IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA C.W.P. No.433 of 1996 Judgment reserved on:11.3.2008. Date of decision: 10.4.2008 M/s.Walia Automobiles, Bhupper ….. Petitioner -Versus- State of H.P. and others …. Respondents Coram: The Hon’ble Mr.Justice Deepak Gupta, Judge. The Hon’ble Mr.Justice Rajiv Sharma, Judge. Whether approved for reporting? Yes For the Petitioner: Mr.K.D.Sood, Advocate For Respondents: Mr.R.M.Bisht, Dy.A.G. Deepak Gupta, J. By means of this petition, the petitioner has prayed for the quashing of the orders whereby penalty and interest have been imposed on the petitioner. The brief facts of the case are that the petitioner is a partnership firm and is engaged in the running of a petrol station at Bhupper, Tehsil Paonta Sahib, District Sirmour, H.P. The petitioner firm is duly registered under the H.P. Motor Spirit (Taxation of Sales) Act, 1968 (hereinafter referred to as the Act). Admittedly, the petitioner has paid the entire tax due under the aforesaid Act for the 2 assessment years 1992-93 and 1993-94. However, penalty and interest have been imposed on the petitioner on the ground that the petitioner did not file the returns within time and therefore was liable to pay penalty and interest in terms of Section 5-A of the Act. It would be pertinent to mention that Section 5-A was introduced vide amendment which came into force w.e.f. 1.6.1992. The relevant portion of this Section reads as follows: “5-A:(1)Tax payable under the Act shall be paid in the manner hereinafter provided at such intervals as may be prescribed. (2)Every dealer shall furnish such returns by such dates and to such authority as may be prescribed. (3)xx xx xx (4)xx xx xx (5)If a dealer fails without sufficient cause to comply with the requirements of the provisions of sub-section (2) or sub-section (3), the Commissioner, or any person appointed to assist him under sub-section (1) of Section 20, may, after giving such dealer a reasonable opportunity of being heard, direct him to pay, by way of penalty, a sum which shall not be less than ten percentum but which shall not exceed one and a half times of the amount of tax to which he is assessed or is liable to be assessed under section 5-B in addition to the amount of tax to which he is assessed or is liable to be assessed and where no tax is payable, a sum not exceeding one hundred rupees.” Section 5-C(1) of the Act provides for the payment of interest which reads as follows: “5-C(1):If any dealer fails to pay the amount of tax due from him under this Act except to the extent mentioned in sub-section (2), he shall, in 3 addition to the amount of tax, be liable to pay simple interest on the amount of tax, due and payable by him at the rate of one percentum per month, from the date immediately following the last date on which the dealer should have either filed the return or paid the tax under this Act, for a period of one month and thereafter at the rate of one and half percentum per month till the default continues.” The Assessing Officer found that all the returns filed by the petitioner for the relevant assessment years had been filed late and he imposed minimum penalty of 10% and also charged interest on the delayed payments. For the assessment year 1992-93 the penalty worked out to Rs.1,60,000/- and the interest worked out to Rs.25,000/-. For the assessment year 1993-94 the interest worked out to Rs.50,000/- and penalty to Rs.1,98,000/-. The petitioner filed appeals against the said orders before the Additional Excise and Taxation Commissioner-cum-Appellate Authority. These appeals were rejected on 23.12.1995. The petitioner filed a Revision Petition which was returned on the ground that no such Revision Petition is maintainable. Hence the present writ petition. The main grounds of challenge are that after the introduction of the amended provisions that is Sections 5-A, 5-B and 5-C, the Rules were not amended and no procedure was prescribed for imposition and recovery of penalty or interest. It is further contended that even as per the old Rules no notices have been given 4 to deposit the tax and therefore penalty should not have been imposed. It would be relevant to refer to Rules 15&16 of the H.P. Motor Spirit (Taxation of Sales) Rules, 1969 (hereinafter referred to as the Rules), which read as under: “15.(a)Before the submission of the monthly return required by sub-rule (b) or (c), every retail dealer licensed in Form P.1, P.2 or P.3 shall pay the full amount of tax due under section 3 of the Act on all retail sales of Motor spirit as shown in the monthly return, into a Government Treasury or the branch of the State Bank of India through a challan form in Form P.M., or at the office of the District Excise and Taxation Officer, provided that no payment shall be accepted at the office of the District Excise and Taxation Officer save through a Bank Draft or a crossed cheque, payable/drawn at a local scheduled bank in favour of the Assessing Authority: Provided that where the payment is made through a crossed cheque and the cheque is dishonoured, the dealer shall be deemed to have not made the payment and shall be liable to any action which may be taken for not making payment under the Act or the rules framed there under: Provided further that the deposit in respect of retail sales made in each district shall be made under separate challans. (b)Every retail dealer licensed in Form P.1, shall prepare or cause to be prepared a return in Form P.C., appended to these rules, of all motor spirit sold during the preceding month and shall lodge the said return with the Petrol Taxation Officer of the districts in which his license has been issued, within 21 days of the close of the month to which it relates. (c)Every retail dealer licensed in Form P.2 or P.3, shall prepare or cause to be prepared separate return in Form P.D., appended to these rules, of all motor spirit sold in retail during the preceding month in each district and shall lodge the said returns with the Petrol Taxation Officer of the district in which the sale took place within 30 days of the close of the month to which it relates. 5 (d)Every retail dealer licensed in Form P.1, P.2 or P.3 shall subscribe at the foot of the monthly return, a declaration duly signed by himself or by his duly authorized manager or agent, to the effect that the particulars set out therein are to the best of his knowledge and belief true, accurate and complete. (e)Every monthly return submitted under sub-rule(b) or (c) above shall be accompanied by the treasury or the State Bank receipt or other evidence of the payment of tax having been made in the manner prescribed under sub-rule (a) above. (f)the Petrol Taxation Officer, after satisfying himself that the payment of the amount shown in the monthly return has duly been made, shall cause to be issued a certificate in Form P.E., appended to these rules, and have it delivered to the retail dealer or his authorized manager or agent submitting the return. Number and date of the certificate issued shall also be recorded at the foot of the return. 16.(a)If the amount of the tax due has not been deposited within the time prescribed under rule 15, the Petrol Taxation Officer shall cause a notice in Form P.F., appended to these rules, to be issued and served on the retail dealer, requiring him to make payment of the unpaid amount of tax within 10 days of the date of service of the said notice. (b)Every notice issued under sub-rule (a) may be given to the retail dealer at his ordinary place or places of business or if the retail dealer be not found on the said premises, to any person in the employ of the retail dealer, who may be found upon the said premises, or if no such person be found, the same may be left at the said premises or affixed in a conspicuous position upon some building or erection in the occupation of the retail dealer. (c)If the tax is not paid within the time fixed by the notice issued under sub-rule (a), the Petrol Taxation Officer, may after calling upon the retail dealer to show cause, proceed to impose a penalty under the provisions of Section 9 of the Act.” It is clear that Rule 15 prescribes the manner, mode and time limits for filing of returns and deposit of the tax. Rule 16 further 6 provides that if the amount of tax due has not been deposited within the time prescribed the Petrol Taxation Officer shall issue a notice to the dealer requiring him to deposit the unpaid tax within 10 days. In case the tax is not paid within 10 days then the penalty under Section 9 of the Act can be imposed. Section 9 of the Act provides that where a party fails to comply with the provisions of the Act and the Rules and no other penalty is provided for under the Act he shall be liable to imposition of penalty not exceeding Rs.2000/- and if the office is continuing one a daily penalty not exceeding Rs.50/-. It is contended on behalf of the petitioner that no penalty in excess of that provided under Section 9 could be imposed. We are not in agreement with this argument since the penalty provided in Section 9 is only applicable in those cases where penalty is not provided for under the other provisions of the Act. Sections 5-A and 5-C provide for the imposition as well as the rate of penalty and interest and therefore it is this penalty and interest which has to be imposed. Shri Sood also contended that no Rules had been framed in terms of amended provision. In our view no Rules were required to be framed. Rule 15 itself provides the manner, mode and time limits for filing of returns and deposit of tax. The return has to be filed within 21 days of the closing of the month to which it relates. Any dealer violating this Rules would be liable to be penalized in terms of 7 Sections 5-A and 5-C above. Section 5-C quoted hereinabove makes it mandatory that interest will be payable at the rate prescribed therein for the delayed period. There is no discretion vested with the Assessing Officer in this regard. The Assessing Officer has imposed the interest strictly in accordance with the provisions of Section 5-C. There is no error in the order of the Assessing Officer and the same is accordingly upheld. As far as penalty is concerned, Section 5-A (5) which has been reproduced above provides that if a dealer without sufficient cause fails to comply with the requirements of the provisions of the Act then penalty can be imposed upon him after giving a reasonable opportunity of being heard. It has been prescribed that the penalty shall not be less than 10% of the amount of tax but shall not exceed one and half times the amount of tax to be assessed under Section 5-B. The pre-requisite for imposition of penalty is that the dealer without reasonable cause has not furnished the returns. It is a well settled principle of law that no penalty can be imposed without issuing a notice to the party concerned to show cause why penalty should not be imposed upon it. It is only then that a party can explain what was the reasonable cause why it could not furnish the returns or deposit tax in time. On a perusal of the order of the Assessing Authority it appears that in fact no notice was ever issued to the petitioner calling upon him to show cause why penalty should 8 not be imposed upon it. It was incumbent upon the Assessing Authority to have issued notice to the petitioner in respect of every return that there is a delay in filing of the same and he should explain why penalty should not be imposed upon him. No such notice has been issued and therefore we are of the opinion that the penalty could not have been imposed upon the petitioner. Even for a minor penalty Rule 16 makes it mandatory to issue notice before imposition of penalty. Even if penalty was to be imposed under Section 5-A, we can read into the said section, the requirement of issuing notice to the dealer upon whom penalty is proposed to be imposed. It is a cardinal principle of Rules of Natural Justice that no party should be condemned unheard and should be given adequate opportunity to put-forward its case. No doubt the petitioner has been given hearing in respect of the penalty but we find that the Assessing Authorities never issued notice to the petitioner intimating him that there was a proposal to issue penalty upon him. We are, therefore, of the opinion that penalty could not have been imposed upon the petitioner. In view of the above discussion, the writ petition is partly allowed. The impugned assessment orders are quashed to the extent they impose penalty under Section 5-A(1) of the Act. However, the imposition of interest is upheld. The respondents are directed to either refund the amount of penalty if deposited by the petitioner 9 within a period of 4 months from today or to adjust it in the returns of the petitioner to be filed hereafter. The writ petition is disposed of in the aforesaid terms. No order as to costs. ( Deepak Gupta ), Judge. April 10 2008. ( Rajiv Sharma ), PV Judge.