Goyal Oil Mills vs The State

Prem Chand Pandit, J.—The following question of law has been referred to us for our opinion by the Sales Tax Tribunal at the instance of the Assessee-

Whether the imposition of the penalty of Rs. 1,800 upon the Firm under Sub-section (6) of Section 10 of the Punjab General Sales Tax Act was legal and valid in the facts and circumstances of the case.

It has arisen in these circumstances. Firm Goyal Oil Mills of Ludhiana was engaged in the business of groundnuts etc. On 27th February, 1965, for the assessment year 1961-62, the Assessing Authority created a liability of purchase tax to the extent of Rs. 12,871,34 regarding this firm, and it also imposed a penalty of Rs. 1,800 u/s 10(6) of the Punjab General Sales Tax Act, 1948 (hereinafter called the Act) on account of the delay in the payment of this tax by the said firm. Against this order the Firm filed an appeal before the Deputy Excise and Taxation Commissioner and the same was rejected on 17th March, 1966. Thereafter a revision was preferred and it was dismissed by the Joint Excise and Taxation Commissioner on 19th July, 1966. A second appeal before the Sales Tax Tribunal also met with the same fate on 9th April, 1968. Then an application u/s 22(1) of the Act was made by the Assessee to the Tribunal for referring the above mentioned question of law to this Court and that is how the matter has come before us.

It is undisputed that the Assessee did not pay the purchase tax within time. When asked by the Assessing Authority as to why he failed to make this payment in time, he stated that the matter regarding levy of purchase tax was in dispute and that this Court had stayed assessment and recovery of this tax in a number of cases. The Assessing Authority then imposed the above mentioned penalty on the Firm.

Section 10 of the Act deals with the payment of tax and filing of the return by the Assessee. The penalty is imposed under Sub-section (b) thereof. The relevant part of Section 10 reads-

Payment of tax and returns,-

(1) xx xx xx

(2) xx xx xx

(3) Such dealers as may be required so to do by the assessing authority by notice served in the prescribed manner and every registered dealer shall furnish such returns by such dates and to such authority as may be prescribed:

Provided that, if any dealer establishes to the satisfaction of the assessing authority that his average taxable turnover does not exceed ten per cent of his average gross turnover, the returns to be furnished by such dealer under this Sub-section shall be annual returns.

(4) Before any registered dealer furnishes the returns required by Sub-section (3), he shall, in the prescribed manner, pay into a Government Treasury or the Reserve Bank of India the full amount of tax due from him under this Act according to such returns and shall furnish along with the returns receipt from such Treasury or Bank showing the payment of such amount.

(5) xx xx x

(6) If a dealer fails without sufficient cause to comply with the requirements of the provisions of Sub-section (3) or Sub-section (4) the Commissioner or any person appointed to assist him under Sub-section (1) of Section 3 may, after giving such dealer a reasonable opportunity of being heard, direct him to pay, by way of penalty a sum not exceeding one and a half times of the amount of tax to which he is assessed or is liable to be assessed u/s 11 in addition to the amount of tax to which he is assessed or is liable to be assessed, and where no tax is payable, a sum not exceeding one hundred rupees.

(7) xx xx x

Learned Counsel contended that the Assessee was not liable to purchase tax for the relevant year of assessment. The Supreme Court in Bhiwani Cotton Mills Ltd. v. The State of Punjab and Anr. (1967) 20 S.T.C. 290 also held that no purchase tax on groundnuts could be levied for the years 1960-61 and 1961-62. In order to validate the imposition of this tax the Punjab General Sales Tax (Amendment and Validation) Act, 1967 (7 of 1967) was enacted. The argument, however, was that if the Assessee was not liable for the purchase tax at the relevant time, he had sufficient cause for not filing his returns or depositing the tax and therefore no penalty could be imposed for not making the payment of this tax within time, u/s 10(6) of the Act.

If the Assessee was not liable for the payment of purchase tax for the assessment year 1961-62, as held by the Supreme Court in Bhiwani Cotton Mills'' case, (1967) 20 S.T.C. 290 it does not stand to reason why penalty should be imposed on him for the non-deposit of this tax. The question of penalty would arise only if the initial liability of the Firm was there. Thus there would be sufficient cause for the Assessee not to file the returns regarding this tax and pay the same.

Counsel for the Department referred to Section 20 of Punjab Act 7 of 1967 and submitted that the imposition of the said purchase tax had been validated retrospectively and thereby the effect of the Supreme Court decision had been negatived. Section 20(1) of Punjab Act 7 of 1967 says-

Validation of assessments etc., in the case of groundnuts-

(1) Notwithstanding anything contained in any judgment, decree or order of any court or other authority to the contrary, any assessment, reassessment, levy and collection of any tax on the purchase of groundnuts made or purporting to have been made, any action or thing taken or done in relation to such assessment, re-assessment, levy or collection under the provisions of the principal Act, before the commencement of the Punjab General Sales Tax (Amendment and Validation) Act. 1967, shall be deemed to be as valid and effective as if such assessment, re-assessment, levy of collection or action or thing had been made, taken or done under the principal Act as amended by the Punjab General Sales Tax (Amendment and Validation) Act, 1967, and accordingly-

(a) all acts, proceedings or things done or action taken by the State Government or by any other officer of the State Government or by any other authority in connection with the assessment, re-assessment, levy or collection of such tax shall, for all purposes, be deemed to be and to have always been done or taker, in accordance with law;

(b) no suit or other proceedings shall be maintained or continued in any court or before any authority for the refund of any such tax; and

(c) no court shall enforce any decree or order directing the refund of any such tax.

Counsel further argued that under this section even the imposition of the penalty had been validated, because it was also an action taken by the Assessing Authority in relation to the assessment in question.

I am of the view that this contention is without any force. The order regarding the imposition of penalty was being challenged by the Assessee and this matter was still sub judice when the Punjab Act 7 of 1967 was enacted. This is not a case where the penalty was imposed by the Assessing Authority and the Assessee had not filed any appeal against the same, with the result that that order had become final. If such had been the position, it could perhaps be argued on the basis of the provisions of Section 20 of Punjab Act 7 of 1967 that the imposition of penalty could not subsequently be challenged by the Assessee in any proceedings. As I have said, this order was still under appeal when Punjab Act 7 of 1967, came into force. The question whether penalty should be imposed in a particular case is one of fact and has to be determined on the circumstances of each case. It will depend upon whether the Assessee had sufficient cause not to comply with the requirements of the provisions of Sub-section (3) or Sub-section (4) of Section 10 of the Act. In the first eventuality no penalty could be imposed on him. In this particular case, the Assessee was not liable to purchase tax for the year 1961-62 as held by the Supreme Court. That being so, it is not possible to hold that he had no sufficient cause for not depositing the said tax or filing the returns in connection therewith. The imposition of the penalty would, therefore, be not legal and valid in the facts and circumstances of this case.

Learned Counsel for the Department also submitted that the Firm had not taken this position before the Assessing Authority, i.e. he had not stated that he was not liable to purchase tax. All that he said was that the matter regarding the levy of purchase tax was in dispute and this Court had in a number of cases stayed the assessment and recovery of this tax.

In my opinion this contention is also without any force. If the Assessee was as a matter of fact not liable to this tax at the relevant time, it would, according to me, be a sufficient cause for him not to deposit that tax. It would be immaterial if instead of saying that he was not liable to pay the said tax, he merely stated that the levy of that tax was in dispute and this Court had stayed the assessment and recovery of that tax in a number of cases.

It may be mentioned1 that this very view was taken in three Bench decisions of this Court in M/s. Punjab Oil Mills v. The State of Punjab, C.W. No. 1566 of 1967, decided by Mahajan J. and myself M/s. Guru Nanak Oil Mills v. Punjab State S.T. Ref. 1 of 1969 decided by Mahajan and Tuli JJ. And M/s. Bharat General Mills, Ludhiana v. State of Punjab S.T. Ref. No. 16 of 1969 decided by Mahajan and Tuli JJ. It may be stated that the learned Counsel for the Department submitted that the effect of Section 20 of Punjab Act 7 of 1967 had not been noticed in any of these rulings. It is, therefore, that this contention had to be considered in the present case.

12 In view of what I have said above the answer to the question referred to us is in the negative, that is, in favour of the Assessee. In the circumstances of this case, however, there will be no order as to costs.

Gopal Singh, J.

I agree.