MARUTI WIRE INDUSTRIES PVT. LTD.versusS.T.O.1ST CIRCLE, MATTANCHERRY AND ORS.

                    MARUT! WIRE INDUSTRIES PVT. LTD.                               A
                                      "
            S.T.O., !st CIRCLE, MATTANCHERRY AND ORS.

                              MARCH 27, 2001

     (S.P. BHARUCHA, R.C. LAHOTI AND Y.K. SABHARWAL, JJ.]                          B

      Sales Tax:

      Kerala General Sales Tax Act, 1963--Section 23(3)-Kerala General
Sales Tax Rules, 1963-Rule 27(7-A)-Iiability of sales tax-Failure to file
return of turnover-Held, assessee liable for other consequences but not penal      c
interest under Section 23(3).

       The appellant entered into an agreement with Mis. Tata Oil Mills Co.
Ltd., to supply imported inedible tallow to their factory at Ernakulam. The
tallow was imported at the Cochin Port and delivered to the buyer. The
appellant did not file a return of the turnover relating to the transaction. The   D
Respondent finalised the assessment and raised a demand of sales tax where·
after the tax was paid. The Respondent then raised demand for payment of
penal interest under sob-section (3) of Section 23 of the Kerala General Sales
Tax Act, 1963 for the period between 1983 and 1985. This demand was
impugned hy the Appellant before the High Court. A Single Judge allowed            E
the petition and quashed the said demand. The Respondent preferred a writ
appeal which was allowed.

      The appellant contended that there was no order of assessment nor a
return of turnover filed by way of self assessment in which case it should
have been accompanied by proof of payment of tax as per self assessment            F
and, therefore, it was not required to pay tax unless and until a demand
based on an order of assessment was raised againstit; that the scheme of the
Act as it stood at the relevant time contemplates a different penal action
against a default, i.e. penalty uuder Section 45A of the Act for failure to
submit the return of turnover which penalty can be as high as twice the            G
amount of sales tax payable hut liability to pay penal interest cannot be cast
on the assessee for such failure when the Act does not speci(tcally provide for
levy of penal interest for failure to file return of turnover.
      The respondent contended that an assessee held liable to payment of
sales tax and filing a return of turnover, cannot be placed on a higher            H
                •                     829
     830                     SUPREME COURT REPORTS                 [2001] 2 S.C.R.
A   pedestal than an assessee w:ho files a return and, therefore, a reasonable
    construction to be placed on sub-section (3) of Section 23 would be that an
    assessee not filing a return of turnover should be held liable to pay penal
    interest with effect from a date on which he should have filed a return of
    turnover accompanied by payment of tax even if such return was not
    actually filed.
B
           Allowing the Appeal, the Court

           HELD : 1. The liability of the assessee-appellant to pay sales tax
    could have arisen either on return of turnover being filed by way of self-
c   assessment or else on an order of assessment being made. No doubt Rule
    27(7A) of the Kerala General Sales Tax Rules, 1963 casts an obligation on
    assessees to file a return of total turnover and taxable turnover accompa-
    nied by proof of payment of the amount of tax due within 20 days of the
    previous quarter hut such a return was not filed by the appellant. Failure
    to file return of taxable turnover may render the assessee liable for any
D
    other consequences of penal action as provided by law but cannot attract
    the liability for payment of penal interest under sub-section (3) of Section
    23 of the Act on the parity of reasoning that if a return of turnover would
    have been filed on the due date then the tax as per return would have
    become due and oayable on that date. [834-C-D]
E
           J.K Synthetics ud. v. C.T.O., (1994) 94 STC 422, followed.

           CIVIL APPELLXI'E JURISDICTION·: Civil Appeal No. 3009 of 1999.

         From the Judgment and Order dated 12.6.98 of the Kerala High Court
F   in W.A. No. 886/94 O.P. No. 4095 of 1996.

         G.C. Sharma, Sudhir Kumar Gupta, J. Kathuria and R.K. Raghavan for          ~
    the Appellant.

G          G. Prakash for the Respondents.

           The Judgment of ihe Court was delivered by

         R.C. LAHOTI, J. Whether the appellant, an assessee, is liable to pay
    any penal interest on the assessed tax under Section 23(3) of the Kerala
H   General Sales Tax Act, 1963 (hereinafter 'the Act', for short), from the date

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 MARUTI WIRE INDUSTRIES CTD.v. S.T.O. !ST CIRCLE. MATIANCHERRY [R.C. LAHOTI, I.]   831
when return was due though neither a return was furnished nor any tax paid               A
on self-assessment basis, is the question arising for decision in this appeal.

      Briefly stated the relevant facts are as follows. In April, 1983 the
appellant, stationed in Patna, entered into an agreement with Mis. Tata Oil.
Mills Co. Ltd. to supply imported inedible tallow to their factory at Emakularn.
Accordingly, the tallow was imported at the Cochin Port and delivered to the ,. B
buyer. The appellant did not file a return of the turnover relating to the above- ·
said transaction. The Sales Tax Officer finalised the assessment on 10.10.1984
and served the appellant on 4.3.1985 with notice raising a demand of sales
tax whereafter the tax was paid. The appellant was then served with two
notices raising demand for payment of Rs. l,85,882.58p. as penal interest                c
under sub-section (3) of Section 23 of the Act for the period 20.5.1983 (the
date by which the return of tum-over was due to be filed accompanied by
proof of payment of the tax due as per return) to 25.2.1985. This demand
was impugned by filing a writ petition before the High Court of Kerala at
Emakularn. A learned single Judge allowed the petition and quashed the said
demand. The State of Kerala preferred a writ appeal which has been allowed D
and the judgment of the learned single Judge has been set aside. The
aggrieved appellant has filed this appeal by special leave.

       Sub-section (3) of Section 23 of the Act reads as under:-

                "(3) If the tax or any other amount assessed or due under this           E
          Act is not paid by any dealer or other person within the time
          prescribed therefor in this Act or in any rule made thereunder and in
          other cases within the time specified therefor in the notice of demand,
          or within the time allowed for its payment by the appellate or
          revisional authority, as the case may be, or if payment is permitted           F
          in instalments by any of the authorities empowered in this behalf, any
          such instalment is not paid within the time specified, therefor, the
          dealer or other person shall pay, by way of penal interest, in the
          manner prescribed, in addition to the amount due, a sum equal to-

                (a) one per cent of such amount for each month or part thereof for       G
                the first three months after the date specified for its payment;

                (b) two per cent of such amount for each month or part thereof
                subsequent to the first three months aforesaid."

       The present one is not a case where any amount of tax was collected               H
     832                      SUPREME COURT REPORTS                  [2001] 2 S.C.R.
A    by the appellant and then not deposited. It is an admitted position that the
                                                                                             ...
     validity of impngned demand depends on the meaning to be assigned \p the
     expression "if the tax or any other amonnt assessed" as occnrring in Section
     23(3) of the Act. According to the appellant there was no order of assessment
                                                                                        •
     nor a retoro of tomover filed by way of self assessment in whicll "~ase it
     should have been accompanied by proof of payment of tax aS per self
B
     assessment and, therefore, the appellant was not required to pay tax unless
     and nntil a demand based on an order of assessment was raised against it.
    According to the respondent, an assessee held liable to payment of sales tax        ~.
    and not filing a return of tom-over, cannot be placed on a higher pedestal
    than an assessee who files a retoro and, therefore, a reasonable construction
c   to be placed on sub-section 3 of Section 23 would be that an assessee not
    filing a return of turnover' should be held liable to pay penal interest with
    effect from a date on which he should have filed a retoro of toroover
    accompanied by payment of tax even if such return was not actually filed.
    The learned connsel for the appellant submitted in response that the scheme
    of the Act as it stood at the relevant time contemplates a different penal action
D
    against such default, i.e. penalty nnder Section 45A of the Act for failure to
    submit the return of turnover which penalty can be as high as an aillonnt twice
    the amonnt of sales tax payable but liability to pay penal interest cannot be
    cast on the assessee for such failure when the Act does not specifically
    provide for levy of penal interest for failure to file retoro of tnrnover. We
E   fmd merit in the appellant's plea. A legislative casus omissus cannot be
    supplied by judicial interpretative process.

           Shri G.C. Sharma, learned senior connsel for the appellant has relied
    on the Constitution Bench decision of this court in J.K. Synthetics Ltd. v.
    Commercial Taxes Officer, (1994) 94 STC 422 in support of his submission.
F
    In J.K. Synthetics case, majority opinion in Associated Cement Co. Ltd. v.
    Commercial Tax Officer, (1981) 48 STC 466 SC, has been over-ruled and the
    minority opinion of PN. Bhagwati, J. (as His Lordship then was) has been
    approved. In Associated Cement Co. 's case, the demand for payment of
    interest was raised nnder Section UB of Rajasthan Sales Tax Act, 1954. The
G   assessee had submitted retoros accompanied by receipts evidencing the
    payment of tax on the basis of the retoros. The freight charges realised by
    the assessee were not included in the quantum of taxable turnover. Later on,
    law was settled by this court holding that the freight charges were liable to
                                                                                        ~
    be included in the figure of turnover whereafter the assessee filed a revised
    retuin including freight charges in the quantum of tnrnover and also paid the
H
 MARUTI WIRE INDUSTRIES Lm.v. S.T.O. !ST CIRCLE, MATTANCHERRY [R.C. LAHOTI, I.]   833
additional tax. Question arose, whether interest could be levied for the delay            A
in depositing the tax amount relatable to the freight charges? Venkataramiah,
J., speaking for himself and on behalf of A.P. Sen, J, held that the expression
"on the basis of return" should be construed as "on the basis of a true and
proper return" and an assessee, who did not file a return or made a wrong
plea as to part of the turnover being not taxable but subsequently found to
                                                                                          B
have made a wrong claim, would be liable to pay in.terest on the amount of
tax which the assessee was held liable to pay but did not pay and such a
construction would be in conformity with the legislative intention. Bhagwati,
J. in his dissenting opinion construing the expression "full amount of tax due
on the basis of the return" held:
                                                                                          c
               " ... , ............... We must look at the return actually filed by the
         assessee in order to see what is the full amount of tax due on the basis
         of such return. It is not the assessed tax nor is it the tax due on the
         basis of a return which ought to have been filed by the assessee but
         it is the tax due according to the return actually filed that is payable
         under sub-section (2) of section 7. lbis provision is really in the              D
         nature of self-assessment and what it requires is that whatever be the
         amowil of Lax. due on the basis of self-assessment must be paid up
         along with the filing of the return which constitutes self-assessment.
         I fail to see how the plain words of sub-section (2) of section 7 can
         be tortured to mean full amount of tax due on the basis of return which          E
         ought to have been filed but which has not been filed."

                                                                [emphasis supplied]

      Repelling a similar plea rafaed on behalf of the Revenue as has been
raised before us, Bhagwati, J. observed that if the assessee fails to file a              F
return, he exposes himself to penalty for such default; the Legislature could
never have intended that the assessee should be liable, on pain of imposition
of penalty, to deposit an amount which is yet to be ascertained through
assessment.

       The same issue which was dealt with by a three-Judges Bench of this                G
court in the case of Associated Cement Co. /Jd. came up for the consideration
of Constitution Bench in the case of J.K Synthetics /Jd. (supra). This court
overruled the majority opinion and approving the minority opinion in Asso-
ciated Cement Co. 's case held that the provision by which the authority is
empowered to levy and collect interest, even if construed as forming part of              H
    834                       SUPREME COURT REPORTS                  [2001] 2 S.C.R.
A   the machinery provisions, is a substantive law, not adjectival law, and interest
    cannot be recovered by way of damages for wrongful detention of the
    amount. This court further held that the "tax payable" or "tax due" is that
    amount which becomes due ex-hypothesi on the turnover and taxable turno-
    ver shown in or based on the return or as to which an order of assessment
    has been made.
B
           In view of the law laid down by the Constitution Bench, we are clearly
    of the opinion that the liability of the assessee appellant to pay sales tax could
    have arisen either on return of turnover being filed by way of self-assessment
    or else on an order of assessment being made. No doubt Rule 27 (7A) of
c   the Kerala General Sales Tax Rules, 1963 casts an obligation on assessees
    to file a return of total turnover and taxable turnover accompanied by proof
    of payment of the amount of tax due within 20 days of the previous quarter
    but such a return was not filed by the appellant. A failure to file return of
    taxable turnover may render the assessee liable for any other consequences
    or penal action as provided by law but cannot attract the liability for payment
D   of penal interest under sub-section (3) of Section 23 of the Act on the parity
    of reasoning that if a return of turnover would have been filed on the due
    date then the tax as per return would have become due and payable on that
    date.

          For the foregoing reasons, the appeal is allowed. The judgment of the
E
    Division Bench is set aside and that of the learned single Judge is restored.
    There will be no order as to the costs.

    V.M.                                                           Appeal allowed.