Research › Search › Judgment

Patna High Court · body

2007 DIGILAW 619 (PAT)

Indian Oil Corporation Ltd. v. State Of Bihar

2007-03-26

AFTAB ALAM, REKHA KUMARI

body2007
Judgment Aftab Alam, J. 1. This writ petition filed by M/s Indian Oil Corporation Limited is directed against an order, passed by the Commercial Taxes Tribunal, Bihar, Patna on 27.8.2004. By this order, the Tribunal disposed of five revision cases filed by the petitioner. 2. The matter comes to the Court after a protracted proceeding before the Revenue Authorities on a number of issues appertaining to different assessment periods. The only issue that survives before the Court relates to imposition of the penalty of Rs. 18.12 crores under Section 16(9) of the Bihar Finance Act, 1981 for default in payment of Rs. 8.61 crores, being a fraction of the total tax amount for the assessment period 1998-99. 3. The relevant facts with regard to the matter at issue are brief and may be stated thus. For the assessment period 1998-99, the petitioner filed its annual return (described as original annual return) on 30.7.1999 showing Rs. 199.06 crores as the tax leviable on is gross turnover. The amount of tax as per the return was already paid in March, 1999. However, it later came to light that the return filed on 30.7.1999 did not contain the petitioners sale figures from Dhanbad Location on which the admitted tax liability amounted to Rs. 8.61 crores. The omission was realised much later and a revised return was filed on 5.12.2002 showing Rs. 211.21 crores as the total tax liability for the period in question. The balance amount of tax was also paid on the same date. 4. The Revenue Authorities have imposed the impugned penalty under Sec. 16(9) of the Act because the petitioner defaulted in payment of admitted amount of tax and deposited the amount that was payable in March, 1999 as late as in December, 2002. 5. On behalf of the petitioner, it is stated that the omission to include the sale figures from Dhanbad Location in the original annual return and the resultant default in payment of tax on the sales from Dhanbad Location was completely unintended. It was due to a computer mistake coupled with a fire taking place in the Regional Office of the Corporation in Kolkata. In the writ petition and further in the supplementary affidavit filed on behalf of the petitioners, a long and detailed explanation is given how the mistake came to occur. It was due to a computer mistake coupled with a fire taking place in the Regional Office of the Corporation in Kolkata. In the writ petition and further in the supplementary affidavit filed on behalf of the petitioners, a long and detailed explanation is given how the mistake came to occur. It is stated that the Regional Office of the Corporation was situated in Kolkata where computerized accounts were maintained of the entire eastern region comprising West Bengal, Bihar, Orissa, Assam and the north-eastern States. All the States were allotted a Code Number and the Bihars Code was 03. Similarly, all Locations where the Corporation had its sale depots were allotted code numbers and the Dhanbad Location was given Code No. 266. It is further stated that while entering the data in the Sales-Tax Journal Summary for the period 1998-99 against code 03 (for the State of Bihar), the sales effected from Dhanbad Location were omitted to be reflected as instead of code 03, no. 00 was shown in the computer. The mistake was purely technical due to some system problem which, according to the petitioner, was evident from the computer prints out. The result of the error was that the sales effected from Dhanbad Location were not entered in the Sales-Tax Journal for the State of Bihar. In the supplementary affidavit, it is further stated that the amount of sales at Dhanbad Location thus could not form part of the turnover; resultantly no tax on those sales was computed, admitted or paid. It was further stated that a big fire took place in the Regional Office on 2.8.2000 in which many registers, ledgers and documents were destroyed and lost. The different ledgers, account books and Tax Journals were later reconstructed with great difficulty. On reconstruction of the ledgers, account books and Tax Journals it came to light that the sales from Dhanbad Location during the period 1998-99 were not included in the return filed in Bihar. Then a revised return was filed and the balance of the tax dues was paid on the same day. On behalf of the petitioner, it was contended that in the aforesaid facts and circumstances, the default in payment of tax was wholly unintended. It was accidental. There was no mens rea or any intent to conceal sales or to evade tax and, therefore, the imposition of penalty was wholly unjustified. 6. Dr. On behalf of the petitioner, it was contended that in the aforesaid facts and circumstances, the default in payment of tax was wholly unintended. It was accidental. There was no mens rea or any intent to conceal sales or to evade tax and, therefore, the imposition of penalty was wholly unjustified. 6. Dr. Debi Pal appearing on behalf of the petitioner laid great stress on the point that the delay in payment of the small fraction of the tax amount was wholly unintentional. Learned counsel submitted that having regard to the complexity of the accounts, it might not have been even possible for the Revenue Authorities to detect the omission and the shortage in the amount of tax paid by the petitioner but as soon as the error was discovered in the petitioners Regional Office, it was corrected voluntarily and the balance amount, being a small fraction of the total tax liability for the assessment period in question, was also paid on the same day the corrected return was filed. He submitted that under these facts and circumstances the imposition of penalty was wholly unjustified and untenable in law. In support of the submission, he relied upon Supreme Court decisions in (i) Hindustan Steel Ltd. vs. The State of Orissa, (1970) 25 STC 211 & (ii) The Cement Marketing Co. of India Ltd. vs. The Assistant Commissioner of Sales Tax, Indore and Others, (1980) 45 STC 197 . He also relied upon a Bench decision of this Court in an earlier case by the same petitioner reported in 2003(3) PLJR 561 (paragraph 19 to 21). 7. In reply, the learned Advocate General appearing for the State argued that the delay in filing the revised return was not for reasons as simple and innocent as sought to be presented on behalf of the petitioner. He submitted that it was not a case where the petitioner filed an annual return and a single revised return on the discovery of the omission. On the petitioners own showing, for the assessment period in question it filed multiple returns as indicated in the table given in para 3 of its supplementary affidavit. 175.htm 8. Further in this regard, the Advocate General invited our attention to the observation made in the order, dated 23.10.2002 passed by the Commissioner, Commercial Taxes. On the petitioners own showing, for the assessment period in question it filed multiple returns as indicated in the table given in para 3 of its supplementary affidavit. 175.htm 8. Further in this regard, the Advocate General invited our attention to the observation made in the order, dated 23.10.2002 passed by the Commissioner, Commercial Taxes. [Against the assessment order initially passed for the period 1998-99 the petitioner preferred a revision before the Commissioner, Commercial Taxes. The Commissioner by his order dated 23.5.2003 set aside the assessment order and remitted the proceeding to the Assessment Officer. Then the proceeding passed through the Assessment Officer and the Appellate and the Revisional Authorities before reaching the Court in this writ petition]. The observation to which the Courts attention was invited are as follows: 5(b). I have carefully perused the Trend Analysis filed by the DR and the four versions of the Annual Return for 1998-99 viz. Original filed on 3.9.99, Revised Annual Return number II filed on 1.7.2002 and Revised Annual Return number III filed on 4.9.02. A perusal of the original return reveals that the GTO as per Part A (Abstract of Quarterly Turnover) was Rs. 1811.53 crores whereas that as per Part B (Abstract of Turnover and Tax) was Rs. 1915.82 crores. When this original return was revised on 3.9.99 the GTO, shown as per Part A was not revised while that shown as per part B was revised from Rs. 1915.82 crores to Rs. 2258.16 crores and corresponding changes were effected to the various components some of the most striking of which are: HSD revised from Rs. 697.75 crores to Rs. 794.21 crores, Export from Rs. 11.47 crores to Rs. 220.62 crores and inter-state sales from Rs. 221.87 crores to Rs. 325.56 crores. The second round of revisions was effected on 1.7.2002 in this court itself during the hearing of the instant case. In this revision too, the GTO as per Part A was left untouched while that as per Part B was scaled up to Rs. 2507.60 crores from the Rs. 2258.16 crores of 3.9.99. Once again, changes were effected to certain components the most significant of which are: LPG falling from Rs. 94.15 crores to Rs. 37.14 crores, sales at concessional rate of 3% falling from Rs. 70.04 crores to Rs. 40.01 crores, Tax-free sale to oil marketing companies rising from Rs. 13.06 crores to Rs. 2258.16 crores of 3.9.99. Once again, changes were effected to certain components the most significant of which are: LPG falling from Rs. 94.15 crores to Rs. 37.14 crores, sales at concessional rate of 3% falling from Rs. 70.04 crores to Rs. 40.01 crores, Tax-free sale to oil marketing companies rising from Rs. 13.06 crores to Rs. 163.53 crores, Exports rising from Rs. 220.62 crores to Rs. 325.95 crores and Stock transfer rising from Rs. 28.91 crores to Rs. 122.86 crores. The returns were once again revised on 4.9.02 and this time Part A and Part B were revised in tandem to show a GTO of Rs. 2589.00 crores; some of the major changes were: LPG from Rs. 37.14 crores to Rs. 85.38 crores and sales at concessional rate of 3% from Rs. 40.01 crores to Rs. 60.10 crores. Most surprisingly and unusually, the tax liability of the company remained unchanged, save consequent to the latest revision effected on 4.9.02. 9. The Advocate General submitted that in light of the above, it was evident that the reason for the original return being incomplete and for the delay in filing the revised return (s) and payment of the balance tax dues was not as simple and innocuous as it is sought to be made out by the petitioners. 10. The materials pointed out by the Advocate General undoubtedly indicate serious deficiencies in the maintenance of records and accounts in the petitioners office. It can even be said that the maintenance of records and accounts in the Corporation is not of a standard that may be expected or desired from a large and important public sector undertaking. At the same time, it cannot be overlooked either that the returns for the assessment period in question filed by the petitioner long after the due date were not rejected by the Revenue Authorities but were taken into account. Further, on behalf of the petitioner it was stated that though in this case, it was being penalized for default in payment of a small fraction of the tax amount, the State Government realised from it, every year, very large sums as advance payment of tax. It was pointed out that in purported exercise of powers under Sec. 3(7) of the Bihar Value Added Tax, the State Government required the petitioner to pay advance tax in the month of March every year. It was pointed out that in purported exercise of powers under Sec. 3(7) of the Bihar Value Added Tax, the State Government required the petitioner to pay advance tax in the month of March every year. Learned counsel stated that by letter, dated 25.1.2000, the petitioner was directed to pay Rs. 50 crores on or before 20.3.2006 as tax for March, 2006 and an additional amount of Rs. 60 crores by 24.3.2006 as advance tax for the year 2006-07. This year too, the State had demanded Rs.150 crores to be paid by 20.3.2007 as advance tax for the months of March, April and May, 2007. 11. In this case, there is. no need for the Court to make any comment on the way the State recovered/realised its tax dues from the petitioner but in the facts and circumstances of the case, it is difficult to hold that the default in payment of the balance tax amount by the petitioner was intentional or by design. 12. Dr. Debi Pal further contended that in the facts of the case the provisions of Sec. 16(9) of the Act had no application and the impugned penalty was not sustainable in law. Dr. Pal submitted that any penalty under sub-section 9 of Sec. 16 of the Act was leviable on non-payment of tax or any extra amount of tax according to return or revised return submitted by the dealer. He further submitted that whatever taxes were payable according to the return or the revised retum(s) submitted by the petitioner were actually paid on the same day the return(s) were filed and hence, there was nothing to attract the provisions of Sec. 16(9) of the Act. In support of the submission, he relied upon a decision of the Supreme Court in J.K. Synthetics Ltd. vs. Commercial Taxes Officer and Birla Cement Works and Another vs. State of Rajasthan and Another, (1994)94 STC 422 (SC). 13. In support of the submission, he relied upon a decision of the Supreme Court in J.K. Synthetics Ltd. vs. Commercial Taxes Officer and Birla Cement Works and Another vs. State of Rajasthan and Another, (1994)94 STC 422 (SC). 13. Sub-section 9 of Sec. 16 of the Act reads as follows: (9) If any registered dealer fails to make payment of the tax under subsection (5) within the due date mentioned in the said sub-section or within the extended date under the proviso to clause (iii) of the said sub-section or of any extra amount of tax due from him according to return or revised return as mentioned in sub-sections (6) and (7) or if a dealer to whom permission to file an annual return has been given under the third proviso to sub-section (1) of this section fails to make payment of the tax in the manner prescribed, the prescribed authority shall, after allowing such a dealer an opportunity of being heard in the manner prescribed, impose a penalty which may extend to five per centum but not less than two and half per centum of the amount of tax for each of the first three months or part thereof following the due date or the extended date and to ten per centum but not less than five per centum for each subsequent month or part thereof. 14. Dr. Pal submitted that the crucial words in the provision were "according to return or revised return" and the penalty envisaged under that sub-section would only be attracted on the failure of the dealer to make payment of the tax according to return or revised return submitted by him. In this case as noted above, the petitioner admittedly submitted the final revised return long after the due date as provided under sub-sections 2, 3 & 4 of Sec. 16 of the Act. Nonetheless, the tax according to the revised return was paid on the date the return was submitted as required under Sec. 16(7) of the Act. Learned Counsel submitted that it was open to the Revenue Authorities not to take into account the final revised return submitted by the petitioner and to proceed against it under Sec. 17 of the Act and to take such other measures as may be provided under the Act. Learned Counsel submitted that it was open to the Revenue Authorities not to take into account the final revised return submitted by the petitioner and to proceed against it under Sec. 17 of the Act and to take such other measures as may be provided under the Act. The Revenue Authorities might even have imposed a penalty against the petitioner for the delayed filing of the return as provided under Sec. 16(8) of the Act but in any even there was no application of Section 16(9) of the Act and the penalty imposed against the petitioner under that provision was both unjustified and untenable in law. 15. On hearing Dr. Pal for the petitioner and the learned Advocate General on behalf of the State and on a careful consideration of the materials on record, I find substance in both the submissions made on behalf of the petitioner and I am of the considered view that in the facts and circumstances of the case, the impugned order of penalty is unsustainable. The imposition of penalty against the petitioner by the Revenue Authorities for the assessment period 1998-99 is accordingly set aside. 16. in the result, this writ petition is aiiowed but with no order as to costs. Rekha Kumari, J. 17 I agree.