JUDGMENT
G.K. Misra, C.J.
1. The petitioner was assessed to sales tax on 31st of August. 1961 under Rule 10 of the Central Sales Tax (Orissa) Rules, 1957 (hereinafter referred to as the Orissa Rules) framed under the Central Sales Tax Act. The assessment for quarters ending 30th June, 1958 to 30th of June, 1959 was to the tune of Rs. 1,21,500/-. Appeals were preferred before the Assistant Commissioner of Sales Tax, Berhampur, and an application for stay was filed therein. Stay was granted conditionally that if Rs. 36,000/- was paid the balance will be stayed. A revision before the Commissioner against the stay order wag dismissed on 26th of March 1962. Rs. 3,000/-was paid and a further prayer for payment in instalment was made before the Sales Tax Officer, Koraput. On 12th of December, 1962 penalty of Rs. 36,000/-was imposed under Rule 16(2) as the tax was not paid. Revision petitions before the Commissioner of Sales Tax against the orders imposing penalty were dismissed on 22nd of June, 1963. On 28th of January, 1963, further penalty was imposed to the tune of Rs. 23,248/- under Rule 16(2). On 29th of September, 1963 the Assistant Commissioner of Sales Tax set aside the orders of the Sales Tax Officer and remanded the assessment proceedings for further examination and reassessment. On 25th of February. 1964 revisions were filed before the Commissioner. A prayer was made that as there was no re-assessment, the payment of the penalty should be stayed and the orders of penalty should be quashed. In March, 1966 the revisions were dismissed by the Commissioner. On 28th of March, 1966 this writ application was filed for quashing the orders of penalty and for refund of Rs. 18,500/- paid towards tax and for vacating the attachment of some of the properties.
2. In S. J. C. Nos. 58 to 62 of 1965 we have delivered our judgment on 11-2-1970 (Orissa), in between the same parties. In paragraph 4 of our judgment the facts of the case have been clearly stated. In short, the facts are: Initially the Sales Tax Officer assessed the petitioner on a finding that there was an inter-State sale between the petitioner and Jalaram Trading Company. The Assistant Commissioner of Sales Tax confirmed the finding that there was an inter-State sale but remanded the case to the Sales Tax Officer for re-examination of accounts and for re-assessment. Thus, though the order of the Sales Tax Officer was confirmed on the question whether there was an inter-State sale or not, there was no assessment. As things stand now there is no assessment. The finding of the Assistant Commissioner was confirmed by the Tribunal as to the character of the inter-State sale. The petitioner came up in a reference to this court. This court set aside the order of the Tribunal as being contrary to law inasmuch as it held that the transaction was of an inter-State character by overlooking certain admissible materials. After the High Court has answered the reference in favour of the dealer, the position is res integra and can be canvassed anew before the Sales Tax Officer on both the points. The Sales Tax Officer has to determine whether at all the petitioner effected sale in favour of Jalaram Trading Company and if there was such an inter-State sale, the quantum of tax payable.
3. In the context of these events and historical background narrated hereinbefore, the question for consideration is whether the penalty already imposed would stand despite the fact that there is no assessment.
4. Rules 16 and 17 of the Orissa Rules are relevant in this connection:
“16. Notice of demand.– (1) In respect of any amount found payable by a dealer the Commissioner shall serve on the dealer a notice of demand in Form VII and shall fix a date for payment, such date not being less than thirty days from the date of service of the notice and also a date on which the dealer shall produce the receipted challan in proof of payment of such amount:
Provided that the Commissioner may in respect of any particular dealer and for the reasons to be recorded in writing, extend the date of such payment or allow such dealer to pay the tax due and penalty, if any, by instalments.
(2) If, on the date fixed under Sub-rule (1) the dealer has not paid the amount due or has failed to produce evidence of payment by the date fixed in the notice in Form VII the Commissioner may impose a penalty not exceeding one-half of the total amount due and serve a notice in Form VIII directing the dealer to pay the penalty together with sums previously due by a date to be fixed in the notice and to produce the receipted challan in proof of payment of such amount by a date also to be specified in the said notice.
Provided that in the cases of continuing default the penalty may be levied in Instalments from time to time so however as not to exceed one-half of the total amount of tax due:
Provided further if collection of the sum specified in the notice of demand in Form VII or any part thereof has been stayed on appeal or revision, penalty may be levied if the sum is not paid and proof of such payment is not produced before the Sales Tax Officer within a fortnight after the expiry of the stay period.
Explanation :– Where stay of collection until disposal of appeal or revision has been ordered, the stay period shall be deemed to have expired on that date of disposal of such appeal or revision and where in such cases the appeal or revision results in a reduction or increase in the sum demanded, a revised notice of demand in Form VIII will issue and no penalty shall be levied until expiry of the time-limit specified in the said revised notice.
17, Recovery of tax from a defaulting dealer:– If on the date fixed under Rule 16 the defaulting dealer has not paid the amount due or such instalment thereof as may be due, the Commissioner shall apply to the District Collector having jurisdiction in the area in which the dealer’s place or places of business are located for the recovery of the amount as an arrear of land revenue.
In areas where the Bihar and Orissa Public Demands Recovery Act, 1914 is in force the application for recovery of the amount may be made to the officer exercising the power of the certificate under this Act.”
5. The corresponding provision, more or less of analogous character, occurs in Rule 32 of the Orissa Sales Tax Rules, 1947.
“32. (1) Notice of Demand:– In respect of any amount found payable by a dealer under Sub-section (4) of Section 13 the Commissioner shall serve on the dealer a notice of demand in Form X and shall fix a date for payment, such date not being less than 30 days from the date of service of the notice and also a date on which the dealer shall produce the receipted challan in proof of payment of such amount.
(2) If, on the date fixed under Sub-rule (1), the dealer has not paid the amount due or has failed to produce evidence of payment by the date fixed in the notice in Form X, the Commissioner may impose a penalty under Sub-section (5) of Section 13 and serve a notice in Form X-A directing the dealer to pay the penalty together with sums previously due by a date to be fixed in the notice and to produce the receipted challan in proof of payment of such amount by a date also to be specified in the said notice;
Provided that in cases of continuing default if the penalty is levied in instalments under the first proviso to subsection (5) of Section 13, notice in Form X-A shall be served on the dealer in the manner provided in this sub-rule on the levy of each instalment of penalty.
Provided further that if collection of the sum specified in a notice of demand in Form X or any part thereof has been stayed on appeal or revision, penalty under Section 13(5) may be levied if the sum is not paid and proof of such payment is not produced before the Sales Tax Officer or the Assistant Sales Tax Officer as the case may be within a fortnight after the expiry of the stay period.
Explanation: — Where stay of collection until disposal of appeal or revision has been ordered, the stay period will be deemed to have expired on the date of disposal of such appeal or revision and where in such cases, the appeal or revision results in a reduction or increase in the sum demanded, a revised notice of demand in Form X will issue and no penalty under Section 13(5) shall be leived until expiry of the time limit specified in the said revised notice.”
6. A bare comparison of the analogous provision would show that the scheme in both Central Sales Tax Act and the Orissa Sales Tax Act are same. There is no corresponding provision in the Income Tax Act regarding the explanation. Mr. Mohapatra places reliance on a decision in Dwarika Prasad Sharma v. State of Orissa, (1965) 16 STC 144 (Orissa) wherein a Bench of this Court held that prior to the amendment of Section 13 of the Orissa Sales Tax Act, 1947, by Ordinance I of 1964 the levy of penalty for failure to pay the amount originally assessed within the time prescribed by law, which was valid at the time the order of penalty was passed, could not subsequently become void merely because the order of assessment was set aside on appeal by the Tribunal and the proceedings were remanded for re-assessment. This decision clearly supports the contention of Mr. Mohapatra.
Mr. Ray drew our attention to the decision in Income Tax Officer, Kolar Circle. Kolar v. Seghu Buchiah Setty, AIR 1964 SC 1473, decided under the Income Tax Act, which had been delivered about a month before the pronouncement of the judgment in (1965) 16 STC 144 (Orissa). An analysis of the majority view in the Supreme Court case would indicate that their Lordships came to the conclusion that when the assessment order is set aside or the amount of demand is reduced or enhanced, a further demand notice would issue in accordance with appellate or revisional order. If in the appellate order the amount assessed is set aside, then no penalty is payable. Their Lordships were aware of the fact that there was no clear provision in the Income Tax Act that the assessment being either set aside or reduced, the penalty would also be set aside or reduced. But the majority came to such a conclusion on an analysis of the scheme of the Income Tax Act and were clearly of opinion that the contrary view would lead to absurd results. Different illustrations were given by Justice Sarkar and Justice Hidayatullah in their judgments. Even Justice Shah in his minority judgment agreed with the majority that the penalty must be set aside if the entire assessment is set aside in appeal. We need not go into the points of dissensions between the two views. It would be sufficient to say that the majority view firmly lays down that despite absence of a specific provision in the Income Tax Act, the scheme when properly analysed would justify a construction that the penalty can no longer be supported where the assessment is set aside. This decision renders the judgment in (1965) 16 STC 144 (Orissa) untenable. We accordingly hold that (1965) 16 STC 144 (Orissa) cannot be taken as laying down good law in view of the Supreme Court decision.
7. Mr. Mohapatra, however, contends that (1965) 16 STC 144 (Orissa) still stands as good law inasmuch as there is an Explanation to Rule 32 of the Orissa Sales Tax Rules and there is no corresponding Explanation anywhere either in the Income Tax Act or Rules and that as the Explanation to Rule 16 of the Orissa Rules is the same as the Explanation to Rule 32 of the Orissa Sales Tax Rules the principle laid down in (1965) 16 STC 144 (Orissa) should be extended in its application to an imposition of penalty under the orissa Rules.
8. Apparently the contention is attractive; but on a closer scrutiny it is without force. The Explanation merely enunciates the elementary law. It says in the first instance that where stay is granted the dealer will not be deemed to have been in default. Even without the Explanation such is the legal position both in civil law and in any taxing statute, Even under the Income Tax Act once assessment is made and demand notice is issued, the assessee would be in default if the amount is not paid on the date fixed unless a stay order has been procured from the appellate authorities. Absence of a corresponding provision in the Income Tax Act therefore does not make any difference. Under the Sales Tax Act if there is default, penalty would accrue.
Same is the provision under the Income Tax Act. The Explanation further clarifies the position that the stay would stand automatically vacated on the date of the disposal of the appeal.
Same is also the position in civil law as well as under the Income Tax Act. It is not also disputed that after the appeal or revision is disposed of, a further demand notice either in Form X or by way of a letter would issue under both the taxing statutes. On a close scrutiny, therefore, it would appear that the Explanation does not create any higher rights or liabilities than is conceived under the general law or under the Income Tax Act. We, therefore, do not think that the Explanation in the Orissa Sales Tax Rules or in the Orissa Rules brings in a different scheme from what is prescribed under the Income Tax Act or the Rules. The principle laid down in the majority view of the Supreme Court decision cannot be distinguished on the basis of the aforesaid Explanation. As we have already said, (1965) 16 STC 144 (Orissa) can no longer be held as laying down good law.
9. In Sri Govindaram Saraf v. State of Orissa, (1963) 14 STC 622 (Orissa) a Bench of this Court had clarified the position as to what is legal position when the assessment is set aside in appeal or revision. Their Lordships observed thus:–
“The amount of tax or penalty demanded has a well-known connotation. There can be no demand of tax or penalty until an assessment is made. There is no assessment quantifying the liability after the original order of assessment was set aside by the Assistant Commissioner, and consequently there can be no demand of tax until further assessment, if any, is made in pursuance of the remand order. It is well known that the liability is already fixed and does not depend upon the assessment. The assessment merely particularises the exact sum which a person is liable to pay.”
In this case the matter is pending before the Sales Tax Officer for re-assessment. The liability to pay tax besides the quantum is under challenge. One does not know whether the Sales Tax Officer would find that the petitioner is liable to pay tax. This being the position, it would be in consonance with the general scheme of the taxing statute that the petitioner’s liability to pay penalty would not arise without re-assessment being made.
10. One more point need be noticed. Mr. Mohapatra raised a preliminary objection that the petitioner did not come against the original order of dismissal of the revision by the Commissioner and has come at a subsequent stage. We do not attach much importance to this technical objection inasmuch as there is no limitation to our powers under Articles 226 and 227 of the Constitution to interfere in a case where penalty is being realised without any finding that the petitioner is liable to pay tax. We accordingly overrule the preliminary objection.
11. In the result, the orders imposing penalty are quashed. The writ application is allowed. A writ of certiorari be issued quashing the aforesaid orders imposing penalty. A writ of Mandamus be issued directing the opposite party to refund whatever penalty has been paid. The attachment of the security deposit is vacated. In the circumstances, there will be no order as to costs.
S. Acharya, J.
12. I agree.
