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2005 DIGILAW 3291 (RAJ)

Banswara Syntex Ltd. v. C. T. O.

2005-12-13

KRISHAN KUMAR ACHARYA, S.N.JHA

body2005
Honble JHA, CJ.—In these two sales-tax revision which have come on reference to the Division Bench the question for consideration is whether on re-assessment of tax under Section 12 of the Rajasthan Sales-Tax Act, 1954 in cases of escaped assessment, interest in terms of Section ll-B(l)(f) of the Act can be charged on the amount of difference of the tax payable prior to 01.04.1987? A learned Judge of this Court in C.T.O. vs. Nalvaya Minerals & Motor Parts (1990(79) STC 113), has held that as Section 12 was brought within the scope of Section 11-B by the Rajasthan Sales Tax (Amendment) Act, 1987 with effect from 01.04.1987, no interest could be charged under Section 11-B in re-assessment proceedings under Section 12 of the Act. Section 12 was inserted by the said amendment in the Explanation appended to Clause (f) of Section 11-B. The decision was rendered interpreting the Explanation as a charging provision. Doubting correctness of the decision, another learned Judge vide order dated 16.12.1999 referred these revisions to the Division Bench for decision on the issue involved. (2). Facts of the case, so far as relevant, may be briefly stated as under. (3). The petitioner-assessee, a registered dealer under the Rajasthan Sales-tax act, 1954 (hereinafter referred to as the Act) engaged in the manufacture of synthetic yarn commenced production with effect from 01.04.1978. Section 5-CC of the Act as it then was (since repealed and replaced by Sales tax Act, 1994) provided for concessional rate of tax on purchase of raw materials for a period of five years from the date of production against Form No.l7-A. The petitioner was accordingly allowed the benefit of purchase of raw materials at concessional rates with effect from 01.04.1978. However, even though the stipulated period expired on 31.05.1983 it continued to get the benefit upto 31.03.1985 and its sales tax liability was accordingly determined in regular assessment proceedings. Later, on audit objection re- assessment proceedings for the assessment years 1983-1984 and 1984-1985 in terms of Section 12 of the Act were initiated. On 17.07.1989 re-assessment orders were passed quantifying the difference of tax payable and on the amount of difference quantified as additional tax, interest under Section ll-B(l)(f) of the Act was levied. Later, on audit objection re- assessment proceedings for the assessment years 1983-1984 and 1984-1985 in terms of Section 12 of the Act were initiated. On 17.07.1989 re-assessment orders were passed quantifying the difference of tax payable and on the amount of difference quantified as additional tax, interest under Section ll-B(l)(f) of the Act was levied. The levy of the amount of difference of tax as well as interest thereon was affirmed in appeal by the Deputy Commissioner (Appeals) and on further appeal by the Rajasthan Sales-tax Tribunal. The petitioner then filed Sales Tax Revisions by this Court which were transferred to Rajasthan Taxation Tribunal, Jodhpur. The Tribunal having been abolished, they were re-transferred to this Court. (4). From the order of reference dated 16.12.1999 it appears that an attempt was made to challenge the levy of the additional tax on the amount of difference and a case was also sought to be made out, for the first time, that the petitioner had established two separate units which commenced production on different dates a d, therefore, even though in respect of former unit it was not entitled to purchase raw materials at concessional rates beyond 31.3.1983, it was entitled to such concessional rates with respect to purchases of raw materials in connection with the second unit. These submissions were rejected by he learned Judge, and for good reasons, if we may say so. (5). Be that as it may, Shri Rajendra Mehta, learned counsel for the petitioner did not go into these aspects of the case at the time of hearing before us. He confined his submissions to the charging of interest on the additional tax i.e. The amount of difference quantified on re-assessment. He submitted that the liability to pay interest may arise in different situations on failure to pay tax, fee or penalty - as mentioned in various clauses of sub-section (1) - one of them being - where the liability to pay tax is quantified under Clause (f). The expression liability to pay tax is quantified vide explanation appended to Clause (f) meant determined of the tax, liability under Sections 7-A, 7-B, 10-A, 13,14 or 17 of the Act. By Rajasthan Sales-tax (Amendment) Act, 1987 which came into force from 01.04.1987, figure 12 was inserted in the array of sections. The expression liability to pay tax is quantified vide explanation appended to Clause (f) meant determined of the tax, liability under Sections 7-A, 7-B, 10-A, 13,14 or 17 of the Act. By Rajasthan Sales-tax (Amendment) Act, 1987 which came into force from 01.04.1987, figure 12 was inserted in the array of sections. By virtue of the amendment, additional tax found payable on re-assessment under Section 12 thus became eligible to levy of interest but only with effect from 01.04.1987. Thus, for the assessment years in question, namely 1983-1984 and 1984-1985 no interest could be levied on the additional tax on re- assessment. Shri Mehta placed reliance on C.T.O. vs. Nalvaya Minerals & Motor Parts (supra). (6). Shri Sangeet Lodha appearing for the Revenue submitted that the decision in Nalvaya Minerals and Motor Parts (supra), no doubt supports the petitioner but, the decision does not lay down the correct law. Counsel urged that the Explanation cannot be regarded as a substantive provision much less a charging provision, it neither restricts nor expands the substantive provision, but in the case of Nalvaya Minerals and Motor Parts (supra), the Explanation was held to be the charging provision and on that premise, interest on the additional tax payable on re-assessment under Section 12 of the Act was held to be not chargeable prior to 01.04.1987 - which is not correct. Counsel submitted that the decision needs re-consideration. (7). Sections 11-B so far as relevant may be quoted at this stage as under: "11-B . Interest on failure to pay tax/fee or penalty.— (I) (a)............................... (I) (b) .......... .......... .......... (I)(c) .............................. (I) (d) (I)(e) .......... Counsel submitted that the decision needs re-consideration. (7). Sections 11-B so far as relevant may be quoted at this stage as under: "11-B . Interest on failure to pay tax/fee or penalty.— (I) (a)............................... (I) (b) .......... .......... .......... (I)(c) .............................. (I) (d) (I)(e) .......... (f) Where the liability to pay tax is quantified in respect of a registered dealer or any other dealer,— (1) who has furnished returns for the period for which the tax is quantified; or (2) who has failed to furnish returns for the whole of the period for which the tax is quantified; or (3) who has failed to furnish returns for any part of the period for which the tax is quantified; then, in respect of categories (i) and (iii), the difference between the tax quantified and the tax shown payable in the returns and in respect of category (ii), the difference between the tax quantified and the tax paid, if any, shall in respect of categories (i) and (ii) be divided proportionately amongst the periods for which he was required to pay tax by or under the provisions of this Act and in respect of category (iii) be divided proportionately amongst the periods for which he was required to pay tax by or under the provisions of this Act but has failed to pay such tax, and the amount so determined shall be deemed to be the amount of the tax payable for such period and the dealer shall be liable to pay interest at the rate of two percent per month on the aforesaid amount from the date by which the tax was payable for such period by or under the provisions of this act until the date of quantification. Explanation.—The expression "liability to pay tax is quantified" in this clause means determination of the tax liability under Sections 7-A, 7-B, 10, 10-A, 12,13,14 or 17 of this Act. (figure within brackets inserted by amendment of 1987) .......... ................ ................ .............." (8). In the case of Nalvaya Minerals & Motor Parts (supra), the explanation was held to be the charging provision and not a machinery provision for computation of interest. (figure within brackets inserted by amendment of 1987) .......... ................ ................ .............." (8). In the case of Nalvaya Minerals & Motor Parts (supra), the explanation was held to be the charging provision and not a machinery provision for computation of interest. Observing that the words of a taxing statute have to be strictly construed the learned Judge held that no interest could be charged under Section 11-B in re-assessment proceedings under Section 1 of the Act and as Section 12 was brought within the ambit of Section 11- B by Rajasthan Sales-tax (Amendment) Act, 1987 only with effect from 01.04.1987, it could not be applied to the earlier assessment years, it would be appropriate to extract the relevant passage from the judgment as under:- "Section 12 does not find mention in it. For the first time, it has been added by Section 10 of the Rajasthan Sales-tax (Amendment) Act, 1987 (Rajasthan Act No.7 of 1987), with effect from 01.04.1987. In a taxing Act one has to look merely at what is is clearly said. There is no room for any intendment. Nothing is to be read in and nothing is to be implied. The subject is not taxed unless the words of taxing statute unambiguously imposes the tax on him. If the legislature fails to express itself clearly, and tax payers escape by not being brought within the letter of law, no question of unjustness as such arises. Courts are not entitled to fill any lacuna in any taxing Act." "The above quoted explanation is a charging provision and not a provision prescribing machinery for the computation of interest. Such provisions are strictly construed." (9). The conclusion in our view was the result of a wholly erroneous approach and wrong interpretation of the Explanation. (10). We will first consider the scope of Explanation. As a part of the provision an Explanation is at times appended to explain the meaning of words of the section - as the very name would suggest. It is a part and parcel of the enactment but the meaning to be given to an Explanation depends on the terms, the context and the purpose. No strait-jacket formulae can be laid down. (11). In Bengal Immunity Co. It is a part and parcel of the enactment but the meaning to be given to an Explanation depends on the terms, the context and the purpose. No strait-jacket formulae can be laid down. (11). In Bengal Immunity Co. Ltd. vs. State of Bihar, AIR 1955 SC 661 , the Explanation appended to Article 286(1) was restricted to its avowed purposed of explaining an outside sale for purpose of Clause (1) and was construed as not conferring any taxing power or as restricting the ban imposed by Clause (2) of the same Article. But in M.P. Sundararamier & Co. vs. State of Andhra Pradesh ( AIR 1958 SC 468 ) and Mohanlal Hargovinddas vs. State of M.P. ( AIR 1967 SC 1022 ), an identical explanation in a state enactment was construed differently and it was held as conferring taxing power, In Bhita Co-operative Development and Can marketing Union Ltd. vs. State of Bihar ( AIR 1967 SC 389 ), it was observed, "The Explanation must be read so as to harmonise with and clear up any ambiguity in the main section. It should not be so construed as to widen the ambit of the section." But in M/s. Hiralal Ratan Lal vs. The Sales Tax officer, Section III Kanpur & Anr., AIR 1973 SC 1034 , the Court held: "....from what has been said in the case, it is clear that if on a true reading of an Explanation it appears that it has widened the scope of the main section, effect must be given to legislative intent notwithstanding the fact that the legislature named that provision as an Explanation." (12). In Dattartraya Govind Mahajan vs. State of Maharashtra AIR 1977 SC 915 ), it was observed: "It is true that the orthodox function of an Explanation is to explain the meaning and effect of the main provision to which it is an Explanation and to clear up any doubt or ambiguity in it.....Therefore, even though the provision in question has been called an Explanation, we must construe it according to its plain language arid not on a priori consideration." (13). In S. Sundaram Pillai etc. In S. Sundaram Pillai etc. vs. V.R. Pattabiraman ( AIR 1985 SC 582 ), the Supreme Court observed: "It is now well settled that an Explanation added to a statutory provision is not a substantive provision in any sense of the term but as the plain meaning of the word itself shows it is merely meant to explain or clarify certain ambiguities which may be have crept in the statutory provision." After referring to various decisions and authorities on the subject the Court summed up the true object of the Explanation in a statute in these words: "Thus, from a conspectus of the authorities referred to above, it is a manifest that the object of an Explanation to a statutory provision is— (a) To explain the meaning and intendment of the Act itself; (b) Where there is any obscurity or vagueness in the main enactment, to clarify the same to as to make it consistent with the dominant object which it seems to subserve; (c) To provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful; (d) An Explanation cannot in any way interfere with or change the enactment or any part, thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment; and (e) It cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same." (14). It is to be considered whether the Explanation in the instant case has in any manner abridged or restricted the power to levy interest conferred by the main provisions of Section 11- B. As seen above, the Explanation seeks to provide meaning to the expression "liability to pay tax is quantified" as "determination of the tax liability". Prior to the 1987 amendment, it referred to determination of tax liability under Sections 7-A, 7-B, 10, 10-A, 13, 14 or 17 of the Act. By amendment Section 12 was included in the array of sections. Now what do these sections refer to? Prior to the 1987 amendment, it referred to determination of tax liability under Sections 7-A, 7-B, 10, 10-A, 13, 14 or 17 of the Act. By amendment Section 12 was included in the array of sections. Now what do these sections refer to? Section 7-A refers to provisional assessment on failure to submit returns: Section 7-B refers to provisional assessment in case of evasion or avoidance of tax; Section 10 refers to regular assessment, Section 10-A contains special provisions regarding assessment of tax liability of casual traders; Section 13 refers to order on appeal arising from assessment orders, Section 14 refers to similar order on further appeal to the Tribunal and Section 17 refers to rectification orders of the Tribunal, the commissioner, the appellate authority or the assessing authority amending any order passed by them. It would thus appear that the quantification of the liability to pay tax may take place by way of provisional assessment on failure to file return or in cases of evasion or avoidance of tax or immediate assessment on transaction by casual dealer or quantification as a result of orders passed by appellate authorities under Section 13 and 14 or by the authority who made the original quantification or passed the orders on appeal by way of rectification. The re-assessment apparently is another mode of quantification of the liability to pay tax and, therefore, omission of Section 12 in the Explanation was a conspicuous omission in the Explanation. Like the provisions of Sections 7-A, 7-B, 10, 10-A and so on, the liability to pay in cases of re-assessment gets quantified when re-assessment order is passed. This situation was covered by Clause (f) of Section 11-B. The legislature, therefore, rightly stepped in to insert Section 12 in the array of sections in the Explanation appended to it. What Section 11-B embodied is the legislative intent to subject a registered dealer to liability to pay interest on the amount of tax which was not paid at the time when he was required to pay it under the relevant provisions of the Act. What Section 11-B embodied is the legislative intent to subject a registered dealer to liability to pay interest on the amount of tax which was not paid at the time when he was required to pay it under the relevant provisions of the Act. For example, under Clause (a) of Section ll-B(I), "where any registered dealer or any other dealer has furnished returns but has not paid the tax as per return or within the time allowed by or under the provisions of this Act" he would be liable to pay interest on the whole or the part of the amount of tax which has not been paid as per return within the time as aforesaid. Similar liability is envisaged in Clauses (b), (c), (d) and (e) of Section ll-B(l). It is in this context that Clause (f) provides for payment of interest on the amount of tax found outstanding after quantification of the tax liability. The Explanation thus neither provides for any exception nor enlarges of restricts the scope of the main provision so as to control the substantive provision. The Explanation rather seeks to facilitate giving full play to the provision by declaring that the expression "liability to pay tax is quantified" means the determination of the tax liability under the relevant provisions of the Act. We are of the view that even de hors the Explanation, the liability to pay interest on failure to pay tax is implicit in re- assessment of the tax liability, Clause (f) of Section ll-B(l) merely provided a mechanism for determination or computation of the liability to pay interest. Even in the absence of the Explanation the quantification of liability to pay tax always means determination of the tax liability. In the instant case the legislature thought it proper to appended an Explanation to make a declaration that such determination or quantification of liability means the determination of the tax liability as provided in sections 7-A, 7-B, 10, 10-A and so on. Simply because Section 12 was not mentioned in the array of sections it does not mean that there is no quantification of liability to pay tax i.e. determination of the tax liability under Section 12 on re assessment. (15). Simply because Section 12 was not mentioned in the array of sections it does not mean that there is no quantification of liability to pay tax i.e. determination of the tax liability under Section 12 on re assessment. (15). In the above premises, we are clearly of the view that the Explanation merely meant to make clarification or declaration so as to make the substantive provisions of Section 11-B consistent with the dominant object which the section aimed to achieve. The finding in Nalvaya Minerals & Motors Parts (supra) that it was a charging provision does not appear to lay down the correct law and the decision is fit to be over-ruled. (16). The whole edifice of the argument of the petitioner being the decision in Nalvaya Minerals & Motor Parts, in view of our findings as above, nothing survives for consideration. (17). In the result, we find no merit in these Sales-Tax Revision which are accordingly dismissed.