JUDGMENT
Rajesh Balia, J.
1. These three revision petitions are directed against the orders dated October 22, 1997 passed by the Rajasthan Tax Board, Ajmer, in Appeals Nos. 1071, 1072 and 1073 of 1996 pertaining to the assessment years 1988-89, 1989-90 and 1990-91.
2. A very short question is involved in these three revision petitions about the liability of the respondent-assessee to pay interest on the amount of tax, which was found due against it as a result of reassessment proceedings.
3. During the aforesaid three assessment years, the respondent-assessee sold furniture to the defence department of the Government of India on the basis of obtaining C form and paid tax at the concessional rate of 5 per cent on the turnover relating to furniture sold to the defence department of the Government of India. The aforesaid claims of the respondent-assessee were accepted by the assessing officer in the regular assessments made under Section 10 of the Act on June 20, 1992, May 15, 1993 and March 1, 1994, respectively.
4. However, it was brought to the notice of the assessing officer by the audit party that in view of the notification dated March 5, 1971, no concessional rates of tax were applicable on the sale of furniture and, therefore, upon initiation of reassessment proceedings in assessment years 1988-89 and 1989-90, tax in respect of turnover of furniture against C form was reassessed on July 9, 1994 and August 9, 1994 respectively. In respect of assessment year 1990-91, same result was brought by resorting to rectification proceedings and tax was imposed on sale of furniture which has been assessed to too low a rate on regular assessment under Section 10. While raising demand for the additional tax on the furniture, interest at the rates prescribed under Section 11-B was also levied for each assessment years on the delayed payment of tax with effect from the date the tax was payable under the provisions of the Rajasthan Sales Tax Act, 1954. Thus, demand for Rs. 5,277, Rs. 8,441 and Rs. 6,439 was raised for the assessment years 1988-89, 1989-90 and 1990-91 respectively.
5. Aggrieved with the levy of interest, the respondent-assessee filed appeals before the Deputy Commissioner (Appeals) in respect of each assessment years, who dismissed those appeals vide his orders dated May 8, 1996.
6. Thereafter, the respondent-assessee further filed appeals before the Rajasthan Tax Board, Ajmer, which came to be allowed vide orders dated October 22, 1997. The Rajasthan Tax Board held that since short payment of tax was not occurred due to any negligence or fault of the assessee, liability of interest cannot be fastened on the respondent-assessee for the period prior to the date of reassessment.
7. I have heard learned counsel for the parties and perused the materials placed before me.
8. It has been urged by the learned counsel for the revenue that concessional rate of tax applicable to sale of other goods was not available in the case of furniture and, therefore, as per the returns submitted by the respondent-assessee for the respective assessment years, tax was payable at the rate of 10 per cent of the turnover of furniture sold to the defence department of the Government of India. However, tax was not paid at the rate of 10 per cent of the turnover of furniture sold to the defence department of the Government of India. Thus, the dealer has failed to pay the tax as per the returns submitted by him and, therefore, in terms of Sub-section (1)(a) and (f) of Section 11-B of the Rajasthan Sales Tax Act, 1954 he is liable to pay interest on that part of the amount of tax which was not paid as per returns at the rate of two per cent per month from the date by which he was required to pay the tax by or under the provisions of the Act of 1954 until the date of payment. In support of his contention, learned counsel for the Revenue has urged that “tax paid which as per return” has reference to tax assessed as per return and not paid by the assessee, at the time when tax for such period was required to be paid, the interest became payable from such date. He urged that a combined reading of Section 11-B as amended with effect from April 7, 1979 with Sections 11 and 7(2) and (2-A), the liability to pay interest is automatic. Interest on delayed payment of tax due as per return in all cases, whether before or after assessment with effect from the date it is payable, or deemed payable and not paid, whether at the time of filing of return, or anterior to it. The legal fiction created under Section 11-B(1)(f), it carried to its logical conclusion in respect of liability to pay such tax at the time stated in Sub-section (2) or (2-A) of Section 7, as the case may be.
9. In this connection, the learned counsel for the petitioner has placed reliance on Haji Lal Mohd. Biri Works v. State of U.P. [1973] 32 STC 496 (SC), Calcutta Jute Manufacturing Co. v. Commercial Tax Officer [1997] 106 STC 433 (SC), Hindustan Engineering Co. v. Assistant Commissioner (Assessment) [1999] 113 STC 14 (Ker), Sales Tax Officer v. Maruthi Wire Industries Private Limited [1999] 113 STC 19 (Ker), Central Provinces Manganese Ore Co. Ltd. v. Commissioner of Income-tax [1986] 160 ITR 961 (SC) and Ganesh Dass Sreeram v. Income-tax Officer [1988] 169 ITR 221 (SC).
10. On the other hand, it was contended by the learned counsel for the respondent-assessee that as no tax was found due on the basis of the returns of regular assessments under Section 10, the provisions of Sub-section (1) of Section 11-B of the Act of 1954 cannot be invoked as the additional amount of tax has arisen on account of assessment or reassessment proceedings or rectification proceedings. The provisions of Sub-section (2) of Section 11-B only govern the cases of levying interest in such cases. Sub-section (2) of Section 11-B of the Act provides that where any amount of tax, fee, interest or penalty is demanded from a dealer as a result of an order passed in any proceedings under this Act (including assessment, appeal, revision, rectification or otherwise) and such tax, interest or penalty is not paid by such dealer within the time required by or under the provisions of this Act, he shall be liable to pay interest at the rate of two per cent per month on the amount of tax or interest or penalty from the date of expiry of such time until the date of payment of such amount.
11. According to the learned counsel for the respondent-assessee, Section 11 of the Act of 1954 provides for payment and recovery of tax. Sub-section (1) of Section 11 of the Act of 1954 provides that the tax shall be payable by a dealer on the basis of the assessments. Sub-section (2) of Section 11 of the Act further lays down that the tax paid by a dealer shall be adjusted against the tax determined as a result of the assessment under Section 10 and the balance of the amount shall be payable by such dealer by such date as may be specified in the notice of demand and, where no such date is specified, it shall be paid within thirty days from the date of service of the notice. He has argued that in this case, the amount of tax determined by way of reassessment or rectification proceedings fell due within the purview of other proceedings referred to in Sub-section (2) of Section 11-B of the Act, the respondent-assessee is not liable to pay any interest much less liable to pay interest with effect from the date of returns filed by him.
12. He has further placed reliance on the provisions of Section 7 of the Rajasthan Sales Tax Act, 1954 (for short “the Act of 1954”). Under Sub-section (2) of Section 7 of the Act of 1954, every return furnished under Sub-section (1) of Section 7 of the Act has to be accompanied by a treasury receipt or receipt of any bank authorised to receive money on behalf of the State Government showing, the deposit of the full amount of tax, which according to him is due on the basis of return in the State Government treasury or bank concerned. Thus, the tax which becomes payable on the basis of material disclosed in return according to him is required to be paid before filing of return, whether under Sub-section (2) or Sub-section (2-A) of Section 7 of the Act. The amount which he was not required to pay at the time or before the filing of return, cannot be subjected to interest under Section 11-B(1) which applies only to case where tax is not paid as per return, when payable by the assessee. This payment can hardly reference to amount which according to assessee is due and not tax due as a result of assessment.
13. In this connection, the learned counsel for the respondent-assessee has placed reliance on decisions of the Supreme Court in State of Rajasthan v. Ghasilal [1965] 16 STC 318 (SC) and J.K. Synthetics Ltd. v. Commercial Taxes Officer [1994] 94 STC 422 (SC) by which the earlier decision of the Supreme Court in Associated Cement Co. Ltd. v. Commercial Taxes Officer [1981] 48 STC 466 (SC) was overruled, while approving the dissenting opinion of P.N. Bhagwati, J ; in Frick India Limited v. State of Haryana [1994] 95 STC 188 (SC), following the decision in J.K. Synthetics Ltd.’s case [1994] 94 STC 422 (SC) and the decision of the Punjab and Haryana High Court in Oswal Spinning & Weaving Mills Ltd. v. State of Punjab [1996] 103 STC 491. The learned counsel has also placed reliance on another decision of the Supreme Court in India Carbon Ltd. v. State of Assam [1997] 106 STC 460 in support of his contention that interest for the delayed payment being part of substantial taxing statute cannot be levied retrospectively on a demand which had not been raised during regular assessment but has become due as a result of reassessment or rectification proceedings. Apart from the decisions of the Supreme Court referred to above, the learned counsel for the respondent-assessee has further invited my attention to a decision of the Kerala High Court in Evershine Plastics v. Assistant Commissioner (Assessment) [2000] 120 STC 396.
14. Before considering the decisions referred to above by the learned counsel for the parties at bar, it would be apposite to refer to the relevant provisions of the Act of 1954 having bearing on the controversy.
15. Section 11-B deals with interest on failure to pay tax, fee or penalty. The relevant provision of Section 11-B reads as under :
Section 11-B, Interest on failure to pay tax, fee or penalty.–(1)(a) Where any registered dealer or any other dealer has furnished returns but has not paid the tax as per return or within the time allowed by or under the provisions of this Act, he shall be liable to pay interest on the whole or that part of the amount of tax which was not paid as per returns within the time as aforesaid, at the rate of two per cent per month from the date by which he was required to pay the tax by or under the provisions of this Act until the date of payment;
(b) Where any registered dealer or any other dealer has furnished a revised return as provided under Sub-section (3) of Section 7, which revised returns shows that amount of tax larger than that already paid is payable, such dealer shall be liable to pay interest on the excess amount of tax at such rate and for such period as provided in Clause (a) of this sub-section as if such amount of tax payable as per the revised return was the amount of tax payable according to the original return ;
(c) Where any registered dealer has filed a return after the expiry of the period prescribed therefor but has not paid the tax as per the return, or within the time allowed by or under the provisions of this Act, he shall be liable to pay interest on the whole or that part of the amount of tax as per return which was not paid within the time as aforesaid at two per cent per month, from the date by which he was required to pay the tax by or under the provisions of this Act until the date of payment;
(d)………………
(e)………………
(f) Where the liability to pay tax is quantified in respect of a registered dealer or any other dealer,–
(i) who has furnished returns for the period for which the tax is quantified ; or
(ii) who has failed to furnish returns for the whole of the period for which the tax is quantified ; or
(iii) who has failed to furnish returns for any part of the period for which the tax is quantified ;
then, in respect of categories (i) and (iii), the difference between the tax quantified and the tax shown payable in the returns and in respect of category (ii), the difference between the tax, quantified and the tax paid, if any, shall in respect of category (i) and (ii) be divided proportionately amongst the periods for which he was required to pay tax by or under the provisions of this Act and in respect of category (iii) be divided proportionately amongst the periods for which he was required to pay the tax by or under the provisions of this Act but has failed to pay such tax, and the amount so determined shall be deemed to be the amount of the tax payable for such period and the dealer shall be liable to pay interest at the rate of two per cent per month on the aforesaid amount from the date by which the tax was payable for such period by or under the provisions of this Act until the date of quantification.
Explanation.–The expression ‘liability to pay is quantified’ in this clause means determination of the tax liability under Sections 7-A, 7-B, 10, 10-A, 12, 13, 14 or 17 of this Act:
Provided that, where any such dealer shows to the satisfaction of the assessing authority that the whole or any part of the balance of tax found due or liability to pay tax quantified is attributable to any particular period, he shall be liable to pay interest on such amount at the rate of two per cent per month from the date by which the tax for the said period was required to be paid by or under the provisions of this Act until the date of quantification.
(2) Where any amount of tax, fee, interest or penalty is demanded from a dealer as a result of an order passed in any proceedings under this Act (including assessment, appeal, revision, rectification or otherwise) and such tax, interest or penalty is not paid by such dealer within the time required by or under the provisions of this Act, he shall be liable to pay interest at the rate of two per cent per month on the amount of tax or interest or penalty from the date of expiry of such time until the date of payment of such amount.
(3)……………
(4)………………
(5)………………”
16. Section 7 of the Act of 1954 provides for submission of returns. The relevant provision of Section 7 reads as under :
“7. Submission of returns.–(1) Every registered dealer and such other dealer as may be required to do so by the assessing authority by notice serve in the prescribed manner, shall furnish prescribed returns, for prescribed periods, in the prescribed forms, in the prescribed manner and within the prescribed time to the assessing authority:
Provided that the assessing authority may extend the date for the submission of such returns by any dealer or class of dealers by a period not exceeding fifteen days in the aggregate :
Provided further that no return shall be required to be filed by a registered dealer who deals exclusively in exempted/sales tax paid goods and whose turnover in the preceding accounting year does not exceed such limit as may he prescribed.
(2) Every such return shall be accompanied by a treasury receipt or receipt of any bank authorised to receive money on behalf of the State Government showing the deposit of the full amount of tax due on the basis of return in the Government treasury or bank concerned.
(2A) Notwithstanding anything contained in Sub-section (2), the State Government may by notification in the Official Gazette require any dealer or class of dealers specified therein, to pay tax at intervals shorter than those prescribed under Sub-section (1). In such cases, the tax according to his accounts shall be deposited at the intervals specified in the said notification in advance of the returns and the return shall be accompanied by the treasury receipts or receipts of any bank authorised to receive money on behalf of the State Government for the full amount of tax due shown in the return.
(2B)………………
(2C)……………..
(3)……………….
(4)………………..”
17. Section 11 of the Act of 1954 deals with payment and recovery of tax. The relevant provision of Section 11 of the Act of 1954 reads as under :
“Section 11. Payment and recovery of tax.–(1) The tax shall be payable by a dealer on the basis of the assessments :
Provided that, notwithstanding anything contained in Section 11-B, the Commissioner may, in pursuance of any recommendation of the State Government, defer the recovery of tax in respect of an industrial unit declared as sick by the Board of Industrial and Financial Reconstruction constituted under the Sick Industrial Companies (Special Provisions) Act, 1985 (Central Act No. 1 of 1986) to such extent, for such period and on such conditions with regard to the payment or rate of interest, as may be specified in such recommendation.
(2) The tax paid by a dealer shall be adjusted against the tax determined as a result of the assessment under Section 10 and the balance of the amount shall be payable by such dealer by such date as may be specified in the notice of demand and, where no such date is specified, it shall be paid within thirty days from the date of service of the notice :
Provided that the assessing authority may, subject to such conditions and restrictions as may be prescribed, in respect of any particular dealer, and, for reasons to be recorded in writing, extent the date of such payment and allow such dealer to pay the tax due and the penalty, if any, by instalments.
(3)………………
(4)………………
(5)………………”
18. Section 16-B provides for time-limit for imposition of penalty or levy of interest. Sub-section (2) of Section 16-B is relevant for the decision of this case, which reads as under :
“Section 16-B. Time-limit for imposition of penalty or levy of interest.–(1)……………………….
(2) No order for levy of interest shall be passed under subsection (1) of Section 11-B,–
(i) after expiry of four years from the end of the financial year in which assessment, reassessment or rectification order was made; or
(ii) if the assessment, reassessment or rectification order is subject-matter of appeal, revision or other proceedings, after expiry of two years from the end of the financial year in which the order in appeal, revision or other proceedings was passed, or an order consequent to appeal was passed :
Provided that where the assessment, reassessment or rectification order has already been passed before the commencement of the Rajasthan Sales Tax (Amendment) Act, 1989, the order for levy of interest may be passed up to 31st March, 1990.
(3)………………”
19. The substantive provision regarding levying of interest is contained in Clause (a) of Sub-section (1) of Section 11-B of the Act of 1954, which provides for two contingencies in which interest becomes payable on the amount of tax : firstly where the dealer has furnished the return but has not paid the tax as per return ; and secondly, where the dealer has not paid the tax within the time allowed by or under the provisions of the Act. In either case, the dealer is liable to pay interest on the whole or that part of the amount of tax which was not paid as per returns within the time as aforesaid at the rate of two per cent per month from the date by which he was required to pay the tax by or under the provisions of this Act until the date of payment. Like provision has been made in respect of dealer under Sub-section (1)(b) of Section 11-B who has chosen to file the revised returns making a clear mention that the amount of tax larger than that already paid is payable, such dealer is liable to pay interest on the excess amount of tax at such rate and for such period as provided in Clause (a) of this sub-section as if such amount of tax payable as per the revised return was the amount of tax payable according to the original return.
20. Clause (c) of Sub-section (1) of Section 11-B of the Act provides that where any registered dealer has filed a return after the expiry of the period prescribed therefor but has not paid the tax as per the return, or within the time allowed by or under the provisions of this Act, he shall be liable to pay interest on the whole or that part of the amount of tax as per return which was not paid within the time as aforesaid as at two per cent per month from the date by which he was required to pay the tax by or under the provisions of this Act until the date of payment.
21. Clause (d) requires payment of interest where a dealer is required to pay tax periodically without filing return, but if he fails to pay such amount within the time allowed.
22. Clause (e) envisages a contingency where a dealer is required to furnish returns periodically but he fails to furnish returns, yet pays tax which according to him is payable. In such cases, tax paid by the assessee is proportionately to be divided amongst the periods for which he was required to furnish returns and pay tax accordingly. On such exercise, if for any period tax is not paid at the time when it ought to have been paid, [obviously along with return for such period as envisaged under Section 7(2) or (2-A)] or is short paid, he is required to pay interest on that shortfall with effect from the date when such tax ought to have been paid, had he furnished returns for respective periods and paid tax accordingly.
23. Clauses (a) to (e) all refer to failure to pay tax in time as per assessee’s own claim and interest becomes payable on late payment of such tax on the basis of the admitted fact that tax is not paid by the dealer at the time when the same was due under the provisions of the Act or Rules framed or notifications issued thereunder.
24. In such cases, where tax is required to be paid as is due according to the dealer, the requirement of late payment of tax as per return is spelt out from Sub-section (2) of Section 7 of the Act, which has been reproduced hereinabove, which enjoins upon the assessee that his return should be accompanied by a treasury receipt or receipt of any bank authorised to receive money on behalf of the State Government, showing the deposit of the full amount of tax due according to him on the basis of return in the State Government treasury or bank concerned. That is to say that the requirement of tax which is payable as per assessee’s own claim arises at least on the date when the return is filed and the proof of payment of tax should be accompanied with it.
25. This is apart from the fact that under Sub-section (2-A) of Section 7 of the Act of 1954, the State Government may by notification in the Official Gazette require any dealer or class of dealers specified therein, to pay tax at intervals shorter than those prescribed under Sub-section (1), as we are not concerned with the provisions regarding non-payment of tax under Sub-section (2-A) of Section 7 of the Act.
26. Scheme of Section 7(2) and (2-A) read by itself only requires payment of tax as per returns which according to assessee is due and cannot have reference to liability to pay tax quantified under any proceedings under the Act, whether by way of regular assessment or provisional or reassessment or by reapplication or any other proceeding referred to in explanation to Clause (f) of Sub-section (1) of Section 11-B. The contingencies envisage under Clauses (a) to (d) all relate to payment of tax as per return or requirement of any other provision before quantification of tax. Therefore, they must relate to tax admitted to be payable by the assessee as per return submitted by him, including all his claims to deductions or exemptions or concessions and cannot relate to tax which becomes determined and quantified on assessment, of any kind, by any authority under the Act, by some adjudicatory process.
27. However, Sub-section (1)(f) of Section 11-B strikes a different note. It speaks about liability to pay interest as a result of quantification of tax by competent authority under the Act by creating a legal fiction, as to when such additional amount of tax remaining outstanding as per return on quantification was deemed to be payable.
28. Clause (f) of Sub-section (1) of Section 11-B envisages that on quantification of tax assessment, where return has been filed by such dealer for any part of the period in which tax shown payable on return and paid is less than the tax on such return is quantified, amount of such short payment is to be divided proportionately amongst the periods for which he is required to pay tax, is deemed to tax payable under or by the provisions of the Act for such period and dealer becomes liable to pay interest from the date, such tax is deemed to be payable for such period until the date of quantification. Explanation to Clause (f) of Sub-section (1) of Section 11-B of the Act makes it clear that expression “quantification” is not used in respect of such difference as amount of tax which was payable as per the dealer as per his return, but referred to tax which has been assessed by authorities under the Act, under any of the provisions of Section 7-A, 7-B, 10, 11-A, 12, 13, 14 or 17 of the Act.
29. The background in which this provision was introduced may be noticed. In the first instance, Section 11-B was inserted, it was in the following terms :
“11-B. Interest on failure to pay tax, fee or penalty.–(a) If the amount of any tax payable under Sub-sections (2) and (2-A) of Section 7 is not paid within the period allowed, or (b) if the amount specified in any notice of demand, whether for tax, fee or penalty is not paid within the period specified in such notice, or in the absence of such specification, within 30 days from the date of service of such notice, the dealer shall be liable to pay simple interest on such amount at one per cent per month from the day commencing after the end of the said period for a period of three months and at one and a half per cent per month thereafter during the time he continues to make default in the payments :
Provided that, where as a result of any order under this Act, the amount, on which interest was payable under this section, has been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded :
Provided further that no interest shall be payable under this section on such amount and for such period in respect of which interest is paid under the provisions of Sections 11 and 14.”
30. Under Clause (a) of Section 11-B, the interest was payable if the amount of any tax payable under Sub-sections (2) and (2-A) of Section 7 is not paid within the time allowed. Section 7 is part of machinery provision for effectuating the charge of imposition under Section 3 of the Act of 1954. From the provision of Section 7(2) and (2-A) quoted above, it is clear that every registered dealer is obligated to furnish return of his taxable turnover under Section 7(1) periodically. Sub-section (2) requires him to submit return with proof of payment of tax due as per return. Sub-section (2-A) authorises State Government to issue notification and require any dealer to pay tax at shorter intervals than prescribed under Sub-section (1) that is to say earlier than return is due. In such event the dealer is further required to deposit along with return proof of payment of tax shown to be due after adjusting the amount deposited as required by such notification.
31. Apparently, at the time of filing of return the tax shown to be due as per return will be tax found by the assessee to be due; which will necessarily include adjustment of deductions, exemptions or concessions claimed by the dealer or claim to any turnover as not taxable.
32. The quantification of tax on the basis of particulars furnished by the assessee under the Act can take place only subsequent to filing of return through an assessment under Section 10. This is also reflected by provisions of Section 11(1) declaring that tax shall be payable by a dealer on the basis of assessment. In terms of Section 11 tax due as per return shall be as assessed on the basis of particulars furnished in return by accepting the particulars to be correct and applying law to such particulars.
33. This makes amply clear that tax payable under Sub-sections (2) and (2-A) of Section 7 is on the basis of self-assessment whereas actual tax payable on the return can only be ascertained legally after assessment is made even by accepting the particulars to be true.
34. In the context of provision of Section 11-B as initially obtaining, liability to pay interest under Section 11-B(a) was on the basis of shortfall in tax payable under Sub-sections (2) and (2-A) of Section 7, which could be referable to tax due as per the self-assessment of tax by the dealer, which will necessarily include his claims to non-taxable turnover, exemptions, deductions and concessions or incentives by such dealer.
35. Considering unamended provisions of Section 11-B, the Supreme Court in J.K. Synthetics Ltd. v. Commercial Taxes Officer [1994] 94 STC 422 held :
“Therefore, the conjoint reading of Sections 7(1), (2) and (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 assessed 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 in the return filed by him, there would be no default on his part to meet his statutory obligation under Section 7 of the Act and, therefore, it would be difficult to hold that the ‘tax payable’ by him ‘is not paid’ to visit him with the 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 the plain language of the section to hold that the law envisages the assessee to predict the final assessment and expect him to pay the tax on that basis to avoid the liability to pay interest. That would be asking him to do the near impossible.”
36. In coming to this conclusion, the Constitution Bench overruled majority opinion in Associated Cement Co. Ltd. v. Commercial Taxes Officer [1981] 48 STC 466 (SC) and approved the minority opinion of honourable Bhagwati, J., wherein he has said :
“………..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. This provision is really in the nature of self-assessment and what it requires is that whatever be the amount of tax 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 ought to have been filed but which has not been filed.”
Pointing out that the construction pressed by the Revenue leads to a serious anomaly, honourable Bhagwati, J., proceeded to observe :
“………If this construction were accepted, the tax payable under Sub-section (2) of Section 7 would be the full amount of tax on the basis of a correct and proper return and that would necessarily be the same as the tax assessed by the assessing authority, because what is a correct and proper return would be determinable only with reference to the assessment ultimately made. The assessment when made would show whether the return filed was correct and proper; it would be correct and proper if it accords with the assessment made; if it does not accord with the assessment, then to the extent to which it differs it would obviously have to be regarded as incorrect and improper. The consequence of the construction suggested on behalf of the revenue would thus be that the tax payable under Sub-section (2) of Section 7 would be the full amount of the tax as assessed, because that would represent the tax due on the basis of a correct and proper return and the assessee would have to deposit at the time of filing the return an amount equivalent to the amount of the tax as assessed. If the assessee fails to do so, then apart from the liability to pay interest under Section 11-B, Clause (a), the assessee would expose himself to penalty under Section 16, Sub-section (1), Clause (n)…….. 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.”
37. However, both the decisions of the Supreme Court whether in Associated Cement Co. Ltd. case [1981] 48 STC 466, case or J.K. Synthetics Ltd. case [1994] 94 STC 422, arose out of similar dispute prior to substitution of Section 11-B in the present form vide Act No. 4 of 1979 with effect from April 7, 1979. In both the cases, the assessee has claimed that freight paid by it on P.O.R. transactions were not part of taxable turnover and, therefore, no tax was paid by the dealer on the amount consisting of freight charges. However, the particulars of such freight charges and claims as not taxable were disclosed in returns. The apex Court finally decided the controversy in Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13, by holding it to be part of taxable turnover. This led to creation of additional demands of tax on such amounts for respective assessment year. Interest under Section 11-B(a) was also levied which led to aforesaid two decisions. As noticed above in the first instance, apex Court held in Associated Cement Co. Ltd. case [1981] 48 STC 466 that tax due under Section 7(2) and (2-A) means tax assessed on the basis of return for attracting Sub-section (a) of Section 11-B. Said decision was by majority. Later on a reference being made to a Constitution Bench, the apex Court in J.K. Synthetics case [1994] 94 STC 422 took the view as aforesaid approving minority opinion in Associated Cement Co. Ltd. case [1981] 48 STC 466 (SC).
38. However, as is apparent from the facts stated above, two decisions were rendered by considering the scheme and context of provisions in the light of provisions of Section 11-B as it stood prior to April 7, 1979. This fact was emphasised and made clear by the court in J.K. Synthetics case [1994] 94 STC 422, when it said :
“As the relevant assessment years in question are from 1975-76 to 1977-78 we are concerned with Section 11-B as it stood before its substitution by Act 4 of 1979 with effect from 7th April, 1979. Section 11-B then provided that if the amount of any tax payable under Sub-sections (2) and (2-A) of Section 7 is not paid within the time allowed or if the tax amount specified in any notice of demand is not paid within the period specified, the dealer shall be liable to pay simple interest on such amount at one per cent per month for a period of three months and thereafter at one and a half per cent per month during the time he continues to make default in the payments.”
39. After considering the amended provisions of Section 11-B since April 7, 1979, the court further said :
“Section 11-B before its amendment nowhere provided for payment of interest on the unpaid tax amount as found on final assessment from the date of the filing of the return under Section 7 of the Act. If the amount of tax payable under Sub-section (2) is paid on the basis of return, not on the basis of final assessment, there can be no question of payment of interest under Clause (a) of Section 11-B. Similarly if the tax is paid according to the return as required by Sub-section (2-A), in other words, if the full amount of tax due ‘shown’ in the return is paid, there can be no question of charging interest under Clause (a) of Section 11-B. So far as Clause (b) is concerned, it is a post-assessment situation. Where tax is found due on final assessment and the dealer is required to make good the difference, a notice of demand will issue. If the dealer fails to pay the tax within the time specified in the notice, and if no time is specified within 30 days from the receipt of notice, he is required to pay interest at the rates prescribed by the sub-section. But if he pays the difference of tax within the prescribed time, there is no question of charging interest. If such an interpretation is not placed, and if the Revenue’s plea is accepted, serious anomalies would surface.”
40. The anomalies to which the court referred were firstly it will render Clause (b) of Section 11-B read with Section 11(2) nugatory and secondly it will result in a defaulter being in better position than a complier of law.
41. As both the decisions do not concern with the amended provisions which have come into operation on April 7, 1979 and governs the present cases which have arisen thereafter, the scheme of new provision has to be examined afresh.
42. One such noticeable change that has been brought about in the scheme of levy of interest is that the liability to pay interest is not connected with tax payable under Section 7(2) and (2-A) but is related to “tax paid as per return”. Thus, Section 11-B(1)(a) is delinked with and not restricted in its operation to cases where such tax as is payable according to the assessee as per return filed by him has not been paid in terms of it with provisions of Section 7. The amount payable under Section 7 could only be such amount which is payable according to dealer as per his return. This had the element of dealer’s claim to reduce the tax liability, remaining undecided at the time of payment of amount as proof of satisfying tax liability as per return at the time of filing of the return. Secondly Clause (f) of Section 11-B(1) makes it definitely connected with tax determined as per return vide assessment and the amount of tax determined by machinery provision of statute on the return and in such case an additional demand of difference between according to assessee is payable and paid and the amount of tax as assessed as per return, interest becomes payable with effect from the date when such amount ought to have been paid by the dealer. As the return is of whole year but tax is paid periodically, it is further envisaged that subject to specific proof, the amount of such additional demand is to be proportionately related to the periodical intervals and which tax is required to be paid by a dealer in respect of his turnover.
43. In this connection, it will be pertinent to note the observations made by the apex Court in J.K. Synthetics case [1994] 94 STC 422 while construing unamended provision and finding the context in which provision has to be construed vis a vis unamended and amended provision. The court said :
“However, according to Section 11-B substituted by Act 4 of 1979 with effect from 7th April, 1979, the liability to pay interest accrues (a) where the dealer has furnished returns but has failed to pay the tax as per the said returns or within the time allowed; (b) where a dealer has furnished a revised return under Section 7(3) whereunder the amount of tax payable is larger than that already paid ; (c) where a dealer has filed his return after expiry of the prescribed period but has not paid the tax as per return or within the time allowed ;
(d) where a dealer is required to pay tax without furnishing a return for any period and such tax is not paid in full by the due date ; (e) where a dealer required to furnish returns pays tax for any period without furnishing returns ; and (f) where the liability to pay tax is quantified in respect of a dealer who had submitted returns for the period for which the tax is quantified. It will thus be seen that under Section 11-B before the 1979 Amendment the liability to pay interest on unpaid tax amount accrued on the dealer in two situations only, viz., (i) failure to pay the tax due under Sub-sections (2) and (2A) of Section 7 and (ii) failure to pay the tax within the time allowed by the notice of demand or thirty days from the receipt of the notice by the dealer. Section 11-B before its amendment nowhere provided for payment of interest on the unpaid tax amount as found on final assessment from the date of the filing of the return under Section 7 of the Act.”
44. The distinction noticed by the apex Court clearly gives out that Clause (f) has connected the liability to interest under Section 11-B(1)(f) with liability to pay interest on such amount of tax which has not been paid as per return with reference to assessment of tax and delinked it with payment of such tax as is due according to assessee as per his return.
45. With this change Section 11-B(1) and (2) both have to be assigned meaningful interpretation in the aforesaid context.
46. What is the meaning “tax payable as per Sub-sections (2) and (2-A) of Section 7” has been interpreted to mean, tax as is due according to assessee as per return submitted by him or tax shown to be payable in the return. This was so when liability to pay interest was on the basis of default in making payment of tax as provided under Section 7(2) and (2-A).
47. Section 11-B as substituted with effect from April 7, 1979 is much more wide and comprehensive. It not only includes liability to pay tax due according to assessee on the one hand, but also makes a substantive provision for levying liability on the basis of assessment. Liability in later cases is twofold.
48. Firstly liability to pay interest on shortfall in tax payment up to the date of quantification and secondly liability to pay interest for non-payment of tax within time after tax is quantified. Former is governed by Sub-section (1)(f) of Section 11-B and latter is governed by Sub-section (2). Thus, very foundation of liability to interest which was payable under Clause (a) of repealed Section 11-B has been altered in Sub-section (1) of substituted Section 11-B.
49. Interpreting the provision as contended by learned counsel for respondent-assessee would render Clause (1)(f) wholly redundant and nugatory. According to dealer on any demand raised as a result of assessment or reassessment becomes payable under Section 11(2) of the Act. There is no liability to pay tax earlier thereto of such demand under Section 7. Non-payment of any tax within time allowed by notice of demand is governed by Sub-section (2) of Section 11-B. That would result in not giving effect to liability to pay interest on amount of the quantified or provisional assessment for failure to file return under Section 7-A or provisional assessment in case of evasion under Section 7-B or regular assessment for the year under Section 10 or assessment of casual dealers under Section 10-A or reassessment of escaped tax under Section 12 or modification of orders in appeal under Section 13 or Section 14 or by way of rectification of any of aforesaid orders under Section 17, which is short of payment already made under Section 7 or otherwise by the assessee and is deemed to be payable on the date periodical payments were due or payment due along with return but has remained to be paid until notice of demand is satisfied. As the non-payment of demand within the period specified in the notice of demand will invite operation of Section 11-B(2) and according to assessee, no amount is payable from thereto.
50. Obviously this contention keeps out of fiction created under Section 11-B(1)(f) that such difference between amount paid and amount quantified is deemed to be payable when tax for the period to which it is related by proportioning it amongst the period. When it was payable, under provisions of the Act considering that tax becomes determined ex hypothesi on occurrence of taxing event and such tax becomes payable as per provisions of the Act in that regard, notwithstanding that actual determination of such tax has to await assessment through machinery provisions. That is only logical conclusion to which legal fiction of payability of tax for the period under Section 11-B(1)(f) leads, and must be given effect to and effectuate the purpose of amending Section 11-B.
51. Principle is well-established that where there is created a legal fiction, it must be carried to its logical end to effectuate the object for which such legal fiction is created.
52. Section 16-B was inserted in the Rajasthan Sales Tax Act, 1954 vide Act No, 3 of 1990 with effect from September 13, 1989. Sub-section (2) of Section 16-B refers to the fact that no order for levy of interest is required to be passed under Sub-section (1) of Section 11-B of the Act after the expiry of four years from the end of the financial year in which assessment, reassessment or rectification order was made ; or if the assessment, reassessment or rectification order is subject-matter of appeal, revision .or other proceedings, after expiry of two years from the end of the financial year in which the order in appeal, revision or other proceedings was passed or an order consequent to appeal was passed provided that where the assessment, reassessment or rectification order has already been passed before the commencement of the Rajasthan Sales Tax (Amendment) Act, 1989, the order for levy of interest may be passed up to March 31, 1990. This provision makes it abundantly clear that payment of tax by the assessee as per return under Sub-section (1)(f) has reference only to tax which is required to be paid according to law applicable to facts, without any variation in return. Claims to deductions, exemptions or concessions are all claims founded on application of law to facts disclosed in return and ultimate tax liability in respect of such claims depend on determination of such claims by applying law thereto by the authorities under the Act.
53. Had it been not so, the limitation prescribed for levying interest under Section 11-B(1) with reference to date of assessment or reassessment or rectification or orders passed in appeal/revision against such order would not have been made. To wit it, the entire purpose of Section 16-B(2) shall be rendered nugatory as it runs counter to contention raised by assessee. If any additional demand raised as a result of assessment goes out of Sub-section (1) of Section 11-B and is governed by Sub-section (2) of Section 11-B then prescribing limitation for making an. order for charging interest under Section 11-B(1) with reference to date of assessment/ reassessment/ rectification become redundant.
54. Sub-section (3) of Section 16-B of the Act further provides that no order for levy of interest shall be passed under Sub-section (2) of Section 11-B after expiry of two years from the end of financial year in which the demand was fully paid or adjusted or an order consequent to appeal was passed.
55. Sub-sections (2) and (3) of Section 16-B indicates that interest becomes payable only on an order being passed in that regard by the assessing officer and liability does not arise automatically. Such an order may be passed along with the assessment order or rectification order as the case may be or within such period as has been prescribed under Section 16-B. The aforesaid scheme of levy of interest leaves no room of doubt that interest is payable on all demands as quantified under the Act for short payment prior to quantification. Interest is payable as per Clause (1) of Section 11-B for failure to pay such demand within the time allowed under law by deeming such tax to be payable for the periods determined under Section 11-B(1)(f). Such interest is payable for the period anterior to quantification of demand. For the period after quantification of the interest becomes payable under Section 11-B(2) where any amount of tax remains unpaid after expiry of period specified in notice of demand.
56. The upshot of above discussion is that in respect of different contingencies envisaged under Section 11-B(1), including tax payable on quantification, interest is payable for any amount of tax found due but not paid, for period up to date of quantification of tax, by deeming such quantified tax to have become payable prior to the date of quantification.
57. As on quantification, for payment of additional demand time is to be specified in notice of demand, the interest has been made chargeable under Section 11-B(2) of the Act for past quantification period, form the date of time specified in notice of demand has expired.
58. As none of the cases cited at bar deals with like provision as are in consideration, they are of little assistance except the decision in J.K. Synthetics [1994] 94 STC 422 (SC), as discussed above which throws sufficient light on the changes that have been brought about by substitution of Section 11-B with effect from April 7, 1979 vis-a-vis provision which was in force during the period for which dispute was before the court. It clearly pointed out the shift in the basis of levy of interest from failure to pay tax due as per assessee under Section 7(2) and (2-A) to non-payment of tax due as per assessment. It gave effect to principle of ex-hypothesi determination of tax on occurrence of taxing event.
59. As a result, these revisions succeed and are allowed. The respondent-dealer shall be liable to pay interest on the quantified amount of tax on the basis of return with effect from the date it was deemed to have become payable but was not so paid. Accordingly, the order passed by the assessing officer is restored.
There shall be no order as to costs.