Case Note & Summary
The State of Mysore appealed by special leave against the acquittal of a registered dealer in three prosecution cases under Section 29(1)(d) of the Mysore Sales Tax Act, 1957 for non-payment of assessed sales tax. The respondent dealer was assessed to sales tax for three separate periods by the Commercial Tax Officer, Bijapur, and notices of demand were served requiring payment within 21 days. The respondent preferred appeals against each assessment under Section 20(1) of the Act but neither paid the tax nor obtained any stay from the appellate authority. Complaints were filed before the Judicial Magistrate First Class, Second Court, Bijapur. The Magistrate acquitted the respondent on the ground that appeals against assessment were pending. The Mysore High Court dismissed the State's appeals against acquittal, observing that other remedies were available for recovery of tax and it did not think fit to exercise discretion under Section 421(1) of the Code of Criminal Procedure. The State then approached the Supreme Court, which granted special leave subject to an undertaking that the respondent would not be prosecuted irrespective of the result. The core legal issues before the Supreme Court were whether prosecution under Section 29(1)(d) is maintainable when an appeal against assessment is pending but the tax has not been paid or stay obtained; whether the proviso to Section 13(3) of the Act bars prosecution for non-payment; and whether the respondent's non-payment constituted wilful default. The respondent contended that by virtue of the proviso to Section 13(3), an assessee cannot be proceeded against unless shown to have failed to comply with an order of the appropriate appellate authority, and since no such order had been made, there was no failure. He further argued that the liability to pay tax must be deemed suspended during pendency of the appeal and that there was no wilful default. The State argued that the respondent's failure to pay within the time allowed was deliberate and wilful, making him liable under Section 29(1)(d), and that the proviso to Section 13(3) only provides interim protection from recovery proceedings, not from prosecution. The Supreme Court rejected the respondent's contentions. It held that liability to pay tax is created by the order of assessment. Where tax is not paid despite service of a notice of demand, the assessee may be proceeded against under Section 13(3)(a) or (b) for recovery. The proviso to Section 13(3) affords interim protection from recovery proceedings only if the assessee obtains an order of stay from the appropriate appellate or revisional authority and complies with any conditions imposed. It does not answer a prosecution under Section 29(1)(d), which penalises failure to pay tax within the time allowed. Section 20(5) expressly provides that notwithstanding an appeal, the tax shall be paid in accordance with the assessment, subject only to directions of the appellate authority on furnishing sufficient security. The Court found that the respondent's non-payment was deliberate and therefore wilful. Accordingly, the Supreme Court allowed the appeals and set aside the acquittals in all three cases. However, in view of the State's undertaking at the time of special leave that the respondent would not be prosecuted, the Court did not convict or sentence the respondent and left the matter there.
Headnote
A) Criminal Law - Statutory Offences - Prosecution for Non-Payment of Sales Tax - Mysore Sales Tax Act, 1957, Section 29(1)(d) - The respondent, a registered dealer, was assessed to sales tax and served notices of demand requiring payment within 21 days. He preferred appeals but did not pay the tax or obtain stay. The Supreme Court held that failure to pay within the time allowed by notice of demand immediately rendered the assessee liable to prosecution under Section 29(1)(d), regardless of pending appeal. Held, acquittal was unwarranted; wilful default established. (Paras 812-815) B) Sales Tax Law - Recovery of Tax - Interim Stay and Proviso - Mysore Sales Tax Act, 1957, Section 13(3) proviso and Section 20(5) - The court interpreted Section 13(3) as providing for recovery of assessed tax as arrears of land revenue or as fine, with interim protection only if the assessee obtains an order of stay from the appellate or revisional authority and complies with any conditions imposed. Section 20(5) expressly provides that notwithstanding appeal, tax shall be paid in accordance with assessment. The proviso to Section 13(3) did not bar prosecution under Section 29(1)(d). Held, preferring appeal does not suspend liability to pay tax. (Paras 812-814) C) Criminal Law - Wilful Default - Meaning of Wilful Non-Payment - Mysore Sales Tax Act, 1957, Section 29(1)(d) - The assessee knew he was required to pay tax within certain time and did not comply; his action was deliberate and therefore wilful. Held, no substance in contention that there was no wilful default. (Paras 814-815)
Issue of Consideration
Whether prosecution under Section 29(1)(d) of the Mysore Sales Tax Act, 1957 is maintainable when the assessee has preferred an appeal against the assessment order but has not paid the tax or obtained stay; Whether the proviso to Section 13(3) bars prosecution for non-payment of tax when no order has been made by the appellate authority regarding payment; Whether the liability to pay tax is suspended during pendency of appeal under Section 20 of the Act; Whether the respondent's non-payment constituted wilful default
Final Decision
The Supreme Court allowed the appeals and set aside the acquittal of the respondent in all three cases. The Court held that the respondent's failure to pay tax within the time allowed was deliberate and wilful, rendering him liable under Section 29(1)(d). However, due to an undertaking given by the State at the time of special leave that the respondent would not be prosecuted, the Court did not convict or sentence the respondent and left the matter there.
Law Points
- Liability to pay tax is created by order of assessment
- Failure to pay tax within time allowed by demand notice is offence under Section 29(1)(d) of Mysore Sales Tax Act
- 1957
- Pendency of appeal does not suspend liability to pay tax
- Proviso to Section 13(3) only gives interim protection from recovery proceedings not from prosecution
- Wilful default includes deliberate non-payment of tax
