1. dentical questions of fact and law being involved in all these cases, they were heard together. All these cases have been received by transfer from the High Court. This judgment shall govern all of them.
Mr. M.L. Bhattacharya argued on behalf of the applicants in RN-290(T) of 1989 and RN-146(T) of 1989 and Mr. Sumit Kumar Chakraborty adopted Mr. Bhattacharya's arguments in the remaining cases on behalf of the applicants.
2. The substantial cases of the applicants in all these cases may be briefly put as follows : The Government of West Bengal enacted the West Bengal Taxation Laws (Second Amendment) Act, 1979, by which amongst others, a new provision being Section 6B and Section 4AAA, were inserted in the Bengal Finance (Sales Tax) Act, 1941, and the West Bengal Sales Tax Act, 1954, respectively with effect from April 1, 1979. The amended sections provide for payment of turnover tax by a dealer if the aggregate gross turnover exceeds Rs. 50 lakhs during any year. The applicants moved writ petitions under Article 226 of the Constitution challenging the legality and validity of the imposition of turnover tax on the grounds that the imposition and collection of turnover tax violates articles 14, 19 and 300A of the Constitution of India. Eventually, rules issued in the said writ applications were discharged with certain directions. The applicants being aggrieved with the said orders, preferred appeals and a number of such appeals came up for hearing before a Division Bench and by an order dated February 24, 1988 Century Spinnng Mfg. Co. v. State of West Bengal, [1989] 73 STC 277 (Cal) the appeals were dismissed. The imposition of turnover tax was found to be valid and not unconstitutional.
3. The applicants' case is that they being dealers registered under the 1941 Act and the Central Act, are entitled to purchase goods at a concessional rate of tax provided they issued necessary declaration forms to their sellers. Such declaration forms are issued by respondent No. 1 provided all the conditions laid down in Rule 27AA of the Bengal Sales Tax Rules, 1941, are complied with. Up to September, 1988, the declaration forms were being regularly issued. In September, 1988, respondent No. 1 refused to issue any further declaration forms unless the turnover tax due and payable by the applicants along with interest accrued thereon were paid. Representations made in that behalf by the applicants for issue of declaration forms were turned down. The plea of the applicants that no interest on turnover tax could be legally demanded, at least prior to disposal of the appeal on February 24, 1988, was also not accepted.
4. In the present applications, the applicants contend that in view of the provisions of Section 10A of the Bengal Finance (Sales Tax) Act, 1941, which came into effect on October 1, 1983, no interest could be demanded from the applicants. Alternatively, it is their case that in any event, interest on turnover tax prior to February 24, 1988, could, in no case, be demanded. On such allegations the applicants prayed for a writ/or order/or direction, commanding the respondents not to demand interest on turnover tax during the period of injunction or to withhold the issue of declaration forms on that account. The applicants did not, however, challenge the competence of the State Legislature to enact Section 10A, nor did they question the vires of the section on any other ground. They simply denied their liability to pay interest in the facts of the respective cases.
5. The respondents in their affidavit-in-opposition have disputed the claim of the applicants that they are not liable to pay interest on turnover tax or that if it is payable at all, it is payable from February 24, 1988. It is submitted that if a litigant succeeds in obtaining a stay regarding the payment of revenue to the State, he does it at his own risk and cannot avoid payment of the interest statutorily provided for, after the stay is vacated.
6. The points that fall for consideration, are mainly two in number.
First, whether interest on turnover tax could be demanded from the applicants, if at all, under the provisions of Sub-sections (1), (2) or (3) of Section 10A of the Bengal Finance (Sales Tax) Act, 1941. The second point urged on behalf of the applicants is that even if any interest is payable that can be demanded only with effect from February 24, 1988, when the decision by the appellate Bench was taken with regard to the challenge to the constitutionality of the imposition of turnover tax. The second point is urged mainly on the ground that uptill the time of the disposal of the appeal, the applicants were injuncted from making the payment.
7. For a proper appreciation of the first point urged on behalf of the applicants, it may be convenient to bear in mind the provisions of Section 10A which came into force with effect from October 1, 1983. The provisions are as follows : "10A. Interest payable by dealer.--(1) Where a registered or certified dealer furnishes a return referred to in Section 10 in respect of any period by the prescribed date or thereafter, but fails to make full payment of tax payable in respect of such period by such prescribed date, he shall pay a simple interest at the rate of two per centum for each English calendar month of default from the first day of such month next following the prescribed date up to the month preceding the month of full payment of such tax or up to the month prior to the month of assessment under Section 11 in respect of such period, whichever is earlier, upon so much of the amount of tax payable by him according to such return as remains unpaid at the commencement of each such month : Provided that where such dealer admits in writing that the amount of tax payable in respect of such period is an amount which is either more or less than, what has been originally shown as payable in the return and where the Commissioner is satisfied on the point of such admission, the interest shall be payable upon so much of the amount of tax payable according to such admission as remains unpaid at the commencement of each such month.
(2) Where a registered or certified dealer fails to furnish a return referred to in Section 10 in respect of any period by the prescribed date or thereafter before the assessment under Section 11 in respect of such period, and on such assessment the full amount of tax payable for such period is found not to have been paid by him by such prescribed date, he shall pay a simple interest at the rate of two per centum for each English calendar month of default from the first day of the month next following the prescribed date up to the month preceding the month of full payment of tax for such period or up to the month prior to the month of assessment under Section 11 in respect of such period, whichever is earlier, upon so much of the amount of tax payable by him according to such assessment as remains unpaid at the commencement of each such month : Provided that where an assessment under Section 11 is made for more than one return period and such assessment does not show separately the tax payable for the period in respect of which interest is payable under this sub-section, the Commissioner shall estimate the tax payable for such period on the basis of such assessment after giving the dealer an opportunity of being heard.
(3) Where a dealer fails to make payment of any tax payable after assessment by the date specified in the notice issued under Sub-section (3) of Section 11 for payment thereof, he shall pay a simple interest at the rate of two per centum for each English calendar month of default from the first day of the month next following the date specified in such notice up to the month preceding the month of full payment of such tax or up to the month preceding the month of commencement of proceedings under Sub-section (4) of Section 11, whichever is earlier, upon so much of the amount of tax payable by him according to such notice as remains unpaid at the commencement of each such month." 8. Now the contention of the applicants is that since the applicants had filed their returns and had paid tax according to such return, Subsection (1) is not attracted. It is then contended that Sub-section (2) contemplates the case of a dealer who fails to furnish a return referred to in Section 10, and, therefore, not applicable to these cases. Subsection (3) speaks of payment after assessment and admittedly is not attracted to these cases.
9. Mr. Bhattacharya argued that the applicants being registered or certified dealers and having furnished their returns periodically as contemplated in Section 10 of the Act and having paid the tax according to such return, it could not be said that any amount of tax payable was remaining unpaid according to the return, and as such, the question of imposition of interest on so much of the amount that remains unpaid could never arise. In this connection, our attention was drawn to Sub-rule (2)(c) of Rule 27AA of the Bengal Sales Tax Rules, 1941. The said rule provides that if the applicant at the time of making application for declaration forms defaulted in furnishing any return or returns, together with the receipted challans showing payment of tax, surcharge or additional surcharge due from him according to such return, for the furnishing of which the prescribed date or dates have already expired, the Commercial Tax Officer shall withhold the issue of declaration forms until such time as he furnishes such return or returns, together with such receipted challans and any other return with challans showing payment due according to such return and the statement referred to in Sub-rule (2) of Rule 36A. This rule also contemplates payment according to the return filed. Therefore, it was argued upon a combined reading of Section 10A and the rule aforesaid that the issue of declaration forms or for the matter of that the payment of interest on turnover tax, could be insisted upon only where the applicant has failed to furnish a return and to pay according to such return. Mr. Bhattacharya laid special emphasis on the use of the expression "according to such return" appearing in Section 10A(1). The substance of his contention is that since he has filed a return and has made payments by challans according to the return, his case cannot be covered by Sub-section (1) of Section 10A.10. On behalf of the respondents it was contended that the section was never intended to mean that a dealer who chooses to file an arbitrary return without reference to the real state of affairs, could be said to have furnished a return according to law. It was also contended that the expression "return" contemplated by Sub-section (1) of Section 10A must certainly mean a true and proper return. It is admitted that in the return furnished by the applicants they had not shown the turnover tax. The form of "return" is a composite one in which sales tax, purchase tax, turnover tax, etc,, are all required to be shown. It is significant to note that "tax" has been defined in the Act to mean tax payable under Section 5, Section 6B, Section 6C or Section 6D. Section 6B relates to turnover tax and is thus required to be shown in the return. Admittedly, in regard to turnover tax, the applicants claimed exemption on the ground that they had challenged the validity of such demand for turnover tax under Section 6B of the Act. Mr. Bhattacharya contended that in interpreting a taxation statute a very strict and literal interpretation should be given and no word or expression should be allowed to be read into the section unless it is specifically mentioned in the section itself. The learned State Representative, on the other hand, argued that a taxation statute usually contains two parts, namely, charging section and machinery provisions. In support of this contention reliance was placed on the decision in the case of Haji Lal Mohd. Biri Works v. State of U.P. reported in [1973] 32 STC 496 (SC). There is an observation in this case that the provision for imposition of interest was apparently added with a view to tightening up the machinery for collection of sales tax and as a deterrent measure so that the dealers may not evade or delay the payment of tax. This was of course a case arising out of Section 8(1-A) of the U.P. Sales Tax Act, 1948. The section provides for recovery of interest on tax remaining unpaid for a specified period after the notice of assessment.
Obviously, it contemplates a case of post-assessment demand for interest. But what is important is the observation that the provision is a machinery provision as distinguished from a charging provision, meant to ensure payment of tax in due time.
11. In the case of Commissioner of Income-tax v. National Taj Traders, reported in [1980] 121 ITR 535 (SC), it was observed that the principle of strict interpretation of taxation statutes does not apply to machinery provisions. The principle that a fiscal statute should be construed strictly, is applicable only to taxing provisions and not to those parts of the statute which contain machinery provisions. The court further observed that casus omissus cannot be supplied by the court except in the case of clear necessity and when reason for it is found in the four corners of the statute itself. But, at the same time, a casus omissus should not be readily inferred and for that purpose all the parts of a statute must be construed with reference to the context and the other clauses so that the construction to be put on a particular provision makes a consistent enactment of the whole statute.
This would be more so if literal construction leads to an absurd or anomalous result which could not be intended by the legislature.
12. In our view unless the expression "return" as used in Section 10A(1), is meant to cover a return which is full and complete in all respects, the result may be disastrous. It may become a handy tool in the hands of an unscrupulous dealer to evade the provisions of Section 10A(1) by submitting a return which is patently incomplete. In our view, the expression "return" used in Section 10A(1), must mean a return which is a complete return covering all items of tax.
Admittedly, in the cases before us the applicants did not submit any return in regard to turnover tax. Their contention is that they had challenged the demand for turnover tax introduced by Section 6B of the Act, and that, as such, they were not required to show the tax in the returns, A return filed by a dealer is required to be true and proper.
At any rate, it must be a complete return.
13. When the statute requires the applicants to furnish returns, it is intended that the return should at least be complete, if not true and correct also. In holding so, we do not propose to introduce a casus omissus. The learned advocate for the applicants drew our attention to certain observations made in the case of Commissioner of Income-tax v.Ajax Products Ltd. reported in [1965] 55 ITR 741 (SC). There are observations in the decision which forbids supplying omissions in a statute or giving a construction which is patently against the language used in the Act. In this decision the Honourable judges of the Supreme Court have quoted with approval a rule of construction of taxation statutes, as has been stated by Rowlatt, J. in Cape Brandy Syndicate v.Inland Revenue Commissioners [1921] 1 KB 64, as follows : "In a taxing Act one has to look merely at what is clearly said.
There is no room for any intendment. There is no equity about a tax.
There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." Upon a reading of the whole judgment it appears that their Lordships held that the subject is not to be taxed unless the charging provision clearly imposes obligation. Their Lordships thereafter upon a close scrutiny of the provisions, observed that the language used fits in clearly within the scheme of entire section. Therefore, what is important to see is whether the language used is consistent with the scheme of the Act and the interpretation to be put to the language should be such as renders the section workable and meaningful.
14. It is true that the word "complete" is not there in Section 10A(1) of the Bengal Finance (Sales Tax) Act, 1941. But unless the expression "return", as used in that section, is construed as a complete return, the entire scheme of the provision would be disturbed. We have already indicated that while a fiscal statute should be construed strictly, such construction is applicable to the taxing or charging provisions especially and not to those parts of the statute which contain machinery provisions. It will bear repetition that according to [1973] 32 STC 496 (SC) (Haji Lal Mohd. Biri Works v. State of U.P.), the provision for imposition of interest is a machinery provision intended to tighten up collection of sales tax.State of Tamil Nadu v. M.K.Kandaswami [1975] 36 STC 191 (SC), that in interpreting such a provision (in that case the question related to interpretation of a clause in the Madras General Sales Tax Act) a construction which would defeat its purpose and, in effect, obliterate it from the statute book, should be eschewed. If more than one construction is possible, that which preserves its workability and efficacy, is to be preferred to the one which would render it otiose or sterile.
16. Unless we interpret the word "return" in Section 10A(1) as meaning a "complete return", the object of the Act would be defeated.
17. Our attention was drawn to a single Bench decision of the Calcutta High Court reported in [1988] 71 STC 404 (Swarmal Choudhury v.Commercial Tax Officer). That was a case relating to declaration forms.
Rule 27AA of the Bengal Sales Tax Rules, 1941, provides that an applicant for declaration forms should have furnished his returns within the prescribed time and have paid the taxes due according to such returns. It was held that at the time of issuance of declaration forms the sales tax authority could only consider whether the dealer had defaulted in furnishing returns and whether the declaration forms were used bona fide and that the correctness of the returns could only be questioned at the time of assessment. The question whether the return was a complete and proper return was not a relevant issue in that case.
18. Upon a reference to this decision, Mr. Bhattacharya argued that the expression "paid taxes according to such return" has been interpreted to mean a payment according to the return which may not necessarily be a complete or proper return. It is true that in the context of the question whether declaration forms should or should not be issued, the only point for consideration is whether returns have been submitted and forms issued have been used in a bona fide manner. The question whether the return was a complete one or not in view of some amendments in the Act itself, as envisaged by Section 6B, did not fall for consideration in that case. We have considered that aspect of the matter and we are of the view that this decision can have no direct application to the facts of the case before us. Rule 27AA(2)(c) contemplates, besides payment of tax, surcharge and additional surcharge, various other safeguards and also contemplates granting of instalments. In the context of such provisions the aforesaid decision was rendered.
19. Admittedly, the applicants did not file any return with regard to the turnover tax. It was submitted that since writ petitions challenging the validity of Section 6B were pending and there was an interim order issued by the High Court restraining the respondents from realising the same, though upon furnishing security by way of bank guarantee, the applicants could not have shown the amount of turnover tax in the returns. Whether the respondents could, in view of the injunction, lawfully demand and collect it during the pendency of the injunction, is a different matter altogether. The injunction could not prevent the applicants from furnishing returns in respect of taxable turnover and then claiming exemption from payment of the same in view of the interim order of injunction. That does not appear to have been done. The return that is required to be furnished is a composite return in respect of all kinds of taxes under the Act. If in such a return an item of tax payable is left blank, it may not perhaps be said that a proper return was submitted.
20. This apart, it seems that even if it is assumed on a very strict and literal construction of Section 10A, that payment according to such return was made so as to take the case out of the scope of Sub-section (1), yet it is possible to take a different view of the matter upon a reading of Sub-section (2). This sub-section certainly relates to the case of a dealer who has failed to furnish a return. It was contended that since a return was filed, the correctness or otherwise of which could only be ascertained at the stage of assessment. Therefore, it could never be said that it was a case coming within the meaning of Sub-section (2). We are, however, unable to agree with this view. We have already indicated that in the return furnished by the applicants the turnover tax was not indicated. Therefore, it is possible to say and hold that in regard to turnover tax, no return was furnished at all. It may be true that the applicants on a bona fide belief submitted that the imposition was illegal and, therefore, unrealisable, and more so, in view of the injunction, yet the fact remains that no return with regard to turnover tax was furnished. The liability to furnish the return was never prohibited by the interim order. In such a situation, it is possible to hold that no returns (at least with regard to turnover tax) were furnished. Consequently, even if Sub-section (1) might not have been attracted, there is no escape from the position that at least Sub-section (2) is applicable. Therefore, in any view of the matter, the liability to pay interest either under Sub-section (1) or under Sub-section (2) of Section 10A cannot be avoided.
21. In this context, the respondents referred to the decision in the case of Associated Cement Co. Ltd. v. Commercial Tax Officer, reported in [1981] 48 STC 466. It was a decision given by a Bench of three judges of the Honourable Supreme Court. The majority view was dissented from by Mr. P.N. Bhagwati, J. who preferred to rely on an earlier decision rendered by a Bench of five judges reported in [1965] 16 STC 318 (State of Rajasthan v. Ghasilal). In the case reported in [1981] 48 STC 466 (SC) (Associated, Cement Co. Ltd. v. Commercial Tax Officer), the assessee submitted returns under the Rajasthan Sales Tax Act, 1954, accompanied by challans which were in accordance with the return. In the challans freight charges were not included in the bona fide belief that freight charges were not liable to be included in the taxable turnover in view of the pendency of a question raised in that behalf and then pending before the Supreme Court. After the judgment, however, the assessee submitted revised returns. It was held that the liability to pay interest was clearly attracted. Mr. Bhattacharya, appearing on behalf of the applicants, preferred to rely on the decision of the larger Bench reported in [1965] 16 STC 318 (SC) (State of Rajasthan v.Ghasilal). In that case it was observed that Section 3 of the Rajasthan Sales Tax Act, 1954, which is the charging section, read with Section 5, creates the liability to pay tax. But till the tax payable is ascertained by the taxing authority under Section 10 or by the assessee under Section 7(2), no tax could be said to be due within the meaning of Section 16(1)(b), for, till then there was only a liability to be assessed to tax and there could be no breach of Section 16(1)(b). It cannot be said that the later decision was made per incuriam. In fact, the majority decision while arriving at their conclusions, had referred to the earlier decision and distinguished the same on facts. Where a Bench of the Supreme Court explains, distinguishes or identifies the correct ratio of an earlier judgment of a larger Bench, then the High Court or the courts below have no choice but to follow the later decision though rendered by a Bench of lesser strength [see Century Spinning Mfg. Co. v. State of West Bengal [1989] 73 STC 277 (Cal)].
22. The next question that falls for consideration is the date from which the liability to pay interest would accrue. The provision, namely, Section 10A was inserted by West Bengal Act 15 of 1983 with effect from October 1, 1983, that is to say, during the pendency of the writ petitions or the appeals before the High Court. It was argued that since the provision was enacted during the pendency of the litigation, there was no question of payment and there was no question of withholding payment either. We have already said that the liability accrues on the failure to pay according to a return or on the failure to furnish a return at all. With the dismissal of the appeals the prohibition stood vacated. The result is, as if the liability was always there, for, the appellate judgment could not be said to create the liability. It merely declared it. The effect of the decision of the appellate Court is to declare that Section 6B is not -ultra vires.
Consequently, the liability to pay turnover tax accrues not from the date of the judgment but from the moment the provision was statutorily given effect to. The running of time for payment of interest cannot for that reason be stopped. In the case of East India Hotels Ltd. v. State [1988] 70 STC 10 (J & K), it was held that recovery of tax stayed during pendency of writ petitions could be made upon dismissal of the writ petitions and the recovery could not be challenged on the ground of stay. Precisely, it was held that operation of the stay order does not prevent the running of time. In the case of Haji Lal Mohd. [1973] 32 STC 496 referred to earlier, the Supreme Court also has observed that there is nothing in Section 8(1A) of the U.P. Sales Tax Act to prevent the running of interest because of the operation of any stay order. The liability to pay interest is created by the statute and not by the judgment. Consequently, the contention that the interest may, if at all, be claimed from February 24, 1988, on which date the appeals were disposed of, cannot therefore, be accepted. To accept such a position would only encourage dilatory tactics on the part of those who are likely to benefit from the delay in the disposal of cases and lifting of prohibitory orders. Such an interpretation would not only be against law but against public policy as well. We have already indicated that a party obtaining a stay order at his own choice does so at his own risk. The liability to pay interest accrued from October 1, 1983, and has become payable with effect from that date irrespective of the date of disposal of the appeals.
23. Besides denying the liability to pay interest the applicants have also made a grievance that the competent authorities were refusing to issue declaration forms because of non-payment of turnover tax and interest thereon.
24. Quite substantial amounts of tax and interest must have, at least in some cases, accumulated over the years. It may be difficult for many to clear the arrears all at once in order to be entitled to the declaration forms. Rule 27AA empowers Commercial Tax Officer to grant time to pay up the arrears in lump or in instalments. Since the extent of arrears in each case and the financial capability of the applicants are not precisely known to us, we are not in a position to say whether instalments should or should not be granted in individual cases. But we expect and hope that the appropriate Commercial Tax Officers shall consider the merit of each case and sympathetically consider the question of granting instalments for the purpose of issuing declaration forms if and when prayers in that behalf are made.
25. With the directions as above, the applications are dismissed. We make no orders as to costs. All interim orders are vacated.