Kania, J.
1. One question has been submitted to us for determination in this reference, on a case stated, by the Sales Tax Tribunal under section 61(1) of the Bombay Sales Tax Act, 1959. The said question is as follows :
'Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the provisions of section 36(3) as amended with effect from 11th May, 1973 regarding the rates at which the penalty is to be calculated will not apply but the old rates would apply when the tax including penalty was to be paid as per notice under section 38(4) on 23rd April, 1973 and not paid on that date but paid subsequently after 11th May, 1973 ?'
2. The facts giving rise to the question referred to us are as follows :
The respondent, Messrs. Rajendra Motors, is a firm registered as a dealer under the Bombay Sales Tax Act, 1959. The respondent was assessed by the Sales Tax Officer concerned for the period from 1st January, 1971 to 31st December, 1971 on 5th March, 1973. According to the assessment order the balance tax due by the respondent came to Rs. 50,018.40. The Sales Tax Officer also levied a penalty of Rs. 12,505 under section 36(2)(c) of the Act. Thus the total amount of the liability of the respondent to the department came to Rs. 62,523.40 for which a demand notice under section 38(4) was issued by the Sales Tax Officer on 6th March, 1973. The said demand notice was served on the respondent on 9th March, 1973. As per this notice an amount of Rs. 62,523.40 had to be paid by the respondent on or before 23rd April, 1973. The respondent did not pay this amount by that date, but paid it by instalments on subsequent dates. The entire amount was paid off by 25th June, 1974. In the meantime sub-section (3) of section 36 of the Bombay Sales Tax Act was amended with effect from 11th May, 1973. As the tax demanded was paid late, the Sales Tax Officer issued a show cause notice dated 12th June, 1975 under section 36(3) for the levy of penalty. The respondent by its letter dated 19th June, 1975 urged that due to financial difficulties the tax could not be paid in time. This explanation was not accepted by the Sales Tax Officer, and he levied a penalty of Rs. 10,707 on 2nd July, 1975 under section 36(3). On appeal this penalty was confirmed by the Assistant Commissioner. It may be mentioned that before the aforesaid amendment of section 36(3) the rate of penalty was 1% of the amount of tax for each month of delay for three months and for any further delay the rate was 1 1/2% per month. By the aforesaid amendment the said rates were increased from 1% to 1 1/2% and from 1 1/2% to 2% respectively. In the aforesaid order of penalty the Sales Tax Officer had levied penalty at the old rates for the delay up to 10th May, 1973 and had calculated the penalty at the enhanced rate as from 11th May, 1973 up to the date of payment. The contention of the respondent before the Tribunal was that the penalty should have been calculated at the old rates, even after 11th May, 1973 as the default had taken place on 23rd April, 1973 before the amendment came into effect. This contention of the respondent was accepted by the Tribunal. This decision of the Tribunal is sought to be challenged by way of the aforesaid question submitted to us.
3. The submission of Mr. Jetly, learned counsel for the Revenue, is that in the present case the default which occurred by non-payment of the tax due as per the notice of demand 6th March, 1973 was a continuous default as from 23rd April, 1973 and hence in respect of the default which continued from 11th May, 1973 the rate of penalty should be calculated as per the amended provisions of sub-section (3) of section 36. It was submitted by him that the nature of the penalty provided under sub-section (3) of section 36 was compensatory and hence non-payment of the same on and after the due date resulted in a continuous default. Alternatively it was submitted by Mr. Jetly that even if the default was not continuous, still the penalty should be calculated at the new rates as from 11th May, 1973 because the penalty imposed under sub-section (3) of section 36 was merely compensatory in nature and intended to make up whatever was lost by way of interest.
4. On the other hand, it was contended by Mr. Jetly, learned counsel for the dealer, that in the present case the liability imposed under sub-section (3) of section 36 of the Bombay Sales Tax Act was penal in character. What the said sub-section provided was a penalty in terms. Once the dealer committed default in the payment of tax on the due date as per the notice of demand, the default was complete and the liability for the penalty was to be considered as of that date. It was open to the Legislature, as it had done, to provide for the measure of this penalty to be calculated in a particular manner, but that in no way showed that the default was continuous. It was submitted by Mr. Surte that the penalty in respect of a dealer in default could be calculated only at the rates prescribed under sub-section (3) of section 36, as at the time when the default took place, namely, prior to 11th May, 1973.
5. Before considering the merits of the submissions advanced to us, it would not be out of place to refer to the relevant provisions of the Bombay Sales Tax Act. Section 33 of the Act provides for assessment of tax. Section 38 deals with the questions of payment of tax, deferred payment of tax and so on. Sub-section (4) of section 38, as it stood at the relevant time, inter alia, provided that the amount of tax assessed or reassessed for any period under section 33 or section 35 less any sum already paid by the dealer in respect of such period and the amount of penalty, if any, levied under section 36 or 37, had to be paid by the dealer by such date, as might be specified in a notice issued by the Commissioner for this purpose being a date not alter than 30 days from the date of service of the notice. Section 36, a section which has undergone frequent amendments, deals with the imposition of penalty in certain cases and bar to prosecution. Sub-section (3) of section 36 provides for the levy of penalty for non-payment of tax by the due date. Sub-section (3) of section 36, as it stood from 1st September, 1969 to 10th May, 1973 read thus :
'If a dealer does not, without reasonable cause, pay tax within the time he is required by or under the provisions of this Act to pay it, the Commissioner may, after giving the dealer an opportunity of being heard, by an order in writing, impose upon the dealer by way of penalty, in addition to the amount of tax a sum equal to -
(a) one pr cent. of the amount of tax for each month for the first three months, after the last date by which the dealer should have paid that tax, and
(b) one and one half per cent. of the amount of tax for each month thereafter, during the time the dealer continues to make default in the payment of tax :
Provided that, the Commissioner or any appellate or revisional authority, may remit the whole or any part of the penalty payable in respect of any period.'
As from 11th May, 1973 in clause (a) of sub-section (3) in place of the words 'one per cent.' the words 'one and one half per cent.' were substituted and in clauses (b) of sub-section (3) the words 'two per cent.' were substituted in the place of the words 'one and one half per cent'. We find that a controversy somewhat similar to the one which arises in this case had to be resolved by the Supreme Court in Commissioner of Wealth-tax, Amritsar v. Suresh Seth : [1981]129ITR328(SC) . In that case, the assessee, the respondent in the appeal before the Supreme Court, filed his wealth-tax returns for the assessment years 1964-65 and 1965-66 on 18th March, 1971 while he was required by section 14(1) of the Wealth-tax Act, 1957 to file the return for the assessment year 1964-65 on or before 30th June, 1964 and the return for the assessment year 1965-66 on or before 30th June, 1965. The Wealth-tax Officer completed the assessments for the aforementioned years on 22nd March, 1971 and commenced proceedings for levying penalty under section 18(1)(a) of the Act for late submission of returns. The Wealth-tax Officer ultimately levied penalty on the respondent. In respect of the assessment year 1964-65 from 1st July, 1964 to 31st March, 1969 the penalty was calculated at 2% per month, calculated on the footing that the penalty imposable was at the rate of 2% per month subject to the maximum of 50% of the wealth-tax payable under section 18(1)(a) before its amendment on 1st April, 1969 and for the period from 1st April, 1969 to 18th March, 1971 it was calculated at 1/2% of the net wealth for each month of default under section 18(1)(a) as amended by the Finance Act, 1969. In respect of the assessment year 1965-66, for the period from 1st July, 1965 to 31st March, 1969 penalty was similarly calculated at 2% per month and from 1st April, 1969 to 18th March, 1971 it was calculated at 1/2% of the net wealth-tax per month. We shall refer to these amendments in some detail a little later. Section 14 of the Wealth-tax Act was amended as from 1st April, 1965. We are not directly concerned with that amendment, but suffice it to say that sub-section (1) of section 14 provided, inter alia, that every person, who was liable to be assessed to wealth-tax, had to file his return by a particular date and power was given to the Wealth-tax Officer to extend the date of delivery of the return to a suitable date. Under section 18(1), as it stood prior to 1st 1965 it was, inter alia, provided as under :
'18. (1) If the Wealth-tax Officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person -
(a) has without reasonable cause failed to furnish the return of his net wealth which he is required to furnish under sub-section (1) or sub-section (2) of section 14 or section 17 or has without reasonable cause failed to furnish it within the time allowed and in the manner required; or ........
he or it may, by order in writing, direct that such person shall pay by way of penalty -
(i) in the case referred to in clause (a), in addition to the amount of wealth-tax payable by him, a sum not exceeding one-and-a-half times the amount of such tax, and ...'
By amendment of sub-section (1) of section 18, which came into effect from 1st April, 1965 it was provided as under :
'18. (1) If the Wealth-tax Officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person -
(a) has without reasonable cause failed to furnish the return (of his net wealth) which he is required to furnish under sub-section (1) of section 14 or by notice given under sub-section (2) of section 14 or section 17, or has without reasonable cause failed to furnish it without the time allowed and in the manner required by sub-section (1) of section 14 or by such notice, as the case may be; or .....
he or it may, by order in writing, direct that such person shall pay by way of penalty -
(i) in the cases referred to in clause (a), in addition to the amount of wealth-tax, if any, payable by him, a sum, equal to two per cent. of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the tax; ......'
After 1st April, 1969 up-till the relevant date a different mode of calculation of the rate of penalty was provided, but the penalty was to be calculated for every month during which the default in filing the return continued. The question which arose before the Supreme Court was as to how the penalty was to be calculated for the default provided in section 18(1)(a) of the Wealth-tax Act, 1957 namely, the failure to file the return of wealth before the due date without reasonable reasonable cause. It was held by the Supreme Court that where the default complained of is one falling under section 18(1)(a) of the Wealth-tax Act, 1957 the penalty has to be computed in accordance with the law in force on the last day on which the return in question has to be failed. Neither the amendment made in 1964 nor the one made in 1969 to clause (i) of section 18(1) has retrospective effect. The Supreme Court has set out the law in this connection with remarkable clarity and we can do no better than to quote from the passage in the judgment of the Supreme Court (at page 335 of the aforesaid Report) which runs as follows :
'A liability in law ordinarily arises out of an act of commissioner or an act of omission. When a person does an act which law prohibits him from doing it and attaches a penalty for doing it, he is stated to have committed an act of commission which amounts to a wrong in the eye of law. Similarly when a person omits to do an act which is required by law to be performed by him and attaches a penalty for such omission, he is said to have committed an act of omission which is also a wrong in the eye of law. Ordinarily, a wrongful act or failure to perform an act required by law to be done becomes a completed act of commission or of omission, as the case may be, as soon as the wrongful act is committed in the former case and when the time prescribed by law to perform an act expires in the latter case and the liability arising therefrom gets fastened as soon as the act of commission or of omission is completed. The extent of that liability is ordinarily measured according to the law in force at the time of such completion. In the case of acts amounting to crimes to punishment to be imposed cannot be enhanced at all under our Constitution by any subsequent legislation by reason of article 20(1) of the Constitution which declares that no person shall be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence. In other cases, however, even though the liability may be enhanced it can only be done by a subsequent law (of course subject to the Constitution) which either by express words or by necessary implication provides for such enhancement. In the instant case, the contention is that the wrong or the default in question has been altered into a continuing wrong or default giving rise to a liability de die in diem, that is, from day to day. The distinctive nature of a continuing wrong is that the law that is violated makes the wrongdoer continuously liable for penalty. A wrong or default which is complete but whose effect may continue to be felt even after its completion is, however, not a continuing wrong or default. It is reasonable to take the view that the Court should not be eager to hold that an act or omission is a continuing wrong or default unless there are words in the statute concerned which make out that such was the intention of the Legislature ....'
The Supreme Court laid down the principle thus (page 338) :
'The true principle appears to be that where the wrong complained of is the omission to perform a positive duty requiring a person to do a certain act the test to determine whether such a wrong is a continuing one is whether the duty in question is one which requires him to continue to do that Act ....'
It is needless to say that the aforesaid decision of the Supreme Court, with which we respectfully agree, is binding on us. We may mention that similar principles have been laid down by Pathak, J., of the Gauhati High Court in T. K. Roy v. Commissioner of Wealth-tax , a case which was referred to Pathak, J., on a difference between two other learned Judges of that Court. Applying the principles laid down by the Supreme Court to that case before us, it is clear that in the case before us also the default of the respondents was a single completed default under sub-section (4) of section 38 of the Bombay Sales Tax Act. The respondent was bound to pay the tax due and the penalty under section 36(2)(c) of the Act on the date specified in the notice of demand. With the consent of parties, we have taken a copy of the said notice of demand dated 6th March, 1973 on record as a part of the paper book and the said notice of demand specifically states that the amount demanded under it had to be paid by 23rd April, 1973. Once the respondent failed to pay that amount on that date without reasonable cause, the default committed by the respondent was complete. The effect of that default on the respondent was undoubtedly continuous in the sense that the penalty levied for the default was to be calculated in accordance with the length of time for which the non-payment continued. However, the liability to penalty under section 36(3) was incurred by non-payment on 23rd April, 1973 and that liability was complete. Only with calculation of the penalty had to be undertaken in accordance with the length of time during which the failure to pay continued. In view of this, it appears clear to us that it is the provisions of sub-section (3) of section 36 of the Bombay Sales Tax Act, as it stood on that day, namely, 23rd April, 1973 which were applicable and the penalty had to be calculated at the rates as provided in sub-section (3) of section 36 as on that date. In this connection, it was urged by Mr. Jetly that although sub-section (3) of section 36 provided for a penalty, it was a penalty under a taxing statute and was not in the nature of a penalty under criminal law. In support of this contention, Mr. Jetly relied on the observations of the Supreme Court in Shiv Dutt Rai Fateh Chand v. Union of India : [1984]148ITR664(SC) , where it has been observed that the penalty imposed by the sales tax authorities is only a civil liability, though penal in character. In the first place, it must be remembered that this observation was made in connection with the question as to whether a penalty imposed by a sales tax authority can be equated with a penalty as contemplated under article 20(1) of the Constitution of India. Moreover, as is clear from the decision of the Supreme Court in the case of Commissioner of Wealth-tax, Amritsar v. Suresh Seth : [1981]129ITR328(SC) , the question whether the liability imposed is civil or criminal would not make any difference to the application of the principles laid down by the Supreme Court in that case. The principles laid down by the Supreme Court clearly apply to liabilities for civil wrongs as well as liabilities for criminal acts. In the present case it is clear, and no contrary argument has been advanced before us, that on the language of sub-section (3) of section 36 that is nothing to show that the penalty imposed was sought to be made retrospectively effective. Nor is there any necessary implication which would lead to this result. The only faint submission made by Mr. Jetly in this connection was that if sub-section (3) of section 36 were interpreted as set out earlier it might lead to discrimination and render the provisions of sub-section (3) of section 36 liable to challenge under article 14 of the Constitution. Mr. Jetly wanted us to consider the case of two assessees both of whom were assessed for the same assessment year and against whom notices of demand also was issued on the same day. In the case of one assessee the notice might be served at such time that the due date for payment fell before 11th May, 1974 and in the other case the due date fell after 11th May, 1974. Mr. Jetly said that, if the provisions of sub-section (3) of section 36 were interpreted as we have done, the result would be that the assessee on whom the notice was served at the earlier date would be liable to pay penalty at the lesser rate and the assessee on whom the notice was served on the later date would be liable to pay penalty at a higher rate and this would result in discrimination. In our view, there is no substance in this argument at all. In the first place, in the example given by Mr. Jetly the assessee on whom the notice was served earlier cannot be said to be similarly situated to an assessee on whom the notice was served later and there is no bar preventing such assessee from being treated differently. A classification based difference in time as has be regarded as permissible classification.
6. We may now come to some of the other cases cited before us. Mr. Jetly strongly relied on the decision of the Supreme Court in Income-tax Officer, 'A' Ward, Indore v. Gwalior Rayon Silk . : [1975]101ITR457(SC) , where it was held that sub-section (3) of section 220 of the Income-tax Act, 1961 does not empower the Income-tax Officer to enter into any indefeasible settlement with the assessee or cloth the Income-tax Officer with any such power as to vary the statutory inhibition contained in sub-section (2). Any order which is passed under sub-section (3) would be subject to the rate of interest mentioned in sub-section (2) and as soon as the rate mentioned in sub-section (2) is varied or enhanced by the Legislature, it would have to be read into sub-section (2) from the date of the amendment and any order passed under sub-section (3) would be subject to the rate so fixed. It was held by the Supreme Court that the moment the amendment to section 220(2) came into operation and the rate of interest was increased to 6 per cent., any order of the Income-tax Officer would automatically operate in accordance with the amendment with effect from April, 1965. That case pertained to the effect of the amendment in the rate of interest provided in sub-section (2) of section 220 of the Income-tax Act, 1961. The material portion of sub-section (2) of section 220, as it stood prior to the amendment effected by the Finance Act, 1965 read thus :
'If the amount specified in any notice of demand under section 156 is not paid within he period limited under sub-section (1), the assessee shall be liable to pay simple interest at four per cent. annum from the day commencing after the end of the period mentioned in sub-section (1).'
By the amendment the rate of interest was increased from four per cent. to six per cent. It must be remembered that the decision of the Supreme Court pertains to this section and in our view, it has no application to the case before us. In the first place, sub-section (2) of section 220 of the Income-tax Act does not deal with the imposition of a penalty as such. What is provided for by the said sub-section is that the assessee shall be liable to pay interest at a particular rate, if the assessee does not pay the amount specified in any notice of demand under section 156 within the period provided in sub-section (1) of section 220. This is a provision for payment of interest and it cannot be equated in law with the payment of penalty. In may be that the penalty in a given case might have been fixed with reference to the loss of interest incurred by the Revenue by late payment, but, in law, the notion of a penalty has to be kept distinct from the notion of payment of interest. In the second place, sub-section (2) of section 220 imposes a liability on an assessee which is unconditional and automatic. There is no question of waiver of interest. Nor does any order have to be passed against the assessee for payment of interest. Once the conditions of sub-section (1) are satisfied, the assessee is bound in law to pay interest as provided in sub-section (2). This can, in no way, be compared with the imposition of penalty by an order as contemplated in sub-section (3) of section 36 of the Bombay Sales Tax Act. We may point out that the aforesaid decision of the Supreme Court has been considered by a Division Bench of the Andhra Pradesh High Court on Commissioner of Wealth-tax, Hyderabad v. R. D. Chand : [1977]108ITR787(AP) . In that case the question was whether under section 14(1) read with section 18(1)(a) of the Wealth-tax Act, 1957 it could be said that the default in filing a return under section 18(1)(a) within the time provided under section 14(1) amounted to a continuous commission of a fresh default for every month during which the filing of the return was delayed beyond the time provided. It was held that such default could not be said to be a continuous default. It was pointed out by the Division Bench that the judgment of the Supreme Court in the case of Income-tax Officer v. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. : [1975]101ITR457(SC) related to a provision dealing with the levy of interest under the Income-tax Act and had no application to the case pertaining to the question of default under section 18(1)(a) of the Wealth-tax Act. Similar observations are also found in the judgment of Pathak, J., of the Gauhati High Court in T. K. Roy v. Commissioner of Wealth-tax . The decision of the Supreme Court in the case of Income-tax Officer, 'A' Ward, Indore v. Gwalior Rayon Silk . : [1975]101ITR457(SC) , in our view, has no application to the facts of the case before us.
7. Mr. Jetly next relied on a decision of a Division Bench of the Gujarat High Court reported in State of Gujarat v. Mukhi Stores [1969] 23 STC 334. The judgment relied on by Mr. Jetly is the judgment of P. N. Bhagwati, C.J., as he then was, on a case referred to him on a difference of opinion between Diwan and Mehta, JJ. We may point out that the question before the Court in that case was altogether different, namely, whether a penalty could be validly imposed on an assessee under section 16(4) of the Bombay Sales Tax Act, 1953 during the period covered by stay orders issued by the appellant and revisional authorities against the recovery of the balance of the tax payable by the assessee. It was held by Bhagwati, C.J., that penalty could be validly imposed under section 16(4) in such cases. Mr. Jetly sought to rely strongly on the observations at page 352 of the aforesaid Report, which run as follows :
'It is no doubt true that the word 'default' occurs in what is indisputably a penal provision but in the context in which that word occurs, it means nothing more than non-payment. The sub-section says that if the tax is not paid by any dealer within the prescribed time, the dealer shall pay penalty for each month during which he continues to make default. The use of the word 'continues' indicates that default occurs as soon as the dealer fails to pay the tax within the prescribed time, whether from inability to make payment or otherwise, and for each month during which this default, that is non-payment, continues the dealer is liable to pay penalty ........'
In our view, the question before the Court in that case was altogether different and the aforesaid observations cannot apply in a case like the case before us. Apart from this, we are bound by the principles laid in the decision of the Supreme Court in Commissioner of Wealth-tax, Amritsar v. Suresh Seth : [1981]129ITR328(SC) , with which we are in respectful agreement, as we have stated earlier and if the observations relied on by Mr. Jetly in the judgment of the Gujarat High Court run counter to the reasoning or the decision of the Supreme Court in the said case, to that extent, the same cannot be regarded as good law. We may now refer to a decision of a Division Bench of the Madras High Court in Commissioner of Gift-tax v. C. Muthukumaraswamy Mudaliar : [1975]98ITR540(Mad) . In that case it was held that though the penalty is treated as an additional tax for some purposes, penalty proceedings are essentially different from assessment proceedings. As the levy of penalty follows the completion of the assessment, the law applicable for the imposition of tax cannot automatically be applied to the imposition of penalty which comes at a later stage. It was, inter alia, held that the amendment to section 17(1)(a) of the Gift-tax Act, 1958 by the Gift-tax (Amendment) Act, 1962 with effect from 1st April, 1963 will not be applicable to cases where the default had been committed before the Amendment Act came into force and the law applicable to the levy of penalty for such defaults was the law as it stood at the time when the default is committed and not as it stood in the financial year for which the assessment was made, nor as it stood on the date when the penalty proceedings were initiated or when the penalty order was imposed. This decision lands support to the view which we have taken and it has been cited with approval by the Supreme Court in the aforesaid in Commissioner of Wealth-tax, Amritsar v. Suresh Seth : [1981]129ITR328(SC) .
8. Mr. Jetly also relied on the decision of the Full Bench of the Andhra Pradesh High Court in Eastern Ore Corporation v. Commercial Tax Officer, Visakhapatnam [1974] 33 STC 129. We do not propose to discuss this decision, as we fail to see any relevance of this decision to the determination of the question before us. The question there was altogether different, viz., whether sub-sections (1) and (3) of section 14 of the Andhra Pradesh General Sales Tax Act, 1957 on the one hand and sub-section (4) of section 14 on the other hand postulate two different situation or whether they can be considered as conflicting or contradictory provisions.
9. In the result, the question referred to us is answered in the affirmative and in favour of the dealer. The applicant to pay the costs of the reference to the respondent.