IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA. C.W.P. No: 461 of 2007 with CWP No.462 of 2007. Date of decision: 24.06.2009 1. CWP No.461 of 2007: M/s. Karol Sons. …......Petitioner. Versus State of H.P. and another. …...Respondents. 2. CWP No.462 of 2007: M/s. Karol Sons. ……. Petitioner. Versus State of H.P. and another. …... Respondents. ___________________________________________________ Coram: The Hon’ble Mr. Justice Deepak Gupta, Judge. The Hon’ble Mr. Justice Surinder Singh, Judge. Whether approved for reporting?1 For the Petitioner : Mr. Ajay Vaidya, Advocate (in both the petitions). For the Respondents : Mr. Ram Murti Bisht, Dy. Adv. General (in both the petitions). Deepak Gupta, J. (Oral): These two writ petitions are being disposed by a common Judgment since common questions of law and facts are involved in the same. 1 Whether the reporters of the local papers may be allowed to see the Judgment? 2 The undisputed facts are that the petitioner-Firm was registered under “The Himachal Pradesh General Sales Tax Act, 1968” and was registered vide Registration Certificate dated 13.10.1995. Clauses 5 & 6 of the Certificate of Registration reads as under :- (5) “The return in form S.T. VIII or S.T. IX or both as the case may be, pertaining to the entire business conducted at the various places of business of the dealer shall be furnished by the dealer from the head office annually/quarterly/monthly. (6) The tax of surcharge is payable annually/quarterly/monthly.” The assessee filed assessment returns on quarterly basis for the 3rd and 4th quarters of the assessment year 1995- 96 and 1st and 2nd quarters of the year 1996-1997. Thereafter, he did not file the returns on quarterly basis. Notice was issued to the assessee on 26th April, 2001 informing him that he had not filed the returns on quarterly basis and why penalty be not imposed upon him. Admittedly, thereafter the assessee filed returns on quarterly basis. On 16.05.2001, penalty was imposed on the assessee in terms of Section 12(6) of the Himachal Pradesh General Sales(Himachal Pradesh) Rules,1920 (hereinafter referred to ‘G.S.T. Rules’) for not filing the returns on quarterly basis. This order of penalty is under challenge in CWP No. 462/2007. 3 For the same period, penalty on same grounds was imposed for not filing the returns on quarterly basis in terms of Section 7 of the Central Sales Tax Act, 1956 (hereinafter referred to as ‘C.S.T. Act’). Section 7(1) of the CST Act reads as under:- “7(1) Every deal registered under the Act shall furnish a return in Form I, monthly/quarterly/annually as required by the Assessing Authority within 30 days of the expiry of each month/quarter/year, together with a treasury/bank receipt in token of the tax due having been paid. Payment shall also be permissible by means of cross- cheques/drafts drawn in favour of the Assessing Authority concerned at places where the treasury business is conduced by the State Bank of India.” We have heard Mr. Ajay Vaidya, learned counsel for the petitioner and Mr. Ram Murti Bisht learned Deputy Advocate General for the State. The contention of Mr. Vaidya is that in terms of Rules 2(m) and 7(1)(d) of “The Himachal Pradesh General Sales Tax Rules, 1970” (hereinafter referred as ‘Himachal Central Rules’) no period for filing the return was prescribed. Hence, the penalty imposed upon the petitioner is arbitrary and illegal. Rules 2(m) and 7(1)(d) read as follows: - 4 2(m): “return period” means the period for which returns are prescribed to be furnished by a dealer”, 7(1) The registration certificate shall specify the following amongst other particulars:- 7(1) (a) to (c) … … … …. 7(1)(d) “ the return period” ; and 7(1)(e) ..… … …. ….. A bare perusal of the aforesaid rules shows that the return period is required to be prescribed. Rule 7(1)(d) lays down that the Certificate of Registration itself shall specify the return period applicable to the assessee in the Registration Certificate issued to the assessee. In the present case, the return period is mentioned as “annually/quarterly/monthly”. Mr. Vaidya contends that out of the three periods mentioned, none is either ticked or scored off. As far as the second writ petition is concerned, the contention of Mr. Vaidya in addition to the aforesaid grounds is that no notice was issued under the C.S.T. Act and penalty was imposed without affording an opportunity to the petitioner. It is also contended that no period for filing the return was prescribed in terms of Clause 7(1) of the Rules. We have perused the Registration Certificate of the petitioner-Firm issued under the C.S.T. Rules and the said Registration 5 Certificate does not contain any stipulation with regard to the period in which the return has to be filed. On the other hand, Mr. Ram Murti Bisht, strenuously contended that the petitioner has not come to this Court with clean hands. He submits that the petitioner was aware that the return was to be filed by the petitioner on quarterly basis, since for four quarters in the year 1995-96 and 1996-97, the petitioner filed the returns on quarterly basis. He further contended that the petitioner should have filed the returns on quarterly basis as were being filed by it earlier. After hearing arguments, we are of the considered opinion that the case set up by the assessee is just and proper. We are dealing with penal provisions which must be construed strictly. Penalty could not be imposed on an assessee unless there was clear violation of the provisions of Act and Rules. The requirement of Rule 7(1)(d) of the C.S.T. Rules was that the return period must be specified in the Certificate of Registration. The return period given in the said certificate was “annually/quarterly/monthly”. The concerned Department did not care to tick or score off what was relevant. The assessee was not specifically told as to whether he was to file his return on monthly, quarterly or monthly basis. In such an event, it was open to the assessee to file the return on any of the three basis. Merely because for some period he may have filed the return on monthly or quarterly basis does not mean that he cannot file the 6 return subsequently on yearly basis. The petitioner for the first time was informed only in April, 2001 that he was required to submit his return on quarterly basis. Thereafter, he was filing returns on quarterly basis. Penalty has been imposed on the petitioner on the ground that he has not filed return on quarterly basis. Since we have held that there was no specific requirement whereby he was required to file return on quarterly basis, the imposition of such penalty is incorrect. Having held so, we are of the considered opinion that even if the period mentioned in the Certificate of Registration is read in favour of the assessee, then, also he was required to file return annually at least. If he has not filed the return on annual basis within the period prescribed by law then penalty can be imposed upon the petitioner. We, therefore, set aside the order of penalty passed under the H.P.G.S.T. Act which is illegal, wrong and arbitrary and direct the Assessing Officer that he shall after giving proper opportunity to the assessee decide whether any penalty is to be imposed on the assessee under Section 12(6) of G.S.T. Act for not filing his returns on yearly basis prior to 21.04.2004. As far as the imposition of penalty under the C.S.T. Act is concerned, we have made reference to the Himachal Central Rules and the Certificate issued under the CST Act which does not fix any period for filing the return. No other 7 material has been placed on record to show that the assessee was required to file returns on quarterly basis. In fact, no notice was given to the assessee under the CST Act or the Central Rules before imposition of penalty under the said Act. The assessee was, however, required to file returns as per the statutory provisions at least on yearly basis. The order passed under the CST Act is accordingly quashed and set aside. The Assessing Officer, however, is directed to issue fresh notice to the assessee and after affording the assessee adequate opportunity of being heard the Assessing Officer shall decide the matter in light of our aforesaid observations. The Assessing Officer shall ensure that notice is issued and the proceedings in both the matters are completed latest by 30th September, 2009. In case the assessee is entitled to any refund, the same shall be paid to him on or before 30th November, 2009, failing which the assessee shall be entitled to the interest on the said amount @ 18% per annum. Both the petitions are disposed in the aforesaid terms. ( Deepak Gupta ) Judge ( Surinder Singh ) June 24, 2009(BRB) Judge 8