HIRANAND SHYAMDAS Vs. ASSISTANT COMMISSIONER OF SALES TAX

JUDGEMENT

(1.) THE petitioner is a firm registered under the Indian Partnership Act, 1932. THE business of the petitioner-firm is to deal in edible oil and vegetable ghee on wholesale scale. THE petitioner was a registered dealer under the provisions of the Bombay Sales Tax Act, 1959 (hereinafter referred to as the Act 1959 ). THE petitioner is also a registered dealer under the provisions of the Gujarat Sales Tax Act, 1969. THE petitioner was assessed by the Sales Tax Officer (2), City Division 2, Ahmedabad, respondent No. 3 herein, for the period from 1st April, 1968, to 31st March, 1969, and an order in this respect was passed on 21st August, 1971. THE Sales Tax Officer found that for the quarter ending 30th June, 1968, the petitioner filed 5 returns showing that he was liable to pay tax of Rs. 45,657 and had actually paid the tax to the tune of Rs. 20,655. 93 at the time of the filing of the return. Thus, there was part-payment of the tax with the return. THE Assistant Commissioner of Sales Tax (Administration-cum-appeal), Range I, respondent No. 1, herein, thereupon issued a show cause notice dated 3rd November, 1971, to the petitioner for showing cause why penalty under sub-section (3) of section 36 of the Act should not be levied against the petitioner. THE petitioner filed his reply to the said show cause notice stating that his financial position was not good as a result of which he could make only a part-payment of the tax. Respondent No. 1 by his order No. SAHA-1/khna/147-JA-3070/72 dated 5th January, 1972, levied penalty of Rs. 14,287. 50 upon the petitioner. Being aggrieved by the said order the petitioner filed an appeal before the Deputy Sales Tax Commissioner, Ahmedabad, Range 1, respondent No. 2 herein, who allowed the appeal of the petitioner and set aside the order dated 5th January, 1972, passed by respondent No. 1. Subsequent to the said order, respondent No. 1 again issued a show cause notice dated 17th July, 1972, upon the petitioner to show cause as to why penalty under section 36 (3a) should not be levied against the petitioner for the less payment of tax than the tax shown as payable by the petitioner in the return for the period ending with 30th June, 1968. THE petitioner filed his reply contending that the provisions of section 36 (3a) were not applicable to the facts of the case and also that the said provisions were ultra vires the provisions to determine the question of the liability to pay penalty and to determine whether the dealer is prevented from making part-payment of the tax due to the existence of reasonable cause. Respondent No. 1 by his order No. SAHA-1/kayada/72-73/ja-9734-38 dated 21st September, 1972, rejected the contention of the petitioner and decided that penalty under section 36 (3a) was attracted. He further held that the period for imposing penalty was to be counted from 1st August, 1968, to 3rd November, 1971, because the petitioner had not paid the balance payable as per order of assessment dated 3rd November, 1971. He further came to the conclusion that the penalty impossable came to Rs. 14,287. 50 and ordered that within 30 days from the receipt of the order the amount of penalty minus anything which has been paid against penalty should be deposited in the Government treasury. It is this order which is challenged in this petition, on the ground that the provisions of sub-section (3) and sub-section (3a) of section 36 are ultra vires of the Constitution being violative of articles 19 (1) (f) and (g) and 14 of the Constitution of India, inasmuch as no machinery has been provided for determining the question as to whether there has been contravention of the provisions of section 35 (3) of the Act. It is also alleged in the petition that the provision of section 36 (3a) are inoperative and unworkable as the starting point for calculating penalty cannot be determined.

(2.) DURING the course of argument Mr. Pathak appearing for the petitioner sought to raise 4 points : (1) The provisions of sub-section (3a) of section 36 are solely dependent upon the provisions of sub-section (3) of section 36 as all the provisions as far as possible of sub-section (3) are incorporated therein. Sub-section (3) of section 36 is ultra vires of the provisions of articles 19 (1) (f) and (g) and 14 of the Constitution as no machinery has been provided to determine the penalty or that the dealer due to reasonable cause has been unabled to pay tax within the prescribed time by the relevant provisions. The consequence is that the impugned order is void, and bad in law. (2) That the provisions of sub-section (3a) of section 36 are inoperative and unworkable as by applying the provisions of sub-section (3) of section 36 for levying of penalty under sub-section (3a) of section 36, starting point for calculating penalty thereunder cannot be determined. (3) That the impugned order has been passed mala fide. (4) That the provisions of section 36 (3a) did not apply to the facts of the present case with the consequence that the order of penalty passed by respondent No. 1 is illegal and bad in law.

(3.) A dealer who commits default in making payment of tax with the return as required by sub-section (2) of section 38 has to pay a penalty according to the rate fixed in sub-section (3) of section 36. But this obligation to pay the amount is not absolute. The dealer can show reasonable cause which prevented him from paying the tax. The words "reasonable cause" implies an inquiry. This inquiry is to be held after issuing a notice to the parties concerned. The parties are entitled to place materials before the officer. The approach of the officer must be a judicial one and the function which he discharges under this sub-section is a judicial function. If this is not the interpretation of sub-section (3) of section 36 the same would be rendered invalid and it is the duty of the court to interpret a provision in such a way as to avoid illegality, if such a construction is reasonably possible.