Laxminarayan Purohit Vs. Addl. Commissioner of Commercial Taxes and Another - Court Judgment

Excerpt:
- state financial corporations act, 1951 [63/1951]. section 29; [p.k. tripathy, a.k. parichha & n.prusty, jj] discharge of loan orissa forest act (14 of 1972), section 56 confiscation of vehicle - held, the authorities under section 56 of the orissa forest act, 1972 are not obliged to release the vehicle from the confiscation proceeding or to pay the sale proceeds of the vehicle after the order of confiscation in favour of orissa state financial corporation when such vehicles were purchased on being financed by the orissa state financial corporation and the loan had not been liquidated by the date of the seizure/confiscation of the vehicle. concept of first charge or second charge has no applicability when the vehicle is not otherwise disposed of to determine the liabilities of the loanee. on the other hand the vehicle having been found indulged in forest offences was made subject matter of a confiscation proceedings, and therefore, the procedure followed for confiscation of the vehicle and for its sale is punitive in nature and not with a view to give benefit to anybody including the department which initiated the confiscation proceeding. apart from that, the claim of the orissa state financial corporation as against its loanee (who had taken the vehicle on hire- purchase agreement) brings the loanee and the sureties within the default clause under the state financial corporation act, 1951 or the heirs and successors of such persons. procedure is provided in the act, 1951 and the rules thereof about the manner in which such loan is to be recovered, and in that context only the vehicle under the hire-purchase agreement is placed as the first charge. if such property is not available for any reason, then the loan is not automatically waived or the loanee and his sureties are not automatically redeemed of the liabilities to repay. the financial corporation is concerned with repayment of loan either from the property or persons offered as surety. thus, a vehicle, which is subject matter of confiscation proceeding under the act, 1872, being not available to the orissa state financial corporation for adjustment of the unpaid loan, that does not at all bring out an anomalous situation so as to defeat the right of the orissa state financial corporation. agreement between the orissa state financial corporation and the loanee is a pure and simple contract governed by the provisions of the contract act, 1872 read with the provisions in the act, 1951 and its rules. on the other hand, a confiscation proceeding under the act, 1972 is punitive in nature for commission of a forest offence. thus, by virtue of the provision in section 56 read with section 64 (2) of the act, 1972, the action taken for confiscation of the vehicle cannot be extended to grant protection of the loan advanced by orissa state financial corporation. by doing that it amounts to grant premium to the pick-pockets in as much as, by making payment of the confiscation amount in favour of the orissa state financial corporation the loan burden of the accused of the forest offence is reduced to the extent of the sale proceeds of the vehicle. in other words, on payment of the sale proceeds of the confiscation proceeding to the orissa state financial corporation towards discharge of the loan account of the accused of a forest offence, it would lead to a system to reward him by repayment of his loan. then it does not become a penalty nor the action become punitive, but it remains as a reward to the accused of forest offence. such a concept is totally not conceivable from any provision in the act, 1972 or the act, 1951. [air 2002 orissa 130 overruled]. -- state financial corporations act, 1951. section 29; discharge of loan orissa forest act (14 of 1972), section 56 confiscation of vehicle - held, the authorities under section 56 of the orissa forest act, 1972 are not obliged to release the vehicle from the confiscation proceeding or to pay the sale proceeds of the vehicle after the order of confiscation in favour of orissa state financial corporation when such vehicles were purchased on being financed by the orissa state financial corporation and the loan had not been liquidated by the date of the seizure/confiscation of the vehicle. concept of first charge or second charge has no applicability when the vehicle is not otherwise disposed of to determine the liabilities of the loanee. on the other hand the vehicle having been found indulged in forest offences was made subject matter of a confiscation proceedings, and therefore, the procedure followed for confiscation of the vehicle and for its sale is punitive in nature and not with a view to give benefit to anybody including the department which initiated the confiscation proceeding. apart from that, the claim of the orissa state financial corporation as against its loanee (who had taken the vehicle on hire- purchase agreement) brings the loanee and the sureties within the default clause under the state financial corporation act, 1951 or the heirs and successors of such persons. procedure is provided in the act, 1951 and the rules thereof about the manner in which such loan is to be recovered, and in that context only the vehicle under the hire-purchase agreement is placed as the first charge. if such property is not available for any reason, then the loan is not automatically waived or the loanee and his sureties are not automatically redeemed of the liabilities to repay. the financial corporation is concerned with repayment of loan either from the property or persons offered as surety. thus, a vehicle, which is subject matter of confiscation proceeding under the act, 1872, being not available to the orissa state financial corporation for adjustment of the unpaid loan, that does not at all bring out an anomalous situation so as to defeat the right of the orissa state financial corporation. agreement between the orissa state financial corporation and the loanee is a pure and simple contract governed by the provisions of the contract act, 1872 read with the provisions in the act, 1951 and its rules. on the other hand, a confiscation proceeding under the act, 1972 is punitive in nature for commission of a forest offence. thus, by virtue of the provision in section 56 read with section 64 (2) of the act, 1972, the action taken for confiscation of the vehicle cannot be extended to grant protection of the loan advanced by orissa state financial corporation. by doing that it amounts to grant premium to the pick-pockets in as much as, by making payment of the confiscation amount in favour of the orissa state financial corporation the loan burden of the accused of the forest offence is reduced to the extent of the sale proceeds of the vehicle. in other words, on payment of the sale proceeds of the confiscation proceeding to the orissa state financial corporation towards discharge of the loan account of the accused of a forest offence, it would lead to a system to reward him by repayment of his loan. then it does not become a penalty nor the action become punitive, but it remains as a reward to the accused of forest offence. such a concept is totally not conceivable from any provision in the act, 1972 or the act, 1951. [air 2002 orissa 130 overruled]. r.k. patra, a.c.j.1. is the sales tax officers obliged to impose the maximum penalty prescribed under sub-section (6) of section 13-aa of the orissa sales tax act, 1947 this is the short question that arises for consideration in this writ petition filed by the executive engineer, roads and building division, sambalpur.2. the facts necessary for adjudication of the above question may be delineated :the petitioner entrusts execution of different works to various contractors under his division. sub-section (1) of section 13-a a of the orissa sales tax act, 1947 (hereinafter referred to as 'the act' requires that any person responsible for paying any sum to any contractor for carrying out any works contract which involves transfer of property in goods shall at any time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or any other mode deduct an amount, towards sales tax equal to four percent of such sum of works contract if its value exceeds rupees one lakh. under sub-section (3) thereof, the amount deducted from the bills or invoice is required to be deposited into a government treasury within one week from the date of deduction in such form or challan as may be prescribed. rule 37-a of the orissa sales tax rules, 1947 prescribes the procedure of deposit into the government treasury (vide form-xi). sub-section (6) thereof lays down that if any person contravenes sub-sections (1) or (2) or (3) or (5b), the sales tax officer shall after giving him an opportunity of being beard by order in-writing impose on such person penalty not exceeding twice the amount requited to be deducted and deposited by him into government treasury. the sales tax officer in letter no. 4447/ct, dated 16-4-1999 (annexure-8) called upon the petitioner to state as to why penalty under sub-section (6) of section 13-a a of the act shall not be imposed on him for wilful withholding of deposit of tax deducted at source amounting to rs. 86,997/-. despite service of notice on him, the petitioner did not file any cause. in the circumstances, the sales tax officer imposed a penalty of rs. 1,73,994/-under sub-section (6) of section 13-aa of the act in his letter no. 4698/ct dated 28-4-1999 (annexure-4) by indicating as follows :'you are called upon to state the reason of the non-remittance of the t.d.b. amount of rs. 86,997.00 relating to the year 1998-99 which was required to be depositedto the government treasury within one week from the date of deduction as per provision of section 13(a)(a)(3) of the orissa sales tax act, failing which penalty not exceeding twice the amount required to be deducted and deposited by you will be imposed in accordance to section 13(a)(a)(5) of the o.s.t. act for such wilful withholding of deposit of t.d.s. amount. though the said letter was served on you on dt. 16-4-99 as per a.d. kept in the file neither you appeared nor effected appearance through any authorised person to state the reasons of such wilful withholding of government revenue in breach of the provision of the o.s.t. act. hence it is ascertained that you have no reason to state in regards to contravening the provision of section 13(a)(a)(3) of the o. s. t. act, compelling me to impose, penalty which is to be recovered from you as your personal liability.'against the said imposition of penalty, the petitioner preferred revision before the commissioner of commercial taxes who by order dated 17-8-1999 (annexure-6) uphold the imposition of penalty to an amount of rs. 1,00,000/-.3. counsel for the petitioner contended that payment of tax depends on allocation of fund by the state government to the petitioner's division and for the year in dispute (1998-99), tax could not be deposited in time for inadequate allocation of fund. on 31-3-1999 when, funds were received, the entire amount of rs. 86,997/- was paid in favour of the sales tax department by way of bankers cheque on that very day. since payment has been made within the financial year, no penalty could have been imposed.4. as it appears, in course of hearing of the revision before the commissioner a statement was filed on behalf of the the petitioner regarding deduction of tax at source. the commissioner found that the petitioner made payment to different contractors on 13-7-1998, 27.9-1998, 11-11-1998, 26-11-1998, 3-12-1998, 27-12-1998, 17-1-1999, 25-1-1999 and 30-3-1999. outof such payment, only in respect of the payment made to thecontractors on 30-3-1999, the deduction at source was made anddeposited in the shape of bankers cheque. although in themonths of july, 1998, september, 1998, november, 1998, december,1998 and january, 1999 payments were made to the contractors,no deduction of sales tax was made at the source. under subsections (1) and (3) of section 13-aa the petitioner was bound tomake deduction towards sales tax from the bills of the contractorsand deposit the same into the government treasury within oneweek from the date of such deduction. although he made paymentto the contractor as indicated above, he did not deduct the salestax from their payments at the source. there is therefore nodoubt that he contravenced sub-section (1) and sub-section (3) ofsection 13-aa of the act and incurred the liability of paymentof penalty. 5. learned counsel contended that under sub-section (6) of section 13-aa although the outer limit of penalty is prescribed, in a given circumstance the sales tax officer has the discretion to modulate the imposition of penalty. on due consideration, we find substance in this submission. under subsection (6) of section 13-aa penalty not exceeding twice the amount required to be deducted and deposited is impossible on the person contravening the provisions of sub-sections (1) or (2) or (3) or (5b). the words 'not exceeding twice the amount' indicate the outer limit of penalty. the sales tax officer has not ascribed any reason as to why the maximum penalty prescribed under law should be imposed on the petitioner. the commissioner although has reduced the quantum of penalty, has not given any specific reason for it.6. for the aforesaid reasons, we uphold the finding that the petitioner incuts the liability of penalty under sub-section (6) of section 13-aa of the act. the aforesaid provision gives a wide discretion to the sales tax officer to impose penalty for contravention of sub-sections (1) or (2) or (3) or (5b). the discretion is however a judicial one and not an arbitrary exercise of thepower. what should be the quantum of penalty, cannot be exhaustively enumerated. it depends upon the facts peculiar to each individual case. since the sales tax officer has not given any reason as to why the petitioner should be inflicted with the maximum penalty (in absence of any reason ascribed even by the commissioner when he reduced the penalty), we are inclined to remit the matter to him to consider the question relating to the imposition of the extent of penalty on the, petitioner. we order accordingly.7. for this purpose, the petitioner will appear before the sales tax officer on 1st of march, 2001 and file his reply. if any such reply is filed, the sales tax officer will consider and dispose of the same according to law. we make it clear that this inquiry by the sales tax authorities is confined only to the quantum of penalty.8. the writ petition is allowed.ch. p.k. misra, j.9. i agree.10. writ petition allowed.