# ASSOCIATED CEMENT CO. LTD v. COMMERCIAL TAX OFFICER, KOl A & ORS

- **Citation:** [1982] 1 S.C.R. 563
- **Court:** Supreme Court of India
- **Decided:** 1981-09-02
- **Case number:** Civil Appeal No. 852 of 1980
- **Bench:** P.N. Bhagwati, A.P. Sen, E.S. Venkataramiah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/associated-cement-co-ltd-v-commercial-tax-officer-kol-a-ors-8303
- **Pages:** 44

## Headnote

Rajasthan Sales Tax Act 1954 Ss. 7AA, 10, JIB and Central Sales Tax Act
1956, S. 9-Scope of.
A
B
Assessee not depositing the tax in respect of amount of freight at the time of
filing original return-Revised return filed and tax deposited-Assessing authority
C
whether competent to inipose penalty-Assessee whether liable to pay interest on
the tax due.
The appellant-assessee a company manufactured cement which was sold
partly in the State of Rajasthan and partly outside the State. The sales tax
returns relating to the sales were filed by the assessee under the Rajasthan Sales
Tax Act, 1954 and under the Central Sales Tax Act 1956 before;; the Assessing
Authority for the period August 1, 1973 to July 31, 1974 i.e. for the assessment
year 1974-75. In those returns the assessee did not include in the taxable turn ..
over the freight charges paid in respect of the goods sold under the bona fide
impression that freight charges were not to be so includible in the taxable turnover in view of certain decisions rendered by the High Courts and the Supreme
Court.
The Supreme Court on August 29, 1978 in Sugar Mills Limited v. State of
Rajasthan and others [1979] 1 SCR 276 held that freight charges formed part of
the sale price and were includible in the taxable turn-over of an assessee and that
sales tax was payable thereon.
D
E
Coming to know of the aforesaid decision the assessee prepared and filed
the revised returns in respect of the assessment year 1974-75 before the CommerF
cial Tax Officer on October 20, 1978 including freight charges in the turn-over
and also deposited alongwith the revised returns, challans showing payment of
the balance of the tax payable under the State Act as well as under the Central
Act.
The assessing authority passed two orders of assessment one under section
10(3) of the State Act and the other under section 9 of the Central Act. The
former order of assessment levied a penalty of Rs. 53,353 under section 7 AA of
the State Act on account of the delay in depositing the sales tax payable in
respect of the amount of freight charges and also levied interest of Rs. 85910/-
under s. llB of the State Act. In the latter order of assessment a penalty of
Rs. 1,34,205/~ was levied under section 7AA of the State Act read with section
9(2) of the Central Act for the delay in depositing the tax payable in respe<t of
the freight charges, and interest of Rs. 2,07,174/- was levied under section 11 B
of the State Act read with section 9(2) of the Central Act,
G
H
564
SUPREME COURT REPORTS
( 1982] ] S.C.R.
A
In the appeals to this Court on the question whether : (A) the Assessing
Authority was right in imposing penalty on the assessee under the two assessment
orders for not depositing the tax in respect of the an1ount of freight at the time
of filing of the original returns under the State Act and the Central Act, and (B)
the assessee was liable under section llB of the State Act to pay interest on the
tax in res::iect of the amount of freight for the period between the date of filing
of the original return and the date when such tax was actually paid while filing
8
the revised return.
,
c
D
E
HELD : [By the Court]
(A) The levy of penllties for not including the freight charges in the
taxable turnover ifl the original returns and for not paying the tax in respect of
such freight charges is unsustainable and the two orders of assessment in so far
as they levy penalty are liable to be quashed and set aside. (571 B, .589 B]
Cen1ent Marketing Co1npany of India Limited v. Co1n1nissioner of Sales Tax
Indore (1980] l SCR 1098 referred to.
[per Bhagwati J. dissenting]
B(lJ So long as the assessee pays the a1nount of tax which according to
him is due on the basis of tbe return filed by him, there would be no default on
his part in complying with the obligation under sub-section (2) of section 7 and
there would be no liability on him to pay interest under section lJB clause (a),
because he would have paid the amount of tax quantitied by

## Text

_Characters 0–39,214 of 112,952. This is a partial read: ask again with offset=39214 for what follows._

A
563
ASSOCIATED CEMENT CO. LTD.
v.
COMMERCIAL TAX OFFICER, KOl A & ORS.
September 2, 1981
[P.N. BHAGWATI, A.P. SEN & E.S. VENKATARAMIAH, JJ.]
Rajasthan Sales Tax Act 1954 Ss. 7AA, 10, JIB and Central Sales Tax Act
1956, S. 9-Scope of.
A
B
Assessee not depositing the tax in respect of amount of freight at the time of
filing original return-Revised return filed and tax deposited-Assessing authority
C
whether competent to inipose penalty-Assessee whether liable to pay interest on
the tax due.
The appellant-assessee a company manufactured cement which was sold
partly in the State of Rajasthan and partly outside the State. The sales tax
returns relating to the sales were filed by the assessee under the Rajasthan Sales
Tax Act, 1954 and under the Central Sales Tax Act 1956 before;; the Assessing
Authority for the period August 1, 1973 to July 31, 1974 i.e. for the assessment
year 1974-75. In those returns the assessee did not include in the taxable turn ..
over the freight charges paid in respect of the goods sold under the bona fide
impression that freight charges were not to be so includible in the taxable turnover in view of certain decisions rendered by the High Courts and the Supreme
Court.
The Supreme Court on August 29, 1978 in Sugar Mills Limited v. State of
Rajasthan and others [1979] 1 SCR 276 held that freight charges formed part of
the sale price and were includible in the taxable turn-over of an assessee and that
sales tax was payable thereon.
D
E
Coming to know of the aforesaid decision the assessee prepared and filed
the revised returns in respect of the assessment year 1974-75 before the CommerF
cial Tax Officer on October 20, 1978 including freight charges in the turn-over
and also deposited alongwith the revised returns, challans showing payment of
the balance of the tax payable under the State Act as well as under the Central
Act.
The assessing authority passed two orders of assessment one under section
10(3) of the State Act and the other under section 9 of the Central Act. The
former order of assessment levied a penalty of Rs. 53,353 under section 7 AA of
the State Act on account of the delay in depositing the sales tax payable in
respect of the amount of freight charges and also levied interest of Rs. 85910/-
under s. llB of the State Act. In the latter order of assessment a penalty of
Rs. 1,34,205/~ was levied under section 7AA of the State Act read with section
9(2) of the Central Act for the delay in depositing the tax payable in respe<t of
the freight charges, and interest of Rs. 2,07,174/- was levied under section 11 B
of the State Act read with section 9(2) of the Central Act,
G
H
564
SUPREME COURT REPORTS
( 1982] ] S.C.R.
A
In the appeals to this Court on the question whether : (A) the Assessing
Authority was right in imposing penalty on the assessee under the two assessment
orders for not depositing the tax in respect of the an1ount of freight at the time
of filing of the original returns under the State Act and the Central Act, and (B)
the assessee was liable under section llB of the State Act to pay interest on the
tax in res::iect of the amount of freight for the period between the date of filing
of the original return and the date when such tax was actually paid while filing
8
the revised return.
,
c
D
E
HELD : [By the Court]
(A) The levy of penllties for not including the freight charges in the
taxable turnover ifl the original returns and for not paying the tax in respect of
such freight charges is unsustainable and the two orders of assessment in so far
as they levy penalty are liable to be quashed and set aside. (571 B, .589 B]
Cen1ent Marketing Co1npany of India Limited v. Co1n1nissioner of Sales Tax
Indore (1980] l SCR 1098 referred to.
[per Bhagwati J. dissenting]
B(lJ So long as the assessee pays the a1nount of tax which according to
him is due on the basis of tbe return filed by him, there would be no default on
his part in complying with the obligation under sub-section (2) of section 7 and
there would be no liability on him to pay interest under section lJB clause (a),
because he would have paid the amount of tax quantitied by him through the
process of self-assessment. The actual amount of tax payable by the assessee would
be determined only when it is assessed by the Assessing Authority under section
10 and that would not be payable until the expiration of the period specified in
the notice of demand or thirty days from the date of service of such notice, as
the case may be. [584 D-E]
(2)
Since the assessee ·deposited the amounts of tax which according to
him were due on the basis of the returns actually filed by him and the returns
were accompanied by receipts showing deposit of such amounts of tax, there
was no default on the part of the assessee in paying the amounts of tax payable
under sub.section (2) of section 7 within the actual period allowed and in the
circumstances no interest was payable by the assessee under section llB clause (a).
[586 F·G]
State of Rajasthan v. Ghasi Lal [1965] 2 SCR 805 relied on.
G
3.
When the assessment"'is made and the tax payable by an assessee is
determined, the tax so determined does not become payable until after a notice
of demand is served by the Assessing Authority under section 11 sub-section (2)
read with Rule 31 of the Rajasthan Sales Tax Rules 1955. The assessee is allowed
time to make payment upto the date specified in the notice of den1and and if no
such date is specified, then within thirty days from the date of service of the -
ff
notice. So long the assessee pays up the amount of the tax assessed within the
time specified in the notice of demand or within thirty days from the date of
service of the notice, as the case may be, he would not be in default and hence
-.
..
..
ASSOCIATED CEMENTV;C.T;O ..
56)
So-1 lB clause (b) provides that the ·asses:see wou\U be Hable to:pay interest on the
tax assessed only if the amount of. such tax is not paid .within the period-specified
in.the notice of demand or in the absence of such specification, within thirty days
from the date of service of such notice and then too, the liability to pay interest
would commence not from the date of the assess1nent, but from the day cornmenc·
ing after the end of the said period, that is, the period specified in the· notice.of
demand or thirty days from the date of service of such notice, as the case may be·.
Thus even after the assessment is made and the tax_ payable by an assessee is
determined, the assessee is not-liable to pay interest on the amount of such tax
until .after the period specified in the notice of demand or in the absence such
specification, thirty days from the date of service of such notice, have expired.
[574 D-H]
4. The language used in sub-section (2) of section 7 is "full amount of tax
due on the basis of return". The "return" is the return filed by the assessee
under sub-section (1) of section 7. When sub-section (l) of section 7 requires
an assessee to file a return, the return filed nlust be correct and proper. If the
return is not correct and proper, the Assessing Authority may not give credence
to the return and may refuse to assess the 1ax on the basis of the return and if
the Assessing Authority finds that the assessee has concealed any particulars
from the return furnished by him or has de-liberately furnished inadequate particulars in the return the Assessing Authority may levy penalty on the a.ssessee
under section 16, sub-section (l) clause (e) and the assessee may also be liable to
be punished for an offence under section 16, sub-section (3) clause (d) for making
a false statement in the return. Whether the return filect be correct or not, the tax
payable by the assessee under sub-section (2) of section 7 would be the full
amount of tax due on the basis of the return. The return actually filed by the
assessee must be looked into in order to see what is the full amount of tax due
on the basis of such return. It is not the assessed tax nor is it the tax due on the
basis of a return which ought to have been filed by the assessee but it is the tax
due according to the return actually filed that is payable under sub-section (2) of
section 7. This provision is real1y in the nature of self-assessment and what it
requires is that whatever be the amount of tax due on the basis of 'self-assessment
must be paid up along with the filing of the return which constitutes selfassessrnent. The plain words of sub-section (2) of section 7 cannot be tortured
to mean full amount of tax due on the basis of return which ought to have been
filed but whieh has not been filed. [576 B·F]
5. The legislature could never have intended that the assessee should be
liable on pain of imposition of penalty, to deposit an amount which is yet to be
ascertained through assessment. How would the assessee know in advance what
view the Assessing Authority would take in regard to the taxability of any particular category of sales or the rate of tax applicable to them and deposit the
amount of tax on that basis ? Even in regard to the liability to pay interest, it
does not stand to reason that the legislature should have subjected the assessee to
such liability for non-payment of an amount of which the liability for payment is
still to be ascertained, [577 E-G]
6. The tax payable under sub-se.:tion (2) of section 7 deall with in
clause (a) of section llB cannot, be equated with the amount
of the tax
assessed forming the subject matter of clause (b) of section llB and hence it must
A
B
c
D
E
G
H
566
SUPREME COURT REPORTS
[1982) I s.c.R.
A
be tax due on the basis of the return actually filed by the assessee and not on the
basis of a correct and proper return which ought to have been filed by him.
B
c
D
E
F
[578 G-H]
7. The scheme of taxation envisaged in the State Act clearly shows that
it is only when the assessment is made and the period specified in the notice of
demand or in the absence of such specification, thirty days from the date of
service of such notice expires, that the amount of tax as assessed becomes payable
by the assessee and its payn1ent can be enforced by the Revenue. What becomes
payable by the assessee under sub-seccion (2) of section 7 is merely the tax due
on the basis of the return actually filed by the assessee that is, on the basis of
self-assessment. rs79 F-G]
8.
On a true construction of the provisions of the State Act tax becomes
due from the assessee and is payable by him only when it is ascertained by the
Assessing Authority under section 10 or by the assessee under section 7(2). Till
then there is only the Jiabilily of the assessee to be assessed to tax and no tax can
be said to be payable by the assessee. The tax payable is ascertained when the
assessment is made by the Assessing Authority under section JO or \vhen the
assessee himself quantifies it through the process of self-assessment under subsection (2) of section 7.
These two amounts of tax may and in quite a number
of cases would be different because one is ascertained by the Assessing Authority
through the process of assessment and that is why sub-section (4) of section 7
provides that every deposit of tax made under sub-section (2) shall be deemed to
be provisional subject to necessary adjustments in pursuance of final assessment
of tax made under section 10.
This provision clearly contemplates that the tax
payable under sub-section (2) of section 7 may be different from the tax assessed
under section 10 and it cannot, therefore, obviously be the tax due on the basis
of a correct and proper return but must be the tax due on the basis of the return
actually filed.
[580 D-G]
·
9(i) It is clear from the language of sub-section (2) of section 7 that it is
only on the filing of the return that the liability to pay the tax due on the basis
of the return arises. If no return is filed within the prescribed time, it would
undoubtedly constitute a default attracting penalty under section 16, sub-section
ll) clause (n) but there would be no liability on the as5¢ssee to pay interest on
the amount of the tax, because the liability to pay the tax due on the basis of the
return under sub-section (2) of section 7 can arise only when the return is filed,
There is no liability on the assessee to pay any amount by way of tax until the
return is filed or the assessment is made. [581 H-582 B]
(ii) It can neither be held that section 7 sub-section (2) is attracted even
G
when no return has been filed. It is clear that until the assessee files a return or
assessment is made, no tax is payable by the assessee, because till then there is
only a liability to be asse5sed to tax. The conclusion that a registered d~alcr
who does not file any return at all as required by sub-section (I) of section 7
would still be liable to pay the amount of tax and if he does not pay the san1e
before the due date for filing the return, he would be liable to pay interest under
H
section ll(bl clause (a) cannot be accepted. This would be contrary to the
decision of this Court in State of Rajasthan v. Ghasi La/[1965] 2 SCR 805.
[582 C·FJ
..
,
ASSOCIATED CEMENT V. C.T.O.
567
(per A.P. Sen and Venkataramiah, JJ]
B(l). The statutory liability under section llB arises wherever there is
default in payment of the tax within the period allowed by law irrespective of
any doubt which an assessee may be entertaining about the liability to pay the tax.
[604 D-E]
3tate of Rajasthan v. Ghasi Lal [1965] 2 SCR 805 distinguished.
2. Tax, interest and penalty are three different concepts. Tax becomes
payable by an assessee by virtue of the charging provision in a taxing statute.
Penalty ordinarily becomes payable when it is found that an assessee has wilfully
violated any of the provisions of the taxing statute. Interest is ordinarily daimed
from an assessee who has withheld Payment of any tax payable by him and it is
always calculated at the prescribed rate on the basis of the actual amount of tax
withheld and thC extent of delay in paying it. It may not be wrong to say that
such interest is compensatory in character and not penal. [594 D~E]
A
B
c
3. Registered dealers can be classified into the following different classes :
(1) A registered dealer who files his return showing a higher taxable turnover
than the actual turnover which is ultimately found to be taxable at the time of
regular assessment and who pays tax under section 7(2) of the Act on the basis
D
of the return. (2) A registered dealer who files a true and proper return and
pays tax on the basis of such return within the time allowed. (3).
A registered
dealer who does not file any return at all as required by section 7(1) and pays
no tax under section 7(2) of the Act. (4). A registered dealer who files a true
return but does not pay the full amount of tax as required by section 7(2), and;
(5) A registered dealer who files a return but wrongly claims either the whole or
any part of the turnover as not taxable and pays under section 7(2) of the Act
that amount of tax, which according to him is payable, on the basis of the return.
In the case of a registered dealer falling ·under class (l) no question of payment
of interest would arise as the amount of tax paid by him at the time of filing
the return is much more than what is actually due and payable by him under the
Act. The extra tax paid by him becomes refundable after the regular assessment
is completed in view of section 7(4) of the Act. In the case of a registered dealer
faHing under clause (2) also no question of payment of interest arises as there is
F
no shortfall in payment of the tax.
[594 F-5950]
4. A fair reading of section llB of the Act suggests that the Act expects
that all assessees who are liable to pay sales tax should file a true return within
the period prescribed undert:sub-section (1) of section 7 and should produce a
treasury receipt or a receipt of any bank authorised to receive money on behalf
of the State Government showing that full amount of tax due from them has been
G
paid. [595 H-596 A ]
5, It is settled law that a distinction has to be made by court while
interpreting the provisions of a taxing statute between charging
prov1s1ons
which impose the charge to tax and machinery provisions which provide the
machinery for th~ quantification of the tax and the levying and collection of the
H
tax so imposed. While charging provisions are construed strictly, m1chinery
sections are not generally subject to a rigorous construction. The courts are
B
c
5<i8
SUPREME COURT REPO~TS
[1982] I S.C.R.
expected to construe the machinery sections in such a manner that a charge to
tax is not defeated. [596 C·D]
India U'nited Mills Ltd. v. Commissioner of Excess Profits Tax, Bombay
[1955) 1 S.C.R. 810, Gursahai Saigal v. Commissioner of lncon1e-tax Punjab [1963]
3 S.C.R. 893 Commissioner of lncome-taX v. Mahaliram Ramjidas, A.LR. 1940 P.C.
124 and Whitney v. Commissioners of Inland Revenue [1926] A.C. 37, referred to.
6. If the words 'on the basis of return' occurring in sub-section (2) of
section 7 of the Act are construed as on the basis of a true and proper return
which ought to have been filed under sub-section (1) of section 7 then all the three
classes of persons viz (i) those who have not filed any return at all and who are
Jater on found to be liable to be assessed, (ii) those who have filed a true
return but have not deposited the full amount_ of tax which they are liable to pay
and (iii) those who filed a return making a \Vrong claim that either the whole or
any part of the turnover is not taxable and who are subsequently found to have
made a wrong claim, would be placed in the same position and they would aJJ
be liable to pay interest on the amount of tax which they are liable. to pay but
have not paid as required by sub-section (2) of section 7 of the Act. This view
is in conformity with the legislative intention in enacting section 1 lB of the Act.
[599 A-CJ
D
7.
In cases to which section 7(2) of the Act applies interest has to be paid
on the tax payable but which has not been paid from the last date on which the
return has to be filed for the assessment year in question and in cases to which
sub-section (2A) is applicable, from the last date on which the advance tax has
to be paid. The amount of interest has however to be calculated after the actual
amount of tax payable is assessed and necessary adjustments are made. [609 B-C]
E
8. Either by delaying the filing of the return or not filing it all or by
filing a return wrongly claiming that a certain part of the turnover is not taxable
or by not disclosing a part of the taxable turnover in the. return an assessee
cannot escape the liability to pay interest under section 11B on the amount of
tax withheld, as a consequence of his own action or inaction, from the last date
on which it had to be paid as per sub-section (2) or sub-section (2A) of section
7, as the case may be, read with the Rules. An assessee cannot contend that
interest does not accrue under section llB on the tax payable by him where the
time to file the return has elapsed until
he actually files a return admitting the
liability to pay such tax or until assessment is made. [604 B-D]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 852 of
1980.
G
From the Assessment orders dated the 30th January, 1980 of
the Commercial Tax Officer, Sp!. Circle Kola, (Rajasthan) for the
assessment year 1974-75.
Soli J. Sorabji, B.R. Agarwal and P. G. Gokhale for the
H
Appellants.
S. T. Desai and B. D. Sharma for the Respondents.
ASSOCIATED CEMENT v. C.T.O. (Bhagwati, J)
569
The Judgment of A.P. Sen arid E. S. Venkataramiah JJ. was
A
delivered by Venkataramiah J. P. N. Bhagwati, J .. gave a dissenting
opinion.
BHAGWATI, J.
I have had the advantage of reading the Judgment prepared by my learned brother Venkataramiah J., but despite
the great respect which I have for his learning and erudition, I find
myself unable to agree with the view taken by him.
The facts
giving arise to this appeal are not very material because the question
which arises for consideration is essentially one of law, but the
factual setting does help to see the question in its proper perspective
and hence it would be useful to set out a few material facts.
The assessee is a public limited company carrying on business
of manufacture and sale of cement. It has a factory for manufacturing cement at Lakheri in the State of Rajasthan and it effects
sales of cement both inside as well as outside the State of Rajasthan.
Since some of the sales effected by the assessee were inside the State
c
of Rajasthan and some others were inter-state sales, the assessee
D
filed returns of sales for the quarters comprised in the period !st
August 1973 upto 31st July 1974 both under the Rajasthan Sales
Tax Act 1954 (hereinafter referred to as the State Act) and the
Central Sales Tax Act 1956 (hereinafter referred to as the Central
Act).
The assessee did not include in the taxable turn-over shown
in the returns the amount of freight paid in respect of the goods
E
sold under the bonafide impression that the amount of freight did
not form part of the sale price and was not includible in the taxable
turn-over of the assessee. This impression
was carried by the
assessee in view of certain decisions which had been given by some
High Courts as well as the Supreme Court and particularly the
decision of the Supreme Court in Hyderabad
Asbestos Cement
F
Products Limited v. State of Andhra Pradesh('). The assessee paid
up for each quarter the full amount of tax calculated on the basis
of the return submitted by it and the receipt for such payment was
filed alongwith the return. The amount of tax paid by the assessee
obviously did not include tax on the amount of freight, since
according to the assessee the amount of freight did not form part
G
of the sale price and was accordingly not shown in the returns as
forming part of the taxable turn-over. Subsequently however, the
question whether the amount of freight formed part of the sale
price and was therefore includible in the taxable turn-over of the
assessee so as to be exigible to tax came up for consideration before
H
(1) 24 S.T.C. 487.
A
B
c
D
E
F
G
H
570
SUPREME COURT REPORTS
(I 982) I s.c.R.
this Court in Hindustan Sugar Mills Limited v. State of Rajosthan
and others(') and it was held by this Court that by reason of the
provisions of the Cement Control Order 1967 which governed the
transactions of sale of cement entered into by the assessee with the
purchasers, the amount of freight formed part of the sale price
within the meaning of the first part of the definition of that term
contained in section 2 (p) of the State Act and section 2 (h) of the
Central Act and was includible in the taxable turn-over of the assessee. As soon as this decision was given by the Court on 29th August
1978, the asse$see immediately prepared revised returns in respect of
the period Isl August 1973 upto 31st July 1974 showing the amount
of freight as forming part of the taxable turn-over and filed the
same before the Commercial Tax Officer, Special Circle, Kola on
20th October 1978. The assessee also deposited alongwith the revised returns challans showing payment of the balance of the tax
on the basis of the revised returns under the State Act as well as the
Central Act. Two orders of assessment were thereafter passed by the
As~essing Authority, one under section IO sub-section (3) of the
State Act and the other under section 9 of the Central Act. The
former order of assessment levied a penalty of Rs. 53,355 under
section 7AA of the State Act and interest amounting to Rs. 85,910.50
under section l IB of the State Act for the delay in pa}ment of the
tax in respect of the amount of freight under State Act, which
according to the Assessing Authority ought to have been deposited
alongwith the filing of the original returns.
Similarly, the latter
order of assessment also levied a penalty of Rs. 1,34,205 under
section 7 AA of the State Act read with section 9 sub-section (2) of
the Central Act and interest amounting to Rs. 2,07,174 under
section l IB of the State Act read with section 9 sub-section (2) of
the Central Act for the delay in depositing the tax payable in respect
of the amount of freight under the Central Act.
The assessee has
in the present appeal preferred with special leave challenged the
validity of both these orders of assessment in so far as they levy
penalty and interest on the assessee.
The first question which arises for consideration before us is
whether the Assessing Authority was right in imrosing penalty on
the assessee under the two assessment orders for not depositing the
tax in respect of the amount of freight at the time of filing of the
original returns under the State Act and the Central Act.
My
(!) [1979] I S.C.R. 276.
'
;
_,,'
17'
&
" \;;
•
r
ASSOCIATED CEMENT v. C.T.O. (Bhagwati, J.)
571
learned brother Venkataramiah has held, following the decisio" of
this Court in Cement Marketing Company of India Limited v. Commissioner of Sales Tax, Indore(') that "the levy of penalties for not
including the freight charges in the taxable turn-over in the original
returns and for not paying the tax in respect of such freight charges,
is unsustainable" and that the two orders of assessment in so far as
they levy penalty on the assessee are liable to be quashed and set
aside.
I entirely agree with the view taken by him and I do not
think T can usefully add anything to what he has said,
The next question that arises for consideration is whether the
assessee was liable under section 1 !B of the State Act to pay interest
on the tax in respect of the amount of freight for the period between
the date of filing of the origi"al return and the date when such tax
was actually paid while filing the revised return. The contention of
the.revenue was that the assessee was so liable and this contention
was sought to be supported by relying on section 2 sub-sections (I)
and (2) read with section 11 B of the State Act. The same provisions
with section 9 sub-section (2) of the Central Act were also relied
upon for the purpose of sustaining the Revenue's claim for interest
under the Central Act.
The determination of the question before
us therefore really turns on the true interpretation of section 7 subsection (I) and (2) read with section l IB of the State Act. Section
7 of the State Act as it stood at the material time was in the following terms :
"7. Submission of returns : (!)Every registered dealer,
and such other dealer, as may be required to do so by the
assessing authority by notice served in the prescribed
manner, shall furnish prescribed returns, for the prescribed
periods, in the prescribed forms, in the prescribed manner
and within the prescribed time to the assessing authority;
Provided that the assessing authority may extend the
date for the submission of such returns by any dealer or
class of dealers by a period not exceeding fifteen days in
the aggregate.
(2) Every such return shall , be accompanied by a
Treasury receipt or receipt of any bank authorised to receive
money on behalf of the State Government, showing the
(1) [1980] 1 S.C.R. 1098.
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deposit of the full amount of tax due on the basis of return
in the State Government Treasury of bank concerned.
(2AJ Notwithstanding anything contained in sub-section
(2), the State Government may by notification in the official
Gazette require any dealer or class of dealers specified
therein, to pay tax at intervals shorter than those prescribed .
under sub-section (I).
In such cases, the proportionate tax
on the basis of the last return shall be deposited at the
intervals specified in the said notification in advance of the
return. The difference if any, of the tax payable according
to the return and the advance tax paid shall be deposited
with the return and the return shall be accompanied by the
treasury receipt, or receipts, of any Bank authorised to
receive money on behalf of the State Government, for the
full amount of tax due shown in the return.
(3) If any dealer discovers any omission,
error, or
wrong statement in any returns furnished by him under
sub-section (1), he may furnish a revised return in the
prescribed manner before the time prescribed for the sub·
mission of the next return but not later.
Section l IB of the State Act during the relevant period provided
inter alia as under :
"l IB.
Interest on failure to pay tax, fee or penalty-
(a) If the amount of any tax payable under sub.sections (2) and (2A) of section 7 is not paid within
the period allowed, or
(b) If the amount specified in any notice of demand,
whether for tax, fee, or penalty, is not paid within
the period specified in such notice, or in the
absence of such specification, within 30 days from
the date of service of such notice, the dealer shall
be liable to pay simple interest on such amount
at one per cent per month from the day commencing after the end of the said period for a
period of three months and at one and a half per
cent per month thereafter during the time he
continues to make default in the payments;
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ASSOCIATED CEMENT v. C.T.O. (Bhagwati, J.)
573
Provided that, where, as a result of any order under
this Act, the amount, on which interest was payable under this section, has been reduced, the
interest shall be reduced accordingly and
the
excess interest paid, if any, shall be refunded:
Provided further that no interest shall be payable
under this section on such amount and for such
period in respect of which interest is paid under
the provisions of sections I J and 14.
These are the two sections which fall for construction but in order
to arrive at their true meaning and legal effect it is necessary to refer
to a few other provisions of the State Act. Section 3 is the charging
section and it creates the liability to pay tax. That is the normal
function of a charging section in a taxing statute.
But, of itself, it
does not make the tax payable by an assessee. It is only when the
tax which an assessee is liable to pay is ascertained that becomes
payable by the assessee.
Now tLe ncrmal mode by which the tax
payable by an assessee is ascertained is by the process of assessment
which is provided in section 10 Sub-section (1) clause (a) of section
IO says that assessment and determination of tax due for any year
shall be made after the returns for all the periods of that year have
become due. Section 11 then provides for payment and recovery
of tax and its provisions in so far as material read inter alia as
follows:
"11. Payment and recovery of tax:(!) The tax shall be
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payable by a dealer on the basis of the assessments.
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(2) The tax paid by a dealer shall be adjusted against
tbe judgment determined as a result of the assessment under
section 10 and the balance of the amount shall be payable
by such dealer by such date as may be specified in the
notice of demand and, where no such date is specified,
shall be paid within thirty days from the date of service
of the notice.
Provided that the assessing authority may, subject to
such conditions and restrictions as may be prescribed, in
respect of any particular dealer, and for reasons to be recorded in writing, extend the date of such payment and
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allow such dealer to pay the tax due and the penalty, if
any, by instalments.
(3) In default of the payment of tax payable under
sub-section (I) or sub-section (2), the amount of tax shall
be recoverable as an arrear of land revenue.
Provided further that where recovery of tax or any
part thereof is stayed under the preceding proviso, the
amount of such tax shall be recoverable with interest at
the prescribed rate on the amount ultimately found due;
and such interest shall be payable on such amount from the
date of tar. first become due."
When the assessment is made and the tax payable by an assessee
is determined, the tax so determined does not become payable until
after a notice of demand is served by the Assessing Authority under
section 11 sub-se:tion (2) read with Rule 31 of the Rajasthan Sales
Tax Rules 1955 made by the Government of Rajasthan in exercise
of the powers conferred under section 26 of the State Act and then
the assessec is allowed time to make payment up to the date specified
in the notice of demand and if no such date is specified, then within
thirty days from the date of service of the notice. So long the
assessee pays up the amount of the tax assessed within tire time
specified in the notice of demand or within thirty days from the
date of service of the notice, as the case may be, he would not be
in default and hence section l IB clause (bl provides that the
assessee would be liable to pay interest on the tax assessed only if
the amount of such tax is not paid within the period specified in
the notice of demand or in the absence of such specification, within
thirty days from the date of service of such notice and then too,
the liability to pay interest would commence not from the date of
assessment, but from "the day commencing after the end of the
said period" that is, the period specified in the notice of demand or
thirty days from the date of service of such notice, as the case may
be. Thus even after the assessment is made and the tax payable
by an assessee is determined, the assessee is not liable to pay interest
on the amount of such tax until after the period specified in the
notice of demand or in the absence such specification, thirty days
from the date of service of such notice, have expired.
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ASSOCIATED CEMENT v. c.r.o. (Bhagwati, J.)
575
Turning now to sub-section (I) of section 7 it requires every
registered dealer to furnish prescribed returns for the prescribed
period, in the prescribed forms, in the prescribed manner and within
the prescribed time to the Assessing Authority. It was not disputed
on behalf of the Revenue that in the present case the prescribed
returns in the prescribed forms were furnished by the assessee in
time for the quarter comprised in the period !st August 1973 to
31st July 1974, the
only grievance in regard to those returns
being that the amount of freight was not shown as forming part of
the taxable turnover. Sub-section (2) of section 7 provides that
every return furnished by the assessee must be accompanied by a
receipt showing the deposit of the full amount of tax due on tho
basis of the return and the assessee accordingly deposited the full
amount of tax calculated on the basis of each quarterly return a.1d
filed the receipt showing such deposit alongwith the return. Since,
according to the view taken by the assessee at the time of filing the
original returns, the amount of freight did not form part of the
sale price, it was not included in the taxable turnover shown in the
original returns and hence no tax on the amount of freight was
deposited by the assessee while filing the original returns. It was
only after the decision of this Court in Hindustan Sugar Mills
Limited Company's case (supra) that the assessee filed revised returns
including the amount of freight in the taxable turnover and deposited
the balance of the tax on the basis of the revised returns. The
argument of the Revenue was and that is the argument which has
appealed to my learned brother, Venkataramiah, that the words
"full amount of tax due on the basis of return" in sub-section (2)
of section 7 meant the full amount of tax due on the basis of a
true and proper return which ought to have been filed by the
assessee and not the full amount of tax due on the basis of the
return actually filed and since the amount of the freight was liable
to be included in the taxable turnover and hence in a true and
proper return, the "full amount of tax due on the basis of return"
within the meaning of sub-section (2) of section 7 included the tax
on the amount of freight and the assessee therefore ought to have
deposited the same at the time of filing, the original returns, and
since the assessee failed to do so, section I IA clause (a) was attracted
and the assessee was liable under that provision to pay interest on
the tax on the amount of freight which remained unpaid until the
filing of the revised returns.
This argument, plausible though it
may seem, is in my opinion unsustainable. It is plainly contrary
to the language of sub-section (2) of section 7 read with section I IB
and is opposed to the scheme of the State Act. It is also inconA
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sistent with the decision of a Bench of five Judges of this Court in
State of Rajasthan v. Ghasi La/(1). Indeed I fail to see how in the
face of the decision, the Court can possibly accept the argument of
the Revenue.
The language used in sub-section (2) of section 7 is "full
amount of tax due on the basis of return". The "return" referred
to is obviously the return filed by the assessee under sub-section (I)
of section 7. Now it is true that when sub-section (I) of section 7
requires an assessee to file a return, the return filed must be correct
and proper. If the return is not correct and proper, the Assessing
Authority may not give credence to the return and may refuse to
assess the tax on basis of the return and if the Assessing Authority
finds that the assessee has concealed any particulars from the return
furnished by him or has deliberately furnished inadequate particulars in the return, the Assessing Authority may levy penalty on
the assessee under section 16 sub-section (I) clause (e) and the
assessee may also be liable to be punished for an offence under
section 16, sub-section (3) clause (d) for making a false statement
in the return. But, whether the return filed be correct or not, the
tax payable by the assessee under sub-sectfon (2) of section 7 would
be the full amount of tax due on the basis of the return.
We must
look at the return actually filed by the assessee in order to see what
is the full amount of tax due on the basis of such return. It is not
the assessed tax nor is it the tax due on the basis of a return which
ought to have been filed by the assessee but it is the tax due
according to the return actually filed that is payable under sub·
section (2) of section 7.
This provision is really in the nature of
self-assessment and what it requires is that whatever be tbe amount
of tax due on the basis of self-assessment must be paid up along
with the filing of the return which constitutes self-assessment. I fail
to see how the plain words of sub-section (2) of section 7 can be
tortured to mean full amount of tax due on the basis of return
which ought to have been filed but which has not been filed.
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It may also be noted that the construction contended for on
behalf of the Revenue leads to a serious anomaly, If this construction were accepted, the tax payable under sub-section (2) of section
7 would be the full amount of tax due on the basis of a correct and
proper return and that would necessarily be the same as the tax
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assessed by the Assessing Authority, because what is a correct and
(I) [1965] 2 S.C.R. 805.
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ASSOCIATED CEMENT v. C.T.O.