Birla Corporation Ltd. vs State of Bihar and Others

Whether a dealer under the Bihar Value Added Tax Act, 2005 (hereinafter referred to as, "the Act") against whom neither any tax is found payable nor is due, could be subjected to the penal provisions of Section 54(4) of the Act for reasons of non-submission of a report of audit in the prescribed form duly signed and verified by an accountant within the meaning of the Chartered Accountant Act, 1949 or by a person entitled to act as an auditor of companies by virtue of the provisions of Section 226(2) of the Companies Act, 1956, is the question posed before us.

With the consent of the parties the matter has been taken for disposal at the stage of admission itself.

The petitioner-company is engaged in the business of manufacture and sale of cement and for that purpose, is registered with the Commercial Taxes Department of the Government of Bihar in its Special Circle, Patna.

Before embarking on the issue raised in the writ petition, it would be relevant to mention that the Bihar Value Added Tax Act, 2005, a legislation under entry 54, List II of the Seventh Schedule to the Constitution of India was enacted on June 23, 2005 when it was published in the Gazette of India, Extraordinary dated June 23, 2005 and was enforced with effect from April 1, 2005 repealing the Bihar Finance Act, 1981.

The period of dispute which falls for consideration in this writ petition is the assessment year 2005-06.

The petitioner filed its return for the assessment year 2005-06 with respondent No. 4, the Deputy Commissioner of Commercial Taxes, Special Circle, Patna and claims to have paid taxes in accordance therewith which statement is not disputed by the respondents. The petitioner also claims to have filed value added tax report in the prescribed form TAR IV on July 25, 2006 and consolidated report of its audit comprising of statement of purchase and sale by its branches situated in different parts of the country including the State of Bihar, in the prescribed form No. TAR I and TAR IV on December 28, 2006. The due date for filing of such audit report is December 31st of each year, as per the provisions of the Act. The petitioner thus submits that the filing of the consolidated report of audit in the prescribed form No. TAR I and TAR IV within the prescribed period of December 31st, even though it did not bear the signature and verification of the accountant as prescribed u/s 54(2) of the Act, was substantial compliance with the statutory requirement.

Before proceeding further, it would be appropriate to reproduce the relevant provisions of Section 54 of the Act which runs as follows:

Accounts to be audited in certain cases.--(1) Every dealer whose gross turnover exceeds forty lakh rupees shall, for the purposes of this Act, get his annual accounts audited by an accountant before the due date within the meaning of the Explanation to Sub-section (3) of Section 24 of this Act.

(2) Every dealer referred to in Sub-section (1) shall obtain, by the date specified in that sub-section, a report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed and a true copy of such report shall be furnished by such dealer to the prescribed authority, on or before the due date within the meaning of the Explanation to Sub-section (3) of Section 24 of this Act.

Explanation.--For the purposes of this section, "accountant" means a Chartered Accountant within the meaning of the Chartered Accountants Act, 1949 and includes a person who, by virtue of the provisions of Sub-section (2) of Section 226 of the Companies Act, 1956, is entitled to be appointed to act as an auditor of companies registered in any State:

Provided that the Commissioner may, by a notification and for specific reasons to be recorded in writing, extend the date of furnishing such report for a period not exceeding three months from the due date.

(3) If the accounts of a registered dealer are not required to be audited in terms of the provisions of Sub-section (1), such dealer shall furnish, to the prescribed authority, the accounts and statements mentioned in Sub-section (2) of Section 52 on or before the 31st day of July of the year following the year to which such accounts or statements relate.

(4) If a dealer contravenes the provisions of Sub-sections (2) or Sub-section (3), the prescribed authority shall, after giving the dealer a reasonable opportunity of being heard, impose on him, in addition to any tax payable, a sum by way of penalty equivalent to two per cent. of the tax payable by him u/s 36 for every month, or part thereof, of such default.

As the report submitted by the petitioner admittedly, did not bear the signature and verification of the accountant as per the provisions of Section 54(2) of the Act, a notice came to be issued at the instance of respondent No. 4, the Deputy Commissioner, Commercial taxes on February 16, 2007 in purported exercise u/s 54(4) of the Act read with Rule 20(1a) of the Rules, requiring the petitioner to show cause as to why penalty be not imposed upon him for violation of the provisions of Section 54(2) of the Act, copy whereof is placed at annexure 1 to the writ petition.

The petitioner in compliance with the said show-cause notice responded by bringing to the notice of respondent No. 4 that it had already filed the report of its audit in the prescribed form and in the prescribed manner on July 25, 2006 and December 28, 2006 and that it had paid the payable taxes in accordance with the said return. It was also brought to the notice of respondent No. 4 that the said audit report had been prepared by a competent accountant after due verification of the books of account and thus it was substantial compliance with the provisions of Section 54. The petitioner by way of abundant precaution and also in addition to the earlier audit reports, filed another audit report in the prescribed form and in the prescribed manner on February 15, 2007 which was in conformity with the earlier audit report. The said fact was also brought to the notice of respondent No. 4 and it was contended that having regard to the circumstances that the petitioner had paid taxes to the tune of over 12.47 crore in accordance with the returns which have been accepted, there was no reason for imposition of penalty of Rs. 35.75 lac for a mere technical breach.

The submissions of the petitioner did not find favour and respondent No. 4, Deputy Commissioner, Commercial Taxes, Special Circle, Patna vide order dated March 8, 2007 (annexure 2) proceeded to impose a penalty of Rs. 35,75,228 for delayed submission of the audit report in purported exercise u/s 54(2) of the Act.

The order of the Deputy Commissioner was challenged by the petitioner by filing an appeal giving rise to Appeal Case No. STSL-17-2007-08, which was rejected by the learned Joint Commissioner, Commerdal Taxes (Appeals) vide order passed on June 29, 2007 (annexure 3).

The petitioner filed a revision application before the Commercial Taxes Tribunal assailing the order as contained in annexure 3 and which is said to be pending. While the revision preferred by the petitioner was pending for consideration before the Commercial Taxes Tribunal, it received a notice issued under the signature of the Assistant Commissioner, Commercial Taxes, Special Circle, Patna requiring him to deposit the balance amount of penalty amount, i.e., Rs. 26,81,406 by March 20, 2009 failing which, coercive measures would be taken for realization of the same.

The revision before the Commercial Taxes Tribunal preferred by the petitioner was not being heard by reason of absence of quorum and in this background the present writ petition came to be filed in this court. The petitioner, in addition to seeking a relief for declaration of the provisions of Section 54(4) of the Act as violative of the Constitutional provisions and being arbitrary and unreasonable, also assailed the legality and validity of the orders passed by the statutory authorities under the Act.

Though the writ petition was initially filed questioning the vires of the provisions of Section 54(4) of the Act, when the matter was taken up by this Court for hearing on admission and disposal, the arguments advanced by Sri D.V. Pathy, learned Counsel appearing on behalf of the petitioner, fell short of the same; rather Mr. Pathy, understandably, endeavoured to persuade us to read down the provisions of Section 54(4) of the Act so as to withstand the touchstone of the Constitutional guarantees, particularly fairness and reasonableness.

Mr. Pathy referred to statutory forms TAR-III and TAR-IV and submitted that the returns filed on behalf of the petitioner satisfied all requirements and provided all required information. It was contended that the prime object of every taxing statute was to provide foolproof mechanisms to prevent tax evasion and to net and punish tax evaders. It was contended that the Legislature while enacting the provisions of Section 54 never intended to punish honest taxpayers.

Mr. Pathy referred to paragraphs 4 to 9 of the counter-affidavit filed on behalf of the State and its officials and submitted that even the stand of the respondent-State and its officials is consistent on the issue that the legal provisions in question had been adopted to prevent tax evasions.

Mr. Pathy next contended that any proceeding initiated for imposition of penalty is in a nature of quasi-criminal proceedings and unless the authorities concerned come to a conclusion that the violation of the statutory provision had occasioned evasion of tax by reason of deliberate, intentional and contumacious conduct of the dealer, the imposition of penalty becomes wholly unwarranted. In support of his submission Mr. Pathy relied upon the judgment of the apex court rendered in the case of Hindustan Steel Ltd. v. State of Orissa reported in [1970] 25 STC 211.

Mr. Pathy with reference to a white paper of State level value added tax and a comparative statement of the relevant penalty provisions relatable to the non-submission of audit as prevalent in some of the other States appended vide annexure 6 series to the writ petition, contended that a perusal thereof clearly shows that the provisions as existing in the Bihar Act are confiscatory in nature qua the provisions existing in other State enactments. A comparative chart was also brought on record of the proceeding to demonstrate that a failure to adhere to the requirements of submission of audit report in the prescribed form and manner, in the States of Kerala and West Bengal did not entail penalty, the penalty for a similar violations in the State of Orissa and Punjab was Rs. 100 per day, Rs. 10,000 in the States of Uttar Pradesh, Arunachal Pradesh, Delhi, Gujarat and Jharkhand and a maximum of Rs. 1 lac in the States of Rajasthan and Jammu and Kashmir. With reference to the provisions of Section 271(b) of the Income Tax Act it was submitted that for identical violations, the said Act provided a penalty at the rate of � per cent of the turnover or Rs. 1 lac, whichever was less. It was thus submitted that the penalty at the rate of two per cent of the tax per month under the enactment was highly unreasonable and confiscatory.

Our attention was drawn towards the language of the provisions as underlying Section 54(4) with particular stress made on the words "in addition to any tax payable", and it was submitted that under the scheme of the Act it were only such dealers against whom any tax was found payable or due and who had not filed their audit report in the prescribed manner as required under Sub-section (2), who came within the purview of the penal provisions. In the same vein, he submitted that such of the dealers like the present petitioner against whom no tax admittedly, was either found payable or was due for the period in question, the proceedings initiated for imposition of penalty in purported exercise of power u/s 54(4) of the Act was clearly an abuse of statutory powers and without sanction of law, specially where the defect, if any, in filing the audit report stood rectified on February 15, 2007.

Mr. Pathy in continuation of his aforesaid submission tried to persuade us by submitting that following the scheme of the Act and the provisions for filing returns, its scrutiny, self-assessment, escape turnover, etc., and the penal provisions covering such violations, the only interpretation that could be given and the only effect of the provisions of Section 54(4) of the Act would be to net the defaulters/tax evaders against whom tax was found payable. It was contended that the legislative intent of the said provisions would never be of penalizing honest taxpayers against whom no tax was found payable.

Mr. Pathy, in support of his submission relied upon the following judgments of the apex court:

(a) C.B. Gautam Vs. Union of India and Others,

(b) Commissioner of Sales Tax, Madhya Pradesh, Indore and Others Vs. Radhakrishan and Others,

(c) Arun Kumar and Others Vs. Union of India (UOI) and Others,

(d) All India Federation of Tax Practitioners Vs. Union of India and Others,

Mr. Pathy, concluding his arguments, submitted that considering the circumstances that report was submitted on behalf of the dealer within the prescribed period which was in conformity to the report submitted in the prescribed form and the prescribed manner on February 15, 2007 coupled with all important aspect that no tax was found payable against the petitioner by the authorities and the returns were accepted, the exercise of discretion by the statutory authorities u/s 54(4) of the Act was arbitrary, unreasonable and an abuse of statutory powers and the orders passed in consequence thereof were unsustainable and fit to be set aside.

Mr. Lalit Kishore, learned senior counsel appearing on behalf of the State and its officials contested the claim advanced on behalf of the petitioner and supported the impugned orders passed by the statutory authorities. It was contended that the orders under challenge in the writ petition had been passed by the authorities in exercise of powers vested under the Act and there was no infirmity in the same. The statutory authorities passing the order had jurisdiction to pass such orders which were within the scope of the provisions of Section 54(4) of the Act. It was contended that as the revision application of the petitioner was pending consideration before the Commercial Taxes Tribunal and which has become functional, the petitioner may be asked to exhaust the remedy available under the Act.

The learned Counsel further submits that the provisions are constitutionally valid and has been engrafted in the Act in exercise of the plenary powers vested in the Legislature and requires no interference. Learned Counsel further submits that the only issue which requires consideration by this Court is whether the mandate of Section 54 has been discharged by the petitioner and if the conclusion is in the negative then the petitioner is not entitled for any relief and the arguments advanced in this regard do not merit consideration. While advancing his arguments on the scope of judicial review in matters concerning vires of statutory provisions, learned Counsel relied upon the judgment of the apex court in Government of Andhra Pradesh and Others Vs. Smt. P. Laxmi Devi, (paras 4 and 6). It was submitted that unless the provision which is put to test before the court, is found to be violative of the constitutional provisions, the opinion should tilt in favour of upholding its validity. He further submits that even in case where two views are possible, the view upholding the constitutionality of the provision should be adopted and every effort should be made to uphold the statute.

The learned Counsel with reference to the various provisions of the Act relating to the returns provided u/s 24, penalty for delayed deposit of tax provided u/s 24(10), scrutiny provided u/s 25, self-assessment provided u/s 26 and escaped turnover as provided u/s 32, submits that each and every aspect of a dealer''s responsibility has been taken care of by the statute and the provision under challenge is relatable to the consequences flowing from failure on the part of the dealer to submit audit report in the manner and form prescribed u/s 54(2) of the Act. He submits that the admitted position is that the petitioner did not submit the audit report as envisaged u/s 54(2) of the Act and in this view he cannot escape the liability provided u/s 54(4) of the Act. It was next contended that the entire arguments advanced on behalf of the petitioner while assailing the main provision centered around the quantum of penalty. With reference to the provisions in force in other States, it was contended that no provision could be assailed on the issue of quantum or of being harsh. In support of his submission, learned Counsel relied upon the judgment of the apex court in Khazan Chand and Others Vs. State of Jammu and Kashmir and Others, (paras 12 and 14).

The learned Counsel in the same vein submits that merely because similar laws prevalent in other State in the eyes of the petitioner are mere acceptable, it cannot be a reason for holding the provision either discriminatory or confiscatory. It was submitted that no taxing provision could be assailed on grounds of quantum and the only test is whether the exercise of power is within legislative confines. He submitted that validity of penal provisions has to be tested on a different touchstone than for a taxing statute. He also relied on the following judgments in support of his submissions:

(i) D.G. Gose and Co. (Agents) Pvt. Ltd. Vs. State of Kerala and Another, (para 47)

(ii) State of U.P. and Others Vs. Sukhpal Singh Bal etc. etc.,

The learned Counsel appearing on behalf of the State, in an effort to distinguish the judgment rendered by the apex court in the case of Hindustan Steel [1970] 25 STC 211 referred to a judgment The Chairman, SEBI Vs. Shriram Mutual Fund and Another, and submits that mens rea has no role in the matter of imposition of penalty and if a person is found to have violated any statutory provisions then he has to suffer the penalty provided in the statute for breach thereof. In support of his submission he relied upon the judgment in Guljag Industries Vs. Commercial Taxes Officer, (paras 9, 19 and 24 to 27). It was next contended that as the dealer was conscious that audit report has to be filed in the manner provided u/s 54(2) of the Act, the non-filing of the same was a continuing offence and the petitioner would be liable for penalty until he discharged the onus envisaged under the said provision. In support of his contention learned Counsel relied upon a judgment of the apex court in Maya Rani Punj Vs. Commissioner of Income Tax, Delhi,

The learned Counsel for the respondents concluding his arguments submitted that neither the circumstances warrant any interference with the statutory provisions or the orders passed thereunder nor the petitioner has been able to make out any case for such interference and thus this writ petition is fit to be dismissed.

Mr. Pathy, in his reply, reiterated his submission and submitted that each and every penal provisions of the Act relatable to returns, scrutiny, deposit of tax, etc., had been provided with the sole object of prevention of tax evasion, penalizing the evaders and for recovery of the same from defaulting dealers. It was contended that the admitted position was that the petitioner had discharged his tax liability and no tax was found due from him and as such following the legislative intent of the penal provisions provided in the Act in relation to other forms of commitments of a dealer, the provisions of Section 54(4) of the Act could in no circumstances be interpreted as intending to penalize honest and bona fide dealers who had discharged their tax liability.

Mr. Pathy, referring to the language of the provisions underlying Section 54(4), submits that the opportunity of hearing envisaged under the said section is to allow the taxing authority to satisfy himself as to whether the non-submission of the audit report in the prescribed form and manner was for any tax evasion or an attempt towards that. He submits that once by contemporaneous documents it is proved that there was neither any pending tax liability against the dealer nor any attempt had been made to evade tax then the delay in filing of the audit report stands condoned, if filed within reasonable time and the delay is reasonably explained. He submits that any other interpretation of the provision would render the "right of hearing" clause illusory. He submits that the hearing clause provided in Sub-section (4) of Section 54 has to be interpreted in the light of the law laid down in Hindustan Steel case [1970] 25 STC 211 . In support of his submission he relies on the judgment of the apex court in Union of India (UOI) and Others Vs. Dharamendra Textile Processors and Others, and submits that delayed submission of the audit report would certainly not result in imposition of automatic penalty and each case has to be weighed and tested in the backdrop of accompanying circumstances.

Mr. Pathy responding to the judgment relied upon by the learned Counsel appearing on behalf of the State in the case of Government of Andhra Pradesh and Others Vs. Smt. P. Laxmi Devi, referred to paragraphs 28, 46 and 68. He accepts the position that provisions of any enactment, if possible, have to be read in a manner of upholding its constitutionality and stresses on the sentence "even if that requires giving strained construction or narrowing down its scope". He submits that a harmonious construction of the provisions of Section 54(2) read with Section 54(4) would mean that only such of the dealers against whom taxes were due or found payable and who had not submitted audit report in prescribed manner and form, would be held liable for imposition of penalty and not dealers against whom no tax was found due or payable. In support of submission that cases of automatic penalty and penalty at the discretion of a statutory authority are different and non-fulfilment of certain conditions of Section 54(2), could not attract automatic penalty where substantial compliance had been carried out by the dealer, he refers to the judgment of the apex court in Cement Marketing Co. of India Ltd. Vs. Assistant Commissioner of Sales Tax, Indore and Others,

Referring to the case of Guljag Industries Vs. Commercial Taxes Officer, with reference to paragraphs 25 and 26, it was submitted that evasion and contravention are two distinct situations and every contravention may not result in evasion of tax. It was submitted that even in the Said case the apex court held that object of penal provision is to prevent loss of revenue and to provide a remedy for making up such loss. It was thus submitted that non-filing of audit report within prescribed time in no manner resulted in any loss of revenue to the State in the present case. In an effort to distinguish the judgment relied upon by the State in the case of D.G. Gose and Co. (Agents) Pvt. Ltd. Vs. State of Kerala and Another, it was submitted that it was a case in which rate of tax was challenged. He submits that law is well-settled that rate of tax can only be challenged on grounds of unconstitutionality and no other grounds. He further submits that the case in hand was of imposition of penalty even where the admitted position existed that there was no default in the matter of payment of tax.

Referring to the case of State of U.P. and Others Vs. Sukhpal Singh Bal etc. etc., and to the paragraphs 15 and 16 thereof it was submitted that the power of imposition of penalty is for the purpose of securing the main object of a taxing statute, i.e., recovery of tax and since admittedly no tax was found due against the petitioner there was no reason for invoking the penal provisions of Section 54(4) for so-called breach of Section 54(2).

In normal circumstances, we would have remitted the matter to the Commercial Taxes Tribunal where the revision filed on behalf of the petitioner is pending for adjudication but since the issue raised by the petitioner requires statutory interpretation in the context of challenge to its vires and the Commercial Taxes Tribunal being a creature of the statute under consideration, we proceed to determine the issue raised in the writ petition ourselves.

We are thus required to answer the question posed at the very beginning of this judgment in the light of the submissions and counter-submissions advanced on behalf of the parties.

We have heard the learned Counsel appearing on behalf of the parties and have perused the materials on record. No doubt Section 54(2) of the Act enjoins upon a dealer to file audit report in the prescribed manner and in the prescribed form within the prescribed period, i.e., by 31st of December each year. The mode and manner of submission of the audit report requires a signature and verification by a chartered accountant or an accountant or a person appointed to act as such. We have been made to go through the various taxing provisions of the Act and the penal provisions controlling the same for breach thereof. We notice that each of the said provisions endeavours towards collection of revenue and provides mechanism for preventing evasion of the same and consequences resulting from breach thereof. Be it a statute relatable to direct taxes or indirect taxes, each endeavours towards timely collection/protection of the State revenue. The object of each taxing statute is to secure revenue and punish the defaulters/evaders for breach thereof. We noticed that the provisions of Section 54(4) in no uncertain terms imposes a penalty upon a defaulting dealer to be paid in addition to "any tax payable" equivalent to two per cent of the "tax payable" for every month or part thereof of "such default".

The Explanation provided u/s 24(10) shows that default is referable to non-payment of tax by a dealer. Thus whereas breach of Section 54(2) is a contravention but it partakes the nature of default only in circumstances where taxes are found payable against the dealer contravening the said provision and the default continues till the taxes so found payable from the dealer together with penalty at the-rate of two per cent of such tax payable is paid by the dealer.

The submission of Mr. Pathy that the breach of taxing provisions and contravention of procedural provisions cannot be equated and put at the same pedestal appears to be on sound reasoning. A taxing statute could never intend to punish honest and bona fide dealer who has discharged his onus and paid his taxes within the prescribed period. The provisions underlying Section 24 relates to submission of returns, payment of tax, interest and penalty, Section 25 provides for scrutiny of returns, Section 26 is reiatable to self-assessment of tax, Section 32 relates to detection of escaped turnover and all these provisions contain penal provisions for breach thereof. The sole object of the statute is collection of revenue in the manner provided and imposition of penalty for evaders. Admittedly, the provisions of Section 54 in no manner is reiatable to revenue, rather is a procedural imperative designed to prevent tax evasion. Certainly, such of the dealers against whom either taxes are found due or circumstances indicate suppression of fact with intention to tax evasion, the said provisions come to the aid of the taxing authorities but the cases of such dealers who have paid their taxes within the prescribed period have to be dealt with differently and cannot be put in the same category of tax evaders simply upon non-submission of audit report in terms of Section 54(2) of the Act. One distinguishing feature of this provisions is that whereas the taxing provisions of the Act have to be complied with by the dealer himself and thus holding him responsible for non-compliance therewith entailing penal provisions would be wholly justifiable but in a situation where the submission of audit report by the dealer is not entirely within his domain but is dependent upon signature and verification of a third party, i.e., an "accountant" within a meaning of the Chartered Accountant Act or a person competent to do so under the Companies Act, 1956, it certainly cannot entail penal consequences for him specially in circumstances where no taxes have been found due against the said dealer. In addition thereto the dealer has been found to have ensured substantial compliance with the same by filing a report in the prescribed form within the prescribed time, though unsigned.

The settled proposition of law that every effort is to be made for upholding a constitutional validity of a taxing provision need not be so strained so as to result in penalizing dealers who are not responsible for any revenue loss to the State but have honestly and timely made contributions to the State revenue. It was strenuously argued on behalf of the petitioner that the petitioner have paid taxes to the tune of over 12.47 crores and the returns of the petitioner has been accepted by the statutory authorities who have found no fault in the same. No tax has been found payable against the petitioner. The authorities in purported exercise of power u/s 54(4) have simply proceeded in a mechanical manner to impose penalty of Rs. 35.75 lac upon the petitioner for committing breach of Section 54(2) of the Act. We thus proceed to determine whether the case of the petitioner and like dealers who have discharged their tax liability of the period under consideration, within the prescribed period and against whom no tax has been found due and who have submitted audit reports initially not signed and verified by any accountant as required u/s 54(2) but have rectified the said defect within a reasonable period, could be subjected to the penal provisions of Section 54(4) of the Act.

We have already noticed the language of Section 54(4) which in no uncertain terms makes repeated reference to the words "tax payable" and the penalty is to continue for the period of such default. We have also noticed that default is referable to a default arising out of non-payment of tax. Thus non-submission of report in the prescribed form and manner as envisaged u/s 54(2) of the Act may be a contravention of the said provision but it certainly does not result in any default until any tax is found payable against the contravening dealer. The penalty in such cases is not automatic; rather the statutory authority while exercising power u/s 54(4) of the Act also has a duty of satisfying himself as to whether the breach of the provision of Section 54(2) is accompanied with any tax evasion or any tax is found payable against the dealer facing such proceedings who has submitted an audit report though unsigned. These surrounding circumstances have to be taken into consideration by the statutory authority while exercising powers u/s 54(4) otherwise it would render the provision of opportunity of hearing illusory for the dealer as it would be of no aid to him and of no avail. The law laid down by the honourable Supreme Court in the case of Hindustan Steel [1970] 25 STC 211 is still a good law in so far it relates to imposition of penalty for disregard of any provision of a taxing statute. In such a statute penalty is permissible only on a finding that contravention was deliberate and for a wrong purpose. Judgments appearing to take a different view were in the context of statutes of a different nature and character.

Presumption always flows in favour of taxing statute unless found violative of constitutional provisions. In the present case, on a careful reading of the provisions u/s 54(4) of the Act, it is found that penalty is imposable only where there is contravention and tax is payable, i.e., the dealer is in "default". This situation does not require even reading down of the express provisions. However, as the learned Counsel appearing on behalf of the petitioner did not choose to seriously assail the validity of the provisions of Section 54(4) of the Act, we need not detain ourselves on this issue any further. We proceed to test whether the case of the present petitioner would be covered within the mischief of Section 54(4).

The words any "tax payable" appearing in Section 54(4) of the Act clearly takes out the class of the tax defaulters/tax evaders from the class of dealers who have discharged their tax liability. The provision is self-eloquent and requires no external aid of interpretation. Once this position is confirmed then the present petitioner sails out of the mischief of the said provision. Question still remains as to what would be the consequence of non-submission of audit report in the prescribed form and in the prescribed manner. We have already noticed that the discharge of the said responsibility is not entirely dependent on the dealer but that there is a third party involved, i.e., an accountant who is required to sign and verify the said report and unless the said formalities are completed, the audit report cannot be submitted. A dealer cannot be saddled with penalty for breach of procedure which is not entirely attributed to him but involves a third party. Such being the requirement of law, it has to be held that the report submitted by the dealer in the prescribed form, in terms of the returns submitted by him with no tax found payable for period in question, coupled with the circumstances that an audit report in the prescribed form and manner was filed on February 15, 2007 which was in conformity to the earlier audit report, it would amount to substantial compliance with the provisions and cannot invite any penalty. Our opinion as above, should not in any manner be construed to mean that the provisions of Section 54(2) of the Act is an empty formality. Rather we wish to clarify that each dealer would be bound by the provisions of Section 54(2) of the Act to submit audit report in the prescribed form and in the prescribed manner but such of the dealers against whom no tax is found payable or is found due, the delayed submission of report within a reasonable period on account of circumstances beyond his control, duly explained to the statutory authority concerned, would not entail penalty as envisaged u/s 54(4) of the Act. Reference in this regard is made to the case of Hirday Narayan Singh Vs. Jang Bahadur Singh and Others, particularly paragraph 5 which runs thus:

(5) On behalf of the respondents, Mr. J.M. Ghosh argued that the payment of the landlord''s fee was a condition precedent to the registration of the kebala and since it has been found in fact that the landlord''s fee has not been paid it ought to be held that the plaintiff acquired no title upon registration of the kebala. In my opinion this argument is untenable and cannot succeed. For it is an established rule that if a statute imposes a public duty and requires that it should be performed in a certain manner or within certain time or on certain conditions such cases will be regarded as intended to be directory otherwise injustice or inconvenience will result to persons who have no control over those exercising their duty without promoting the essential aim of the Legislature. It has been held, for instance, when an Act ordered a thing to be done by a public body or public officers and pointed out the specific time when it was to be done, that the Act was directory only and might be complied with after the prescribed time ''Smith v. Jones'' [1830] IB & Ad 328 at page 334. In another case ''Bellamy v. Saull'' [1863] 32 LJQB 366, the Queen''s Bench had to construe Section 34 of the Revenue Act, 1861, which enacted that no copy of a bill of sale should be filed in any court unless the original was produced to the officer duly stamped and it was held that the section did not invalidate the registration if the bill was not duly stamped when so produced since the object of the enactment was to protect the Revenue, and this was thought sufficiently attained if the deed was afterwards duly stamped, without going to the extreme of holding the registration void.

As the respondents have not disputed the fact that there is no tax payable against the petitioner for the period in question, the case of the petitioner would not be covered by the penal provisions of Section 54(4) of the Act and the orders imposing penalty impugned in the writ petition and affirmed by the appellant authority cannot be sustained and have to be set aside.

In the result this writ petition is allowed and the order imposing penalty dated March 8, 2007 (annexure 2) and affirmed in appeal by the appellate authority vide order dated June 29, 2009 (annexure 3) are set aside and any amount realized by the respondents from the petitioner by reason of the impugned orders shall stand refundable to the petitioner within a period of three months from the date of receipt of a copy of this order.

However, there shall be no order as to cost.