Case Note & Summary
The Supreme Court heard appeals by special leave filed by J.K. Synthetics Ltd., an assessee under the Rajasthan Sales Tax Act, 1954 and the Central Sales Tax Act, 1956, against assessment orders of the Commercial Taxes Officer for assessment years 1975-76, 1976-77 and 1977-78. The dispute concerned payment of interest on the amount of freight charged in respect of sale of cement under the relevant Cement Control Order. The assessee had filed returns on the premise that freight did not form part of the sale price for payment of sales tax. That premise was rejected by the Supreme Court in Hindustan Sugar Mills Ltd. v. State of Rajasthan & J.K. Synthetics Ltd. v. CTO, Kota by order dated 22-8-1978, which held that freight element formed part of the price of cement and sales tax was leviable on the sale price inclusive of the freight amount. Consequently, the assessee became liable to pay sales tax on the sale price inclusive of freight, but no dispute remained on computation. The only question was whether the assessee was required to pay interest on the additional sales tax that became due upon inclusion of freight in the sale price. The assessee contended that interest under Section 11-B of the Rajasthan Sales Tax Act, 1954 could be charged only for the period subsequent to the determination of sales tax under final assessment and after expiry of the period allowed under the notice of demand. It relied on State of Rajasthan v. Ghasilal. The Revenue contended that interest became payable from the date on which the original return was filed under Section 7(2) or Section 7(2-A) of the Act, as the case may be. It relied on Associated Cement Co. Ltd. v. CTO, where it was held that where a return is filed under Section 7(2), interest runs from the date of filing the return. The assessee sought to distinguish Associated Cement on the ground that the case related to deposit of differential tax under Section 7(2-A) of the Act. Thus the court was required to interpret Sections 7(2), 7(2-A) read with Section 11-B of the Act and Section 9(2) of the Central Act, along with the ratio of the two precedents. The court examined the statutory scheme. Section 3 is the charging section, Section 5 prescribes rates, and Section 7(1) requires dealers to furnish returns. Section 7(2) provides that every return shall be accompanied by a treasury receipt showing deposit of the full amount of tax due on the basis of the return. Section 7(2-A), added with a non obstante clause, permits payment at shorter intervals and also requires the return to be accompanied by receipt for the full amount of tax due shown in the return. Rule 25 of the Rajasthan Sales Tax Rules, 1955 and Form ST 5 require the return to be verified and the information to be correct and complete. The court observed that although the phraseology in sub-sections (2) and (2-A) differs, the content and purport are identical: both require deposit of full tax due based on the information furnished in the return. The information must be correct and complete to the best of the dealer's knowledge and belief, without wilful omission. If the dealer furnished full particulars honestly believing them to be correct and complete, it would be difficult to hold that the dealer had not acted bona fide in depositing the tax due. The tax deposited is provisional and subject to adjustment on final assessment. Section 7-AA provides penalty only where the dealer failed to furnish return without reasonable cause, suggesting that reasonable cause may absolve penalty. The excerpt does not contain the final decision on whether interest runs from the original return or from final assessment; the court was still analyzing the provisions and precedents.
Headnote
A) Sales Tax - Interest on Failure to Pay Tax - Section 11-B Rajasthan Sales Tax Act, 1954 - Interest under Section 11-B is attracted when tax payable under Sections 7(2) or 7(2-A) is not paid within the period allowed or when amount in notice of demand is not paid within period specified - Dispute concerned whether interest on additional tax due to inclusion of freight in cement sale price ran from original return or final assessment - Court examined that Section 7(2) requires deposit of full tax due on basis of return and Section 7(2-A) similarly requires full tax due shown in return; a dealer must deposit tax due on true and complete return, and default after period allowed attracts interest - Held that if dealer deposits tax based on bona fide belief that freight was not includible, omission may not be wilful, but interest provision operates on failure to pay tax due within period allowed (Paras 1-4). B) Sales Tax - Return and Payment of Tax - Sections 7(2), 7(2-A) Rajasthan Sales Tax Act, 1954 and Rule 25 Rajasthan Sales Tax Rules, 1955 - Every return must be accompanied by treasury receipt showing deposit of full amount of tax due on basis of return; sub-section (2-A) requires receipt for full amount of tax due shown in return - On conjoint reading of Section 7, Rule 25 and Form ST 5, information furnished in return must be correct and complete to best of knowledge and belief without wilful omission - Held that deposit of tax due on such information is provisional and subject to final assessment, but failure to deposit full tax due on a true return triggers interest under Section 11-B (Paras 3-6). C) Statutory Interpretation - Non Obstante Clause and Bona Fide Belief - Section 7(2-A) Rajasthan Sales Tax Act, 1954 - Sub-section (2-A) begins with non obstante clause but its content and purport are identical to Section 7(2) in requiring full tax due to be deposited with return - Assessee's emphasis on phrase "tax due shown in the return" in (2-A) did not create material difference from "tax due on the basis of return" in (2) - Held that interpretation turns on whether return was true and complete; a bona fide belief about non-includibility of freight may negate wilful omission and penalty but does not necessarily absolve from interest on tax found due on final assessment (Paras 5-6).
Issue of Consideration
Whether interest under Section 11-B of the Rajasthan Sales Tax Act, 1954 is payable on additional sales tax due on inclusion of freight in sale price of cement under the Cement Control Order, and from which date such interest runs; Whether differential tax under Section 7(2-A) attracts interest under Section 11-B; Whether assessee's bona fide belief that freight was not includible in sale price absolves it from liability to pay interest.
Law Points
- Freight charged under Cement Control Order forms part of sale price and sales tax is leviable on sale price inclusive of freight
- Section 7(2) requires deposit of full amount of tax due on basis of return
- Section 7(2-A) requires deposit of full amount of tax due shown in return
- Return must be correct and complete to best of dealer's knowledge and belief without wilful omission
- Interest under Section 11-B is attracted on failure to pay tax within period allowed
- Bona fide belief may negate wilful omission and penalty but may not absolve interest
- Tax deposited under Section 7(4) is provisional subject to final assessment
- Section 9(2) of Central Sales Tax Act applies to levy of interest on central sales tax
