Delhi High Court

M/S Pure Drinks (New Delhi) ... vs The Member, Sales Tax Tribunal The ... on 21 March, 2013

Author: Badar Durrez Ahmed

        THE HIGH COURT OF DELHI AT NEW DELHI
%                                       Judgment delivered on: 21.03.2013

+       W.P.(C) 1638/1994

        M/S PURE DRINKS (NEW DELHI) LIMITED ....Petitioner

                               versus

        THE MEMBER, SALES TAX TRIBUNAL
        & ORS.                                                ..... Respondents

Advocates who appeared in this case:
For the Petitioner  : Mr Rajesh Jain, Advocate.
For the Respondent   : None.

CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE R.V.EASWAR

                                  JUDGMENT

BADAR DURREZ AHMED, J (ORAL)

1. This is an old matter of 1994. It has been specifically listed today

for hearing. Nobody is present on behalf of the respondent and that is

why we have been constrained to hear this matter in the absence of the

respondent.

2. This writ petition is directed against the order dated 13.02.1994

passed by the Sales Tax Appellate Tribunal. The point in issue relates to

the chargeability of interest under section 27(1) of the Delhi Sales Tax

Act, 1975 (hereinafter referred to as „the said Act‟). In the facts and

circumstances of the present case, it is an admitted position that no return

has been filed under the said Act in respect of the year 1980-1981.

Admittedly, under the Delhi Sales Tax Act, 1975 quarterly returns are

required to be filed unless by specific direction those returns are required

to be filed monthly. However, we need not concern ourselves with this

inasmuch as the fact remains that the petitioner did not file any return in

respect of the year 1980-81. The petitioner had also not deposited any tax

during the currency of that year.

3. Section 23(5) of the said Act deals with the situation where a dealer

fails to furnish returns in respect of any period by the prescribed date. In

such eventuality, the Commissioner is mandated to, after giving the

dealer a reasonable opportunity of being heard, make a best judgment

assessment. Consequently, after due notice and opportunity to the dealer

(petitioner herein) a best judgment assessment was made on 26.03.1985

by the assessing authority whereby the petitioner was directed to pay a

sum of `52,39,763.23 under the said Act and by a separate order of the

same date, the petitioner was required to pay a sum of `5,92,469/- under

the Central Sales Tax Act, 1956. However, in neither case was any

interest levied by the assessing authority under section 27(1) of the said

Act.

4. Thereafter, on 01.10.1985, a show-cause notice was issued by the

Assistant Commissioner seeking suo moto revision of the assessment

orders under section 46 of the said Act. Several points were mentioned in

the said show-cause notice which included RD exemption, concessional

rate of tax on submission of C-Forms as well as the question that no

interest was charged under section 27(1) of the said Act by the assessing

authority. Thereafter, the Assistant Commissioner passed an order on

03.09.1986 whereby the Assistant Commissioner gave directions to the

Sales Tax Officer to issue the necessary demand notice and challans in

terms of the said order, which included computation of interest for each

of the four quarters of 1980-81 both under the local Act as well as under

the central Act. The computation of interest was given as under:

        "Under the                    Interest
        Local Act

        Ist   Qr.               ` 18,14,362.00
        IInd "                  ` 11,43,682.00
        IIIrd "                 ` 6,15,795.00
        IVth "                  ` 5,05,817.00
        Under the
        Central Act




         Ist   Qr.                  ` 3,06,878.00
        IInd "                     `   95,308.00
        IIIrd "                    `   36,725.00
        IVth "                     `   33,096.00"

5. Being aggrieved by the said order dated 03.09.1986 the petitioner

preferred an appeal before the Sales Tax Appellate Tribunal (hereinafter

referred to as „the Tribunal‟). The Tribunal disposed of the said appeal

by an order dated 31.07.1989. The Tribunal considered three issues: -

        "(a)     The dealer has been under assessed;

        (b)      That the deduction has been wrongly allowed

        (c)      That the dealer has been assessed on yearly basis and
                 not quarter-wise."

6. With regard to the first two issues the Tribunal concluded as under:

"8. Therefore it is clear in this case that the Revising Authority has trenched upon the powers of reassessment, which were given by section 24 of the Delhi Act, to the Sales Tax Officer. Therefore, the exercise of these powers by the Revising Authority u/s 46 of the Delhi Act is not only illegal but above of powers. Therefore, the decision of the Revising Authority, revising the orders of the Assessing Authority on the first two grounds, cannot be sustained and needs to be set aside."

7. The Tribunal also held that even in respect of the third issue the

order of the Sales Tax Officer should not have and could not have been

revised by the revising authority. As such, the said appeal was decided in

favour of the petitioner/ dealer by quashing the order passed by the

Assistant Commissioner on 03.09.1986 and restoring the ex-parte orders

of the Sales Tax Officer (assessing authority) which created the additional

demand of `52,39,769/- under the local Act and `5,92,466.68 under the

central Act.

8. Thereafter, the revenue filed a review application before the

Tribunal which was disposed of by the order dated 13.02.1994. It is this

order, which is impugned before us. By virtue of the order dated

13.02.1994, the Tribunal reviewed its earlier order dated 31.07.1989,

inter alia, on the point of interest. The Tribunal took the view that the

issue of interest under section 27(1) of the said Act had not been

considered by the Tribunal in the first round and as it ought to have

considered the same, a review was in order. Thereafter, the Tribunal

considered the matter on merits and decided that interest was chargeable

from the petitioner under section 27(1) of the said Act. The Tribunal

reviewed its order, dismissed the appeal filed by the petitioner in so far as

the question of interest was concerned and directed the petitioner to pay

the interest as determined by the Assistant Commissioner by virtue of his

order dated 03.09.1986.

9. The writ petition has been filed by the petitioner being aggrieved

by the said order passed by the Tribunal on 13.02.1994.

10. It was submitted by the learned counsel for the petitioner that since

this was a case where the petitioner/ dealer had not filed any return

whatsoever, there was no question of levy of interest under section 27(1)

of the said Act. He submitted that the provision of interest under section

27(1) would only apply where the petitioner/ dealer failed to pay the "tax

due" as required by section 21(3) of the said Act. He further pointed out

that the expression "tax due" would have reference to section 21(3) of the

said Act which required the registered dealer to furnish returns and pay

the full amount of "tax due" from him under the said Act "according to

such returns". Thus, according to the learned counsel for the petitioner,

prior to an assessment, unless and until the dealer filed a return, there

could not be any "tax due" because that would have relation to the

amount of tax due "according to the return". Since, no return was filed,

therefore, there could be no „tax due‟ as used in section 27(1) of the said

Act. The learned counsel for the petitioner also submitted that while it

may seem incongruous that a person who files a return would be liable to

pay interest and a person who does not file the return would not be liable

to pay any interest under section 27(1) of the said Act, it must also be

kept in mind that non-filing of the return attracts a penalty under section

55 of the said Act. Section 55 of the said Act stipulates that if a dealer

fails to file any return without reasonable cause or to pay tax due

according to the return as required by section 21(3) of the said Act, the

Commissioner may, after giving the dealer an opportunity of being heard,

direct the dealer to pay by way of penalty, in addition to the tax payable,

a sum not exceeding twice that amount. Therefore, it was submitted by

the learned counsel for the petitioner that the non-compliance with the

requirement of filing of a return under section 21(3) of the said Act is

adequately dealt with by the imposition of a penalty under section 55 of

the said Act and the question of interest in that eventuality would not

arise.

11. The learned counsel for the petitioner also submitted that apart

from attracting penalty under section 55 of the said Act the non-filing of

returns would also be treated as an offence under section 50 of the said

Act, which could invite punishment with rigorous imprisonment that

could extend to six months or with fine or with both. The learned

counsel, in making the aforesaid submission, drew our attention to the

following provisions of the said Act, which are reproduced hereunder to

the extent relevant: -

"Section 21 - Periodical payment of tax and filing or returns -

(1) Tax payable under this Act shall be paid in the manner hereinafter provided at such intervals as may be prescribed.

(2) Every registered dealer and every other dealer who may be required so to do by the Commissioner by notice served in the prescribed manner shall furnish such returns of turnover by such dates and to such authority as may be prescribed.

(3) Every registered dealer required to furnish returns under sub-section (2) shall pay into Government Treasury or the Reserve Bank of India or in such other manner as may be prescribed, the full amount of tax due from him under this Act according to such return and shall where such payment is made into a Government Treasury or the Reserve Bank Of India furnish alongwith the return a receipt from such Treasury of Bank showing the payment of such amount.

                 xxxxxxx    xxxxxxxx   xxxxxxxx
        Section 23- Assessment
                 (1)   xxxxxxx   xxxxxxxx     xxxxxxxx
                 (2)   xxxxxxx   xxxxxxxx     xxxxxxxx
                 (3)   xxxxxxx   xxxxxxxx     xxxxxxxx
                 (4)   xxxxxxx   xxxxxxxx     xxxxxxxx

(5) If a dealer fails to furnish returns in respect of any period by the prescribed date, the Commissioner shall, after giving the dealer a reasonable opportunity of being heard, assess to the best of his judgment the amount of tax, if any, due from him.

                 xxxxxxx          xxxxxxxx            xxxxxxxx

        Section 27 - Interest

(1) If any dealer fails to pay the tax due as required by sub-section (3) of section 21, he shall, in addition to the tax (including any penalty) due, be liable of pay simple interest on the amount so due at one per cent per month from the date immediately following the last date for the submission of the return under sub-section (2) of the said section for a period of one month thereafter for so long as he continues to make default in such payment or till the date of completion of assessment under section 23 whichever is earlier.

(2) When a dealer or a person is in default or is deemed to be in default in making the payment of tax, he shall, in addition to the amounts payable under section 23 or section 24, be liable to pay simple interest on such amount at one per cent per month from the date of such default for a period of one month, and at one and a half per cent per month thereafter for so long as he continues to make default in the payment of the said amount.

xxxxxxx xxxxxxxx xxxxxxxx Section 55 - Imposition of penalty (1) If a dealer fails without reasonable cause to furnish any return by the prescribed date as required under sub- section (2) of section 21, or to pay the tax due according to the return as required by sub-section (3) of that section, the Commissioner may after giving the dealer an 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 twice that amount or where no tax is payable a sum not exceeding two thousand rupees.

(2) The penalties specified under sub-section (1) may be imposed by the Commissioner notwithstanding the fact that assessment proceedings have not been initiated against the dealer under section 23."

12. The learned counsel for the petitioner supported his arguments by

referring to the Constitution Bench decision of the Supreme Court in the

case of State of Rajasthan v. Ghasilal: AIR 1965 SC 1454. He also

referred to the decision of the Supreme Court in Associated Cement

Company Ltd. v. CTO: (1981) 4 SCC 578. In particular, he referred to

the minority view of Bhagwati, J. (as his Lordship then was). Thereafter,

the learned counsel drew our attention to the Constitution Bench decision

in the case of J. K. Synthetics Ltd. v. CTO: (1994) 4 SCC 276, wherein

the majority view in Associated Cement Company Ltd. (supra) was

overruled and the view taken by Bhagwati, J., that is, the minority view in

Associated Cement Company Ltd. (supra) was upheld. Finally, the

learned counsel referred to the Supreme Court decision in the case of

Maruti Wire Industries Pvt. Ltd. v. STO & ORS.: (2001) 3 SCC 735.

13. In Ghasilal (supra) the Constitution Bench observed as under: -

"10. In our opinion, there has been no breach of s. 16(1)(b) of the Act, and consequently, the orders imposing the penalties cannot be sustained. According to the terms of s. 16(1)(b), there must be a tax due and there must be a failure to pay the tax due within the time allowed. There was some discussion before us as to the meaning of the words 'time allowed' but we need not decide in this case whether the words 'time allowed' connote time allowed by an assessing authority or time allowed by a provision in the Rules or the Act, or all these things, as we are of the view that no tax was due within the terms of s. 16(1)(b) of the Act. Section 3, the charging section, read with s. 5, makes tax payable, i.e., creates a liability to pay the tax. That is the normal function of a charging section in a taxing statute. But till the tax payable is ascertained by the assessing authority under S. 10, or by the assessee under s. 7(2), no tax can be said to be due within s. 16(1)(b) of the Act, for till then there is only a liability to be assessed to tax. "

(underlining added)

14. The observations of the Constitution Bench were in respect of the

provisions of Rajasthan Sales Tax Act, which are similar to the provisions

of Delhi Sales Tax Act, 1975. The decision in Ghasilal (supra) has been

summarized by the Supreme Court in J. K. Synthetics Ltd. (supra) as

under: -

"8. The decision rendered by the Constitution Bench of this Court in the case of Ghasilal turned on the following facts. The Act had come into force on 1-4-1955 while the rules framed thereunder were published in the Rajasthan Government Gazette on 28-3-1955. Ghasilal challenged the making of assessments on his turnover for the year 1955-56 on the ground that the rules were invalid. The High Court in

the writ petition filed by Ghasilal made an interim order on 9-1-1958 that Ghasilal will maintain proper accounts and file the prescribed returns and the Revenue will not assess him till further orders. During the pendency of the writ petition the rules were validated by Ordinance No.5 of 1959 (which later became an Act). Thereupon Ghasilal withdrew his writ petition. Thereafter on 4-12-1959, the Sales Tax Officer, Kota City Circle, sent him a show-cause notice asking him to deposit the tax due up to date within a week, failing which he threatened to take necessary action permissible in law. On receipt of the notice Ghasilal filed a return in respect of the 4th quarter ending on 22-10-1957 and deposited the tax of `11,808.37. On 25-4-1960, the Sales Tax Officer made an assessment in respect of the accounting period from 3-11-1956 to 22-10-1957 and imposed a penalty under Section 16(1)(b) of the Act on the ground that the assessee had not deposited the tax for the earlier quarters on the due dates and the tax for the 4th quarter was deposited after a lapse of two years. His appeal was dismissed by the Deputy Commissioner of Sales Tax who endorsed the view that the interim order of the High Court had not precluded the assessee from paying the tax and filing the returns. On the same line of reasoning penalty was also levied for the subsequent periods. Ghasilal challenged the levy of penalty by a writ petition and the High Court allowed the same. It may be noted that Section 7-AA was not on the statute book then and the penalty was levied under Section 16(1)(b) as it then stood which inter alia provided for imposition of penalty if the tax due was not paid within the time allowed. The submission made on behalf of Ghasilal was that there was no breach of Section 16(1)(b) inasmuch as no tax was due till the assessee filed his returns under Section 7(1) of the Act because the tax to be deposited as required by Section 7(2) was to be calculated on the basis of the return. There cannot be non-compliance of Section 7(2) unless a return is filed without depositing the tax due on the basis of the return. Hence, counsel contended, there was no violation of Section 7(2) and so long as the tax was not

assessed and determined as required under Section 10, the liability for payment of penalty did not arise. On the other hand the Revenue contended that the liability to pay tax had arisen under Sections 3 and 5 of the Act and the delay in complying with the demand notice entailed imposition of penalty. This Court held:

"According to the terms of Section 16(1)(b), there must be a tax due and there must be a failure to pay the tax due within the time allowed. ...i.e., creates a liability to pay tax. That is the normal function of a charging section in a taxing statute. But till the tax payable is ascertained by the assessing authority under Section 10, or by the assessee under Section 7(2), no tax can be said to be due within Section 16(1)(b) of the Act, for till then there is only a liability to be assessed to tax" The situation may be different after the introduction of Section 7-A. The contention based on the show-cause notice was brushed aside as one without substance as the learned counsel for the Revenue was unable to show any rule or section under which it was issued. On this line of reasoning this Court upheld the High Court decision and dismissed the appeal."

15. The minority view in Associated Cement Company Ltd. (supra) is

clearly brought out by the observations contained in paragraph 10 thereof,

which is to the following effect: -

"10. Mr. Justice Venkataramiah has in his judgment classified registered dealers into the following five different categories:

1. A registered dealer who files his return

showing a higher taxable turnover than the actual turnover which is ultimately found to be taxable at the time of regular assessment and who pays tax under Section 7(2) of the Act on the basis of the return.

2. A registered dealer who files a true and proper return and pays tax on the basis of such return within the time allowed.

3. A registered dealer who does not file any return at all as required by Section 7(1) and pays no tax under Section 7(2) of the Act.

4. A registered dealer who files a true return but does not pay the full amount of tax as required by Section 7(2) and

5. A registered dealer who files a return but wrongly claims either the whole or any part of the turnover as not taxable and pays under Section 7(2) of the Act that amount of tax, which according to him is payable, on the basis of the return.

The learned Judge has observed that if the construction contended for on behalf of the assessee were accepted, registered dealers falling within Categories 3, 4, and 5 would be outside the provision enacted in sub-section (2) of Section 7 read with Section 11-B, clause (a) and no interest would be payable by them under that provision and that would make clause (a) of Section 11-B "either unworkable or meaningless". I must, with the greatest respect, confess my inability to appreciate the line of reasoning which has prevailed with the learned Judge in making this observation. The learned Judge has proceeded on the basis that the registered dealers falling within all the three Categories, namely, 3, 4 and 5 are required by sub-section (2) of Section

7 to pay the tax chargeable under Section 3 of the State Act and if they do not pay the same within the time allowed, that is, at the time when the returns are filed or in case the returns are not filed within the prescribed time, then before the expiration of the date when they ought to have been filed they would be liable to pay interest under Section 11-B, clause (a). There is, in my opinion, a basic fallacy underlying this assumption, because it is clear from the language of sub-section (2) of Section 7 that it is only on the filing of the return that the liability to pay the tax due on the basis of the return arises. If no return is filed within the prescribed time, it would undoubtedly constitute a default attracting penalty under Section 16, sub-section (1), clause

(n), but there would be no liability on the assessee to pay interest on the amount of the tax, because the liability to pay the "tax due on the basis of the return" under sub-section (2) of Section 7 can arise only when the return is filed. There is no liability on the assessee to pay any amount by way of tax until the return is filed or the assessment is made. This is clear from the decision of this Court in the State of Rajasthan v. Ghasilal where this Court held in so many terms at page 322 of the Report that since the assessee in that case did not file returns till December 19, 1959 and January and March 1960, "Section 7(2) could not be attracted till then" (emphasis supplied). I fail to understand how in the face of these observations made by a Bench of five Judges of this Court, it can ever be held that Section 7, sub-section (2) is attracted even when no return has been filed. It is clear from the observations in this case - observations which we have set out here as also in an earlier paragraph - that until the assessee files a return or the assessment is made, no tax is payable by the assessee, because "till then there is only a liability to be assessed to tax". I must therefore regretfully express my inability to accept the conclusion reached by my learned brother Venkataramiah that a registered dealer falling within Category 3 who does not file any return at all as required by sub-section (1) of Section 7 would still be liable to pay the

amount of tax and if he does not pay the same before the due date for filing the return has expired, he would be liable to pay interest under Section 11-B, clause (a). That would be plainly contrary to the decision in State of Rajasthan v. Ghasilal which, being a decision of five Judges of this Court, is binding upon us."

16. From the above extract, it is apparent that five different categories

of cases have been examined. The third category being that of a

registered dealer, who does not file any return as required under section

7(1) of the Rajasthan Sales Tax Act and pays no tax under section 7(2) of

the Rajasthan Sales Tax Act, which are similar to the provisions of

section 21(2) and 21(3) of the Delhi Sales Tax Act, 1975.

17. In J. K. Synthetics Ltd. (supra) the Supreme Court was considering

as to whether the provisions with regard to levy of interest under section

11B of the Rajasthan Sales Tax Act (which is similar to section 27 of the

Delhi Sales Tax Act, 1975) would have to be construed strictly or not.

This question has been specifically raised in paragraph 9 in J.K.

Synthetics Ltd. (supra) which reads as under: -

"9. Before we proceed further we must emphasise that penalty provisions in a statute have to be strictly construed and that is why we have pointed out earlier that the considerations which may weigh with the authority as well as the court in construing penal provisions would be different from those which would weigh in construing a

provision providing for payment of interest on unpaid amount of tax which ought to have been paid. Section 3, read with Section 5 of the Act, is the charging provision whereas the rest of the provisions provide the machinery for the levy and collection of the tax. In order to ensure prompt collection of the tax due certain penal provisions are made to deal with erring dealers and defaulters and these provisions being penal in nature would have to be construed strictly. But the machinery provisions need not be strictly construed. The machinery provisions must be so construed as would enable smooth and effective collection of the tax from the dealers liable to pay tax under the statute. Section 11-B provides for levy of interest on failure of the dealer to pay tax due under the Act and within the time allowed. Should this provision be strictly construed or should it receive a broad and liberal construction, is a question which we will have to consider in determining the sweep of the said provision. We will do so at the appropriate stage but for the present we may notice the thrust of this Court‟s decision in the case of Associated Cement Co. Ltd.?"

18. This question has been answered after examining the position in

Associated Cement Company Ltd. (supra) in detail as also several other

decisions of the Supreme Court. The Constitution Bench concluded that

any provision made in a statute for charging and levying interest on

delayed payment of tax must be construed as a substantive law and not as

an adjectival law and, therefore, it arrived at the conclusion that the

minority view in the case of Associated Cement Company Ltd. (supra)

was the correct view. This would be clear from the observations of the

Supreme Court as under: -

"16. It is well-known that when a statute levies a tax it does so by inserting a charging section by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. It, therefore, provides the machinery for the assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters. Provision is also made for charging interest on delayed payments, etc. Ordinarily the charging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provisions must, no doubt, be so construed as would effectuate the object and purpose of the statute and not defeat the same. (See Whitney v. IRC, CIT v. Mahaliram Ramjidas, India United Mills Ltd. v. Commissioner of Excess Profits Tax, Bombay and Gursahai Saigal v. CIT, Punjab). But it must also be realised that provision by which the authority is empowered to levy and collect interest, even if construed as forming part of the machinery provisions, is substantive law for the simple reason that in the absence of contract or usage interest can be levied under law and it cannot be recovered by way of damages for wrongful detention of the amount. (See Bengal Nagpur Railway Co. Ltd. v. Ruttanji Ramji and Union of India v. A.L. Rallia Ram). Our attention was, however, drawn by Mr. Sen to two cases. Even in those cases, C.I.T. v. M. Chandra Sekhar and Central Provinces Manganese Ore Co. Ltd. v. C.I.T., all that the Court pointed out was that provision for charging interest was, it seems, introduced in order to compensate for the loss occasioned to the Revenue due to delay. But then interest was charged on the strength of a statutory provision, may be its objective was to compensate the Revenue for delay in payment of tax. But regardless of the reason which impelled the legislature to provide for charging interest, the Court must give that meaning to it as is conveyed by the language used and the purpose to be achieved. Therefore, any provision made in a

statute for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjectival law. So construed and applying the normal rule of interpretation of statutes, we find, as pointed out by us earlier and by Bhagwati, J. in the Associated Cement Co. case, that if the Revenue's contention is accepted it leads to conflicts and creates certain anomalies which could never have been intended by the legislature.

17. Let us look at the question from a slightly different angle. Section 7(1) enjoins on every dealer that he shall furnish prescribed returns for the prescribed period within the prescribed time to the assessing authority. By the proviso the time can be extended by not more than fifteen days. The requirement of Section 7(1) is undoubtedly a statutory requirement. The prescribed return must be accompanied by a receipt evidencing the deposit of full amount of 'tax due' in the state Government on the basis of the return. That is the requirement of Section 7(2). Section 7(2A), no doubt, permits payment of tax at shorter intervals but the ultimate requirement is deposit of the full amount of 'tax due' shown in the return. When Section 11-B(a) uses the expression 'tax payable under Sub-sections (2) and (2A) of Section 7', that must be understood in the context of the aforesaid expressions employed in the two sub-sections. Therefore, the expression 'tax payable' under the said two sub-sections is the full amount of tax due and 'tax due' is that amount which becomes due ex-hypothesi on the turnover and taxable turnover 'shown in or based on the return'. The word 'payable' is a descriptive word, which ordinarily means 'that which must be paid or is due, or may be paid' but its correct meaning can only be determined if the context in which it is used is kept in view. The word has been frequently understood to mean that which may, can or should be paid and is held equivalent to 'due'. Therefore, the conjoint reading of Sections 7(1), (2) and (2A) and 11B of the Act leaves no room for doubt that the expression 'tax payable' in Section 11B can only mean the full amount of tax which becomes due under Sub-sections (2) and (2A), of the Act

when assessed on the basis of the information regarding turnover and taxable turnover furnished or shown in the return. Therefore, so long as the assessee pays the tax which according to him is due on the basis of information supplied in the return filed by him, there would be no default on his part to meet his statutory obligation under Section 7 of the Act and, therefore, it would be difficult to hold that the 'tax payable' by him 'is not paid' to visit him with the liability to pay interest under Clause (a) of Section 11-B. It would be a different matter if the return is not approved by the authority but that is not the case here. It is difficult on the plain language of the section to hold that the law envisages the assessee to predicate the final assessment and expect him to pay the tax on that basis to avoid the liability to pay interest. That would be asking him to do the near impossible.

xxxxx xxxxx xxxxx

19. In the result we are of the view that the majority opinion expressed by Venkataramiah, J. in the Associated Cement Company case does not, with respect, state the law correctly and in our view the legal position was correctly stated by Bhagwati, J. in his minority judgment. We, therefore, overrule the majority view in that decision and affirm the minority view as laying down the correct law. We must make it clear to avoid any possibility of doubt in future that our view is based on the law as it stood before the amendments effected by Act 4 of 1979. Reference to the provisions of law after the amendments by Act 4 of 1979 are if at all for the limited purpose of comparison and we should not be understood to have expressed any view in regard to them."

(underlining added)

19. Finally, the decision of the Supreme Court in Maruti Wire

Industries Pvt. Ltd. (supra) is also to be considered. In that case the

Supreme Court was considering the provisions of section 23(3) of the

Kerala General Sales Tax Act, 1963 (which is similar to section 27 of the

Delhi Sales Tax Act, 1975). After setting out the provisions of section

23(3) of the Kerala General Sales Tax Act, 1963, the Supreme Court

observed as under: -

"4. The present one is not a case where any amount of tax was collected by the appellant and then not deposited. It is an admitted position that the validity of impugned demand depends on the meaning to be assigned to the expression "if the tax or any other amount assessed as occurring in Section 23(3) of the Act. According to the appellant there was no order of assessment nor a return of turnover filed by way of self assessment in which case it should have been accompanied by proof of payment of tax as per self assessment and, therefore, the appellant was not required to pay tax unless and until a demand based on an order of assessment was raised against it. According to the respondent, an assessee held liable to payment of sales tax and not filing a return of turn-over, cannot be placed on a higher pedestal than an assessee who files a return and, therefore, a reasonable construction to be placed on sub- section 3 of Section 23 would be that an assessee not filing a return of turnover should be held liable to pay penal interest with effect from a date on which he should have filed a return of turnover accompanied by payment of tax even if such return was not actually filed. The learned counsel for the appellant submitted in response that the scheme of the Act as it stood at the relevant time contemplates a different penal action against such default, i.e. penalty under Section 45A of the Act for failure to submit the return of turnover

which penalty can be as high as an amount twice the amount of sales tax payable but liability to pay penal interest cannot be cast on the assessee for such failure when the Act does not specifically provide for levy of penal interest for failure to file return of turnover. We find merit in the appellant‟s plea. A legislative casus omissus cannot be supplied by judicial interpretative process."

20. The Supreme Court ultimately concluded as under: -

"7. The same issue which was dealt with by a three- Judges Bench of this court in the case of Associated Cement Co. Ltd. came up for the consideration of Constitution Bench in the case of J.K. Synthetics Ltd. (supra). This court overruled the majority opinion and approving the minority opinion in Associated Cement Co. case held that the provision by which the authority is empowered to levy and collect interest, even if construed as forming part of the machinery provisions, is a substantive law, not adjectival law, and interest cannot be recovered by way of damages for wrongful detention of the amount. This court further held that the "tax payable" or "tax due" is that amount which becomes due ex-hypothesi on the turnover and taxable turnover shown in or based on the return or as to which an order of assessment has been made.

8. In view of the law laid down by the Constitution Bench, we are clearly of the opinion that the liability of the assessee appellant to pay sales tax could have arisen either on return of turnover being filed by way of self-assessment or else on an order of assessment being made. No doubt Rule 27 (7-A) of the Kerala General Sales Tax Rules, 1963 casts an obligation on assessees to file a return of total turnover and taxable turnover accompanied by proof of payment of the amount of tax due within 20 days of the previous quarter but such a return was not filed by the appellant. A failure to file return of taxable turnover may render the assessee liable for any other consequences or penal action as provided by

law but cannot attract the liability for payment of penal interest under sub-section (3) of Section 23 of the Act on the parity of reasoning that if a return of turnover would have been filed on the due date then the tax as per return would have become due and payable on that date."

(underlining added)

21. From an examination of the aforesaid decisions it is apparent that

the expression "tax due" as appearing in section 27(1) of the said Act

would have to be read in relation to the provisions of section 21(3)

thereof. Section 21(3) of the said Act has clear reference to the

furnishing of a return. Moreover, it has reference to the full amount of

tax due from a dealer under the Act "according to such return". In other

words, the tax which is said to be due under section 27(1) of the said Act

must be the tax which is due "according to a return". It is obvious that if

no return is filed then there could be no tax due within the meaning of

section 27(1) of the said Act read with section 21(3) thereof. The tax

which is ultimately assessed is the tax which becomes due on assessment

and if this tax so assessed is not paid even after the demand is raised then

the dealer would be deemed to be in default and would be liable to pay

interest under section 27(2) of the said Act. But till such tax is assessed

no interest can be levied on such a dealer, who has not filed a return

under section 27(1) of the said Act.