Sunil Kumar Roy vs Assistant superintendent, Commercial Taxes

A.K. Mukherjea, J.—This is an application under Article 226 of the Constitution of India in which the Petitioner has challenged an assessment order dated February 10,1968, and two notices dated February 26, and March 15, 1968, respectively. The assessment order was made by the Assistant Superintendent of Commercial Taxes, Central Circle, Bihar, Calcutta. The short facts of the case are as follows: The Petitioner carries on business under the name and style of Bhowra Coke Company, being the sole proprietor of the firm concerned. The Petitioner manufactures cokes and its bye-products or derivatives; his coke plant and works are located at Bhowra in the district of Dhanbad, Bihar. The Petitioner is a registered dealer both under the Bihar Sales Tax Act and the Central Sales Tax Act at Dhanbad. The financial year of the Petitioner for the purpose of submitting return under the Central Sales Tax Act, 1956, is from April 1 to March 31. The Petitioner, it appears, did not file the return for the quarter ended June 30, 1967, in time. In application filed on August 8, 1967, he prayed for time to file the, return for the quarter from March to June, 1967, by September 2, 1967. The Commercial Tax Officer rejected this prayer and in his turn issued a notice u/s 14(4) of the Bihar Sales Tax Act calling upon the Petitioner to show cause for non-filing of his return in proper time. In reply, the Petitioner again asked for time and ultimately, when this prayer was, also rejected, filed the return for the quarter ended June 30, 1967, on September 11, 1967. In this return the Petitioner is stated to have admitted his liability to pay tax of Rs. 553 under the Bihar Sales Tax Act and Rs. 7,854-63 P. under the Central Sales Tax Act. The Petitioner did not, however, make any payment of the admitted taxes as he was required to do under the relevant Act and Rules. The Commercial Tax Officer thereupon proceeded to complete the assessment on quarterly basis and served the requisite notice of hearing under Sections 16(4) and 20(4) upon the Petitioner. The Petitioner appeared through lawyer and made an application for time to produce his returns. The case was adjourned till November 20,1967. On that date, however, the Petitioner made another application for a further extension of time for production of books of� accounts. The date for examination of accounts was thereupon extended to January 24, 1968, and on this day also the Petitioner again applied through his lawyer for a further extension of time on the ground that his accountant was pre-occupied. The Commercial Tax Officer informed the Petitioner by a letter dated January 24, 1968, that the Petitioner was granted another extension of time for three days and, if he failed to produce accounts by January 24, 1968, ex parte orders of assessment were to be passed in this case. On January 27, 1968, the Petitioner came up with another application for adjournment of the case on the ground that his accountant was still pre-occupied. The Petitioner was informed by a letter dated February 5, 1968, that the Commercial Tax Officer was not prepared to adjourn the case till the first week of March as he had been asked to do but that the case was being adjourned to February 8, 1968, for passing ex parte orders. The apparent intention, as the officer says in the assessment order, was to give the dealer a final opportunity so that he could produce the books of accounts on February 8, 1968, if he chose to do so. The Petitioner, however, wrote back through his Advocate to say that he was unable to appear on February 8, 1968, on account of his accountant''s preoccupation. Thereafter, the Sales Tax Officer made a best judgment assessment u/s 16(3) of the Bihar Sales Tax Act read with Rule 12 of the Central Sales Tax Act (Bihar Rules, 1957). This order of assessment is dated February 10, 1968, and is found annexed to the petition. The Respondent No. 1 also imposed upon the Petitioner a penalty of Rs. 100 and Rs. 620 u/s 14(4) and Section 20(4) of the Bihar Sales Tax Act, 1959, read with Rule 12 of the Central Sales Tax Act (Bihar Rules, 1957) for delay in filing of return and for failure to pay the admitted tax liability for the period of assessment, namely, April to June, 1967. The Respondent No. 1 also issued on February 26, 1968, a notice upon the Petitioner calling upon him to pay the sum of Rs. 20,400 being the assessed tax of Rs. 19,680 and the two penalties, of Rs. 100 and Rs. 620 respectively. This notice was served upon the Petitioner on February 28,1968. Further notice dated March 15, 1968, was served upon the Petitioner directing him to pay the said sum by March 18,1968. The Petitioner now seeks to challenge the aforesaid order of assessment as well as the said two notices dated February 26,1968, and March 15, 1968, respectively.

Though the petition contains various grounds on which the assessment order is sought to be challenged, Mr. Panja appearing for the Petitioner advanced only two arguments in support of this challenge. We shall deal with his arguments one by one.

It was contended by Mr. Panja that the Commercial Tax Superintendent had no jurisdiction to make assessment on a quarterly basis and that he could make the assessment only on an annual basis, that is to say, for one entire financial year. The order of assessment challenged in this petition relates only to one quarter, that is to say, to the period April 1, 1967 to June 30, 1967. Therefore, it was argued, this assessment is bad.

Mr. Panja pointed out that the Respondent No. 1 has in his assessment order given certain reasons for making the assessment on a quarterly basis. The reasons are to be found in the assessment order itself. The order points out that the Petitioner made ho attempt to pay the admitted taxes even after he had made a delayed submission of his return for the quarter ended June 30, 1967. It is further pointed out that the Petitioner''s past record even in the matter of payment of admitted taxes was disappointing. These are the reasons which prompted the Commercial Tax Superintendent to do everything ''to collect the admitted taxes without loss of time'' and that is why he had ''decided to initiate proceedings for assessment of tax on quarterly basis''. Mr. Panja contended that these considerations which induced the Respondent No. 1 to make quarterly assessment are completely irrelevant and extraneous considerations. The charging section of the Act under which the assessment order is made permits the assessment to be done only on an annual basis. The reasons mentioned by the Respondent No. 1 for making a quarterly assessment could not possibly have enlarged his jurisdiction to make an assessment on a basis different from what is warranted by the Statute.

The liability to tax on inter-State sales is founded on the provisions contained in Section 6 of the Central Sales Tax Act, 1956, (hereinafter referred to as the said Central Act) which was enacted to provide for the levy, ''collection and distribution of taxes on sales of goods in the course of inter-State trade or commerce.

Sub-section (1) of Section 6 of the said Central Act provides as follows:

Subject to the other provisions contained in this Act, every dealer shall, with effect from such date as Central Government may, by notification in the Official Gazette, appoint, not being earlier than 30 days from the date of such notification be liable to pay tax under this Act on all sales, effected by him in the course of inter-State trade or commerce during any year on or from the date so notified.

This Sub-section is the charging section in respect of Central sales tax insofar as it creates the liability for paying tax on sales in course of inter-State trade and commerce effected during any year ''Year'' has been defined in Section 2(k) of the said Central Act as follows:

(k) ''Year'', in relation to a dealer, means the year applicable in relation to him under the General Sales Tax Law of the appropriate State, and where there is no such year applicable, the financial year.

The General Sales Tax Law of Bihar is to be found in the Bihar Sales Tax Act, 1959, where ''year'' has been defined to mean ''a financial year''. A ''financial year'' has not been defined in the Act. Both parties in the present proceedings have, however, admitted that the financial year was from April of one year to March of the succeeding year. The net result of these provisions is this that tax is to be paid on sales in the course of inter-State trade and commerce effected during a period beginning from April of one year to March of the succeeding year. The aforesaid tax is under the provisions of Sub-section (1) of Section 9 of the said Central Act to be levied and collected by the Government of India in the manner provided in Sub-section (3). "in the appropriate State. Sub-section (3) of Section 9 provides that the authorities for the time being empowered to assess, collect and enforce payment of any tax under the Central Sales Tax Law of the appropriate State shall, on behalf of the Government of India and subject to any rules made under this Act, assess, collect and enforce payment of any tax, including any penalty, payable by a dealer under this Act in the same manner as the tax on the sale or purchase of goods under the General Sales Tax Law of the State is assessed, paid and collected. This Sub-section also provides that the authorities may exercise all or any of the powers they have under the General Sales Tax Law of the State and the provisions of such law including provisions relating to returns, appeals,...penalties shall apply accordingly.

It is, therefore, clear that the manner of assessment and realisation of the tax is subject to rules made under the said Central Act as well as the rules prescribed under the General Sales Tax Law of the State, i.e. the Bihar Sales Tax Act of 1959. Therefore, unless there are any rules under the Central Act bearing on this subject we have to fall back upon the provisions of the Bihar Sales Tax Act and the rules made thereunder for ascertaining the manner of assessment, levy and collection of taxes; The charging section of the Bihar Sales Tax Act is Section 3 of that Act. As there is a special charging section in the said Central Act we need not refer to the provisions of Section 3 of the Bihar Sales Tax Act. But, it may be convenient to mention that a dealer becomes liable to pay sales tax and purchase, tax only if his gross turnover during a period not exceeding 12 months exceeds Rs. 15,000. The dealers who were liable to such taxes fall into two categories depending on the date when their gross turnover exceeds Rs. 15,000. But, we are not concerned with that classification here. We may also mention that Sub-section (10) of Section 3 of the Bihar Sales Tax Act is in the following terms:

The tax for each year may, with the previous approval of the Commissioner, be estimated and collected in advance during a year in such installments as may be fixed by the prescribed authority. For this purpose the prescribed authority may require the dealer to furnish an advance estimate of his taxable turnover for that year and may provisionally determine the amount of tax payable by the dealer in respect of the year. Thereupon the dealer shall pay the amount so determined by such date as may be fixed by such authority. The language of Section 6 of the said Central Act makes it absolutely clear that the incidence of taxation under that Act is year wise. It will be noticed that in the case of the Central Act the question of turnover is not important though the main basis of taxation in the Bihar Sales Tax Act and indeed most of the State Acts imposing sales tax is ''gross turnover'' of a dealer. Under the Central Act all sales effected by a dealer in inter-State trade or commerce are liable to tax. The words ''during any year'' in Sub-section (1) of Section 6 are important and, in my opinion, indicate clearly that the incidence of taxation or, in other words, chargeability is year wise. For deciding as to whether a particular tax is year wise or not it is the charger section which is important. For this we have very high authority, namely, the decision of the Supreme Court in Mathra Prashad and Sons Vs. State of Punjab, . The Supreme Court had to construe in that case the fact of the East Punjab General Sales Tax Act. One of the questions that arose for discussion was as to whether liability for sales tax under East Punjab Sales Tax Act was year wise or whether it could be computed from day to day or at least from period to period within a year. Hidayatullah J. (as his Lordship then was) in delivering the majority judgment of the Supreme Court analyzed different sections of the Punjab Sales Tax Act and in particular the charging sections, namely, Sections 4 and 5 of that Act and held:

there is no doubt that the tax is a yearly tax. It was payable, in the first instance, by a dealer whose gross turnover during the financial year immediately preceding 1 May 1949 was above the taxable quantum. The tax is to be levied on the taxable turnover of a dealer every year. The difference between gross turnover and taxable turnover is this, that to arrive at the taxable turnover on any period, some deductions have to be made for the same period. This clearly shows that the tax is for a year.

His Lordship laid a lot of emphasis on the words ''gross turnover during the year'' in Section 4(1) and the words ''taxable turnover every year of a dealer'' in Section 5(1) of the Act. In fact, his Lordship considered these words in the two charging sections to be so important that his Lordship does not attach much importance to the fact that the sections and the rules relating to levy and collection of taxes refer to different periods. Indeed, his Lordship holds that the method of collection allows collection of tax at intervals. In some cases, the tax is collected quarterly and in other cases collected monthly. But this, according to his Lordship, does not affect the incidence of tax which, according to the charging section, is determined with reference to the period of one year. Applying the same principle for the interpretation of the Central Act, I have no doubt in my mind that the incidence of taxation under the Central Act is year wise. The charging section in this case is, as I have said, Sub-section (1) of Section 6, and it clearly provides for liability to pay tax on sales during any year and the year, of course, means the period of 12 months from April of one year to March of succeeding year. In the instant case, the question that has arisen is slightly different. The question is whether assessments can be made on a quarterly basis. On behalf of the Petitioner it was contended that the unit of tax liability under the Central Act being ''a year'' the taxing officer had no jurisdiction to make an assessment on a quarterly basis and the reasons which the taxing officer has advanced in respect of such quarterly assessments in the order of assessment are extraneous reasons which cannot make such assessment valid. For the purpose of answering this question, the charging section is not, in my opinion, always decisive. It is well-known that there are three stages in the imposition of tax. There is first the declaration of liability. This is fixed by that part of the statute which indicates the persons who would be made liable and also the property or transaction in respect of which such persons would be liable. The second stage is that of assessment. Liability'' which is fixed in the first stage does not depend on assessment. But, it is a contingent liability which means an ''obligation'' which matures into an existing liability after the assessment has been made. The assessment quantifies the exact sum which a particular person has to pay. Finally, comes the third stage which is the stage of recovery of the tax assessed on any particular person. At this stage, if the person taxed does not pay voluntarily, certain methods of recovery are adopted by the taxing authority to realize the sum assessed.

In order to ascertain whether in the instant case the taxing officer could make quarterly assessments of taxes payable under the Central Act, we have to examine the provisions relating to assessment and also other provisions ancillary to it. The Central Act, as we have already pointed out, does not provide for any machinery for the purpose of assessment. Tax under that Act is to be levied and collected by the authorities who are for the time being empowered to assess," collect and enforce payment of any tax under the General Sales Tax Law of the appropriate State. In doing all these things, the appropriate authorities are subject to the rules made under the Central Act as well as the provisions'' of the State law relating to returns, assessments, penalties, levies and collection of taxes. Since the rules under the Central Act do not make any provision for assessment, levy and collection of the tax under that Act we have to rely upon the provisions of the Bihar Sales Tax Act.

Let us,. therefore, see what are the provisions of the Bihar Sales Tax Law on the question of assessment. We shall start from the point where a dealer has to file returns. Section 14 of the Bihar Sales Tax Act contains the material provisions. Section 14 of the Bihar Sales Tax Act deals with the question of returns to be submitted by every registered dealer. Sub-section (1) provides that every dealer is to furnish returns within such period and to such authority as may be prescribed, provided, however, that the prescribed authority may fix by a notice in writing a different period of any particular dealer. Sub-section (2) provides that if a dealer who has furnished a return prescribed in Sub-section (1) has made a mistake or omission, he may furnish a revised return before the prescribed authority passes an order determining the amount of'' tax payable by the dealer for the period for which the return has been furnished. Sub-section (3) empowers a prescribed authority to extend the period for submission of returns in certain cases. Sub-section (4) provides that if a dealer fails to furnish a return within the prescribed period or the period specially fixed for him under Sub-section (1), penalty may be imposed on him. This penalty may be a sum not exceeding Rs. ''5 for every day after the expiry of the prescribed or fixed period during which the dealer fails to furnish the required return.

It will be noticed that the period for which a return has to be furnished has been left for determination by rules.

Rule 10 of the Bihar Sales Tax Rules, 1959, runs as follows:

Rule 10(1). Every registered dealer shall, unless otherwise required under the proviso to Sub-section (1) of Section 14, by the authority prescribed in Rule 12, furnish to the said authority quarterly returns and also an annual return in Form XII.

Provided that the Commissioner may by order in writing and subject to such conditions or restrictions, as may be specified in the order, permit a registered dealer to furnish only an annual return in the said Form ; such permission may be refused, modified or annulled by the Commissioner in writing after giving the dealer a reasonable opportunity of being heard.

(2) Subject to Sub-rule (1) such returns shall be filed within one calendar month of the expiry of the period to which they relate and shall be signed and verified in the manner provided in the Form, by the appropriate person mentioned in Clause (a) of Sub-rule (2) of Rule 4 or by the manager, if any, declared u/s 10.

Therefore, the provisions of Rule 10 show clearly that except in special cases the prescribed period of returns under the Bihar Sales Tax Rules is both quarterly and annual. That means, four quarterly returns have to be submitted by the dealer every year and finally an annual return which must be a consolidation for the four quarterly returns.

After the returns have been filed, arises the question of assessment. As I have already said neither the Central Sales Tax Act nor the rules made under that Act make any provision for assessment.

Therefore,-in this matter also we have to fall back upon the provisions of the general sales tax law of Bihar, i:e. to say, on the provisions of the Bihar Sales Tax Act as well as the rules made under that Act. The material provision in the Bihar Sales Tax Act is to be found in Section 16. This is the most important section for the purpose of this case. Sub-section (1) of Section 16 provides that if the prescribed authority is satisfied about the returns furnished by the dealer in respect of any period without requiring the presence of the dealer or the production of further accounts and evidence by the dealer the authority may remake an assessment of the tax due from the dealer on the basis of such returns. Section 2(a) provides that if the prescribed authority is not so satisfied he shall serve a notice upon the dealer to appear before him either in person or through an authorised representative and produce accounts or evidence in -support of the dealer''s returns and then after examining the accounts and. evidence assess the amount of tax due from the dealer. Sub-section (3) provides that if having furnished returns in respect of a period, the dealer fails to comply with the notice served in Sub-section (2) or if his accounts and evidence are in the opinion of the prescribed authority correct or incorrect or unreliable, the said authority shall assess to the best of its judgment the amount of tax due from the dealer. Sub-section (4) provides that if the dealer fails to furnish returns in respect of any period the prescribed authority shall after, giving the dealer a reasonable opportunity make, an assessment to the best of its judgment, of the amount of tax due from the dealer.

It is not necessary for us to go into further details about the provisions of this section. It is enough if we take note of the fact that the assessments are to be made on the basis of the returns. And even when no returns are submitted the assessments are to be made with reference to the prescribed period. Therefore, assessments under the Bihar Sales Tax Act are bound to -be made on the quarterly returns as well as the annual return furnished by a dealer unless, of course, the dealer in question has been given special permission by the authority to furnish only an annual return. The very scheme of the Act and the rules, therefore, provide" for quarterly assessments.

Before I part with this aspect of the case I must deal with a decision of the Bombay High Court on an analogous point. I am referring to the decision in Commissioner of Sales Tax Vs. Cooper and Co., . The Bombay High Court was called upon to decide whether liability under the Central Act for tax on inter-State sales was a yearly liability. A Division Bench of the Bombay High Court held that a year was the unit, both for the purpose of chargeability arid assessment proceeding under the Sales Tax Act, 1956. As far as chargeability is concerned, their Lordships relied on the language of Sub-section (1) of Section 6 of the Central Act and held that since the Central Act provided in terms that every dealer was to be liable to pay tax on all sales ''during any year'' the charge or liability that the Central Sales Tax Act imposed must be taken to be a yearly liability. The Bombay High Court considered also the provisions of Bombay Sales Tax Act, 1953, and came to the finding that even the procedure of assessment in that case which was to follow the pattern laid down in Section 14 of the Bombay Sales Tax Act of 1953 provided that every registered dealer was to be assessed separately for each year. Their Lordships, therefore, held that ''year'' was the unit both for the purpose of '' chargeability as well as for the purpose of assessment proceedings. It may be remembered, however, that the Supreme Court decision in the case of Mathra Parshad and Sons v. The State of Punjab (Supra), to which the Bombay High Court referred, had relied on the charging section alone for determining whether the tax was year wise or riot.

16, I see no conflict between the decision of the Bombay High Court or the decision of the Supreme Court to which I have just made a reference and my own decision in the instant case. On this aspect of the matter I may point out that the Supreme Court in Mathra Parshad''s case (1) clearly laid down that assessment could be made on the basis of other periods even though the incidence of taxation is ''year wise''. The Supreme Court was not called upon in that case to decide the question which we are dealing with in the instant case, namely, whether assessments can be made on other than annual basis. It is important to remember that the Supreme Court clearly observed that all these questions must depend on the actual language of the laws prevailing in different States. In view of the provisions of the Bihar Sales Tax Act and the Rules relating to assessment made under that Act, there is no escape from the proposition that even for the purpose of Central Sales "Tax Act assessment in Bihar can be made on a quarterly basis.

The second ground of challenge that has been made against the order of assessment is this that, according to the Petitioner, the assessment cannot be described as a ''best judgment assessment'' insofar as the officer concerned has failed to consider the previous returns of the Petitioner and has made a pure guess-work. There is no sub-silence in this objection. The assessment order shows the materials on which the judgment has been arrived at. In any case, in an application under Article 226 of the Constitution of India, I cannot weigh the materials on the basis of which the assessment has been made.

It is not for me to act as an Appellate authority and to decide whether the assessment has been correctly made or whether the materials considered by the officer justify the best judgment assessment. In this view of the matter this argument must also fail.

There was no other argument made on behalf of the Petitioner. In these circumstances the petition fails and I make the following order. The application is dismissed. The Rule is discharged. I make no order as to costs.