Holding

The appellants are liable to pay interest under Section 10‑A from the date of assessment because they failed to furnish a proper return as required by Section 10, and the interim injunction does not negate the statutory right to interest.

Summary

The appellants, Calcutta Jute Manufacturing Co. and others, were assessed a turnover tax under Section 6‑B of the Bengal Finance (Sales Tax) Act, 1941 after their challenge to the provision’s constitutional validity was rejected. While they paid the tax, the West Bengal government later introduced Section 10‑A imposing 2% per month interest on any tax payable during default, and demanded interest from the appellants. The appellants argued that they had filed returns (albeit without stating turnover or tax) and paid the tax as per those returns, and that a High Court injunction restraining collection should preclude interest liability. The Supreme Court held that the returns filed were not valid returns under Section 10, so the appellants failed to meet the statutory filing requirement, triggering interest liability from the date of assessment under Section 10‑A. The Court further held that an interim injunction does not extinguish the legislature’s right to levy interest and the maxim “actus curiae neminem gravabit” does not shield a taxpayer from statutory interest. Consequently, the appellants were liable to pay interest and the appeals were dismissed.

Issues considered

Whether the appellants are liable to pay interest under Section 10‑A of the Bengal Finance (Sales Tax) Act, 1941 on turnover tax for the period during which recovery was stayed by a High Court injunction.
Whether filing a return that omits turnover or tax amount satisfies the requirement of a ‘return’ under Section 10, thereby attracting interest liability.
Whether the principle ‘actus curiae neminem gravabit’ can bar the imposition of interest in this context.

Legislation cited

Bengal Finance (Sales Tax) Act, 1941s. 10-A, s. 6-B
West Bengal Sales Tax Act, 1954s. 4-AAA

Subjects

turnover taxinterest on taxsales taxSection 6-BSection 10-Ainterim injunctiontax assessmentstatutory interestactus curiae neminem gravabit

Judgment

A CALCUTTA JUTE MANUFACTURING CO. AND ANR.
v. ·-
COMMERCIAL TAX OFFICER AND ORS.

JULY 8, 1997

B [S.C. SEN AND K.T. THOMAS, JJ.)

Sales Tax:

Bengal Financial (Sales Tax) Act, J941/West Bengal Sales Tax Act,
c J954.
Sections 6-B and JO-A and 11/Section 4-AAA-Turnover tax-Asses-
see unsuccessfully challengi,ng the validity of provision for turnover tax in
Section 6-B without entertaining any doubt as to their liability to turnover tax
thereunder in case the provision was found to be valilf-Whether appellant
D liable to pay interest on the tax amount for the period under litigation before
the High Court-Held, 'Yes'.

Return within the meaning of section JO-A-Furnishing of return
without mentioning the amount of turnover or tax payable under section
6-B-Held, amounts to failure to furnish a return "refeTTed to in section JO"
E within the meaning of Section JO-A.

Turnover tax-Interest-Furnishing of return-Payment of tax as per
return-Whether incun-ed liability to pay interest under Section JO-A (2) on
the turnover tax at the very moment (lSsessment was made under Section
11-Held, 'Yes'.
F
Injunctions-Grant of by the courts-Held, could not lead to the in-
ference that the High Court was satisfied of a strong prim a f acie case for the
appellants.

G Legal Maxims-'Actus cwiae neminem gravabit'-Meaning and ap-
plicability of'

A new Section 6-B was included in the Bengal Finance (Sales Tax)
Act, 1941 ('Act') and an identical provision Section 4-AAA was included in
the West Bengal Sales Tax Act, 1954, providing for imposing a tax on the
H turnover of a dealer if annual aggregate gross turnover exceeded Rs. Fifty
474
CALCUTIAJUfE MANUFACI'URJNG CO. v. COMMERCIAL TAX OFF1CER 475

lakhs. A
Appellants, concerned with Section 6-B, challenged its validity in writ
petitions filed before the High Court. The High Court injuncted the
Government from collecting such tax on turnover, but ultimately the writ
petitions were dismissed. Therefore, the liability of the appellants to pay
tax on the turnover became conclusive and appellants remitted the tax B
amount accordingly.

In the meantime, Government of West Bengal introduced yet another

- provision as Section 10-A in the Act by which interest at the rate of 2% per
month was charged on the tax amount payable by the dealer during the
period of default. So demands were made on the appellants to pay interest
C

on the tax amount.

Appellants disputed their liability to pay interest mainly on two
grounds, (i) that since appellants have furnished the returns and paid full
tax as per such returns, they were not liable to pay interest under Section D
10-A; and (ii) even otherwise they were not liable to pay interest on the tax
amount as its non-recovery was the effect of the injunction order granted
by the High Court.

Tribunal, however, dismissed the petitions filed by the Appellants. '
Hence this appeal. E
The appellants contended that the appellants could not be mulcted
with interest on the tax amount as they were bona fide contesting the
validity of Section 6-B of the Act. It was also contended that as the
appellants had furnished the returns and paid the tax as per such returns,
they were not liable to pay interest under Section 10-A of the Act. Finally F
it was contended that applying a less onerous interpretation, the appel·
)ants who had filed the returns according to their own estimation should
not be considered as defaulters in furnishing the return.

Dismissing the appeals, this Court G
HELD : 1. It was the constitutional validity of Section 6-B of the
Bengal Finance (Sales Tax) Act, 1941 which was challenged by the appel·
lants in the earlier writ petitions before the Calcutta High Court and which
finally ended up in upholding of its validity. Hence, there was no question
of the assessee waiting for the determination and the turnover as there was H
476 SUPREME COURT REPORTS [1997] SUPP. 1 S.C.R.

A no dispute on that aspect. [483-C-E] ·~

J.K. Synthetics Ltd. v. Commercial Tax Officer, [1994] 4 SCC 276,,
distinguished.

Hindustan Sugar Mills Limited v. State of Rajasthan, [1978] 4 SCC
B 271 and Associated Cement Co. Ltd. v. Commercial Tax Officer, (1981) 48
STC 466, referred to.

(2) The tax amount which the appellants should have paid as per
Section 6-B remained with the appellants during the entire period and they
would have earned good profit with that amount. The State, to which the
C tax amount should necessarily have gone, was not able to utilize it for
public purposes. When appellant had the advantage of keeping the amount
of tax without paying it to the State Exchequer only because the High Court
granted orders restraining the State from recovering that amount from
the assessee, no act of the court shall cause prejudice to any party. The
D maxim "actus curiae neminem gravabit" has ever remained a salutary and
guiding principle. [483-G-H; 484-A]

(3) The contention that as the courts granted injunction restrain-
ing the State from recovering the tax amounts as per Section 6-B would
raise a presumption that the Court was then satisfied of the bona-tides
E of the contention is too fragile for depriving the State of the statutory
right of interest incorporated in Section 10-A of the Act. Interim orders
are passed by the High Courts on variety of considerations, one upon
being the strained financial position of the person approaching the court.
Merely because the Court granted interim orders it cannot be inferred
F that court was then satisfied of a strong pn'ma f acie case for the
appellants. On the contrary, it is well nigh settled that there is always
a presumption in favour of a.legislative act. The presumption cannot be
the other way round. [484-8-D]

G CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1902 of 1990.

From the Judgment and Order dated 27.6.90 of the West Bengal
Taxation Tribunal, Calcutta, in Case No. R.N. 110 of 1990.

Dipankar Ghosh, Shankar Ghosh, D.A. Dave, S. Hegde, M.N. Krish-
H na Mani, Ashok Grover, A. Sen Gupta, D.P. Mukherjee, Prashant Kumar,
CALCIJITAJlITE MANUFACTURING CO. v. COMMERCIAL TAX OFFICER[IHOMAS, J.] 477

A.K. Banerjee, Ms. V.D. Khanna, Raj Kumar Gupta, H.V.P. Sharma, A
Rajesh, G.S. Chatterjee, Shashi Bhushan, Pramod Dayal, Surya Kant,
Aruna, AK Sil, Dilip Sinha, K.R. Saha, J.R. Das and D. Krishnan, for the
appearing parties.

The Judgment of the Court was delivered by
B
THOMAS, J. The question raised in all these appeals is whether an
assessee is liable to pay interest under Section lOA of the Bengal Finance
(Sales Tax) Act 1941, on the turnover tax for the period during which
recovery of the tax amount was stopped by orders of the High Court. West
Bengal Taxation Tribunal answered the said question against the appellants
and hence these appeals by special leave. c
For dealing with the aforesaid question, only necessary facts need be
mentioned; A new provision (Section 6B) was included in the Bengal
Finaiice (Sales Tax) Act 1941, (hereinafter referred to as the 'Act' for
short) and an identical provision was included in the West Bengal Sales
Tax Act 1954 as Section 4AAA. The effect of the new provision was that D
they imposed a tax on the turnover of a dealer whose annual aggregate
gross turnover exceeded Rs. Fifty lakhs. The provisions came into force on
1.4.1979. These appellants were concerned with Section 6B of the Act and
hence, they filed writ petitions before the Calcutta High Court challenging
the validity of the aforesaid provision. The High Court, on admission of
the writ petitions, granted interim relief by injuncting West Bengal Govern- E
ment from collecting such tax on the turnover, but ultimately the writ
petitions were dismissed. Thus, liability of the appellants to pay tax on the
turnover became conclusive and appellants remitted the tax amount ac-
cordingly. But in the meanwhile, Government of West Bengal introduced
yet another provision as Section lOA in the Act by which interest at the
rate of 2% per month was charged on the tax amount payable by the dealer F
during the period of default. So demands were made on the appellants to
pay interest on the tax amount.

Appellants disputed their liability to pay such interest mainly on two
grounds. First is, that since appellants have furnished the returns and paid
full tax as per such returns they are not liable to pay interest under section G
lOA of the Act. Second is, even otherwise they are not liable to pay interest
on the tax amount as its non-recovery was the effect of the injunction order
granted by the High Court.

West Bengal Taxation Tribunal, before which the appellants chal-
lenged the demand for payment of interest, dismissed the petitions filed by H
478 SUPREME COURT REPORTS [1997] SUPP.1 S.C.R.

A the appellants. For considering the contentions of the appellants a perusal
of Section lOA is necessary. Section lOA of the Act reads thus:

"lOA. 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
B 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

c 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 remains
-
unpaid at the end of each such month of default.

Provided that where such dealer admits in writing that the amount
of tax payable in respect of such period is an amount which is
D
either more or less than, what has been originally shown as pay.ible
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 end of each such month of default.
E
(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 full amount of tax
payable for such period is found not to have been paid by him by
F 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
G
much of the amount of tax, payable by him according to such
assessment as remains unpaid at the end of each such month of
default.

Provided that where an assessment under section 11 is made for _.
H more than one period and such assessment does not show
CALClJITAJUTEMANUFACl1JRINGCO. v. COMMERCIALTAXOFFICER[IHOMAS, J.] 479

separately the tax payable for the period in respect of which A
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- B
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 C
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 end of each such month of default."

It must be pointed out at the outset itself that nobody has a case that D
appellants are liable to pay interest by virtue of sub-section (3) thereof.
Learned counsel for the appellants, however, contended that they are not
liable to pay interest under the other two sub-sections because the situation
envisaged in either of them was non-existent. According to the counsel,
since appellants have furnished returns and paid the tax, as per such
returns, there is no liability to pay interest on the turnover tax because E
sub-section (1) contemplates a situation where there was failure to pay tax
in accordance with the returns furnished and sub-section (2) contemplates
a situation where no return has been furnished at all.

The requirement in sub-section (1) is "to make full payment of the p
tax payable" after furnishing a return referred to in section 10 of the Act
within the prescribed date. Two obligations are thus implied therein as for
a dealer: First is that he should have furnished a return within the
prescribed date in accordance with the terms referred to in Section 10.
Second is that he should make full payment of the tax payable under law.
Sub-section (1) operates in the case of a dealer who had performed the G
first obligation but failed to perform the second obligation. On the other
hand sub-section (2) would operate in a case where the dealer failed to
discharge the first obligation mentioned above.

So the initial aspect to be considered is whether the first obligation
has been discharged by the appellants. If a dealer has furnished only a H
480 SUPREME COURT REPORTS (1997) SUPP. 1 S.C.R.

A truncated return that cannot be regarded as furnishing the return referred
to in Section 10. It must be the full and accurate return. If a dealer makes ·
just a statement by calling it a return it cannot be regarded as the return
referred to in Section 10 of the Act. It is a different matter if the dealer
would have committed some marginal errors in the return or there were
some mistakes of a minor nature.
B
Here it is admitted that the appellants have not mentioned the
amount of turnover or the tax payable thereon in the return filed by them.
If that be so the consequence is that they have failed to furnish a return
which is "referred to in section 10". The corollary is that there was failure
C to furnish the return as envisaged in sub-section (2). Thus, the liability to
pay interest commenced under that sub-section at the very moment the
assessing authority made the assessment under section 11. Interest thereon
would start accruing from the date prescribed for furnishing the correct
return in accordance with section 10.

D Learned counsel for the appellant, however, contended that since the
appellant had filed the return according to his own estimation of the tax
liability, he cannot be ..:onsidered a defaulter in furnishing the return. In
support thereof, learned counsel pleaded for an interpretation which is less
onerous to the assessee.
E
The State is empowered by the legislature to raise revenue through
the mode prescribed in the Act so the State should not be the sufferer on
account of the delay caused by the taxpayer in payment of the tax due. The
provision for charging interest would have been introduced in order to
compensate the State (or the Revenue) for the loss occasioned due to delay
F in paying the tax vide Commissioner of Income Tax, AP v. M. Chandra
Sekhar, [1985] 1 SCC 283 and Central Provinces Manganese Ore Co. Ltd.,
v. Commissioner of Income Tax, (1986] 3 SCC 461. When interpreting such
a provision in a taxing statute a construction which would preserve the
purpose of the provision must be adopted. It is well-settled that in inter-
G preting a taxing statute normally, there is no scope for consideration of
principles of equity. It was so said by Rowlatt J. in Cape Brandy Syndicate
v. Inland Revenue Commissioners, (1921} 1 KB 64 at page 71.

"In a taxing Act one has to look merely at what is clearly said.

H
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,
[
CALCUTIAJUTE MANUFACTIJRING CO. v. COMMERCIAL TAX OFFICER [THOMAS, l.J 481

nothing is to be implied. One can only look fairly at the language A
used."

The above observation has been quoted with approval by a Bench of
three Judges of this Court in Commissioner of Income-Tax, Madras v. Ajax
Products Ltd., 55 STC 741. In another decision rendered by a Bench of
three Judges of this Court in The State of Tamil Nadu v. M.K Kandaswami B
and Others, 36 STC 191, it has been observed thus:

"In interpreting such a provision, 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 C
which preserves its workability and efficacy is to be preferred to
the one which would render it otiose or sterile."

We are, therefore, not adopting a construction which would upset or
even impair the purpose in introducing section lOA in the Act. The return D
to be filed by the dealer is the full and correct return as referred to in
section 10 and on failure to furnish such a return the liability to pay
interest from the prescribed date would arise when assessment is com-
pleted.

Learned counsel next contended alternatively that in view of the E
decision of the Constitution Bench in J.K. Synthetics Ltd. v. Commercial
Taxes Officer, [1994] 4 SCC 276, the appellants cannot be mulcted with
interest on the tax amount since they were bona fide contending and
contesting the validity of section 68 of the Act. This contention warrants
serious consideration. F
The ratio laid down in the aforesaid decision is that the provision in
a taxing statute providing for levy of interest on failure of the dealer to pay
tax due under the particular Act should not be strictly construed but should
be so construed as to effectuate and not defeat the object and purpose of G
the Act. The Constitution Bench was called upon to decide the case on a
reference necessitated in view of an apparent conflict between two earlier
decisions of this Court. Under Section llB of the Rajasthan Sales Tax Act,
1954, a dealer was made to pay interest on the amount of tax "payable
under sub-section (2) and sub-section (2a) of Section 7 if it is not paid
within the period allowed". J .K. Synthetics Ltd. filed returns on the premise H
482 SUPREME COURT REPORTS [1997] SUPP. 1 S.C.R.

A that the amount of freight (charged in respect of the sale of cement as per ,
a Cement Control Order) did not form part of the sale price for the
purpose of payment of sales tax. That contention was rejected by the court
in Hindustan Sugar Mills Limited v. State of Rajasthan & Ors., [1978) 4 SCC
271. On the strength of the said decision M/s. J.K. Synthetics Ltd. was
required to pay sales tax on the sale price inclusive of the freight. The
B dispute then arose whether the company should pay interest from the date
of filing of the returns or only from the date of determination of tax payable
in the final assessment. Revenue then contended that interest became
payable from the date on which the original return was filed under Section
7(2) or 7(2A) of the Rajasthan Sales Tax Act. The said contention was
C based on another earlier decision of a Bench of three Judges of this Court
in Associated Cement Company Ltd. v. Commercial Tax Officer, (1981) 48
STC 466. A majority of judges held in that case that interest would run
from the date of filing of returns. Ahmadi J. (as His Lordship then was)
speaking for the Constitution Bench in J .K. Synthetics Ltd. held thus:
D
"When Section 11-B(a) uses the expression 'tax payable under
sub-sections (2) & (2-A) of Section 7', that must be understood in
the context of the aforesaid expressions employed in the two
sub-sections. Therefore, the expression 'tax payable' under the said
two sub-sections is the full amount of tax due and "tax due" is that
E amount which becomes due ex hypothesis on the turnover and
taxable turnover 'shown in or based on the return.' The word
"payable" is a descriptive word, which ordinarily means 'that which
must be paid or is due, or may be paid' but its correct meaning
can only be determined if the context in which it is used is kept in
F view. The word has been frequently understood to mean that which
may, can or should be paid.and is held equivalent to 'due'. There-
fore, the conjoint reading of Sections 7(1), (2) & (2-A) and 11-B
of the Act leaves no room for doubt that the expression 'tax
payable' in Section 11-B can only mean the full amount of tax which
becomes due under sub-sections (2) and (2-A) of the Act when
G asse.ssed on the basis of the information regarding turnover and
taxable turnover furnished or shown in the return. Therefore, so
long as the assessee pays the tax which according to him is due on
the basis of information supplied on the return filed by him, there
would be no default on his part to meet his statutory obligation
H under Section 7 of the Act and, therefore, it would be difficult to
CALQJITAJUIBMANUFACIURINGCQ v. CXJMMERClALTAXOFFICERffHOMA'l,J.] 483

hold that the 'tax payable' by him 'is not paid' to visit him with the A
liability to pay interest under clause (a) of Section 11-B. It would
be a different matter if the return is not approved by the authority
but that is not the case here. It is difficult on that plain language
of the section to hold that the law envisages the assessec to
predicate the final assessment and expect him .to pay the tax on B
that basis to avoid the liability to pay interest. That would be asking
him to do the mere impossible."

Thus the majority view expressed in Associated Cement Co. case was
over-ruled and the minority view therein was upheld by the Constitution
Bench. C

But the position here is explicitly distinguishable from the factual
situation in M/s. JK Synthetics Ltd. Herc, nobody had doubt that if section
6B of the Act was valid the tax was ;:iayable on the turnover. It was the
constitutional validity of Section 6B which was challenged by the appellants D
in the earlier writ petitions before the Calcutta High Court and which
finally ended up in upholding of ;_ts validity. Hence, there was no question
of the assessee waiting for the determination and the turnover as there was
no dispute on that aspect. The fact that appellants questioned the constitu-
tional validity of the charging provision cannot be equated with a dispute
whether the freight paid would also form part of the sale amount. It was a E
highly debated dispute whether price amount would envelope the freight
charges paid by the dealer and until the controversy was resolved by the
Court in Hindustan Sugar Mills Ltd. v. 171e State of Rajasthan, (1978] 4 SCC
271, the dealers were justified in excluding the freight charges from sale
price. It was for that reason the Constitution Bench refrained from mulct- p
ing the tax payer with liability to pay interest additionally. Appellants in
these cases have never disputed that they are liable to pay tax on the
turnover under section 68 of the Act even while they focussed on the vires
of that provision.

The tax amount which they should have paid as per section 6-B G
remained with the appellant during the entire period and they would have
earned good profit with that amount. The State, to which the tax amount
should necessarily have gone, was not able tu utilize it for public purposes.
When appellants had the advantage of keeping the amount of tax without
paying it to the State exchequer only because the High Court granted H
484 SUPREME COURT REPORTS (1997] SUPP. 1 S.C.R.

A orders restraining the State from recovering that amount from the assessee,
no act of the Court shall cause prejudice to any party. The prestine ·
doctrine couched in the maxim "actus curiae nemin~m gravabit" has ever
remained a salutary and guiding principle.

The contention that as the Courts granted injunction restraining the
B State from recovering the tax amount as per Section 6B would raise a
presumption that the Court was then satisfied of the bona fides of the
contention is too fragile for depriving the State of the statutory right of
interest incorporated in Section 10-A of the Act. Interim orders are passed
by the High Court on a variety of considerations, one among being the
C strained financial position of the person approaching the Court. Merely
because the Court granted interim orders it cannot be inferred that Court
was then satisfied of a strong prim a f acie case for the appellants. On the
contrary, it is well nigh settled that there is always a presumption in favour
of constitutionality of a legislative act. The presumption cannot be the other
way round.
D
We, therefore, concur with the view taken by the West Bengal
Taxation Tribunal and dismiss all these appeals.

R.K.S. Appeals dismissed.