Case: Commissioner of Sales Tax, Cuttack, Orissa Vs. Brijraj Rameshwar

SIKRI, J.1. These are three appeals by special leave directed against the judgment of the High Court of Orissa in a reference under section 24(1) of the Orissa Sales Tax Act, 1947, hereinafter referred to as the Act. We may mention that the respondent has not entered appearance.2. The respondent, Brijraj Rameshwar, hereinafter referred to as the assessee, started a grocery business at Sambalpur on August 22, 1948. Thinking that he was liable to pay tax under the Act, he applied on August 22, 1949, under section 9 of the Act, to be registered as a dealer. He stated in the application that his gross turnover during the period from August 22, 1948, to August 21, 1949, was Rs. 5, 005. It appears that an Inspector reported on November 11, 1949, that the gross turnover of the assessee did not exceed Rs. 5, 000, and it was the case of the department that on this report the application was filed on November 11, 1949. But no intimation as to this was sent to the assessee. On December 18, 1950, the assessee sent a reminder requesting the officer to grant certificate of registration on the basis of his application, dated August 22, 1949. By letter, dated September 11, 1951, the Assistant Sales Tax Officer informed the assessee that the application filed on August 22, 1949, was cancelled as he was not then liable for registration, and asked him to furnish a fresh application for registration. The assessee then submitted an application, dated October 18, 1951, and on the basis of this application the assessee was granted a registration certificate on November 2, 1951.3. On November 25, 1953, proceedings under section 12(5) of the Act were started in respect of three quarters, namely, quarters ending December 31, 1950, March 31, 1951 and June 30, 1951. The Assistant Sales Tax Officer, by orders, dated December 31, 1953, assessed the assessee for the quarters ending December 31, 1950, and March 31, 1951, and by order, dated January 28, 1954, assessed the assessee for the quarter ending June 30, 1951. These orders were passed under section 12(5) of the Act. The Assistant Sales Tax Officer repelled the argument of the assessee that he had not wilfully failed to apply for registration within the meaning of section 12(5) on the ground that although he was an inhabitant of the town, he failed to enquire earlier than September 11, 1951, about the fact of his application. The Assistant Sales Tax Officer not only assessed him but also levied a penalty of Rs. 5 for each quarter. The assessee appealed but failed to convince the Assistant Collector of Sales Tax. On further appeal, however, the Sales Tax Tribunal annulled the assessments for the quarters ending on December 31, 1950, and March 31, 1951. The assessment for the quarter ending June 30, 1951, was modified but upheld and treated as under section 12(4) of the Act.On the application of the Commissioner of Sales Tax, the Appellate Tribunal referred the following questions to the High Court:1. Whether in the facts and circumstances of the case the application registration submitted by the opponent to the Sales Tax Officer, Sambalpur Circle, on 22nd August, 1949, was valid and was pending till 11th September, 1951?2. Whether rule 6 of the Orissa Sales Tax Rules, 1947, as it stood at the time of filing the aforesaid application for registration, contemplated application for registration under section 9 of the Orissa Sales Tax Act, 1947, to be made on a date when the prescribed minimum limit of gross turnover might not have been actually reached?3. Whether in the facts and circumstances of the case the certificate of registration granted to the opponent on application made subsequent to the date of accrual of his liability to pay tax remained valid for the entire financial year during which the application was made and the registration certificate was granted; and whether proceedings for assessment for the quarter ending on 30th June, 1951, which commenced on 23rd November, 1953, should have been instituted under section 12(2) or section 12(4) and not under section 12(5) of the Orissa Sales Tax Act, 1947?4. Whether in the facts and circumstances of the case completion of assessment in respect of quarters ending 31st December, 1950, and 31st March, 1951 under section 12(5) was illegal?The High Court answered the first question in the affirmative, namely, "that in the facts and circumstances of the case the application for registration submitted by the opposite party to the Sales Tax Officer, Sambalpur Circle, on 22nd August, 1949, was valid or is to be treated as valid, and was pending till 11th September, 1951."The answer to the second question was in the negative.4. The High Court answered the first part of the third question in the negative, namely, "that in the facts and circumstances of the case the certificate of registration, granted to the opposite party on application made subsequent to the date of accrual of his liability to pay tax, did not remain valid for the entire financial year during which the application was made and the registration certificate was granted." The second part of question No. 3 was answered thus:"So, our answer to the second part of question No. 3 is that the proceedings for assessment for the quarter ending on 30th June, 1951, which commenced on 23rd November, 1953, should have been instituted under section 12(2) or section 12(4) and not under section 12(5) of the Orissa Sales Tax Act, 1947, and accordingly our answer to the second part of question No. 3 is in the affirmative."Question No. 4 was answered in the affirmative on the following reasoning :"In view of our finding that the dealers application, dated August 22, 1949, was a valid application, the question of assessment under section 12(5) does not arise, since it contemplates cases of failure to apply for registration without sufficient causes. So our answer to question No. 5 (Question No. 4 in our judgment) is that in the facts and circumstances of the cases completion of assessment in respect of quarters ending 31st December, 1950, and 31st March, 1951, under section 12(5) was illegal."The learned counsel for the appellant, Mr. Bindra, submits that the application of the assessee, dated August 22, 1949, for registration, was not a valid application, and that the assessments under section 12(5) of the Act were valid.It is not necessary to decide the question whether the said application, dated August 22, 1949, was a valid application or not, because even if we assume that the application was invalid under section 9(2) of the Act, we are satisfied that section 12(5) of the Act did not apply to the facts and circumstances of the case.Section 12(5) reads thus :"12. (5) If upon information which has come into this possession, the Collector is satisfied that any dealer has been liable to pay tax under this Act in respect of any period and has nevertheless wilfully failed to apply for registration, the Collector shall, after giving the dealer a reasonable opportunity of being heard, assess, to the best of his judgment the amount of tax, if any, due from the dealer in respect of such period and all subsequent periods and the Collector may direct that the dealer shall pay, by way of penalty, in addition to the amount so assessed, a sum not exceeding one and a half times that amount."5. Section 12(5) enables the Collector to assess a dealer if two conditions are satisfied : (a) that the ealer was liable to pay tax in respect of a period, and (b) that he wilfully failed to apply registration. Mr. Bindra contends that on the facts in this case both conditions are fulfilled. He says that the application, dated August 22, 1949, must be left out of account for it was invalid. If this is treated as non est it follows that the assessee wilfully failed to apply for registration. He urges that the assessee did not enquire about the fate of his application till September 11, 1951, and this is material on which the assessing authority could well come to the conclusion that the assessee had wilfully failed to apply for registration. We are unable to accede to this contention. The fact that the assessee applied for registration cannot be ignored in determining the question. He, in fact, stated that he was liable to tax under the Act as his gross turnover exceeded Rs. 5, 000. He was not thereby trying to avoid tax, but on the contrary he was telling the Sales Tax Officer that he was liable to be taxed. It is negligence of the Sales Tax Officer in not informing him that his application has been rejected that led him not to file another application. The expression "nevertheless wilfully failed to apply for registration" connotes a deliberate failure to apply for registration in order to avoid taxation. We are of the opinion that on the facts of this case it is not established that the assessee wilfully failed to apply for registration. Therefore, it follows that the assessments could not be made under section 12(5) of the Act.Accordingly we hold that the answer to question No. 4 should be in the affirmative. Mr. Bindra did not attack any others answer given by the High Court, except perhaps, by inference, the answer to the second part of question No. 3, which also involves the applicability of section 12(5) in respect of the quarter ending June 30, 1951. We need only say that the assessment in respect of this quarter could not be made under section 12(5). Whether section 12(2) or section 12(4) applies or whether section 12(7) applies was not argued before us and therefore, we say nothing about this. We should not be taken to endorse the view of the High Court that section 12(2) or section 12(4) applied.

Decision:
0[ds]It is not necessary to decide the question whether the said application, dated August 22, 1949, was a valid application or not, because even if we assume that the application was invalid under section 9(2) of the Act, we are satisfied that section 12(5) of the Act did not apply to the facts and circumstances of the case.Section 12(5) enables the Collector to assess a dealer if two conditions are satisfied : (a) that the ealer was liable to pay tax in respect of a period, and (b) that he wilfully failed to apply registration. Mr.Bindra contends that on the facts in this case both conditions are fulfilled. He says that the application, dated August 22, 1949, must be left out of account for it was invalid.If this is treated as non est it follows that the assessee wilfully failed to apply for registration. He urges that the assessee did not enquire about the fate of his application till September 11, 1951, and this is material on which the assessing authority could well come to the conclusion that the assessee had wilfully failed to apply for registration. We are unable to accede to this contention. The fact that the assessee applied for registration cannot be ignored in determining the question. He, in fact, stated that he was liable to tax under the Act as his gross turnover exceeded Rs. 5, 000. He was not thereby trying to avoid tax, but on the contrary he was telling the Sales Tax Officer that he was liable to be taxed. It is negligence of the Sales Tax Officer in not informing him that his application has been rejected that led him not to file another application. The expression "nevertheless wilfully failed to apply for registration" connotes a deliberate failure to apply for registration in order to avoid taxation. We are of the opinion that on the facts of this case it is not established that the assessee wilfully failed to apply for registration. Therefore, it follows that the assessments could not be made under section 12(5) of the Act.Accordingly we hold that the answer to question No. 4 should be in the affirmative. Mr.Bindra did not attack any others answer given by the High Court, except perhaps, by inference, the answer to the second part of question No. 3, which also involves the applicability of section 12(5) in respect of the quarter ending June 30, 1951.We need only say that the assessment in respect of this quarter could not be made under section 12(5). Whether section 12(2) or section 12(4) applies or whether section 12(7) applies was not argued before us and therefore, we say nothing about this. We should not be taken to endorse the view of the High Court that section 12(2) or section 12(4) applied.