# KHEMKA &CO v. STATE OF MAHARASHTRA

- **Citation:** [1975] 3 S.C.R. 753
- **Court:** Supreme Court of India
- **Decided:** 1975-02-27
- **Case number:** Civil Appeal No. 2089 of 1969
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/khemka-co-v-state-of-maharashtra-6378
- **Pages:** 30

## Headnote

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KHEMKA &CO.
v.
STATE OF MAHARASHTRA
27th February, 1975
753
[A. N. RAY, CJ., H .. R. KHANNA, K. K. MATHEW, M. H. BEG, Y. V.
CHANDRACHUD, JJ.].
Central Sales Tax Act 1956-S. 9(2)-Scope of Bombay Sales Tax Act-S.
16(4)-1/ penalty under tlie Central Act could be levied under s. 16(4) of tire
Bombay Act.
·
Section 9(2) of the Central Sales-tax Act, 1956 provides that the authorities
for the time being empowered to assess, re-assess. collect and enforce payment
of nny tax under the general sales-tax law of the appropriate State shall, on behalf
of the Government of India, assess, re-assess, collect and enforce payment of tax,
including any p~nalty, payable by a dealer under this Act as if the tax or penalty
payable by such a dealer under this Act is a tax or penalty payable under the
11eneral S<•les-tax law of the State. Section 16 of the Bombay Sales-tax Act pro·
~ides for payment and reco.verv of tax. Sub-section ( 4) states that if the tax is
not paid by any dealer within the prescribed time, the dealer shall pay a penalty
in addition to sales-tax assessed.
·The assessee unsuccessfully contended before various sales-tax nuthoriries as
well as before the High Court that levy of penalty under s. 16(4) of the Bombay
Sales-tax Act for delay or default in payment of tax under the Central Sales Tax
Act was without jurisdiction as it was not warranted by the provisions of s. 9 (2)
of the Central Sales-tax Act, 1956.
In lhe Mysore case which was similar to the Bombay case, however, the High
Court allowed the assessee's claim that the. levy of penalty under lb~ Mysore
Sa!e5·tax Act•in respect of sales-tax payable under the Central Sales-tax Act was
11ltra i·ires.
It was contended before this Court that there was no provision in the Central ·
Sales-tax Act for. imposition of penalty for delay or default in payment of tax
and. therefore, imposition of penalty -under the provisions of the State Act for
delay or default in payment of tax was illegal.
[per Ray, CJ. and Khanna, J.] (Beg, J. concurring in the final results).
Allowing the appeal,
HELD : The Mysore High Court correctly pointed out that the words "as if
the tax or penalty payable by such a dealer under this Act" relate to tax or
p·Jn<t!ty which is payable only under the Central Act.
[763B]
The provision in the State Sales Tax Act imposing penalty for non-payment
of sales-tax within the prescribed time is not attracted to impose penalty on dea·
!crs under the Central Sales Tax Act in respect of .tax and penalty payable under
lhe Central Act. There is no lack of sanction for payment of tax. Any dealer
\'.ho would not comply with the provisions for payment of tax would be subjected
ta recovery proceedings under the Public Demands. Recovery Act.
A penalty
is a statutory liability. The Central Act contains specific provisions for penalty.
Those are the only provisions for penalty available against the dealers under the
Central Act. Each State Sales Tax Act contains provisions for penalties. These
prov'.sions in some cases are also for failure to submit a return or failure to
register. It is rightly said that those provisions cannot apply to dealers under
the Central Act because the Central Act makes similar provisions.
Th~ Central
Act is a self-contained code which. by the charging section, creaks !!ability for
tax and which by other sections creates a liability for penalty and imposes pen~lty.
Section 9(2) of the Central Act creates the State authoritie• as ag~ncies to carry
out the as~essment. re-assessment. collection and enforcement of tax and penalty ·
payable by a dealer under the Act.
[765H: 766A ·Bl
~
2-564SCI/75
,.
I
754
SUPREME COURT REPORTS
U 97 SJ 3 s.c.R.
( J) The words 'as1<ss, re-assess, coJlect nnd enforce ·payment of tax including nny penalty rayabk by a uealcr unJ~r this Ac!' mean that the tax as well as
renalty is payable only undi;r the Central Act.
By s. 9(2) of the Central Sales
Tax Act the State Sales-TtlX Authorities arc created as agents of the

## Text

_Characters 0–39,923 of 98,647. This is a partial read: ask again with offset=39923 for what follows._

A
B
c
D
E
F
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H
KHEMKA &CO.
v.
STATE OF MAHARASHTRA
27th February, 1975
753
[A. N. RAY, CJ., H .. R. KHANNA, K. K. MATHEW, M. H. BEG, Y. V.
CHANDRACHUD, JJ.].
Central Sales Tax Act 1956-S. 9(2)-Scope of Bombay Sales Tax Act-S.
16(4)-1/ penalty under tlie Central Act could be levied under s. 16(4) of tire
Bombay Act.
·
Section 9(2) of the Central Sales-tax Act, 1956 provides that the authorities
for the time being empowered to assess, re-assess. collect and enforce payment
of nny tax under the general sales-tax law of the appropriate State shall, on behalf
of the Government of India, assess, re-assess, collect and enforce payment of tax,
including any p~nalty, payable by a dealer under this Act as if the tax or penalty
payable by such a dealer under this Act is a tax or penalty payable under the
11eneral S<•les-tax law of the State. Section 16 of the Bombay Sales-tax Act pro·
~ides for payment and reco.verv of tax. Sub-section ( 4) states that if the tax is
not paid by any dealer within the prescribed time, the dealer shall pay a penalty
in addition to sales-tax assessed.
·The assessee unsuccessfully contended before various sales-tax nuthoriries as
well as before the High Court that levy of penalty under s. 16(4) of the Bombay
Sales-tax Act for delay or default in payment of tax under the Central Sales Tax
Act was without jurisdiction as it was not warranted by the provisions of s. 9 (2)
of the Central Sales-tax Act, 1956.
In lhe Mysore case which was similar to the Bombay case, however, the High
Court allowed the assessee's claim that the. levy of penalty under lb~ Mysore
Sa!e5·tax Act•in respect of sales-tax payable under the Central Sales-tax Act was
11ltra i·ires.
It was contended before this Court that there was no provision in the Central ·
Sales-tax Act for. imposition of penalty for delay or default in payment of tax
and. therefore, imposition of penalty -under the provisions of the State Act for
delay or default in payment of tax was illegal.
[per Ray, CJ. and Khanna, J.] (Beg, J. concurring in the final results).
Allowing the appeal,
HELD : The Mysore High Court correctly pointed out that the words "as if
the tax or penalty payable by such a dealer under this Act" relate to tax or
p·Jn<t!ty which is payable only under the Central Act.
[763B]
The provision in the State Sales Tax Act imposing penalty for non-payment
of sales-tax within the prescribed time is not attracted to impose penalty on dea·
!crs under the Central Sales Tax Act in respect of .tax and penalty payable under
lhe Central Act. There is no lack of sanction for payment of tax. Any dealer
\'.ho would not comply with the provisions for payment of tax would be subjected
ta recovery proceedings under the Public Demands. Recovery Act.
A penalty
is a statutory liability. The Central Act contains specific provisions for penalty.
Those are the only provisions for penalty available against the dealers under the
Central Act. Each State Sales Tax Act contains provisions for penalties. These
prov'.sions in some cases are also for failure to submit a return or failure to
register. It is rightly said that those provisions cannot apply to dealers under
the Central Act because the Central Act makes similar provisions.
Th~ Central
Act is a self-contained code which. by the charging section, creaks !!ability for
tax and which by other sections creates a liability for penalty and imposes pen~lty.
Section 9(2) of the Central Act creates the State authoritie• as ag~ncies to carry
out the as~essment. re-assessment. collection and enforcement of tax and penalty ·
payable by a dealer under the Act.
[765H: 766A ·Bl
~
2-564SCI/75
,.
I
754
SUPREME COURT REPORTS
U 97 SJ 3 s.c.R.
( J) The words 'as1<ss, re-assess, coJlect nnd enforce ·payment of tax including nny penalty rayabk by a uealcr unJ~r this Ac!' mean that the tax as well as
renalty is payable only undi;r the Central Act.
By s. 9(2) of the Central Sales
Tax Act the State Sales-TtlX Authorities arc created as agents of the Go\'ernment
of frdi~. [7CJ D: BJ
\2) The words "and for this purpose they may exercise all or any of the
powers they haw under the general sales-tax law of the State" ins. 9(2) of the
Central Act
1-.~late to "assess, re-assess, collect and enforce payment of tax in·
duding any p(:nalty payable by a dealer under this Act." In that context the last
limb of s. 9(2) of lhe Central A,ct, namely, "and the provisions of such law ....
. . . . . . shall apply accordingly'' means that the provisions of the State Act me
applicable for the purpose of assessment, re·assessm~nt, collection and enforcement of payment of tax including penalty payable under the Central Act.
The
WQrds pf the last pa·rt of s. 9(2) namely, "shall apply accordingly~' relate clearly
to the words "and for this purpose" with the result that the provisions of the
StMe Act shall apply only for the purpose of assessment, re-assessment, coll.cction
and enfor:ement. [761G-H; 7€2A] ·
(3) The extent of liability for tax as well as penalty is not attracted by the
doctrine of cj11sdem generis in the application of the provisions of the State Act
B
c
in regard to assessment, re-assessment, collection and enforcement of payment
of t~ix including any penalty payable under the Central Act.
The doctrine of
ej11sdtm ge11eris shows that the genus in s. 9 (2) of the Central Act is 'for !his purpose'.
Tn oth,~r words, the genus is assessm~nt, re-assessment, collection and en·
forcem~nt of payment. The genus is applicable in regard ·to the proceduri for
D
assessment, rc,assessment, collection and enforcement of payment. The genus j,
from whom to collect and against whom to enforce. [76~A-C]
( 4) The deeming provision in the Central Act that the tax as well as penalty
levied under the Central Act will be deemed as if payable under the general saks
tax law of the State, cannot possibly mean the tax or penalty impo~ed under any
State Act will be deemed to be tax or penalty payable under the Central Act.
The entire authority of the State ·machinery is that "for this purpose" meaning
E
thereby the purpose of assessing, re-assessing, collecting and enforcing payment
of tax including any penalty payable under the Central Act, they, meaning the
State agencies, may exercise powers under the general sales tax law of the State.
The words "for thi.s prn'pose" cannot have the effect enlarging the contern: of tax
and the content of penalty under the Central Act. Liability to pay tax as well '"
liability to pay penalty is created by the Central Act.
(7620-E]
(5) If the liability to pay tax is determined by the provisions of the Central
.\ct the liability to pay penalty is also that ''hich is payable under the Central Act.
F
Th~ procedural law prescribed in the general sales-tax Jaw of the State applie1 tG
th~ matter of assessment, re-~ssessment, collection and enforcement of paym.:nt
of tax under the Central Act because the liability to pay tax is dctennined under
the Central Act.
Similarly liability to pay pen•Jtv i:; determined with refercn.:~
to the p1w;i;io11s of the Central Act. [763DJ.
Stii!e o.1 J\cr11/n v. P. P. Joseph & Co .. 255 STC -183; followed.
(6) Rebate is a conc~ssion ,,·hereas penalty is an imrosition. The conco'·
·
<ion does not !ninose liability bnt penalty does.
Tt, therefore, ~tands to re;»on
G
that .rchale is included within the nrocedural nart of collection and enforccrnem
of p;1yment of tax. ·renal\y, like in1position of tax, cannot be included within th~
prow!ural rart. f763G-H]
()rissa C'111mt Limited v. Tlte State of Orissa & Anr., 27 S.T.C. 118; fo'Jov;;;J.
C. A. Ahralia111, Uppootfi/, Kottayam v. The lnco111e Tax O[ficer, KottaYl/'n
& A11r., [1961] 2 S:C.R. 765 and Co111missio11er of Tnco111e-Tax, Andhm Prndrsh
"I
v. Mis. Bhikaji Dadabhai & Co., [1961] 3 S.C.R. 923, distinguish~d.
£
(7) Penalty is within assessment proceedings just as tax is within the assessment proceedings when the relevant Act by substantive charging provision levies
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KHEMKA & CO. V. MAHARASH1 RA
755
tax as well as JlCnnlty.
Pcn;1Jty is not merely a sancticJ. It is not merely an
adjunct lo assc>1mc11t.
ll is not merely consequential to assessment. It is not
merc:r mad:inery. Pcn:ilty is in addition to tax and is a liability under :he Act.
T'cm1Jty is not a C<':1tinuation of assessment p;o,;ecdings and iienally partakes of
the ch:nacter of additional tax.
[765B-D]
Jnin Brothers & 01 <. v. U1;ion of India. 77. l.T.R. 107 followed .
(8) Under a taxing statute Jbbility does not begin on assessment.
There
r,rn;t be a liability creat<·d b:: the Act, the Act must provide for assessment and
the Act must pro1 ide for eai'orcement of the taxing provisions. The mere fact
that there is machinery for '"sessment, collection ·and enforcement of tax mid
penalty in the State Act docs no' mean t1rnt the provision for penalty in the State
Act is treated as penalty under the Central Act. The meaning of penalty under
the Central Ac.t cannot be enlarged by the provisions of machinery of the State
Act incorporated for working out the Central Act. [765E·Fl
Jail! Brothers & Ors .• v. Ul!ion of lndin, 77, I.T.R. 107 and Cliafluram & Ors.
v. Ccmm[ssioner of !11comc-tax, Bihar, 15, I.T.R. 302, followed.
Per BEG. J. (l) The prnvbions relating to penalties are special and
spcc:ific
pro..-ision•; in each Act. They are not part of "the general sales tax hw" of ei1hcr
the State er of the Union. ![ the provisions relating to penalties, such as those
found in the Central Act and the State Acts. are really special prol'i·;ions which
can be invoked in the special circumstances given in each statute, th~ reference to
penalties in the concluding portion of s. 9(2) must be interpreted to relate cn1y
to the special provisions relating to penalties provided for specificr•lly in the Cen·
tral Act.
[782B·CJ
·
(2) The rule to be applied with regard to a statute purporting to impcsc a
charge is ''that the intention to impose a charge upon the subject, must be shown
by clear and unambiguous language". If the language leaves room for coming
to the conclusion that only penalties specified in the Central Act are enforceable
by the machinery for enforcement of liability under the gen?ral sales tax law of a
State, then, the legislative intent could safely be presumed to be to confine penalties mentioned in the concluding part of s. 9(2) to only those mentioned specifkrlly in the Central Act.
[782F-G]
Oriental Bank Corporation v. Wright, [18801 5 App, Cas. 842 @ 856 referred
IQ.
(31 Section 76(a) of the Bombay Sales Tax Act. 1959 repealed the Bombay
Sales Tax Act of 1953. Section 16 of the 1959 Act refers to an entirely different
subject matter. At the time when the assessment order was made, there wns no
provision for imposition of any penalty under s. 16(4) of the Bombay Act of
1953 which the Sales Tax Authorities and the High Court sought to utiii'' to
jus'.ify the penalty imposed.
[777G·H]
·
(4) In 1956 the Parliament conld not have applied its mind to provisions
l'hich caP1e into existence afterw~rds. It could not have incorporated them by
reference <ls parts of a procedure applicable to assessments which took place acter
1959 when the Bomhav Act of 1953 was repealed.
At the time of the pa?.sing
of the Central Act. lhe relevant statute in existence in Eombay was lhe B0m':•aY
,\ct, 1953. Bnt s. 16(4) of the Bombay Act of 1953 under which the mies tax
authorities pmported to act, did not exist on the statute book at the time of assessment. Unless it is assumed that s. 9(2) of ihe Central Act, by necessary im;·.]i.:ation .. authorised the S!ate Legislatures to go on in1posing such penalties for such
breaches of duty as it pleased them to lay down on beldf Cf Pu!iamcnt subsequently enacted provisions of State enactments would
not
he
avc<ii obk
/.! l 8A-CJ
Re. Del/Ji Lmrs Act (1912) etc. [1951] S.C.R. 747 referred to.
<5) Section 13 ·af the Mysore Sales Tax.Act 1957 was entirely recast in 1958.
It would be carrying the theory of referential legislation too far to ass1:rnc '!oat
s. 9(2) of the Central 1\ct, 1956 purported to authorise the State Legislatures to
7 56
SUPREME COURT REPORTS
[19751 3 s.C.R.
impose liabilities in the nature of additional tax ot· penaltie3 leal'ing their rates
and conditions for their imposition also to be determined by the State Legislatures
a·.; •rnd when the State Legislatures decided to impose or amend them.
[7780]
(6) On a co·nsideration of the ?rovisions of s. 16( 4) of the Bombay Act it
seems clear that whatever may be the objects of levying a penalty, its imposition
gives rise to a substantive-liability which can be viewed either as an additional tax
or as a fine for the infringement of the law. It is an imposition of a pecuniary
liability which is compar_a ble to a punishment for the commission of an offence.
[779B}
!7) The imposition of a pecuniary liability, which take the form of a penalty
or fine for a breach of a legal obligation, cannot be relegated to the region of
mere procedure and machinery for the realization of tax.
Such liabilities must
be created by dear, unambiguous, and express enactment.
The languag•e used
should leave no serious doubts about its effect so that the persons who are• to be
subjected to such liability fpr the infringement of law are not left in a state of
uncertainty as !1) what the~r duties or liabilities are. [7790]
(8) The provisions of s. 9(2) of the Central Sales Tax Act make it clear that
the powers of the State Sales Tax Officers were specifically limited by the provisions of the Central Act. They cannot go beyond these provisions. It is also
clenr from s. 9(2) that these powers are exercisable only "for this purpose". In
other words, they are not authorised to collect dues for purposes extraneous to the
Cr.ntral A~t. [78 IH]
Pa Mathew and Chandrachud, JJ. (dissenting).
(!) A careful analysis of s. 9(2) of the Central Act would show that the
authorities empowered to assess, reassess. collect and enforce payment of tax
payable under the general sales tax law of the appropriate State shall assess, reassess, collect and enforce payment of tax including penalties payable by a
dealer under the Central Act as ir the tax or penalty payable by a dealer under the
Central Act is a !~ix or penalty payable under the general sales-tax law of the
State and for that purpose, the authorities may exercise all or any of the powers
they have under the genernl sal·~s tax law of rhe State.
[767F-G]
(2) If the sales-tax authorities of a State have power, when enforcing payment of sales-tax payable under the general sales-tax law of the State to impose
penalty for non-payment of tax within the prescribed time, they will have a like
power to impose penalty, for enforcing payment of the tax payable under the
Central Act within the time prescribed. It was not necessary that powe~ to impose penalty for enforcing the payment of tax payable by a dealer under the Central Act should have been specifically provided in or conferred separately by the
sub-se~tion uoon the sales tax authorities of the State, because, the powe.r to enforce payment of tax payable under the Central Act, in the same manner as the
power to enforce tax payable under the general sales-tax law d the State. has
been given by it. The provision for imposition of penalty in s. 16 of the Bombay
Sales Tax Act facilitqtes the collection of tax as it is a sanction for non-observance of the duty to pay the tax within the prescribed time. It operates as a
deterrent against the commission of breach of that duty, and is a means to enforce
the payment ()f tax wi.hin the time prescribed.
[767H; 768A-0]
C. A. ,1braham U1111oottil v. The Income Tax Officer [1961] 2 S.C.R. 765,
Marsddi Krishna Reddy v. Income Tax Officer, Tena/i [1957] 31 I.T.R. 678.
Commissioner of Income Tax v. Bhikaji Dadabhai & Co., [1961] 3 S.C.R. 923
and Orissa Cement Limited
v.
The State of Orissa and Anr. 27 S.T.C. 1 lR
referred to.
(3) If rebate can be given on the basis that it would facilitate, expedite and
stimulate the collection of tax there is no reason why a penalty could not be imposed to expe~ite, facilitate and stimulate the collection of tax and as part of the
process of collection. Payment of rebate is a liability from the point of view of
the Revenue .. though it is a concession from the point of view of the assessee. If
penalty is levy of money on an assessee, rebate means payment of money to an
assessee [770C-Ol
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l\HEMKA & CO, v. MAHARASHTRA
757
( 4) It is difficult to hold that Parliament invested the State authorities with
power to a~ses;, re-assess, collect and enforce p;1yment of tax payable under the
Central Act as if the tax is a tax payable under the general sales tax law of the
State, but denuded them of the power to invoke the provision in the general salcstax law of the State for imposition of penalty .for enforcing payment of the tax
payable thereunder, as that is an effective means to the enforcement of payment
of tax within the prescribed time. [770F-G]
(5) The analogy of principal and agent has no relevance in this context. If
the power of enforcement of payment of tax payable under the Central Act conferred on the authorities of the State would include the power to impose penalties
provided in the general sales tax law of· the State there is an end of the matter.
The whole falacy in the reasoning of the _High Court is the assumption that only
the penalties provided in the Central Act can be imposed by the authorities by
using the machinery of the sa.les-tax law of the State as they alone are specifically
mentioned in s. 9 (2) and in ignoring what are the powers actually conferred by
the words enforce payment of tax ........ .'.as if the tax .......... payable by .
such a dealer under this Act is a tax ........ payable under the general sales tax
law of the State" in the sub-section. [772A-B]
( 6) It is clear from s. 9 (2) that the penalties which could. be imposed by
the State authorities by virtue of the express provision in it are the penalties provi<led in s. I 0 read with s. 1 OA.
[772H]
(7) When s. 9 (2) says that assessment, re-assessment, collection and enforcement of payment of tax due under the Central Act should be made by the autho·
. rities of the State as if the tax payable .under that Act is tax payable under the
general sales-tax law of the State and for that purpose "they may exercise all or
any of the powers they have under the sales tax law of the State", there can be
no manner of doubt that if for enforcing payment of tax due under sales-tax law
of th_e State, they have power to impose penalty, they have the same power of
imposing penalty for enforcing payment of tax payable under the Central Act.
The reason why the sales tax authorities of the State were given specific power
under s. 9(2) to enforce the penalties payable by a dealer under the Central Act
is that those penalties were not and perhaps could not have been provided for in
the sales-tax law of the State. The penalties provided in s. JO read with s. lOA
of the Central Act are not for the purpose of or in connection with assessment,
re-assessment, collection and enforcement of payment of tax payable by a dealer
under the Central Act and could not have been imposed by the sales tax authorities of the State in making assessment, re-assessment, collection or in enforcing
payment of ihe tax payable under the Central Act.
Therefore, express power
had to be conferred upon the sales tax authorities of the State to enforce the penal- ·
ties payable by a dealer under the Central Act.
f773C-G.I
(8) In the nature and scheme of the Central Act. it was not necessary to provide for imposition of penalty or for the other methods of enforcing the payment
of tax payable under the Centrnl Act since Parliament has adopted the machinery
provided in the general sales tax law of the State as respects enforcement of the
tax payable under the Central Act. [774E]
(9) The expression "penalties" in the latter part of the s. 9(2) can only refer
to penalties imposable under the general sales tax law of the State in connection
. with assessment, re-assessment, collection and enforcement of payment of tax ..
The latter part of the sub-section only enumerates some of the powers exercisable
by the sales-tax authorities of the State to assess, re-assess, collect and enforce
oayment of tax payable under the Central Act. The language of the sub-section
beginning with "and for this purpose they may exercise all or any .of the powers
they have under the general sales tax law of the State, and the provisions of such
Jaw including provisions relating to returns, provisional assessment, advance payme~t of tax .... appeals, reviews, revisions, references, refunds, penalties ...... "
makes it clear that the word 'penalties' occurring therein can refer only to penal·
tics rirovided in the general sales-tax Jaw of the State. In other words the express mention of the power to impose 'penalties' among the enumerated. powers
beoinning with the ·.vords "and the provisions of such law including the provisions
rel~ting to ...... penalties" would put it beyond doubt that the word "penalties"
758
SUPREME COURT REPORTS
' [1975] 3 s.c.R.
in the lallcr part of the sub-section can only refer to penaltie> imposabl1~ under
the g:neral sales tax law of th~ State in relation to assessment, re-asscs~ment, colh~cti>in and enforcement of p::;·meU': of tax pa·yable thereunder.
\77JB-D]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2089 of 1969.
Appeal by Special Leave from the Jt:dgmcnt •and Order dat;:d the
22nd February 1968 of the Bombay High Court in Sales Tax Reference
No. 36 of 1967 and
Civil Appeal No. 2118 of 1970
from the Jud1!lncnt and ord~r dated the 18th March, 1970 of the
Vfysorc High Co~rt in Writ Petition No. 345 of 1970.
S. T. Desai, P. G. Blwrwri and K. J. John, for the api;cllant (In
C.A. 2089/69).
:'vi, Veerappa, f?r the appellant (in C.A. 2118170).
Sai;tosh Chatter,jee and G. S. Chatterjee for the Applicant/Intervener (State of West Bengal).
c
L. N. Sinha, Solicitor General, M. N. Shro.fj for the Intervener
D
(L'nion of India in C.A.2089 /69).
L. N. Sinha, Solicitor General, M. G. Bha11dare and M. N. Shroff
for respondent (C.A. No. 2089/69).
The Judgment of A. N. Ray, C.J. and H. R. Khanna,
.T.
was
delivered by Ray, CJ. K. K. Mathew, J. gave a dissenting opinion
E
on behalf of himself and Y. V. Chandrachud, J., M. H. Beg, J. gave
a separate Opinion.
RAY, C.J.+-These appeals raise the question as to whether the
asscssees under tile Central Sales. Tax Act, 1956 hereinafter referred
to <ls the Central Act could be made liable for penalty under the provisions of the State Sales Tax Act hereinafter referred to as the State
F
Act. The peJrnlty imposed under the State Act is for default in payment of taxes within the prescribed time.
The
Central
Act
states
section
9(1)
that
the
tax
payable
by
any
dealer
under
the
Central
Act
on
sales
of
goods
effected by him in the course of inter-.state
trade or commerce shall be levied by the Government of India and the
G
tax so levied shall be collected by that Government in accordance with
the provis:ons of sub-section (2) in the State from which the movement of gqods_commmced.
Section 9(2) of the Central Act is as follows :-
"Subject to the other provisions of this Act and the Rules
m<.de thereunder, the authorities for the time being empowered to assess, re-assess, collect and enforce payment of any
tax under the general sales tax law of the appropriate State
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shall, on beh•alf of the Government of India, assess,· re-assess,
collect an\! enforce payment of tax, including any penaliy,
payable by a dealer under this Act as if the tax or penalty payable by such a dealer under this Act is a tax or pen•alty payable U'i1der the general sales tax law of the State; and for
this purpose they may exercise all or any of the powers they
have under the general sales tax l'aw of the State; and the
provisions of such law, including provisions relating to returns, provisiu1aal assessment, advance payment of tax. regisfration of the transferee of any business, imposition of the
tax liability of r. person carrying on business on the· tmnsferee of, or successor to, such business, transfer of liability
of any firm or Hindu undivided family to pay tax in the event
of the dissolution of such firm or partition of such family, recovery of tax from third parfas, appeals, reviews, revisions,
references, refunds, rebates, penalties, componding of offences
and treatment.of documents furnished a dealer as confidential shall apply accordingly.
Provided that if in any State or part thereof there is no
go1eral sales tax Jaw in force, the Central Government, may,
by rules made in this behaif make necessary provision for
all or any of the matters specified in this sub-section.''
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Section 6 of the Central Act provides for liability to tax on interstate sales.
Section 8 of the Central Act provides for rates of tax
on sales in the course of inter-State trade or commerce.
Section 9
of the Ceiatral Act provides for collection of tax and penalties.
Section 10 of the Central Act provides penalties.
The various
grour,ds for penalties are fully enumerated there.
Section lOA (1) of
the Central Act provides for imposition of penalty in lieu of prosecution.
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The contention on behalf of the assessee is that there is no provision
i•,1 the Central Act for imposition of penalty for delay or default in
payment of tax, and, therefore, imposition of penalty under the provisions of the State Act for del'ay or default in payment of tax is illegal.
The rival contention on behalf of the Revenue is that the provision
for penalty for default in payment of tax as enacted h1 the State Act
is upplicable to the payment and collection of the tax under the Central
Act and is incidental to 'llnd part of the process of such payment and
collection.
The Solicitor-General on behalf of the Reve'.me placed reliance on
th<.: decisions in K. V. Adinarayana Setty v. Commercial Tax Officer,
Kolar Circle, Kolar 14 S.T.C. 587; Commissioner of Sales Tax, Madhya
Pradesh, Indore v. Kantilal Mohan/al & Brothers 19 S.T.C. 377; M/s
H. Jf. Esufali H. M. Abdulali v. Commissioner of Sales Tax M.P.
l ndore 24 S.T.C. 1; and Auto Pins (India) v. The State of Haryana
& Ors. 26 S.T.C. 466 in support of his contntion.
The contentions of the Solicit::>r General are these : Section 9 ( 1) ·of
the Central Act speaks of tax.
That section does aot mention penalty.
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SUPREME COURT REPORTS
(19751 3 s.c.R.
Tax will include collection and enforcement of payme,1t.
The words
"tax and penalty payable by a dealer under this Act" indicate that the
. word~ "under this Act" in the Central Act relate only to a dealer.
Section 9 (2) of the Central Act is a provision prescribing the procedure
for assessing, collecting and enforcing payment :>f tax. 'The words.
"collect and enforce payment of tax, including any penalty" in Sec:tion
9(2) of the Central Act ir1clude not only penalties imposed py the
Central Act but also penalties under the State Act. The words "as if
the tax or peaalty payable by such •a dealer under this Act is a tax or
penalty payable under the general sales tax law of the State" indicate
that tax or penalty is imposed by the Central Act and by incorporating
the State Act as a 'Part of thP. Central Act the$abi!ity to pay tax is
enforced by penalty for delay or default in payment of tax.
The Solicitor-General further submitted a.s follows : The latter part
of section 9(2) of the Central Act, viz., "for this purpose they may
exercise all or any of the powers they have under the ge,1eral sales tax
law of the State; •and4the provisions of such law ........ shall apply
accordingly" shows that the enforcement provisions in the State Act for
delay or default in payment of tax are adopted by the Central Act for
working out the provisions relating to assessment, re-assessment, collection and e;,1Eorcement of tax or penalties.
Penalty is a sanction for
non-payment. If the assessee does not pay and if there is no provision for imposition penalty, there will be no sanction for enforcement
of payment
The purpose for which the State Act is incorporated in
the Ce,1tral Act is, int::.r alia, enforcing payment of tax which inc:ludes
penalty for deloay and default in payment of tax. In short, just as
penalty is imposed for non-payment of tax under the State Act that
provision is attracted for delay or default, in payment of tax under the
Cenrtal Act.
' On behalf of the assessee it was said that the provisions. contained
i11 section 9 ( 2) of the Central Act mean that only if tax as well as
penalty is payatle by a dealer under the Central Act then there can
be coHection and enforcement of tax and penalty in the same mal1'ner
as provided i11 sales tax law of the State.
Second, the Central Act
must lrave a substantive provision to wammt imposition of penalty.
The provision in a. State Act regarding penalty for default in payment
cannot be applied when there is no substantive provision relating to levy
or penalty in the Central Act in respect of that default.
Third, se:ctim
9(2) of the Central Act is procedural and only deals with utilisation of
existing m.:ichinery in State Jaw.
The: State authorities are empowered
to exercise powers under the general sales tax law of the State to assess,
re-assess, collect and enforce payment of tax and penalty payable
under the Central Act.
Just as tax payable under the Central Act
can be collected and enforced similarly, only penalty payabie under
the Central Act can be collected and enforced.
Counsel on behalf of the assessees relied on the decisions in B. H.
Shah & Co. v .. The State of Madras 20 S.T.C. 146; The State of Madras
v. M. Angappa_ Chettiar and Sons 22 S.T.C. 226; Guldas Narasappa
Thimaiaiah Oil'Mills v. Commercial Tax Officer, Raichur 25 S:.T.C.
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489; and Hurdatroy Jute Mills Private Ltd. Katihar & Ors. v. Superintendent of Commercial Taxes, Purnea & Ors. 30 S.T.C. 151 in support
of the proposition that the substantive law for penalty under the State
Act is not incorporated in the Central Act.
Section 9(2) of the Central Act first provides that the authorities
empowered to assess, re-assess, collect and enforce payment of any rax
under the general sales tax law of the appropriate State sha:ll, on behalf
of the Government of Lldia, assess, re-assess and enforce payment of
rax including any penalty payable by a dealer under the Central Act.
The State Sales Tax authorities are thus created agents of the Government of India.
The second important part in section 9(2) of the Central i\ct is that the State authorities shall assess, re-assess, collect and
enforce payment of tax including any pe.rnlty payable by the dealer under the Central Act as if the tax or penalty payable by such a dealer
under the Central Act is a tax or penalty payable under the general
sales tax law of the State. This part of the section sets out the scope
of work of the State agencies.
The words "assess, re-assess, collect
and enforce payment of tax including any penalty payable by dealer
under this Act" mean that the tax as well •as pe<a!!lty is payable only
under the Central Act.
To suggest that the words "under this Act" qualify dealer will be
unsound for two reasons.
First, section 2 (b) of the Central Act defines
a dealer.
A dealer is not defined as dealer under the Central Act
but as one who carries on business of buying a•ad selling. If the words
"under this Act" were to relate only to dealer then the words "under
this Act" would have to be scored out in relation to the words "tax·
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including any penalty payable".
The result would be that the words
"payable by a dealer" in the context of the words "as if the tax or
pe1mlty payable by such a dealer under this Act" would be rootless.
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It is only tax as well as pe<.1alty payable by a dealer under the Central Act which can be assessed, re-as.sessed, collected and enforced in
regard to payment.
The words "as if the tax or penalty payable by
such a dealer under the Central Act is a tax or penalty payable under
the general sales tax law of the State" have origin and root in the words
"payment of tax including any penalty payable by llealer under the
Central Act."
Just as tax under the State Act cannot be P'ayable and
collected and enforced, similarly penalty under the State Act cannot
be assessed, collected and enforced.
The words "and for this purpose they may exercise all or any of
the powers they have U'ader the general safos tax law of the State" in
section 9(2) of the Central Act are important.
The words "and for
this purpose" relate to "assess, re-assess, collect and enforce payment
of tax including any penalty payable by dealer under this Act." . In
that context; the last limb of section 9 ( 2) of the Central Act viz. "and
the provisions of such law ........ shall apply accordi,1gly" mean that
. the provisions of the State Act are applicable for the purpose of assessH
ment, re-assessment, collection aad enforcement of payment of tax
including pen•alty payable under the Central Act.
The words of the
last part of section 9(2) viz. "shall apply accordingly" relate clearly
762
SUPREME COURT REPORTS
(19751 3 s.c.R.
to the words "1nd for this purpose" with the result that the provisicrn
or the StatG Act shall apply only for the purpose of assessment, reassessment, collection and enforcement.
The doctrine of efusdem
~;e11eris shows ;hat the genus in section 9 ( 2) of the Central Act is "for
this purpose". In other words, the genus is assessment, re-assessment,
coflection and enforcement of payment.
The genus is appliC'able in
regJrd to the procedure for assessment, re-as'icssment, collection and
r.nfc1cement of payment. The genus is from whom to collect and
~.~:ii:ist whom to en1forcc.
It is apparent that the extent of liability
f,~r tax as w1~ll as penalty is not attracted by the doctrine of ejusd,·m
.~Ci!':'.' i.1 in th'~ application of the provisions of the State A~t in regard
tn
:.s,;~ssment, re:assessment, collection and enforcement of payment
of !.::x incllding any penalty payable under the Central Act.
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The deeming provision in the Central Act that the tax as well as
penalty levied under the Central Act will be deemed as if payable
under the general sales tax law of the State carmot possibly me~m that
tax or penalty imposed under any State Act will be deemed to be tax
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or prnalty payable under the Central Act.
The entire authority of the
State machim,ry is that "for this purpose" meaning thereby the purD
pose of assessing, re-assessing, collecting and e'aforcing payment of tax
including any penalty payable under the Central Act, they, meaning
,the State agencies, may exercise powers under the general sales toax
law of the State.
The words "for this purpose" cannot have the:.effeet
of enlarging the content of tax and the content of penalty payable u1.1der the Central Act.
Liability to pay tax as well as liability to pay
penalty is created by the Central Act.
One of the reasons why tax
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as w.:11 as penalty is the substantive provision in the Central Act and is
not incorporat~d by reference to the State Act is illustrated by the
history of section 9 ( 2) of the Central Act.
The present section 9 ( 2)
of the Central Act was formerly section 9 (3) of the Central Act. The
.Madras High Court in D. H. Shah & Co.'s case pointed out that the
imposition of penalty under sectibn 12(3) of the Madras Act, 1959
could not be attracted for levy of penalty. The Madras High Court
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gave the reason that then sectio•a 9(3) of the Central Act only adopted
the procedure of the State Act for asses~ment, re-assessment, collection
and enforcement of tax as well as penalty pay.able under the Central
Act.
The Madras High Court in Angoppa Chettiar & Sons case ('supra)
gave the. correct reason that the power to C'.)!lcct penalty under the
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then· section 9 ( 3) of the Central Act would cover only the penalty
payable under the Central Act and would not include a power to impose penalty for a contravention or omission for which the Central Act
did· Mt contain a provision.
In that case, the Madras Genera:l Sales
Tax Act, 1939 which was i•acorpomted by reference by section 9 ( 3)
of the Central Act as' it then stood did not contain a provision for levv
of a penalty. Subsequently, section 16(2) of the Madras Generlil
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Sales Tax Ac:t 1959 provided for levy of penalty for failure to disclose
a relevant turnover.
The conclusion which the Madras High Court
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arrived at was that provisions of then section 9(3) of the Central Act
could \.lot be applied for levy of a penalty under section 16(2) of the
.\Iadras Act.
The Mysore High Court in Guldas Narasappa Thimmaiah
Oil
Mills case (supra) which is the present appeal pointed out that the
provisions contained in section 13 ( 1) and (2) of the State Act in regard to penalty for default in making payriJ.ent could not he applicable
because a comparable provision was not to be found in the Cc<,1tral
.:\ct.
The Mysore High Court correctly pointed out that the words
"as if the tax or penalty payable by such dealer under this Act" show
that the words "payable by such a dealer under this Act" relate to tax
or penalty which is payable only under the Central Act.
The Mysore High Court relied on the decision of this Court iri
Swte of Kera/a v. P. P. Joseph & Co. 25 S.T.C. 483 in support of
the proposition that the Sl'ate law is applicable only in regard to proc<?dure for assessmeat, re-assessment, collection and enforcement. If
the liability to pay tax is determined by the provisions of the Central
Act the liability to pay penalty is also that which is payable under the
Central Act.
This Court in the Kerala case said that the procedural
law prescribed in the general sales tax Jaw of the State applies to the
matter of assessment, re-assessment, collection and enforcement
of
payment of tax 'under the Central Act because the frability to pay tax
ls deter-nincd u.1der the Central Act.
Similarly, liability to pay penalty
is determined with reference to the provisions of the Central Act.
This Court in Orissa Cement Limited v. the State of Orissa & An:·.
27 S.T.C. 118 considered whether rebate provided in section 13(8)
c-'1' , h~ Orissa Sales Tax Act was available to dealers if they paid the
lax mider the Central Act before tlfe due date of payment. It may be
stated that at the relevant time of the decision in :the Orissa Cement
case (supra) the provisions co1,1tained in the then s.ectioP 9 ( 3) .of the
Central Act stated inter a/ia that "the provisions of such Jaw including
the provisions relating to returns, appf.!als, reviews, revisiom, references, penalties and compounding of offence~ shall apply accordingly," and
the word "rebate" did not occur there.
This Court said that rebate
for paymt!at of tax within the prescribed time under the State Act was
•available to dealers for payment of tax under the Central Act on the
reasoning that the power to collect the tax assessed in the same manner
as the tax on the sale and purchase of goods under the general sales tax
law of the State would include within itself all concessions given under
the State Act for paymc.<,1t within the prescribed time.
The reason why
rebate is allowed and penalty is disallowed is that rebate is a concession
whereas penalty is an imposition.
The concession does not impose
liability but penalty does.
It, therefore, stands to reasor. that rebate
is included within the procedural part of collection and enforcement
of payment.
Penalty like impositicia of tax cannot be included within
the procedural part.
The decision of this Court in C. A. Abraham, Uppoottil. Kottayam
v.The Income Tax Officer, Kottayam & Anr. (1961) 2 S.CR.