commissioner or any person appointed under subsection    (2) of Section 9 to assist him, in the course of any proceedings    under this Act, is satisfied that a dealer has concealed the    particulars of his sales or has furnished inaccurate particulars    of his sales, he may, after giving the dealer a reasonable opportunity of being heard, direct that the dealer shall pay, by way    of penalty, in addition to the amount of tax payable, a sum not    exceeding two and a half times the amount of tax which would    thereby have been avoided. 
 

   (2) If a person commits an offence under clause (a) of Section    50, the Commissioner or any person appointed under subsection    (2) of Section 9 to assist him may, after giving that person a    reasonable opportunity of being heard, by order in writing,    impose upon such person by way of penalty, a sum not exceeding    two and half times the amount of tax which would thereby have    been avoided. 
 

   (3) If a person purchasing goods commits an offence under clause    (c) or clause (d) of Section 50, the authority which granted him,    or,as the case may be, is competent to grant him a certificate of    registration under this Act, may, after giving him a reasonable    opportunity of being heard, by order in writing, impose upon him    by way of penalty, a sum not exceeding two and a half time the    tax which would have been levied under this Act in respect of the    sale to him of the goods, if the offence had not been committed."    

A bare reading of the provision makes it clear that action under Section 56 can only be taken in the course of any proceedings under the Act. Undisputedly, at the point of time when action under Section 56 of the Act was initiated there was no proceeding pending in respect of relevant quarter i.e. quarter ending 30th June, 1999. Action can be taken after satisfaction is reached in any proceedings under the Act that a dealer had concealed the particulars of his sales or has furnished inaccurate particulars of his sales. A notice in Form ST-32 has to be issued in terms of Rule 45 of the Delhi Sales Tax Rules, 1975 (in short the Rules). It is fairly accepted by learned counsel for the Revenue that the proceedings initiated on the basis of impugned notice have been kept in abeyance. If during the course of proceedings for assessment which have been already initiated. Assessing Officer is satisfied that any action under Section 56 is necessary, the same shall be done if not already done. In view of this statement we hold the proceedings initiated under Section 56 by notice dated 12th November, 1999 as invalid and inoperative. We do not think it necessary to express any opinion on the notice issued or proposed to be issued in case of any proceeding.

4. So far as the question as to whether the FIR could be acted upon, this is a matter with which we are not presently concerned. A grievance is made by the petitioner that certain documents which the petitioner requested the Department to be supplied to it have not been supplied though there is likelihood that they shall be used by the Department. Since the assessment proceedings are in progress, the assessing officer shall consider the request made for production of certain documents and shall pass necessary orders therein. We make it clear that we have not expressed any opinion in that regard.

5. So far as the amount collected purportedly on the basis of voluntary offer made by the assessee is concerned, there is great controversy as to whether the action was voluntary or under threat from the respondents. Undisputedly a portion of the amount in question has been deposited, and notwithstanding an order of stay passed by this court amounts have been collected by encashing cheques. Learned counsel for the Revenue submitted that being aware that after cancellation of the registration of M/s. Pratham International it has to face with penal consequences for making false claim of deduction, the petitioner made an offer to pay tax and that could be construed to be on the basis of a revised return for the concerned period. Since there was no demand raised and no revised return is there on record, the amount collected does not appear to be in line with any provisions of the Act. There is a procedure prescribed for filing a revised return in terms of subSection (4) of Section 21 of the Act. The revised return has to be in Form ST11. It has to be accompanied by an explanatory note specifying the omissions, errors or incorrect statements because of which the submission of a revised return has become inevitable, and the reasons for such errors etc. The procedural details are contained in Rule 23. Even if petition dated 24.11.1999, for the sake of argument, is taken to be the explanatory note, other requirements relating to a revised return, which were to be fulfillled, were not done. But at the same time, it is not impermissible for an assessee to deposit tax voluntarily in advance to meet the demand which may be fashioned subsequently. In view of this position we feel that best course would be to direct Revenue to deposit the entire amount paid/collected pursuant to application of the petitioner dated 24th November, 1999, in this Court within a period of one month. On the amount being deposited the same shall be kept in interest bearing fixed deposits and shall be dealt with on the basis of adjudication to be done by the Revenue authorities. The cheques which have not been encashed shall not be encashed until the assessment is completed and if any tax demand is raised collection thereof shall be in accordance with law.

6. The petition stands disposed of accordingly. < p class="centerAlign">