Rajasthan High Court - Jodhpur

C.T.O.,Suratgarh vs M/S Ex.Engineer,Border Fencing Div on 10 October, 2024

Author: Rekha Borana

Bench: Rekha Borana

    [2024:RJ-JD:18048]

          HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
                           JODHPUR
                   S.B. Civil Revision Petition No. 172/2006

     Commercial Taxes Officer, Suratgarh, District Hanumangarh.
                                                                        ----Petitioner
                                        Versus
     Executive Engineer, Border Fencing Division, C.P.W.D., BSF
     Campus, Anoopgarh, District Hanumangarh.
                                                                      ----Respondent


    For Petitioner(s)         :     Mr. Sunil Bhandari
    For Respondent(s)         :     Mr. Rajeev Purohit



                  HON'BLE MS. JUSTICE REKHA BORANA

Order

Reportable 10/10/2024

1. The issue in the present revision petition is: if an assessment

order is once set aside and after remand, a fresh assessment

order is passed, interest on the tax payable would be leviable from

which date - the date from which the tax became due to be

payable in terms of provisions of the Act; or from the date of the

first assessment order; or from the date of fresh assessment order

(after remand) was passed?

2. The facts of the case are that assessment order dated

29.10.1992 was passed by the Assessing Authority in terms of

Section 10(1)(b) of the Rajasthan Sales Tax Act, 1954 (for short

hereinafter referred to as, 'the Act of 1954'). Aggrieved of the

said assessment order, an appeal was preferred by the assessee

before the Deputy Commissioner (Appeals), Commercial Taxes.

The appeal of the assessee was allowed vide order dated

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08.12.1998. The assessment order was set aside and the matter

was remanded back to the Assessing Authority for passing of a

fresh assessment order after affording an opportunity of hearing

to the assessee. After remand, notices were issued by the

Assessing Authority to the assessee calling upon it to submit the

books of accounts. No response to the said notice was filed by the

assessee and hence, vide order dated 05.12.2000, fresh

assessment order in terms of Section 29(8)(b) of the Act of 1994

was passed (as by that time, the Act of 1954 stood repealed and

that of 1994 had come into effect). Vide the said order, a liability

of tax amounting to Rs.14,75,130/- was assessed by the

Assessing Authority. Further, in terms of Section 58 of the Act of

1994, the interest on the said amount was quantified as

Rs.32,15,785/-. Penalty of Rs.500/- and Rs.5320/- were also

imposed. Summing up, a demand of Rs.46,96,735/- was raised

against the respondent assessee vide the order dated 05.12.2000.

3. The order dated 05.12.2000 was assailed vide an appeal and

the Appellate Authority, vide order dated 21.08.2003, while

affirming the order of liability of tax for an amount of

Rs.14,75,130/-, set aside the remaining order imposing penalty in

terms of Section 58 of the Act of 1994.

4. A second appeal against the order dated 21.08.2003 was

preferred before the Rajasthan Tax Board, Ajmer in terms of

Section 85 of the Act of 1994. Learned Tax Board although

declined to interfere with the order of assessment of liability of

tax, while affirming the order of liability of interest, held that the

same could have been levied only w.e.f. 05.12.2000, that is, the

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date on which fresh assessment order was passed by the

Assessing Authority after the matter having been remanded.

The impugned order dated 09.08.2004 as passed by the

learned Tax Board has been challenged by the petitioner-

Department in the present revision petition to the extent the order

of assessment qua interest has been modified by the learned Tax

Board.

5. Learned counsel for the petitioner submitted that learned Tax

Board erred in holding that the interest on the tax payable would

be leviable w.e.f. 05.12.2000. In terms of Section 58 of the Act of

1994, the interest becomes leviable if the tax which is payable, is

not paid within the time prescribed. As per Section 25(1) of the

Act of 1994, the tax payable is to be deposited within the time

prescribed. As per Section 26(1) of the Act of 1994, every

registered dealer is required to furnish prescribed return in

prescribed manner and within the prescribed time to the Assessing

Authority. After the said return having been filed, the Assessing

Officer shall make an assessment on basis of the said return. If

any dealer does not file returns in terms of Section 26(1), the

Assessing Authority shall assess the dealer and determine the tax

payable by him.

6. Counsel submitted that in the present matter, admittedly, the

respondent-Firm did not file the return in accordance with Section

26(1) of the Act of 1994 and hence, the Assessing Authority

passed the assessment order dated 29.10.1992. The demand for

payment of tax on basis of the said assessment was hence raised

by the Assessing Authority. Section 58 of the Act of 1994 provides

that where a dealer or person commits default in making payment

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of such tax, such dealer or person shall be liable to pay interest on

such amount for the period starting from the day immediately

succeeding the date specified for such payment to the actual date

of payment.

7. Learned counsel therefore submitted that admittedly, the tax

amount in pursuance to the assessment order dated 29.10.1992

was not paid and hence, the interest in terms of Section 58 of the

Act of 1994 became leviable from the date immediately

succeeding the date specified for such payment. After the remand

of the matter to the Assessing Authority, the earlier order of

assessment of tax to the tune of Rs.14,75,130/- was maintained

and hence, the interest was definitely leviable from the date when

the tax, as payable, was not paid. Learned counsel submitted that

the learned Tax Board erred in holding that the interest was

leviable w.e.f. 05.12.2000 only and not from the date it became

payable.

8. In support of his submissions, learned counsel relied upon

the following judgments:

i. Pepsico India Holdings Ltd. vs. Commissioner of Trade Tax, Lucknow, U.P.; (2011) 13 SCC 68

ii. Commissioner of Income Tax, Orissa vs. Kalinga Tubes Ltd.; (1996) 2 SCC 277 iii. J.K. Synthetics Limited and Birla Cement Works and Ors. vs. Commercial Taxes Officer and State of Rajasthan and Ors; 1994 (4) SCC 276.

iv. Assistant Commissioner, Special Circle, Commercial Taxes, Bhilwara vs. M/s Madhusudan Industries Ltd.; S.B. Civil Revision Petition No.551/2005 (Rajasthan High Court)(decided on 12.09.2023) v. Commissioner of Income Tax vs. Udaipur Mineral Development Syndicate (P) Ltd.; IT Ref. No.32 of 1995 (Rajasthan High Court)(decided on 12.11.2014)

[2024:RJ-JD:18048] (5 of 10) [CR-172/2006]

vi. Commercial Taxes Officer vs. Rastogi Steel Furniture; S.B. Sales Tax Revision No.868/1999 (Rajasthan High Court)(decided on 24.04.2002)

9. Per contra, learned counsel for the respondent, while

supporting the finding of the learned Tax Board, argued that once

the order dated 29.10.1992 was set aside by the Appellate

Authority, it ceased to exist. After the matter been remanded by

the Appellate Authority, a fresh assessment order was passed on

05.12.2000. Meaning thereby, the liability to pay interest, if any,

accrued only w.e.f. the said date. The order dated 29.10.1992

once having been set aside, lost its existence and hence, the order

of interest as levied by the said order, could not have been given

effect to.

10. In support of his submissions, learned counsel relied upon

the judgment passed by the Hon'ble Apex Court in the case of

Philips India Ltd. & Ors. vs. Assistant Commissioner,

Commercial Taxes, Calcutta & Ors.; 2004(10) SCC 436

wherein, while relying on earlier judgment of Hon'ble Apex Court

in the case of ITO Kolar & Ors. vs. Seghu Buchiah Setty; AIR

1964 (SC) 1473, it was held that in cases where assessment is

reduced, enhanced or annulled or where fresh assessment is

directed to be made, then the earlier order ceases to exist and the

liability can arise only from the date of fresh demand notice and

the Department will necessarily have to issue a fresh demand

notice. The Court further held that a party can be considered to

be a defaulter only if the payment is not made within the time

specified in the fresh demand notice. Further that, in such cases,

interest cannot be demanded for an earlier period.

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11. Responding to the above argument raised by learned counsel

for the respondent, learned counsel for the petitioner, in rejoinder,

submitted that the judgment as passed in Seghu Buchiah

Setty's case (supra) does not hold good any more. To give a

go-bye to the ratio as laid down in the said judgment, the Union of

India proceeded on to enact the Taxation Laws (Continuation and

Validation of Recovery Proceedings) Act, 1964 (for short

hereinafter referred to as, 'the Act of 1964'). After the Act of

1964 having come into effect, the ratio as laid down in Seghu

Buchiah Setty's case (supra) would not govern the field.

12. Heard learned counsel for the parties and perused the

material available on record.

13. In the opinion of this Court, the issue in question is no more

res integra and would be covered by the ratio as laid down and

settled by the Hon'ble Apex Court in a series of judgments.

14. Kalinga Tubes Ltd. (supra) was the matter wherein the

Sales Tax Officer had assessed additional sales tax for the year

1962-63 which was later reduced by the Sales Tax Tribunal. The

assessee claimed this reduced amount as a deduction for the

assessment year 1971-72 arguing that the liability was

determined only then. In the said case, the Hon'ble Apex Court

ruled that under the merchandise system of accounting, such

liabilities accrue when the sales occur and not when the liability is

finalized.

15. The Full Bench of the Hon'ble Apex Court in J.K. Synthetics

Limited (supra), while dealing with the provisions of the

Rajasthan Sales Tax Act, 1954 held as under:

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"Therefore, the conjoint reading of Sections 7(1), (2) and (2A) an 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 u/s 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 11B. It would be a different matter if the return is no 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."

16. In the matter of J.K. Synthetics Limited (supra), the

Hon'ble Apex Court held that the majority opinion expressed by

Venkararmiah J. in the case of Associated Cement Company

Limited vs. Commercial Tax Officer, Kota & Ors.; AIR 1981

SC 1887 does not state the law correctly and held that the legal

position was correctly stated by Bhagwati J. in his minority

judgment. The Court therefore, overruled the majority view in the

said case and affirmed the minority view as laying down the

correct law. Justice Bhagwati in Associated Cements's case

(supra) (the minority view) held as under:

"The only way in which Clauses (a) and (b) of Section 11B can be read harmoniously and full meaning and effect can be give to them is by construing them as dealing with distinct matters or situations. The tax payable under Sub-section (2) of Section 7 dealt with in Clause (a) of Section 11B cannot, therefore, be equated with the amount of the tax assessed forming the subject-

matter of Clause (b) of Section 11B and hence it

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must be held to be tax due on the basis of the return actually filed by the assessee and not on the basis of a correct and proper return which ought to have been filed by him."

The Hon'ble Apex Court, while referring to the minority view

in Associated Cements' case, observed as under:

"The learned Judge, therefore, concludes that the scheme of taxation under the Act clearly envisages that it is only when the assessment is made and the period specified in the notice of demand or thirty days, as the case may be, expires that the amount of tax as assessed becomes payable and if the same is not paid within a time allowed, the liability to pay interest thereon accrues."

17. The crux of the above judgments is that the interest is

payable on the full tax liability as determined in the final

assessment, if there is a delay in paying the said full assessed tax

amount, within the stipulated period.

18. The Division Bench of this Court in Udaipur Mineral

Development Syndicate (P) Ltd. (supra), while dealing with a

situation wherein the declared income of the assessee was revised

and re-assessed, observed that the revised or the modified orders

relate back to the original assessment order and hence, the

interest would be payable w.e.f the original assessment order and

not the new demand notice as issued after modification.

19. The Single Bench of this High Court in the case of Rastogi

Steel Furniture (supra), while considering the provision of

Section 11B of the Act of 1954 and the subsequent amendments

made therein, observed that the dealer would be liable to pay

interest on the quantified amount of tax based on the return, from

the date it was payable but it was not paid.

[2024:RJ-JD:18048] (9 of 10) [CR-172/2006]

20. In Maruti Wire Industries Pvt. Ltd. vs. S.T.O., 1st Circle,

Mattancherry & Ors.; 2001(3) SCC 735 the Hon'ble Apex Court

held that a failure to file return of taxable turnover will render the

assessee's liability for any other consequences or penal action as

provided by law but cannot attract liability for payment of penal

interest.

21. So far as the judgment in the case of Philips India Ltd.

(supra) as relied upon by learned counsel for the respondent is

concerned, the said judgment was passed relying upon the earlier

Apex Court judgment in the case of Seghu Buchiah Setty

(supra). So far as Seghu Buchiah Setty's judgment is

concerned, the Hon'ble Apex Court in the case of Mohan Wahi

vs. Commissioner, Income Tax, Varanasi & Ors.; 2001 (4)

SCC 362 specifically observed that the decision in Seghu

Buchiah Setty (supra) was superseded by the enactment of

Taxation Laws (Continuation and Validation of Recovery

Proceedings) Act, 1964 which was given a retrospective effect.

Vide Section 3 of the Act of 1964, it was provided that it shall not

be necessary for the taxing authority to serve upon the assessee a

fresh notice of demand.

22. In view of the above position of law, the ratio of Seghu

Buchiah Setty (supra) cannot be said to be applicable and the

proceedings would definitely be governed by the first assessment

order as issued by the competent authority.

23. What can be concluded from the above judgments and the

ratio laid therein, is that :

(i) Even if the original assessment order is

varied/reversed/modified by a subsequent order, no fresh demand

[2024:RJ-JD:18048] (10 of 10) [CR-172/2006]

notice will be required to be issued. Only if the amount has been

reduced, the intimation of the same to the assessee would be

sufficient.

(ii) The interest in terms of Section 58 of the Act would be

payable if the demand as raised by the first demand notice is not

satisfied within the stipulated period.

(iii) The interest in terms of the first proviso to Section 58(1)

shall be chargeable even if the tax recovery is stayed by any

appellate authority or the Court.

24. The answer therefore, to the issue as framed in the opening

para of this judgment, would be that, even if an assessment order

is once set aside and after remand, a fresh assessment order is

passed, interest on the assessed demand/tax shall be payable

from the date of the first assessment order only (if the amount of

tax as assessed, is not paid within the time specified in the notice

of demand).

25. With the above conclusions, the present revision petition is

allowed, the order impugned dated 09.08.2004 (Annex.3) is

quashed and set aside to the extent it has held the interest on the

tax amount to be leviable from 05.12.2000 (the date of fresh

assessment order). It is hereby declared that the assessee shall