P P SONS Vs. ASSISTANT COMMISSIONER

JUDGEMENT

(1.) THE petitioner-firm is an assessee under the Kerala General Sales Tax Act, 1963. For the assessment year 1978-79 the assessment was completed on March 28, 1980. Against the said order of assessment the petitioner filed an appeal, according to it, disputing the liability to pay tax for the sum of Rs. 46,639. THE petitioner also moved an application for stay before the appellate authority, the Deputy Commissioner (Appeals) at Calicut. Since no stay was granted by the appellate authority, the petitioner approached this Court by way of O. P. No. 546 of 1983 essentially praying for a direction to the authorities to stay the collection of the disputed tax pending disposal of the appeal. This Court disposed of the said original petition by judgment dated January 24, 1983, with a direction to the authorities to keep in abeyance the recovery of the disputed tax on condition that the petitioner deposited a sum of Rs. 25,000 within three weeks of the date of the said judgment. THE petitioner did not deposit the sum of Rs. 25,000 as direction in O. P. No. 546 of 1983 within time. THE Assistant Commissioner (Assessment), Sales Tax, thereupon issued the notice exhibit P1 dated March 2, 1983 to the petitioner informing him that he has failed to comply with the directions issued by the High Court in O. P. No. 546 of 1983 and calling upon him therefore to pay the entire arrears for the assessment year 1978-79 with penal interest before March 10, 1983, threatening coercive process on his failure to pay the entire arrears. Meanwhile the petitioner sent exhibit P2 letter to the Assistant Commissioner of Sales Tax along with a cheque for Rs. 25,000 stating that the payment was in compliance with the directions of the High Court in O. P. No. 546 of 1983 and further informing the authority that the petitioner has filed a petition for extension of time and orders were being awaited on that application. It was also stated that an order in that behalf will be produced before the authority as soon as such an order was obtained. THE petitioner had filed C. M. P. No. 6400 of 1983 in O. P. No. 546 of 1983 for extension of time as indicated in exhibit P2 communication. By order dated March 14, 1983, this Court extended the time by three weeks up to and inclusive of March 8, 1983. THE petitioner's case therefore is that he must be taken to have complied with the directions of this Court in O. P. No. 546 of 1983 and if that be so, the recovery of the balance tax due from him for the assessment year 1978-79 stood stayed until the disposal of the appeal he had filed before the appellate authority against that order.

(2.) CERTAIN goods of the petitioner were detained at the check-post, Feroke under section 29 of the Act. The petitioner thereupon deposited a sum of Rs. 23,364 on May 6, 1978, as a condition for getting the goods released. Though a penalty was imposed by the original authority, in appeal by the petitioner, the Appellate Assistant Commissioner held the imposition of penalty unsustainable and directed the refund of the sum of Rs. 23,364 collected by way of penalty. Consequent on the decision of the Appellate Assistant Commissioner in that behalf dated September 2, 1978, the Sales Tax Officer (Enquiry) passed an order exhibit P3 dated July 6, 1982 to refund the amount of Rs. 23,364 of the petitioner immediately. The petitioner requested the assessing authority by letter dated March 7, 1983 to refund the sum of Rs. 23,364 in terms of the order exhibit P3. The petitioner also sent a communication exhibit P4 dated March 15, 1983 to the Assistant Commissioner (Assessment) submitting that the High Court had extended the time for complying with the direction in O. P. No. 546 of 1983 and further submitting that the direction of the High Court had been complied with. At this stage, the Sales Tax Officer, respondent No. 3, by the order exhibit P5 ordered adjustment of the sum of Rs. 23,364 due by way of refund to the petitioner towards the balance tax due from the petitioner for the assessment year 1978-79. This order, as can be seen, was passed on March 19, 1983, five days after this Court extended the time for deposit on March 14, 1983. The adjustment was obviously on the basis that the petitioner had failed to comply with the direction of the High Court in O. P. No. 546 of 1983 to deposit a sum of Rs. 25,000 in time so as to enable him to have the benefit of a stay of recovery of the disputed tax for the assessment year 1978-79 pending the appeal. The petitioner protested at this and wrote exhibit P6 letter dated March 21, 1983 to the Assistant Commissioner of Sales Tax (Assessment ). It pointed out that the High Court had extended the time for deposit and the amount having been deposited within the extended time, the balance tax due for the assessment year 1978-79 could not be recovered before the disposal of the appeal relating to the year 1978-79. It was, therefore, submitted that the adjustment ordered under exhibit P5 on the basis that the entire amount of tax for the assessment year 1978-79 could be recovered since there was no stay of recovery was erroneous and requesting the Assistant Commissioner of Sales Tax (Assessment) to refund the sum of Rs. 23,364 which had been adjusted. It was pointed out that the authority had no right to adjust it as done in the light of the High Court decision. In reply, the petitioner received exhibit P7 dated March 25, 1983, informing the petitioner that the Sales Tax Officer, IV Circle, Calicut, had been given instruction to refund the sum of Rs. 23,364 thus accepting the stand adopted by the petitioner in his communication, exhibit P6.

(3.) SECTION 23 of the Act deals with the payment of tax and the recovery thereof. SECTION 23 (3) of the Act as it stood at the relevant time read as follows : " If the tax assessed or any other amount due under this Act or any instalment thereof is not paid by any dealer or other person within the time specified therefor in the notice of demand or in the order permitting payment in instalments or within the time allowed for its payment by the appellate or revising authority or within the time specified therefor in this Act or in any rule made thereunder, the dealer or other person shall pay, by way of penal interest, in the manner prescribed, in addition to the amount due, a sum equal to - (a) one per cent of such amount for each month or part thereof for the first three months after the date specified for its payment; (b) two per cent of such amount for each month or part thereof subsequent to the first three months aforesaid. " The scope of this said section came up for consideration before this Court in the decision reported in v. Haridas v. Assistant Commissioner, Sales Tax [1979] 44 STC 26. After noticing the earlier Division Bench decision of this Court reported in Burmah Shell Oil Storage and Distributing Co. of India Ltd. v. Sales Tax Officer [1973] 32 STC 429 the Division Bench held that "the liability to pay penal interest is automatic and there was no provision to pass a separate order imposing penal interest". It was brought to my notice by the learned counsel for the petitioner that the scope of section 23 (3) of the Act came up for consideration before a Division Bench in W. A. No. 16 of 1988 and that question was referred to a Full Bench in the light of certain observations in Joy Varghese v. State of Kerala [1986] 62 STC 227 (Ker ). In that reference a Full Bench of this Court has now spoken on the scope of section 23 (3) of the Act in the decision reported in P. C. Abdulla v. Sales Tax Officer [1992] 86 STC 259; 1992 KLJ (Tax Cases) 259. After an elaborate discussion of the question the Full Bench has held that the decision in Joy Varghese's case [1986] 62 STC 227 (Ker) does not lay down the correct law. The Full Bench held thus : " In this case the assessees had opted for rule 21 assessment. By filing the return, they had made their own assessment. The tax so assessed should have been paid by the dealer along with the returns as enjoined in rule 21 (7) of the Rules. If there is any default and non-payment of the tax so assessed, as enjoyed by the rule, the liability to pay penal interest automatically arises. The dealer need not be served with any demand notice. Even without receipt of a notice, the dealer shall be liable to pay the penal interest. This, in short, is the effect of section 23 (1) read with section 23 (3) and rule 21 (7) read with rule 31 of the Rules. Form No. 14d, as also form No. 24, provided by the Rules to the extent they militate against the statutory provisions, section 23 (1) read with section 23 (3) of the Act, and rules 21 (7) and 31 of the Rules should bow down to the parent provisions. The implication sought to be made out, by a reference to form No. 14d and form No. 24, that the service of a notice of demand is a pre-requisite for levy and recovery of penal interest under section 23 (3) of the Act, is not acceptable. It will be contrary to section 23 (1) read with section 23 (3) of the Act and also rules 21 (7) and (10) and 31 of the Rules. Such statutory provisions should prevail in preference to the entries in the statutory forms. " This Court also proceeded to hold that a notice of demand is not an essential pre-requisite for the levy and collection of penal interest. Thus, the principle laid down in Haridas case [1979] 44 STC 26 (Ker) was affirmed. In the order exhibit P12 the 2nd respondent has followed the decision in Haridas case [1979] 44 STC 26 (Ker) and has distinguished the decision in Joy Varghese's case [1986] 62 STC 227 (Ker) on the ground that what fell for decision in that case was whether penal interest was leviable without the issue of a notice as contemplated in sub-rule (3) of rule 18 and that the provision of rule 18 (3) was different from that contained in rule 21 (7) of the Rules.