Associated Cement Co. Ltd. Vs. Commercial Tax Officer, Kota & Ors [1981] INSC 156 (2 September 1981)
1981 Latest Caselaw 156 SC

Associated Cement Co. Ltd. Vs. Commercial Tax Officer, Kota & Ors [1981] INSC 156 (2 September 1981)

BHAGWATI, P.N.

BHAGWATI, P.N.

SEN, A.P. (J) VENKATARAMIAH, E.S. (J)

CITATION: 1981 AIR 1887 1982 SCR (1) 563 1981 SCC (4) 578 1981 SCALE (3)1338

ACT:

Rajasthan Sales Tax Act 1954 Ss. 7AA, 10, 11B and Central Sales Tax Act 1956, S. 9-Scope of.

Assessee not depositing the tax in respect of amount of freight at the time of filing original return-Revised return filed and tax deposited-Assessing authority whether competent to impose penalty-Assessee whether liable to pay interest on the tax due.

HEADNOTE:

The appellant-assessee a company manufactured cement which was sold partly in the State of Rajasthan and partly outside the State. The sales tax returns relating to the sales were filed by the assessee under the Rajasthan Sales Tax Act, 1954 and under the Central Sales Tax Act 1956 before the Assessing Authority for the period August 1, 1973 to July 31, 1974 i.e. for the assessment year 1974-75. In those returns the assessee did not include in the taxable turnover the freight charges paid in respect of the goods sold under the bonafide impression that freight charges were not to be so includible in the taxable turnover in view of certain decisions rendered by the High Courts and the Supreme Court.

The Supreme Court on August 29, 1978 In Sugar Mills Limited v. State of Rajasthan and others [1979] 1 SCR 276 held that freight charges formed part of the sale price and were includible in the taxable turn-over of an assessee and that sales tax was payable thereon.

Coming to know of the aforesaid decision the assessee prepared and filed the revised returns in respect of the assessment year 1974-75 before the Commercial Tax officer on October 20, 1978 including freight charges in the turn-over and also deposited along with the revised returns, challans showing payment of the balance of the tax payable under the State Act as well as under the Central Act.

The assessing authority passed two orders of assessment one under section 10(3) of the State Act and the other under section 9 of the Central Act. The former order of assessment levied a penalty of Rs. 53,353 under section 7AA of the State Act on account of the delay in depositing the sales tax payable in respect of the amount of freight charges and also levied interest of Rs. 85910/under s. 11B of the State Act. In the latter order of assessment a penalty of Rs.

1,34,205/- was levied under section 7AA of the State Act read with section 9(2) of the Central Act for the delay in depositing the tax payable in respect of the freight charges, and interest of Rs. 2,07,174/- was levied under section 11 of the State Act read with section 9(2) of the Central Act, 564 In the appeals to this Court on the question whether:

(A) the Assessing Authority was right in imposing penalty on the assessee under the two assessment orders for not depositing the tax in respect of the amount of freight at the time of filing of the original returns under the State Act and the Central Act, and (B) the assessee was liable under section 11B of the State Act to pay interest on the tax in respect of the amount of freight for the period between the date of filing of the original return and the date when such tax was actually paid while filing the revised return.

^

HELD: [By The Court] (A) The levy of penalties for not including the freight charges in the taxable turnover in the original returns and for not paying the tax in respect of such freight charges is unsustainable and the two orders of assessment in so far as they levy penalty are liable to be quashed and set aside.

[571 B, 589 B] Cement Marketing Company of India Limited v. Commissioner of Sales Tax Indore [1980] 1 SCR 1098 referred to.

[per Bhagwati J. dissenting] B(1) So long as the assessee pays the amount of tax which according to him is due on the basis of the return filed by him, there would be no default on his part in complying with the obligation under sub-section (2) of section 7 and there would be no liability on him to pay interest under section 11B clause (a), because he would have paid the amount of tax quantified by him through the process of self-assessment. The actual amount of tax payable by the assessee would be determined only when it is assessed by the Assessing Authority under section 10 and that would not be payable until the expiration of the period specified in the notice of demand or thirty days from the date of service of such notice, as the case may be. [584 D-E] (2) Since the assessee deposited the amounts of tax which according to him were due on the basis of the returns actually filed by him and the returns were accompanied by receipts showing deposit of such amounts of tax, there was no default on the part of the assessee in paying the amounts of tax payable under sub-section (2) of section 7 within the actual period allowed and in the circumstances no interest was payable by the assessee under section 11B clause (a).

[586 F-G] State of Rajasthan v. Ghasi Lal [1965] 2 SCR 805 relied on.

3. When the assessment, is made and the tax payable by an assessee is determined, the tax so determined does not become payable until after a notice of demand is served by the Assessing Authority under section 11 sub-section (2) read with Rule 31 of the Rajasthan Sales Tax Rules 1955. The assessee is allowed time to make payment up to the date specified in the notice of demand and if no such date is specified, then within thirty days from the date of service of the notice. So long the assessee pays up the amount of the tax assessed within the time specified in the notice of demand or within thirty days from the date of service of the notice, as the case may be, he would not be in default and hence 565 S. 11B clause (b) provides that the assessee would be liable to pay interest on the tax assessed only if the amount of such tax is not paid within the period specified in the notice of demand or in the absence of such specification, within thirty days from the date Of service of such notice and then too, the liability to pay interest would commence not from the date of the assessment, but from the day commencing after the end of the said period, that is, the period specified in the notice of demand or thirty days from the date of service of such notice, as the case may be. Thus even after the assessment is made and the tax payable by an assessee is determined, the assessee is not liable to pay interest on the amount of such tax until after the period specified in the notice of demand or in the absence such specification, thirty days From the date of service of such notice, have expired. [574 D-H]

4. The language used in sub-section (2) of section 7 is "full amount of tax due on the basis of return". The "return" is the return Sled by the assessee under sub- section (1) of section 7. When sub-section (1) of section 7 requires an assessee to file a return, the return filed must be correct and proper. If the return is not correct and proper, the Assessing Authority may not give credence to the return and may refuse to assess the tax on the basis of the return and if the Assessing Authority finds that the assessee has concealed any particulars from the return furnished by him or has deliberately furnished inadequate particulars in the return the Assessing Authority may levy penalty on the assessee under section 16, sub-section (1) clause (e) and the assessee may also be liable to be punished for an offence under Section 16, sub-section (3) clause (d) for making a false statement in the return.

Whether the return filed be correct or not, the tax payable by the assessee under sub-section (2) of section 7 would be the full amount of tax due on the basis of the return. The return actually filed by the assessee must be looked into in order to see what is the full amount of tax duo on the basis of such return. It is not the assessed tax nor is it the tax due on the basis of a return which ought to have been filed by the assessee but it is the tax due according to the return actually filed that is payable under sub-section (2) of section 7. This provision is really in the nature of self-assessment and what it requires is that whatever be the amount of tax due on the basis of self-assessment must be paid up along with the filing of the return which constitutes self-assessment. The plain words of sub-section (2) of section 7 cannot be tortured to mean full amount of tax due on the basis of return which ought to have been filed but which has not been filed. [576 B-F]

5. The legislature could never have intended that the assessee should be liable on pain of imposition of penalty, to deposit an amount which is yet to be ascertained through assessment. How would the assessee know in advance what view the Assessing Authority would take in regard to the taxability of any particular category of sales or the rate of tax applicable to them and deposit the amount of tax on that basis ? Even in regard to the liability to pay interest, it does not stand to reason that the legislature should have subjected the assessee to such liability for non-payment of an amount of which the liability for payment is still to be ascertained. [577 F-G]

6. The tax payable under sub-section (2) of section 7 dealt with in clause (a) of section 11B cannot, be equated with the amount of the tax assessed forming the subject matter of clause (b) of section 11B and hence it must 566 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. [578 G-H]

7. The scheme of taxation envisaged in the State Act clearly shows that it is only when the assessment is made and the period specified in the notice of demand or in the absence of such specification, thirty days from the date of service of such notice expires, that the amount of tax as assessed becomes payable by the assessee and its payment can be enforced by the Revenue. What becomes payable by the assessee under sub-section (2) of section 7 is merely the tax due on the basis of the return actually filed by the assessee that is, on the basis of self-assessment. [579 F-G]

8. On a true construction of the provisions of the State Act tax becomes due from the assessee and is payable by him only when it is ascertained by the Assessing Authority under section 10 or by the assessee under section 7(2). Till then there is only the liability of the assessee to be assessed to tax and no tax can be said to be payable by the assessee. The tax payable is ascertained when the assessment is made by the Assessing Authority under section 10 or when the assessee himself quantifies it through the process of self-assessment under subsection (2) of section

7. These two amounts of tax may and in quite a number of cases would be different because one is ascertained by the Assessing Authority through the process of assessment and that is why sub-section (4) of section 7 provides that every deposit of tax made under sub-section (2) shall be deemed to be provisional subject to necessary adjustments in pursuance of final assessment of tax made under section 10. This provision clearly contemplates that the tax payable under sub-section (2) of section 7 may be different from the tax assessed under section 10 and it cannot, therefore, obviously be the tax due on the basis of a correct and proper return but must be the tax due on the basis of the return actually filed. [580 D-G] 9(i) it is clear from the language of subsection (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. [581 H- 582 B] (ii) It can neither be held that section 7 sub-section (2) is attracted even when no return has been filed. It is clear that until the assessee files a return or assessment is made, no tax is payable by the assessee, because till then there is only a liability to be assessed to tax. The conclusion that a registered dealer 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, he would be liable to pay interest under section 11(b) clause (a) cannot be accepted. This would be contrary to the decision of this Court in State of Rajasthan v. Ghasi Lal [ 1965] 2 SCR 805.

[582 C-F] 567 [per A.P. Sen and Venkataramiah, JJ] B(1). The statutory liability under section 11B arises wherever there is default in payment of the tax within the period allowed by law irrespective of any doubt which an assessee may be entertaining about the liability to pay the tax. [604 D-E] State of Rajasthan v. Ghasi Lal [1965] 2 SCR 805 distinguished.

2. Tax, interest and penalty are three different concepts. Tax becomes payable by an assessee by virtue of the charging provision in a taxing statute. Penalty ordinarily becomes payable when it is found that an assessee has willfully violated any of the provisions of the taxing statute. Interest is ordinarily claimed from an assessee who has withheld payment of any tax payable by him and it is always calculated at the prescribed rate on the basis of the actual amount of tax withheld and the extent of delay in paying it. It may not be wrong to say that such interest is compensatory In character and not penal. [594 D-F]

3. Registered dealers can be classified into the following different classes: (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. In the case of a registered dealer falling under class (1) no question of payment of interest would arise as the amount of tax paid by him at the time of filing the return is much more than what is actually due and payable by him under the Act. The extra tax paid by him becomes refundable after the regular assessment is completed in view of section 7(4) of the Act.

In the case of a registered dealer falling under clause (2) also no question of payment of interest arises as there is no shortfall in payment of the tax. [594 F-595D]

4. A fair reading of section 11 of the Act suggests that the Act expects that all assessees who are liable to pay sales tax should file a true return within the period prescribed under sub-section (1) of section 7 and should produce a treasury receipt or a receipt of any bank authorised to receive money on behalf of the State Government showing that full amount of tax due from them has been paid. [595 H-596 A ]

5. It is settled law that a distinction has to be made by court while interpreting the provisions of a taxing statute between charging provisions which impose the charge to tax and machinery provisions which provide the machinery for the quantification of the tax and the levying and collection of the tax so imposed. While charging provisions are construed strictly, machinery sections are not generally subject to a rigorous construction. The courts are 568 expected to construe the machinery sections in such a manner that a charge to tax is not defeated. [596 C-D] India United Mills Ltd. v. Commissioner of Excess Profits Tax, Bombay [1955] 1 S.C.R. 810, Gursahai Saigal v. Commissioner of Income-tax Punjab [1963] 3 S.C.R. 893 Commissioner of Income-tax v. Mahaliram Ramjidas, A.I.R.

1940 P.C. 124 and Whitney v. Commissioners of Inland Revenue [1926] A.C. 37, referred to.

6. If the words 'on the basis of return' occurring in sub-section (2) of section 7 of the Act are construed as on The basis of a true and proper return which ought to have been filed under sub-section (1) of section 7 then all the three classes of persons viz (i) those who have not filed any return at all and who are later on found to be liable to be assessed, (ii) those who have filed a true return but have not deposited the full amount of tax which they are liable to pay and (iii) those who filed a return making a wrong claim that either the whole or any part of the turnover is not taxable and who are subsequently found to have made a wrong claim, would be placed in the same position and they would all be liable to pay interest on the amount of tax which they are liable to pay but have not paid as required by sub-section (2) of section 7 of the Act. This view is in conformity with the legislative intention in enacting section 11B of the Act [599 A-C]

7. In cases to which section 7(2) of the Act applies interest has to be paid on the tax payable but which has not been paid from the last date on which the return has to be filed for the assessment year in question and in cases to which sub-section (2A) is applicable, from the last date on which the advance tax has to be paid. The amount of interest has however to be calculated after the actual amount of tax payable is assessed and necessary adjustments are made. [609 B-C]

8. Either by delaying the filing of the return or not filing it all or by filing a return wrongly claiming that a certain part of the turnover is not taxable or by not disclosing a part of the taxable turnover in the return an assessee cannot escape the liability to pay interest under section 11B on the amount of tax with held, as a consequence of his own action or inaction, from the last date on which it had to be paid as per sub-section (2) or sub-section (2A) of section 7, as the case may be, read with the Rules. An assessee cannot contend that interest does not accrue under section 11B on the tax payable by him where the time to file the return has elapsed until the actually files a return admitting the liability to pay such talc or until assessment is made. [604 B-D]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 852 of 1980.

From the Assessment orders dated the 30th January, 1980 of the Commercial Tax officer, Spl. Circle Kota, (Rajasthan) for the assessment year 1974-75.

Soli J. Sorabji, B.R. Agarwal and P. G. Gokhale for the Appellants.

S. T. Desai and B. D. Sharma for the Respondents.

569 The Judgment of A.P. Sen and E. S. Venkataramiah JJ.

was delivered by Venkataramiah J. P. N. Bhagwati, J. gave a dissenting opinion.

BHAGWATI, J. I have had the advantage of reading the Judgment prepared by my learned brother Venkataramiah J., but despite the great respect which I have for his learning and erudition, I find myself unable to agree with the view taken by him. The facts giving arise to this appeal are not very material because the question which arises for consideration is essentially one of law, but the factual setting does help to see the question in its proper perspective and hence it would be useful to set out a few material facts.

The assessee is a public limited company carrying on business of manufacture and sale of cement. It has a factory for manufacturing cement at Lakheri in the State of Rajasthan and it effects sales of cement both inside as well as outside the State of Rajasthan. Since some of the sales effected by the assessee were inside the State of Rajasthan and some others were inter-state sales, the assessee filed returns of sales for the quarters comprised in the period 1st August 1973 up to 31st July 1974 both under the Rajasthan Sales Tax Act 1954 thereinafter referred to as the Stale Act) and the Central Sales Tax Act 1956 (hereinafter referred to as the Central Act). The assessee did not include in the taxable turn-over shown in the returns the amount of freight paid in respect of the goods sold under the bonafide impression that the amount of freight did not form part of the sale price and was not includible in the taxable turn-over of the assessee. This impression was carried by the assessee in view of certain decisions which had been given by some High Courts as well as the Supreme Court and particularly the decision of the Supreme Court in Hyderabad Asbestos Cement Products Limited v. State of Andhra Pradesh(1). The assessee paid up for each quarter the full amount of tax calculated on the basis of the return submitted by it and the receipt for such payment was filed along with the return. The amount of tax paid by the assessee obviously did not include tax on the amount of freight, since according to the assessee the amount of freight did not form part of the sale price and was accordingly not shown in the returns as forming part of the taxable turn-over. Subsequently however, the question whether the amount of freight formed part of the sale price and was therefore includible in the taxable turn-over of the assessee so as to be exigible to tax came up for consideration before 570 this Court in Hindustan Sugar Mills Limited v. State of Rajasthan and others(1) and it was held by this Court that by reason of the provisions of the Cement Control order 1967 which governed the transactions of sale of cement entered into by the assessee with the purchasers, the amount of freight formed part of the sale price within the meaning of the first part of the definition of that term contained in section 2 (p) of the State Act and section 2 (h) of the Central Act and was includible in the taxable turn-over of the assessee. As soon as this decision was given by the Court on 29th August 1978, the assessee immediately prepared revised returns in respect of the period 1st August 1973 up to 31st July 1974 showing the amount of freight as forming part of the taxable turn-over and filed the same before the Commercial Tax officer, Special Circle, Kota on 20th October 1978. The assessee also deposited along with the revised returns challans showing payment of the balance of the tax on the basis of the revised returns under the State Act as well as the Central Act. Two orders of assessment were thereafter passed by the Assessing Authority, one under section 10 sub-section (3) of the State Act and the other under section 9 of the Central Act. The former order of assessment levied a penalty of Rs. 53,355 under section 7AA of the State Act and interest amounting to Rs. 85,910.50 under section 11B of the State Act for the delay in payment of the tax in respect of the amount of freight under State Act, which according to the Assessing Authority ought to have been deposited alongwith the filing of the original returns. Similarly, the latter order of assessment also levied a penalty of Rs. 1,34,205 under section 7 AA of the State Act read with section 9 sub-section (2) of the Central Act and interest amounting to Rs. 2,07,174 under section 11B of the State Act read with section 9 sub-section (2) of the Central Act for the delay in depositing the tax payable in respect of the amount of freight under the Central Act. The assessee has in the present appeal preferred with special leave challenged the validity of both these orders of assessment in so far as they levy penalty and interest on the assessee.

The first question which arises for consideration before us is whether the Assessing Authority was right in imposing penalty on the assessee under the two assessment orders for not depositing the tax in respect of the amount of freight at the time of filing of the original returns under the State Act and the Central Act. My. learned brother Venkataramiah has held, following the decision of this Court in Cement Marketing Company of India Limited v. Commissioner of Sales Tax, Indore(l) that "the levy of penalties for not including the freight charges in the taxable turn-over in the original returns and for not paying the tax in respect of such freight charges, is unsustainable" and that the two orders of assessment in so far as they levy penalty on the assessee are liable to be quashed and set aside. I entirely agree with the view taken by him and I do not think I can usefully add anything to what he has said.

The next question that arises for consideration is whether the assessee was liable under section II B of the State Act to pay interest on the tax in respect of the amount of freight for the period between the date of filing of the original return and the date when such tax was actually paid while filing the revised return. The contention of the revenue was that the assessee was so liable and this contention was sought to be supported by relying on section 2 sub-sections (1) and (2) read with section 11 of the State Act. The same provisions with section 9 sub-section (2) of the Central Act were also relied upon for the purpose of sustaining the Revenue's claim for interest under the Central Act. The determination of the question before us therefore really turns on the true interpretation of section 7 subsection (1) and (2) read with section II B of the State Act. Section 7 of the State Act as it stood at the material time was in the following terms:

"7. Submission of returns: (1) Every registered dealer, and such other dealer, as may be required to do so by the assessing authority by notice served in the prescribed manner, shall furnish prescribed returns, for the prescribed periods, in the prescribed forms, in the prescribed manner and within the prescribed time to the assessing authority;

Provided that the assessing authority may extend the date for the submission of such returns by any dealer or class of dealers by a period not exceeding fifteen days in the aggregate.

(2) Every such return shall is be accompanied by a Treasury receipt or receipt of any bank authorised to receive money on behalf of the State Government, showing the 572 deposit of the full amount of tax due on the basis of return in the State Government Treasury of bank concerned.

(2A) Notwithstanding anything contained in sub-section (2). the State Government may by notification in the official Gazette require any dealer or class of dealers specified therein, to pay tax It intervals shorter than those prescribed under sub-sec[ion (1). In such cases, the proportionate tax on the basis of the last return shall be deposited at the intervals specified in the said notification in advance of the return. The difference if any, of the tax payable according to the return and the advance tax paid shall be deposited with the return and the return shall be accompanied by the treasury receipt, or receipts, of any Bank authorised to receive money on behalf of the State Government, for the full amount of tax due shown in the return.

(3) If any dealer discovers any omission, error, or r) wrong statement in any returns furnished by him under sub- section (1), he may furnish a revised return in the prescribed manner before the time prescribed for the sub mission of the next return but not later.

Section II B of the State Act during the relevant period provided inter alia as under:

"11B. Interest on failure to pay tax, fee or penalty- (a) If the amount of any tax payable under sub- sections (2) and (2A) of section 7 is not paid within the period allowed, or (b) If the amount specified in any notice of demand, whether for tax, fee, or penalty, is not paid within the period specified in such notice, or in the absence of such specification, within 30 days from the date of service of such notice, the dealer shall be liable to pay simple interest on such amount at one per cent per month from the day commencing after the end of the said period for a period of three months and at one and a half per cent per month thereafter during the time he continues to make default in the payments;

573 Provided that, where, as a result of any order under this Act, the amount, on which interest was pay able under this section, has been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded:

Provided further that no interest shall be payable under this section on such amount and for such period in respect of which interest is paid under the provisions of sections 11 and 14.

These are the two sections which fall for construction but in order to arrive at their true meaning and legal effect it is necessary to refer to a few other provisions of the State Act. Section 3 is the charging section and it creates the liability to pay tax. That is the normal function of a charging section in a taxing statute. But, of itself, it does not make the tax payable by an assessee. It is only when the tax which an assessee is liable to pay is ascertained that becomes payable by the assessee. Now the normal mode by which the tax payable by an assessee is ascertained is by the process of assessment which is provided in section 10 Sub-section (I) clause (a) of section 10 says that assessment and determination of tax due for any year shall be made after the returns for all the periods of that year have become due. Section 11 then provides for payment and recovery of tax and its provisions in so far as material read inter alia as follows:

"11. Payment and recovery of tax: (I) The tax shall be payable by a dealer on the basis of the assessments. F (2) The tax paid by a dealer shall be adjusted against the judgment determined as a result of the assessment under section 10 and the balance of the amount shall be payable by such dealer by such date as may be specified in the notice of demand and, where no such date is specified, shall be paid within thirty days from the date of service of the notice.

Provided that the assessing authority may, subject to such conditions and restrictions as may be prescribed, in respect of any particular dealer, and for reasons to be re-corded in writing, extend the date of such payment and 574 allow such dealer to pay the tax due and the penalty, if any, by installments.

(3) In default of the payment of tax payable under sub-section (1) or sub-section (2), the amount of tax shall be recoverable as an arrear of land revenue.

.... ...... ...... ...... .... ........ ........ ..

Provided further that where recovery of tax or any part thereof is stayed under the preceding proviso, the amount of such tax shall be recoverable with interest at the prescribed rate on the amount ultimately found due; and such interest shall be payable on such amount from the date of tax first become due.'' When the assessment is made and the tax payable by an assessee is determined, the tax so determined does not become payable until after a notice of demand is served by the Assessing Authority under section 11 sub-section (2) read with Rule 31 of the Rajasthan Sales Tax Rules 1955 made by the Government of Rajasthan in exercise of the powers conferred under section 26 of the State Act and then the assessee is allowed time to make payment up to the date specified in the notice of demand and if no such date is specified, then within thirty days from the date of service of the notice. So long the assessee pays up the amount of the tax assessed within the time specified in the notice of demand or within thirty days from the date of service of the notice, as the case may be, he would not be in default and hence section 11 B clause (b) provides that the assessee would be liable to pay interest on the tax assessed only if . the amount of such tax is not paid within the period specified in the notice of demand or in the absence of such specification, within thirty days from the date of service of such notice and then too, the liability to pay interest would commence not from the date of assessment, but from "the day commencing after the end of the said period" that is, the period specified in the notice of demand or thirty days from the date of service of such notice, as the case may be. Thus even after the assessment is made and the tax payable by an assessee is determined, the assessee is not liable to pay interest on the amount of such tax until after the period specified in the notice of demand or in the absence such specification, thirty days from the date of service of such notice, have expired.

575 Turning now to sub-section (I) of section 7 it requires every A registered dealer to furnish prescribed returns for the prescribed period, in the prescribed forms, in the prescribed manner and within the prescribed time to the Assessing Authority. It was not disputed on behalf of the Revenue that in the present case the prescribed returns in the prescribed forms were furnished by the assessee in time for the quarter comprised in the period 1st August 1973 to 31st July 1974, the only grievance in regard to those returns being that the amount of freight was not shown as forming part of the taxable turnover. Sub-section (2) of section 7 provides that every return furnished by the assessee must be accompanied by a receipt showing the deposit of the full amount of tax due on the basis of the return and the assessee accordingly deposited the full amount of tax calculated on the basis of each quarterly return and filed the receipt showing such deposit along with the return. Since, according to the view taken by the assessee at the time of filing the original returns, the amount of freight did not form part of the sale price, it was not included in the taxable turnover shown in the original returns and hence no tax on the amount of freight was deposited by the assessee while filing the original returns. It was only after the decision of this Court in Hindustan Sugar Mills Limited Company's case (supra) that the assessee filed revised returns including the amount of freight in the taxable turnover and deposited the balance of the tax on the basis of the revised returns. The argument of the Revenue was and that is the argument which has appealed to my learned brother, Venkataramiah, that the words "full amount of tax due on the basis of return" in sub-section (2) of section 7 meant the full amount of tax due on the basis of a true and proper return which ought to have been filed by the assessee and not the full amount of tax due on the basis of the return actually filed and since the amount of the freight was liable to be included in the taxable turnover and hence in a true and proper return, the "full amount of tax due on the basis of return" within the meaning of sub-section (2) of section 7 included the tax on the amount of freight and the assessee therefore ought to have deposited the same at the time of filing, the original returns, and since the assessee failed to do so, section 11 A clause (a) was attracted and the assessee was liable under that provision to pay interest on the tax on the amount of freight which remained unpaid until the filing of the revised returns. This argument, plausible though it may seem, is in my opinion unsustainable. It is plainly contrary to the language of sub-section (2) of section 7 read with section 11B and is opposed to the scheme of the State Act.

It is also inconsistent with the decision of a Bench of five Judges of this Court in State of Rajasthan v. Ghasi Lal(1). Indeed I fail to see how in the face of the decision, the Court can possibly accept the argument of the Revenue.

The language used in sub-section (2) of section 7 is "full amount of tax due on the basis of return". The "return" referred to is obviously the return filed by the assessee under sub-section (1) of section 7. Now it is true that when sub-section (1) of section 7 requires an assessee to file a return, the return filed must be correct and proper. If the return is not correct and proper, the Assessing Authority may not give credence to the return and may refuse to assess the tax on basis of the return and if the Assessing Authority finds that the assessee has concealed any particulars from the return furnished by him or has deliberately furnished inadequate particulars in the return, the Assessing Authority may levy penalty on the assesssee under section 16 sub-section (1) clause (e) and the assessee may also be liable to be punished for an offence under section 16, sub-section (3) clause (d) for making a false statement in the return. But, whether the return filed be correct or not, the tax payable by the assessee under sub-section (2) of section 7 would be the full amount of tax due on the basis of the return. We must look at the return actually filed by the assessee in order to see what is the full amount of tax due on the basis of such return. It is not the assessed tax nor is it the tax due on the basis of a return which ought to have been filed by the assessee but it is the tax due according to the return actually filed that is payable under sub-section (2) of section 7. This provision is really in the nature of self-assessment and what it requires is that whatever be the amount of tax due on the basis of self-assessment must be paid up along with the filing of the return which constitutes self-assessment. I fail to see how the plain words of sub-section (2) of section 7 can be tortured to mean full amount of tax due on the basis of return which ought to have been filed but which has not been filed.

It may also be noted that the construction contended for on behalf of the Revenue leads to a serious anomaly. If this construction were accepted, the tax payable under sub- section (2) of section 7 would be the full amount of tax due on the basis of a correct and proper return and that would necessarily be the same as the tax assessed by the Assessing Authority, because what is a correct and 577 proper return would be determinable only with reference to the A assessment ultimately made. The assessment when made would show whether the return filed was correct and .

proper, it would be correct and proper if it accords with the assessment made; if it does not accord with the assessment, then to the extent to which it differs it would obviously have to be regarded as incorrect and improper. The consequence of the construction suggested on behalf of the Revenue would be thus that the tax payable under sub-section (2) of section 7 would be the full amount of the tax as assessed, because that would represent the tax due on the basis of a correct and proper return and the assessee would have t deposit at the time of filing the return, an amount equivalent to the amount of the tax as assessed. If the assessee fails to do so, then apart from the liability to pay interest under section I IB clause (a), the assessee would expose himself to penalty under section 16 sub-section (1) clause (n) which provides inter alia that any person who fails to comply with any requirement of the provisions of the State Act, the requirement under sub-section (2) of section 7 being to deposit the full amount of tax due on the basis of return, shall be liable to D penalty in "a sum not exceeding Rs. 1,000 and in the case of continuing default, a further penalty not exceeding Rs. 50 for every day of such continuance." This is a consequence which it is difficult to believe could ever have been contemplated by the legislature. The legislature could never have intended that the assessee should be liable, on pain of imposition of penalty, to deposit an amount which is yet to be ascertained through assessment. How would the assessee know in advance what view the Assessing Authority would take in regard to the taxability of any particular category of sales or the rate of tax applicable to them and deposit the amount of tax on that basis ? And this would be all the more problematic in the case of a statute like the sales tax law which is full of complexities and where it may be difficult to assert dogmatically that a particular view is right or wrong. Even in regard to the liability to pay interest, it does not stand to reason that the legislature should have subjected the assessee to such liability for non-payment of an amount of which the liability for payment is still to be ascertained. Moreover, on the construction of the Revenue, if the assessee has not deposited at the time of filing the return an amount equivalent to the full amount of the tax assessed, the assessee would be liable to pay interest on amount remaining unpaid from the date of filing of the return until payment. But, as I have already pointed out above, when the assessment is made and the tax payable by the 578 assessee is determined, the assessee is given time for payment of the amount of the tax assessed upto the period specified in the notice of demand and in the absence of such specification, within thirty days from the date of service of such notice and it is only if the assessee fails to make payment within such period that he becomes liable to pay interest on the amount of the tax assessed to the extent to which it remains unpaid. There is no liability on the assessee to pay interest on the amount of the tax assessed until after the expiration of the period specified in the notice of demand or thirty days from the date of service of such notice, as the case may be. There would thus be a conflict between the two provisions, if the construction contended for on behalf of the Revenue were accepted. Under sub-section (2) of section 7 read with section 11 B clause (a), the assessee would be liable to pay interest on the amount of the tax assessed to the extent to which it has not been deposited at the time of filing the return and such interest would run continuously from the date of the filing of the return until payment, while under section 11 B clause (b) the assessee would not be liable to pay interest on the amount of the tax assessed during the period specified in the notice of demand or in the absence of such non- specification during the period of thirty days from the date of service of such notice. Such a conflict could never have been intended by the legislature. It is a well-settled rule of interpretation that a statute must be so construed as not to create any repugnance between the different provisions, for it is a basic assumption underlying every interpretational exercise that the legislature must be supposed not to have intended to contradict itself. The Court must always prefer that interpretation which avoids repugnancy between two provisions of a statute and gives full meaning and effect to both. Therefore, on this principle of interpretation also the construction canvassed on behalf of the Revenue cannot be accepted, as it would create a direct conflict between the provisions of clause (a) and (b) of section 11 B. The only way in which clauses (a) and (b) of section 11 B can be read harmoniously and full meaning and effect can be given 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 11 B cannot, therefore, be equated with the amount of the tax assessed forming the subject matter of clause (be of section l l and hence it 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.

579 There is also another angle from which the problem can be a considered. Clause (a) of section 11 B postulates tax which, though payable under sub-section (2) of section 7, is not paid by the assessee within the time allowed and hence it subjects the assessee to liability to interest for non- payment of such tax. Now if, as contended by the Revenue, the tax payable under sub-section (2) of section 7 means the full amount of tax due on the basis of a correct and proper return which ought to have been filed by the assessee, and is, therefore, equivalent to the amount of the tax as assessed, it would be the amount of the tax as assessed which would be payable under sub-section (2) of section 7 and this amount would be payable by the assessee at the time of filing the return, even though ex hypothesi no assessment has taken place. Now it is difficult to appreciate how under the scheme of taxation embodied in the State Act, the amount of tax which is yet to be ascertained through the process of assessment can be said to be payable by the assessee at the time of filing the return. If, as contended by the Revenue, it is so payable it is difficult to understand why it should have been liable to bear interest from the date of filing the return upto the date of assessment and thereafter it should have been freed from the liability of bearing interest upto the period specified in the notice of demand or thirty days from the date of service of the notice, as the case may be and the rate of interest also should have been made to vary from period to period. Moreover, it is, to my mind, impossible to accept the proposition that the amount of the tax ultimately assessed, which would represent the tax due on the basis of a correct and proper return should be payable by the assessee at the time of filing the return under sub-section (2) of section 7. The scheme of taxation envisaged in the State Act clearly shows that it is only when the assessment is made and the period specified in the notice of demand or in the absence of such specification, thirty days from the date of service of such notice expires, that The amount of tax as assessed becomes payable by the assessee and its payment can be enforced by the Revenue. What becomes payable by the assessee under sub- section (2) of section 7 is merely the tax due on the basis of the return actually filed by the assessee that is, on the basis of self-assessment. G This position seems to be clear beyond doubt on an examination of the scheme of taxation contained in the State Act and no authority is needed in support of it, but if any authority were needed, it is to be found in the decision of a Bench of five Judges of this Court in State of Rajasthan v. Ghasi Lal (supra). There the 580 question was whether the assessee could be said to have failed, without reasonable cause, to pay the tax due within the time allowed, when he paid the tax due on the basis of the quarterly returns at the time of filing those returns, but the returns were filed long after the due dates for filing the same had expired. The argument of the Revenue was that tax became due from the assessee under section 3 which is the charging section and the assessee could not withhold payment of the same by delaying the filing of the quarterly returns within the time prescribed under the State Act and he was therefore liable to pay interest on the amount of the tax as assessed from the date the quarterly returns ought to have been filed and the amount of the tax paid. This argument of the Revenue was rejected by the Court and Sikri, J. speaking on behalf of the Bench of five Judges, said:

"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." These observations show beyond doubt that on a true construction of the provisions of the State Act tax becomes due from the assessee and is payable by him only when it is "ascertained by the Assessing Authority under section 10 or by the assessee under section 7(2)". Until then, there is only the liability of the assessee to be assessed to tax and no tax can be said to be payable by the assessee. The tax payable is ascertained when the assessment is made by the Assessing Authority under section 10 or when the assessee himself quantifies it through the process of self-assessment under sub-section (2) of section 7. These two amounts of tax may, and in quite a number of cases would, be different because one is ascertained by the assessee himself by filing his return and the other is ascertained by the Assessing Authority through the process of assessment and that is why sub-section (4) of section 7 provides that every deposit of tax made under sub-section (2) shall be deemed to be provisional subject to necessary adjustments in pursuance of final assessment of tax made under section 10. This provision clearly contemplates that the tax payable under sub-section (2) of section 7 may be different from the tax assessed under section 10 and it cannot, therefore, obviously be the tax due on the basis of correct and proper return (because that would necessarily be the same as the tax ultimately assessed under section 10) but must be the tax due on the basis of the return actually filed.

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 (S) would be outside the provision enacted in sub-section (2) of section 7 read with section 11B clause (a) and no interest would be payable by them under that provision and that would make clause (a) of section I I "either unworkable or meaningless". I must, with the greatest respect, confess my inability to appropriate 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 (S) 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 11B 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 582 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 constitutes 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. Ghasi Lal (supra) 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 have been quoted 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 liability 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 (I) 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 I IB clause (a). That would be plainly contrary to the decision in State of p Rajasthan v. Ghasi Lal (supra) which, being a decision of S Judges of this Court, is binding upon us.

So also with regard to registered dealers falling within category 4, I cannot agree with the view taken by my learned brother Venkataramiah. He has reasoned that if a registered dealer files a return but does not pay the full amount of the tax due on the basis of the return filed by him, the Assessing Authority would be entitled to ignore the return under sub-rule (4) of Rule 25 and when the return is not taken cognizance of, there would be no return on the basis of which interest can be computed. This reasoning is, in my opinion, fallacious and if I may say so without meaning the slightest disrespect, it is based on misappreciation of the effect of sub-rule (4) of Rule 25 vis-a-vis sub-section (2) of section 7. Rule 25 583 sub-rule (4) provides that if a return is not accompanied by a receipt for the deposit of tax as required by sub-section (2) of section 7, the Assessing Authority shall not be bound to take any cognizance of the return. If the assessee does not deposit the amount of tax due on the basis of the return and files the return without making such deposit, the Assessing Authority is given the discretion to ignore the return and to proceed to assess the assessee as if no return were filed. But, the Assessing Authority may, in a given case, if it so thinks fit, take cognizance of the return for the purpose of assessment, despite the fact That the tax due on the basis of the return has not been deposited by the assessee as required by sub-section (2) of section 7. Where the Assessing Authority chooses to take cognizance of the return, there can be no doubt, even on the reasoning of Mr. Justice Venkataramiah, that the assessee would be liable to pay the amount of tax due on the basis of the return and if he fails to do so, he would have to pay interest under section 11 clause (a). Then merely because the Assessing Authority may, in a given case, in the exercise of its discretion, decline to take cognizance of the return, it does not mean that in such a case the assessee would be retrospectively relieved of his liability to pay the amount of tax due on the basis of the return, on the ground that the return filed by him has become 'no-return'. The liability of the assessee to deposit the amount of tax due on the basis of the return cannot depend upon a future discretionary event. namely, whether the Assessing Authority chooses to take cognizance of the return or declines to take cognizance of it. The only correct way of reading sub- section (2) of section 7 and sub-Rule (4) of Rule 25 is that whenever a return is led by the assessee, it must under sub- section (2) of section 7 be accompanied by receipt showing deposit of the full amount of tax due on the basis of the return and if the assessee fails to deposit the amount of the tax due on the basis of the return actually filed, the Assessing Authority would have the option under sub-rule (4) of Rule 25 either to take or not to take cognizance of the return. If the Assessing Authority chooses not to take cognizance of the return, it would proceed to assess the assessee as if no return had been filed by him, but that would not relieve the assessee of the obligation attaching to him under sub-section (2) of section 7 of depositing, at the time of filing the return, the amount of the tax due on the basis of the return actually filed nor would it condone the breach of such obligation. If the assessee does not pay the full amount of the tax due on the basis of the return as required subsection (2) of section 7, he would be liable to pay interest under 584 section 11B clause (a), irrespective of whether the Assessing Authority chooses to act upon the return or declines to take cognizance of it. The argument which has appealed to my learned brother Venkataramiah that if the construction put forward on behalf of the assessee were accepted, sub-section (2) of section 7 would fail in its application to a registered dealer falling within category 4 is therefore in my opinion not a valid argument and with the greatest respect, I must confess my inability to accept it.

On the construction contended for on behalf of the assessee, the case of a registered dealer falling within category 4 is clearly covered by sub-section (2) of section 7 and in fact, it is precisely to cover inter alia a case of this kind that the legislature enacted sub-section (2) of section 7 read with section 11B clause (a). Similarly the case of a registered dealer falling within category 5 is also covered by sub-section (2) of section 7 and if he does not pay the amount of tax which according to him is payable, on the basis of the return filed by him, he would be liable to pay interest under section 11B clause (a). So long as the assessee pays the amount of tax which according to him is due on the basis of the return filed by him, there would be no default on his part in complying with the obligation under sub-section (2) of section 7 and there would be no liability on him to pay interest under section 11B clause (a), because he would have paid the amount of tax quantified by him through the process of self-assessment The actual amount of tax payable by the assessee would be determined only when it is assessed by the Assessing Authority under section 10 and that would not be payable until the expiration of the period specified in the notice of demand or thirty days from the date of service of such notice, as the case may be.

I must therefore regret my inability to accept the view taken by my learned brother Venkataramiah that if the construction contended for on behalf of the assessee were accepted, section 11 clause (a) would become meaningless or unworkable. That provision would have full meaning and effect on the construction canvassed on behalf of the assessee and in fact as pointed out above if the construction which has appealed to my learned brother Venkataramiah were accepted, the consequence would be directly contradictory to the decision of this Court in State of Rajasthan v. Ghasi Lal (supra). My learned brother Venkataramiah has relied strongly on the decision of this Court in Gurshai Saigal v. Commissioner of Income Tax, Punjab(l) but I fail to see how this decision can 585 be of any help in the present case where section 11B clause (a) is not at all rendered meaningless or unworkable on the construction suggested on behalf of the assessee. The assessee in that case was sought to be charged with interest under sub-section (8) of section 18A of the Indian Income Tax Act 1922 which provided that "where, on making the regular assessment, the Income-tax Officer finds that no payment of tax has been made in accordance with the foregoing provisions of this section, interest calculated in the manner laid in sub-section (6) shall be added to The tax as determined on the basis of the regular assessment." The argument of the assessee was that since sub-section (6) of section 18A provided that where in any year an assessee has paid tax under sub-section (2) or sub-section (3) on the basis of his own estimate and the tax so paid is less than 80% of the tax determined on the basis of the regular assessment, simple interest at the rate of 6% per annum from the first day of January in the financial year in which the tax WAS paid upto the date of such regular assessment shall be payable by the assessee and since no payment of tax had been made by the asses n e r, at all in that case it, was not possible to calculate interest in tile manner laid down in sub-section (6) and no interest could therefore be charged to the assessee under sub-section (8) of section 18A. This argument was rejected by the Court on the ground that if the words "from the first day of January in the financial year in which the tax was paid" occurring in sub- section (6) of section 18A were to be literally applied in a case falling within sub-section (8) of section 18A where no tax would have been paid, sub-section (8) would be rendered totally meaningless and futile. The Court therefore with a view not to rendering sub-section (8) of section 18A a dead letter construed the words in sub-section (6) to mean "from the first day o, January in the financial year in which the tax ought to have been paid." This liberty was taken by the Court with the language of sub-section (6) of section 18A, because the Court proceeded on the hypothesis that the legislature could not have intended that sub-section (8) of section 18A should be meaningless and unworkable. But here in the present case there is no compelling necessity to modify the words used in sub-section (2) of section 7, because sub-section (2) of section 7 read with section 11B clause (a) is not rendered meaningless or futile on a plain natural construction of the language used in that provision.

It is interesting to compare section 140A sub-section (I) of the Income Tax Act, 1961 with section 7 sub-section (2) of the State Act. Sub-section (I) of section 140A provides that where any tax is 586 payable on the basis of any return required to be furnished under section 139 or under sec. 148, after taking into account the amount of tax, if any, already paid under any provision of the Act, the assessee shall be liable to pay such tax before furnishing the return and the return shall be accompanied by proof of payment of such tax. Sub-section (3) of section 140A then proceeds to state that if any assessee fails to pay the tax or any part thereof in accordance with the provision of sub-section (1), the Income Tax officer may direct that a sum equal to two percent of such tax or part thereof, as the case may be, shall be recovered from him by way of penalty for e