# STATE OF RAJASTHAN AND OTHERS v. GHASILAL

- **Citation:** [1965] 2 S.C.R. 805
- **Court:** Supreme Court of India
- **Decided:** 1965-01-21
- **Case number:** Civil Appeals Nos. 408-409 of 1964
- **Bench:** K. N. Wanchoo, M. Hidayatullah, J.C. S~. J. R. Mudholkar, S. M. Sikri
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-rajasthan-and-others-v-ghasilal-3341
- **Pages:** 6

## Headnote

Ra;asthan Sales Tax Act, 1955, ss. 7(2), 16(1)(b) and Raiasthan Sale~
Tax Rules, r. 31-Scope of.
On a petition of the assessee challenging the validity of Rajasthan
Sales Tax Rules, the High Court passed an interim order that the assessee
C
would keep proper accounts and file the prescribed returns, but that
he should not be assessed till further orders.
While the petition was
pending an ordinance was promulgated validating the rules,
and the
assessee withdrew the petition.
The sales tax officer sent a show cause
notic~ and the assessee filed the return ao<I deposited tai.
The Sales
Tax Officer assessed tax and imposed a penalty under s. 16(1)(b) of
the Act and justified and imposition on the ground that the High Court
D
did not say that the assessee was allowed to withhold the tax, but that
on the contrary the order of the High Court showed that the assessee
should have filed returns in time and according to s. 7(2) of the Act
the Treasury challan of the deposit should have accompanied them. TM
ruisessee's appeal to the Deputy Commissioner of Sales Tax (Appeals)
was dismissed.
The Sales-tax Officer, for a subsequent period, imposed
another penalty on the same grounds.
The assessee filed two writ petitions in the High Court which were allowed. In appeal
E
HELD: (i) There had been no breach of s. 16(l)(b) of the Act,
F
G
H
and consequently the orders imposing the penalties could not be sustained. [809 H]
Till the tax payable was ascertained by the assessing authority under
s. 10, or by the assessee under s. 7(2), no tax could be said to be due
withins. 16(1)(b) of the Act, for, till then there was only a liability to
be assessed to tax. [810 B.(;]
Rule 31 of the Rajasthao Sales Tax Rules comes into the picture
only when an assessment has been completed. [81 () D]
(ii) Section 7(2) of the Act could not be attracted till the assessee
filed the returns. [810 F]
CML APPELLATE JURISDICTION: Civil Appeals Nos. 408-409
of 1964.
Appeal by special leave from the judgment and order dated.
February 5, 1963 of the Rajasthan High Court in D.B. Civil Writ
Petitions Nos. 172 and 111 of 1961.
G. C. Kasliwal, Advocate-General, for the State of Ra;asthan,
K. K. Jain and R. N. Sachthey, for the appellant.
R. K. Garg, S. C. Agarwala, D. P. Singh and M. K. Rtul'Ur
murthi, for the respondent.
(
I
I
I
806
SUPREME COURT REPORTS
[ 1965( 2 S.C.R.

## Text

A
STATE OF RAJASTHAN AND OTHERS
v.
GHASILAL
January 21, 1965
B
[K. N. WANCHOO, M. HIDAYATULLAH, J.C. S~.
J. R. MUDHOLKAR AND S. M. SIKRI JJ.]
Ra;asthan Sales Tax Act, 1955, ss. 7(2), 16(1)(b) and Raiasthan Sale~
Tax Rules, r. 31-Scope of.
On a petition of the assessee challenging the validity of Rajasthan
Sales Tax Rules, the High Court passed an interim order that the assessee
C
would keep proper accounts and file the prescribed returns, but that
he should not be assessed till further orders.
While the petition was
pending an ordinance was promulgated validating the rules,
and the
assessee withdrew the petition.
The sales tax officer sent a show cause
notic~ and the assessee filed the return ao<I deposited tai.
The Sales
Tax Officer assessed tax and imposed a penalty under s. 16(1)(b) of
the Act and justified and imposition on the ground that the High Court
D
did not say that the assessee was allowed to withhold the tax, but that
on the contrary the order of the High Court showed that the assessee
should have filed returns in time and according to s. 7(2) of the Act
the Treasury challan of the deposit should have accompanied them. TM
ruisessee's appeal to the Deputy Commissioner of Sales Tax (Appeals)
was dismissed.
The Sales-tax Officer, for a subsequent period, imposed
another penalty on the same grounds.
The assessee filed two writ petitions in the High Court which were allowed. In appeal
E
HELD: (i) There had been no breach of s. 16(l)(b) of the Act,
F
G
H
and consequently the orders imposing the penalties could not be sustained. [809 H]
Till the tax payable was ascertained by the assessing authority under
s. 10, or by the assessee under s. 7(2), no tax could be said to be due
withins. 16(1)(b) of the Act, for, till then there was only a liability to
be assessed to tax. [810 B.(;]
Rule 31 of the Rajasthao Sales Tax Rules comes into the picture
only when an assessment has been completed. [81 () D]
(ii) Section 7(2) of the Act could not be attracted till the assessee
filed the returns. [810 F]
CML APPELLATE JURISDICTION: Civil Appeals Nos. 408-409
of 1964.
Appeal by special leave from the judgment and order dated.
February 5, 1963 of the Rajasthan High Court in D.B. Civil Writ
Petitions Nos. 172 and 111 of 1961.
G. C. Kasliwal, Advocate-General, for the State of Ra;asthan,
K. K. Jain and R. N. Sachthey, for the appellant.
R. K. Garg, S. C. Agarwala, D. P. Singh and M. K. Rtul'Ur
murthi, for the respondent.
(
I
I
I
806
SUPREME COURT REPORTS
[ 1965( 2 S.C.R.
The Judgment of the Court was delivered by
Sikri, J. These two appeals by special leave are directed
against the judgment of the Rajasthan High Court allowing Civil
Writ Petitions Nos. 111 and 172 of 1961, and quashing orders
A
of the Sales Tax authorities imposing penalties on the respondent,
Ghasilal, for delay in payment of tax due. The High Court came
B
to the conclusion that the penalties had been imposed in violation
of Art. 20(1) of the Constitution, but it is not necessary to deal
with this question because we are inclined to accept the contention raised by the learned counsel for· the respondent, Mr. Garg,
that the penalties have been imposed in violation of the relevant
statutory provisions.
C
The relevant facts are these. On March 28, 1955, Rajasthan
Sales Tax Rules (hereinafter referred to as the Rules) were published in the Rajasthan 'Gazette.
The Rajasthan Sales Tax Act
(hereinafter referred to as the Act) came into force on April 1,
1955. The respondent filed Civil Writ Petition, No. 11 of 1958, D
in the High Court challenging the making of assessments on the
turnover of the respondent for the year 1955-56 on the ground
that the said Rules were invalid. On January 9, 1958, the High
Coμrt passed an interim order that 'the petitioner will keep proper
accounts and file the prescribed returns but he shall not be assessed
till further orders'. While the petition was pending in the High E
Court, an Ordinance (No. 5 of 1959) was promulgated on November 6, 19 5 9, validating the Rules.
Thereupon the respondent
withdrew Writ Petition No. 11of1958. On December 17, 1959
the Rajasthan Sales Tax Validation Act (Rajasthan Act 43 of
1959) replaced the Ordinance. It is common ground that the
effect of the said Ordinance and the said Act was to validate the F
Rules, even if any defect existed in the making of the Rules. We
may mention that according to the appellant, the said Ordinance
and the said Validating Act were enacted out of abundant caution.
On December 4, 1959, the Sales Tax Officer, Kotah City
Circle, sent a show cause notice to the respondent in the following
words:
G
"Your writ No. 11 has been dismissed by the Hon'ble
High Court on 23rd November,.1959. You are, therefore, requested to deposit the tax due upto date within a
week, ~ailing which necessary action according to law
will be taken."
This notice was served on the respondent tlle same day. The respondent filed a return for the 4th quarter ending October 22, 1957,
H
STATE v. OHASILAL (Sikri, /.)
807
A and Rs. 11,898.31 was deposited as tax. It appears that on January 8, 1960, March 5, 1960 and March 19, 1960, he deposited
Rs. 28,607 as tax in respect of the four quarters of the accounting
period October 23, 1957 to November 10, 1958. It is not clear
from the record whether he filed returns on these dates. On
April 25, 1960, the Sales Tax Officer made an assessment in resB pect of the accounting period November 3, 1956-to October 22,
1957, and proceeded to impose a penalty of Rs. 400 under
s. 16(l)(b) of the Rajasthan Sales Tax Act. He justified the imposition of penalty thus :
c
D
E
F
"The assessee has not deposited tax of the quarters
on the due date, the tax deposited for 4th quarter is very
late, i.e . ., after two years the assessee was given a notice
and in reply to which he referred the stay order of the
Hon'ble High Court granted to him in a writ petition
filed challenging the validity of sales tax rules made
under the Act, the stay order of the Hon'ble High Court
does not say that the assessee is allowed to withhold the
tax on the contrary, it directs
that the
petitioner
(assessee) will keep proper accounts and file prescribed
returns but shall not be assessed.
This clearly shows
that the assessee should have filed returns in time and
according to section 7(2) the Treasury challan of the
deposit should have accompanied them. This amounts
to contravention of the mandatory provisions, the writ
was dismissed on 23-4-58 sic (23-11-59), even the
amount was not deposited till 17-12-59.
This shows
that the assessee withheld the tax intentionally."
The respondent appealed to Deputy Commissioner Sales Tax
(Appeals), Kotah, who dismissed the appeal, holding that the stay
order of the High Court did not ju~tify the respondent in not
filing the return and depositing the tax in accordance with s. 7(2)
of the Rajasthan Sales Tax Act.
G
On December 6, 1960, the Sales Tax Officer assessed the
respondent in respect of the accounting period October 23, 1957
to November 10, 1958, and imposed a penalty of Rs. 1,000 for
not depositing the tax in time on the same grounds.
The respondent then filed a petition (No. 111 of 1961) under Art. 226
of the Constitution, on April 3, 1961, challenging the imposition
H of penalty in respect of the period November 3, 1956 to October
22, 1957, and on April 4, 1961, he filed a petition (No. 172 of
1961) challenging the imposition of penalty in respect of the
IASup.65-S
808
SUPRBMB COUllT lU!PORTS
(1965] 2 S.C.R.
,
.accounting period October 23, 1957 to November 10, 1958. As A
we have said before, the High Court allowed the petitions.
The learned Advocate-General has raised a number of points
before us and particularly invited us to hold that the High Court
was in error in holding that there has been contravention of Art.
.20(1) of the Constitution, and that the Rules as originally pub-·
B
lished on March 28, 1955, suffered from no procedural defect in
the matter of their promulgation and duly came into force on
April l, 1955. But we express no opinion one way or the other
on these points as the appeals can be disposed of on a narrow
point of the construction of the Act.
The relevant provisions qf the Act read thus :
"s. 7(1) Every dealer liable to pay tax shall furnish
returns of his turnover for the prescribed periods in the
prescribed form, 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 teceipt of any bank authorised to
receive money on behalf of the State Government showing the deposit of the full amount of tax due on the basis
of return in the Government Treasury or bank concerned.
(3) H 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
submission of the next return but not later.
(4) Every deposit of tax made under sub-sec~on (2)
shall be deemed to be provisional subject to necessary
adjustments in pursuance of the final assessment of tax
made for any year under section 10.
S. 16(1)-Il any personc
D
E
F
G
(a) has without reasonable cause failed to get himH
self registered as required by sub-section (1) of section 6
within the time prescribed; or
'STATB v. OHASILAL (Sikri, /.)
809
A
{b) has without reasonable cause failed to pay the -
B
D
tax due within the time allowed; or
(c) has without reasonable cause failed to furnish
the return of his turnover, or failed to furnish it within
the time allowed; or
the assessing authority may direct that such person shall
pay by way of penalty, in the case referred to in clause (a)
in addition to the fee payable by him, a sum not exceeding Rs. 50 and in case referred to in clause (b ), in addition to the amount payable by him, a sum not exceeding
ltal:f of that amount, and that in cases referred to in
clauses (c) and (d), in addition to the tax payable by him,
a sum not exceeding half the amount of tax determined;
in the case referred to in clause (e), in addition to the
tax payable by him a sum not exceeding double the
amount of tax, if any which would have been avoided
if taxable turnover as returned by sucli person had been
accepted as correct turnover, and in the cases referred
to in clauses (f), (ff) and (g), a sum not exceeding
Rs. 100."
Mr. Garg contends that there was no breach of s. 16(l)(b)
of the Act. No tax was due till the respondent filed returns under
s. 7(1) of the Act Section 7(2), which requires a deposit of the
full amount due on the basis of the return was compiled with
when the respondent filed the returns, on December 18, 1959,
and in January to March, 1960. There cannot be non-compliance
F of s. 7(2) unless a return is filed without depositing the tax due
on the basis of the return, and as no return was filed earlier than
pecember 18,-1959, there had been no violation of the requirements of s. 7(2). He further contends that no tax is due till
assessment is made under s. 10 of the Act
G
The learned Advocate-General, on the other hand, urges that .,.
tax becomes due because of the charging sections of the Act, i.e.,
s. 3 with s. 5. He further contends that a show cause notice
had been given on December 4, 1959, and as there was delay in
complying with the notice, there was breach of s. 16(1)(b) of the
Act.
H
In our opinion, there has been no breach of s. 16(1)(b) of the
Act, and consequently, the orders imposing the penalties cannot
be sustained. According to the terms of s. 16(l)(b), there must
810
SUPIU!MB OOUllT RBPOllTS
(1965) 2 S.C.ll.
be a tax due and there must be a failure to pay the tax due within A
the time allowed.
There was some discussion before us as to
the meaning of the words 'time allowed', but we need not decide
in this case whether the words 'time allowed' connote time allowed
by an assessing authority or time allowed by a provision in the
Rules or the Act, or all these things, as we are of th'e view that
no tax was due within the terms of s. 16(1)(b) of the Act.
SecB
lion 3, the charging section, read withs. 5, makes tax payable, i.e.,
creates a liability to pay the tax. That is the normal function of
a charging section in a taxing statute. But till the tax payable is
ascertained by the assessing authority under s. • 10, or by the
assessee under s; 7 (2), no tax can be said to be due within
C
s. 16(1)(b) of the Act, for till then there is only a liability to be
assessed to tax.
The contention of the learned Advocate-General that the
show cause notice dated December 4, 1959, makes tax due is
without any substance. He was not able to point to any rule or
provision of the Act, under which the show cause notice was D
issued. It may be that the assessing authority had in mind r. 31,
but that rule comes into the picture only when an assessment
has been completed.
The last contention of the learned Advocate-General is that
the stay order passed by the High Court required the respondent E
to submit returns. This, according to him, implied that he had to
submit returns in accordance with law, including s. 7(2). As he
had failed to submit returns and deposit the tax in accordance with
the directions of the High Court, there was a breach of s. 16(1 )(b ).
We are unable to read the stay order as implying that the respondent was obliged to deposit tax for the stay order then would be :r
of no utility to the assessee. Apart from that, the respondent did
not file returns till December 1959, and January-March 1960,
and s. 7 (2) could not be attracted till then.
We may mention that we are not concerned with the question
whether there has been any breach of s. 16(1)(c).
G
In the result, the appeals fail and are dismissed with costs.
One set of hearing fee.
Appeals dismissed.