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Judgment
Jawahar Lal Gupta, J.—Does the rate of tax include the surcharge ?
This is the basic question that arises for consideration in the seven petitions viz, C. W. P. Nos. 5697 of 1988, 16, 17, 18 and 723 of 1989, 15114 of 1990 and 9242 of 1991. These are, therefore, being disposed of by a common order. The facts as stated in C. W, P. No. 9242 of 1991 may be noticed.
The petitioner is a Private Limited Company. It is engaged in the manufacture of Air Conditioned Water Coolers etc. and has its factory at Faridabad. The Company sell its Products within and outside the State of Haryana The assessment for the year 1988-89 in respect of its liability under the Central Sales Tax Act, 1956 (hereinafter referred to as ''the Central Act'') was finalised by the Assessing Authority vide its order dated March 22, 1991. A liability of Rs. 92 657/- was created. The Company made an application for stay of recovery and prayed that the appeal be heard without deposit of the tax as assessed by the Assessing Authority Having failed in its attempt, the Company has approached this Court through the present writ petition. The action of the Assessing Authority in including the surcharge as envisaged u/s 16 of the Haryana General Sales Tax Act, 1973 (hereinafter referred to as the Haryana Act) as a part of the tax under Sect, on 8 (2) (b) of the Central Act and he consequential calculations of interest and imposition of penalty have been challenged as being illegal and arbitrary.
A written statement has been filed on behalf of the respondents It has been inter alia averred that the Company has statutory remedies available under, the Act and, therefore, writ petition is incompetent. On merits, it has been pleaded that the petitioner is liable to pay surcharge also on the Inter-State sales. Accordingly the claim made by the petitioner has been contested. Reference has also been made to the advice rendered by the Ministry of Law and justice.
Arguments on behalf of the petitioner have been addressed only by Mr. R P. Sawhney Advocate On behalf of the respondents, Mr. D. D. Vasudeva, learned Assistant Advocate General, Haryana has made his submissions. Mr Sawhney contends that the Haryana General Sales Tax Act prescribed the rate of tax u/s 15 Further a levy of surcharge has been provided for u/s 16'' The rate of tax on sales in the course of Inter-State trade or commerce has been provided for u/s 8 of the Central Act According to learned counsel for the petitioners the rate of tax u/s 8(2)(b) of the Central Act is the same as that prescribed u/s 15 of the Haryana Act. Learned counsel contends that surcharge as leviable u/s 16 does not form a part of the rate of tax as contemplated u/s 8(2)(b) of the Central Act In support of his contention, the learned counsel has placed reliance on the two Division Bench judgments in State of Karnataka and Anr. v. P K. P. Abdul Hakeem & Co. 59 S. T. C. 203. and Assistant Commissioner (Assessment) v. Janatha Expeller Co., 64 S.S. C. 435. He further contends that the levy of interest and penalty was wholly unjustified in the circumstances of the case. On the other hand, Mr. Vasudeva has contended that surcharge is a tax on tax Accordingly, it is a part of the tax and that is the rate at which the tax under the Central Act had to be paid by the petitioner. The tax having not been paid, the assessment orders including the levy of interest and penalty are wholly just and legal. Learned counsel also raised a preliminary objection that the petitioner had adequate remedies under the Act and the writ petition should not be entertained.
After hearing the learned counsel for the parties I find that there is no merit in the preliminary objection raised on behalf of the respondents. Admittedly the Sales Tax Tribunal has already taken the view that the surcharge envisaged u/s 16 of the Haryana Act is included in the rate of tax under the Central Act In view of this, no useful purpose would have been served if the petitioner had resorted to the remedies under the Act. Accordingly, the preliminary objection cannot be sustained.
A perusal of the provisions of the Haryana Act shows that the rate of tax has undoubtedly been prescribed u/s 15. Section 16 of the Act provides for the levy of surcharge. In the final analysis the tax payable under the Haryana Act is not only at the rate contemplated u/s 15, but such as may be determined on a combined reading of Sections 15 and 16. The assessee has to pay the amount which is determined in accordance with the provisions of Sections 5 and 16. That being so, the rate of tax u/s 8(2)(b) of the Central Act cannot be confined to the rate contemplated u/s 15 alone.
It is no doubt correct that the taxing provision has to be construed strictly. It is also correct that if the two interpretations are possible, normally the Courts lean in favour of the assessee. However, it is equally settled that the provisions of the Act have to be harmoniously construed. On a combined reading of Sections 15 and 16 I am left with no doubt that the rate of tax is not only the one prescribed u/s 15, but such as may be arrived at on a combined reading of Sections 15 and 16 of the Haryana Act Accordingly, the tax under the Central Act, has to be determined at the same rate as may be arrived at on a combined reading of Sections 15 and 16 of the Haryana Act.
Mr. Sawhney relies on the two Division Bench decisions, mentioned above, to contend that the rate of tax u/s 8(2)(b) has to be confined to the one provided for u/s 15 alone. These two judgments probably lend some support to his contention, however, both the decisions have been considered by a Division Bench of the Andhra Pradesh High Court in Section 5. Spinning Mills Ltd. v. Commercial Tax Officer 68 S. T. C 95 The Division Bench inter alia observed as under:-
"The object of the sub-section is to bring about a uniformity in the matter of rate of tax between an Intra-State sale and an Inter-State sale, and not to confer the benefit of lesser tax in the case of Inter-State sale. Indeed, but for the said subsection the tax would be chargeable at a higher rate. It cannot be gainsaid that even the provisions of a taxing enactment have to be reasonably construed having regard to the object and purpose underlying it, and the attempt should be to achieve the underlying object. Above all, the significance of the words "whether called a tax, or fee or by any other name" has to be duly recognised and given effect to.
An unreported Bench decision has been brought to our notice in W. P. No. 2955 of 1968 and batch, dated 23rd November, 1970, where a similar question appears to have been considered The question considered was, whether additional tax u/s 5-A of the Andhra Pradesh General Sales Tax Act car be added in the computation of rate of tax applicable under the State law for the purpose of determining the liability to tax under subsection (2-A) of Section 8 of the Central Sales Tax Act. The Bench rejected the contention that the additional levy cannot be taken into consideration. It was observed that the additional tax provided by Section 5-A is also a rate, and that like Section 5, Section 5-A is also a charging section. In fact, the Bench went further and observed that the same principle applies to surcharge in the calculation of lower rate of tax under" Section 8(2A) of the Act. It was observed that surcharge is nothing but an additional tax. We are in respectful agreement with the said Bench decision, and hold that surcharge must be taken into account while determining the rate of tax payable under sub-section. (2-A) of Section 8."
I am in respectful agreement with the view expressed by their Lordships. Accordingly, I find no merit in the primary contention raised on behalf of the petitioners.
This brings me to the next question relating to the equality of the impugned order in so far as it relates to the imposition of interest and penalty. The provision regarding the submission of returns and payment of tax is contained in Section 25 while the Imposition of penalty is covered by Section 47 of the Haryana Act. An assessee u/s 25 is not only bound to submit his returns in the prescribed manner, but he is also required to "pay into a Government Treasury or the Reserve Bank of India or the State Bank of India the full amount of tax due from him under this Act according to such returns..................". Further under clause (5) of Section 25 in the event of failure to pay the tax due "as required by sub-section (3) he shall be liable to pay in addition to the tax due simple interest on the amount due..............". The petitioner had admittedly paid the tax as determined by him according to the return. However, the Assessing Authority found that the rate of tax at Which the payment had been made was not in accordance with law. This controversy resulted in the decision that the petitioner had not paid the amount of tax as determined by the authority. This controversy was highly technical. The petitioner could have bonafide believed that the tax had to be paid at the rate envisaged u/s 15 only. It had paid that amount. In this situation, I am of the view that the Assessing Authority was in error in holding that the petitioner had failed to pay the tax due. In the circumstances of the case, I am of the opinion that on account of the doubt regarding the correct interpretation of the provision, which had not been clarified even by the departmental authorities till the matter was settled by the Tribunal, the petitioner had adequate reason for not paying the tax at the rate at which the department has now held it to be liable. Accordingly, the matter regarding the imposition of penalty and interest deserves to be reconsidered by the Assessing Authority,
In view of the above, I hold that the tax u/s 8 of the Central Act has to be paid at a rate determined on a combined reading of Sections 15 and 16 of the Haryana Act. The order of the Assessing Authority in that respect is upheld. However, with regard to the imposition of penalty and interest, the matter is remanded to the Assessing Authority for reconsideration. The writ petitions are accordingly disposed of. In the circumstances of the case, there will be no order as to costs.