ORDER
K. Sahai, J.
1. By an order of this court dated the 27th November; 1956, the Company known as the Bihar Bolts, Rivets and Engineering Works Ltd. has been directed to be wound up. The Deputy Registrar of this Court, who was appointed as Provisional Liquidator by an order dated the 25th
September, 1956, is the Official Liquidator. He has submitted a report dated the 9th May, 1958 in which he has stated that the sales tax Department of the Government of Bihar has claimed that a sum of Rs. 8,541-13-6 pies out of its total claim of Rs. 11,472-3-0 be treated as preferential claim under Sub-section (1) (a) of Section 530 of the Indian Companies Act, 1956. He has expressed the opinion that the entire claim of the Department ought to be treated as an ordinary debt due to a creditor from the Company and to be included in the Creditors’ list but not as a preferential claim. The Superintendent of commercial taxes, Patna Urban Circle, has on the other hand, filed an application supported by an affidavit. In this application, he has stated that the Official Liquidator has taken a view which is erroneous In law, that a sum of Rs. 9,809-13-0 became due and payable within 12 months next before the relevant date i.e. the 25th September, 1956 and hence this amount should be treated as preferential claim. He has attached to the application a statement showing in detail when the taxes amounting to a total of Rs. 9,809-13-0 became finally due and payable.
2. The fact that the Company under liquidation has been a registered dealer under the Bihar Sales Tax Act, 1947, from the year 1948-49 has not been disputed. The Superintendent does not claim in his application that the amounts of sales tax for the years 1952-53 and 1953-54 totalling Rs. 1,662-6-0 ought to be paid in priority to other ordinary claims. Mr. K.P. Varma who appeared on behalf of the Sales Tax Department, has admitted that the sales tax for the years 1948-49 and
1949-50 totalling a sum of Rs. 1,875-12-0 cannot be treated as preferential claim. He has, however, urged that the amounts of sales tax for the years
1950-51, 1951-52 and 1954-55 are liable to rank as such claim. An extract from the statement attached to the application of the Superintendent in respect of these years is as follows:–
Sl. No.
Period of Assessment.
Date of last order.
Final demand notice Issued
Amount of final demand
Amount paid
Balance due
Rs.
As.
P.
Rs.
As.
P.
Rs.
As.
P.
3.
1950-51
Board’s resolution passed on 29-6-56
24-8-56
3000
0
0
520
0
0
2480
0
0
4.
1951-52
Do
24-8-56
5050
0
0
180
0
0
4870
0
0
5.
1954-55
S. C. T’S Assessment Order.
15-5-57
933
0
0
348
15
0
584
1
0
Total
7934
1
0
3. Thus the question at this stage is whether this court should direct the payment of the dues of the Department amount to Rs. 7934-1-0 as preferential claim. Mr. Varma has argued that an amount becomes due and payable to the Sales tax Department only when it is ascertained, quantified and notified. He has relied upon the decision in In the matter of Recols (India) Ltd. 57 Cal WN 468 in support of his contention. His submission is that the final demand notice for the balance of taxes in respect of each of the years in question was issued well within twelve months next before the ”relevant date” which was the 25th September, 1956, and hence the entire amount of Rs. 7934-1-0 must be treated as preferential claim. On the other hand, Mr. Shreenath Singh, who has appeared on behalf of the Official Liquidator, has argued that the words ‘due’ and ‘payable’ as used in Section 530(1) (a) are not synonymous terms and that a claim cannot rank as preferential unless it becomes due as well as payable within the period of twelve months next before the relevant date.
4. In order to appreciate the arguments put forward by learned Counsel, it is necessary to read
Sub-section (1) (a) of Section 530 of the Indian Companies Act, 1956:
“530. Preferential payments:– (1) In a winding up, there shall be paid in priority to all other debts:–
(a) all revenues, taxes, cesses and rates due from the company to the Central or State Government or to a local authority at the relevant date as defined in Clause (c) of Sub-section (8), and having become due and payable within the twelve months next before that date:”
Under Sub-section (8) (c) of Section 530 “the relevant date” is the dale of appointment of a provisional liquidator where such a liquidator is appointed. It is, therefore, undisputed that “the relevant date” in the circumstances of this case was the 25th September, 1936, when the provisional liquidator was appointed. I may mention that on this point, there is a difference between the Companies Act of 1956, (hereinafter called the new Act) and Companies Act of 1913 (hereinafter called the old Act). The equivalent provision in the old Act is to be found in Section 230. Under Sub-section. (5) of that section, the date to be taken into consideration i.e.
the material date was the date of the winding up “order” in a case where an order for compulsory winding up was passed and no voluntary winding up had commenced previously.
5 It is manifest from Section 530 (1) (a) of the new Act that a claim has to be paid in priority to other debts if-
(1) the claim was due on the relevant date, and
(2) the claim became “due and payable” within a period of twelve months next before the relevant date.
6. Mr. Shreenath Singh has not disputed that the entire amount of Rs. 7934-1-0 was due from the Company to the Sales tax Department on the 25th September. 1956. The first requirement is thus fulfilled.
7. Mr. Shreenath Singh is undoubtedly right when he says that the words ‘due’ and ‘payable’ are not synonymous. As soon as one person owes a certain amount to another, the amount is due from the former to the latter. If a date is fixed for payment of the amount, it does not become payable and the debtor cannot be compelled to pay before that date. In Wharton’s Law Lexicon (Fourteenth Edition) at page 355 there is a passage as follows under the word “due”:–
“It should be observed that a debt is said to be due the instant that it has existence as a debt, it may be payable at a future time”.
The urging section under the Bihar Sales Tax Act (Bihar Act XIX of 1947) is Section 4. Under that section liability to pay sales tax arises, subject to the provisions of Sections 5, 6, 7 and 8, as soon as a dealer effects any sales on a date following a period of twelve months in which his gross turnover exceeds the limit which is provided in different years.
8. Under Section 5, a uniform rate of tax is fixed. The dealer is liable to pay tax at that rate on his taxable turnover irrespective of the amount of the turnover.
9. The meaning of the expression “taxable turnover” has been given in the Explanation to that section. It provides for exclusion of sales of certain goods, sales to registered dealers in certain circumstances and other sales as directed by the State Government when computing the taxable turnover and it further provides for a rebate of 2 per cent on the balance left.
10. Section 6 empowers the State Government to exempt sale of any goods from liability to tax. Under Section 17, the State Government can exempt any dealer from payment of sales tax. Section 8 states that the State Government may prescribe the points in the series of sales by successive dealers at which taxation can be made.
11. A perusal of Sections 4 to 8 makes it clear that a dealer may easily compute the tax which he is liable to pay for any sale as soon as he makes it.
12. Section 12 of the Sales Tax Act provides for submission of returns and revised returns by a dealer. Under Rule 22 of the rules framed by the State Government in exercise of the powers conferred upon them under Section 31 of the Sales Tax Act, every dealer has to file quarterly returns within a calendar month from the expiry of the quarter and a consolidated annual return within a calendar month from the expiry of the year, unless the Commissioner of sales tax directs otherwise. Section 13 provides for the assessment of sales tax.
13. It will be noticed that there are two important points of difference in this connection between the Bihar Sales tax Act and the Income tax Act. Firstly income tax for one year called the assessment year, is assessed on the income of the previous year, called the accounting year. Sales tax on the other hand, becomes liable to be paid immediately after each sale is effected though, for the facility of computation and payment of tax, provision has been made for the filing of returns at the expiry of each quarter. Secondly, rates of income tax vary in accordance with the amount (c)f income whereas the amount of sales tax does not vary on the amount of taxable turnover. The result is that no one can be certain of what income tax he has to pay at least until the accounting year expires. But a dealer can always be certain of what sales tax he has to pay as soon as he effects the Bale. At the time when a dealer prepares his return, he only adds up the sales effected by him during the period in question. The assessment is a process whereby a prescribed authority similarly adds up the amounts. I do not, therefore, think that the liability to pay sales tax arises either at the preparation of the return or the passing of the assessment order.
14. It is clear from the reasons which I have given above that sales tax becomes due for each transaction of sale immediately after the sale is effected. In the 57 Cal WN 468, (Supra), Chakravartti, C. J. does not appear to have interpreted the words ‘due’ and ‘payable’ separately. But Sinha, J. interpreted the two words separately. The provisions of the Finance (Sales Tax) Act, 1941, were under consideration in that case but it appears that those provisions were somewhat similar to the provisions of the Act under consideration in this case. The decision of Sinha J. as to when sales tax becomes due appears to support the view which I have expressed.
15. The next question is when sales tax becomes payable. Section 14 of the Act provides for the manner in which and the intervals at which the tax has to be paid. Sub-sections (2) and (3) lay down that the amount of sales tax payable on the basis of the return or the revised return submitted by a dealer shall be paid into a Government Treasury and receipt of such payment shall be filed along with the return. It is, therefore, clear that to the extent of the liability admitted in a return the amount of tax is payable before the dealer submits that return. No question of subsequent recovery of such a sum arises as it is paid even before the return is filed. Under Sub-section (4) of Section, 14 however, the amount of sales tax assessed under Section 13 less the amount already paid by the dealer, is payable by a date specified in a notice issued by the Commissioner for payment. No amount which remains unascertained and no amount which is not legally recoverable by the claimant or creditor can be said to be payable. Until final assessment order has been passed declaring the amount that a dealer must pay as tax in excess of the liability admitted by him in his return no one can be certain of the figure. Hence the amount becomes ascertained only when the final assessment authority quantifies it. That amount becomes legally recoverable only when a notice is issued by the Commissioner as provided for in Sub-section (4) of Section 14. With great respect, therefore, I am of opinion that Chakravartti C.J. has rightly said in Recol’s case 57 Cal WN 468 (supra) that the tax becomes payable “when it has been ascertained, quantified and notified to the assessee, with a demand for payment…..” Sinha, J. who has delivered a separate Judgment has agreed with Chakravartti C. J. on this point. I may also
add that Mr. Shreenath Singh has conceded that the tax for the three years in question became payable on the dates given in the column of the “final demand notice” in the extract from the statement which I have quoted above.
16. Mr. Shreenath Singh has contended that the amount of Rs. 7934-1-0 due to Sales-tax Department is not entitled to priority because it did not become due during the period of twelve months next before the relevant date. I am of opinion that this contention is without substance. Section 530 (1) (a) of the new Act does not require that a claim must become due as well as payable within the period of twelve months. In my judgment its requirements are satisfied if the co-existence of both occurs for the first time within the period. Even if the amounts of sales tax for the three years in question were due from before the period of twelve months, they were not payable previously aS they first became payable within that period having already been due from before I hold that the entire amount of Rs. 7934-1-0 ought to be treated as preferential claim and to be paid in priority to ordinary debts, The official liquidator is directed to treat the claim of the Sales-tax Department for the aforesaid amount accordingly.