Case: State of Gujarat and Ors Vs. Patel Ramjibhai Danabhai and Ors

restricted in its application to the case of an unregistered dealer whose modus operandi to evade tax involves ab initio disregard of the law. It does not apply to a registered dealer who has escaped assessment or has been under-assessed or assessed at a lower rate or has been wrongly allowed any deduction or has concealed any material particulars relating to sales or purchases or has knowingly furnished incorrect returns. The case of such a registered dealer will fall under Section 35 and not under Section 33(6). Section 33(6) is a special provision confined to a particular class of tax-evaders, namely, unregistered dealers; while Section 35 is a general provision to deal with cases of escaped assessment or under assessment. Generalia specialibus non derogant is a cardinal principle of interpretation. It means that the general provisions must always yield to the special provisions. Construed in accordance with this fundamental principle the special class of unregistered dealers covered by Section 33(6) must be taken to have been excluded from the purview of the general provisions in Section 35. Thus considered, it is clear that the case of an unregistered dealer who evades tax by committing the double default specified in Section 33(6), action can be taken only under that Section and not under Section 35. 27. It is true that no limitation has been prescribed for taking action under Section 33(6) against an unregistered dealer falling thereunder. But, there is rational basis for not putting any restriction as to the length of time within which action can be taken under Section 33(6). The reason is that tax evasion by the unregistered dealers in this class because of the clandestine modus operandi adopted by them, and wholesale disregard of the law, is more contumacious in character, more sinister in its effect both on the law-abiding tax-payers and the collection of public revenue, and more difficult to detect than tax-evasion by a registered dealer. When a dealer applies for and obtains a registration certificate under the Act, he thereby admits his liability to pay tax. In his case, the Sales-tax Authorities, have basic information, in pursuance of which, they can, by the exercise of due vigilance , check and detect any tax-evasion by him within a reasonable time. This reasonable time is the period of limitation fixed by the Legislature, in its wisdom, in Section 35. But the case of a tax-evading unregistered dealer is different. In his case, the Authorities have on their record no such basic information such as the registration record which would supply them a lead to work upon. For lack of information, or want of adequate staff, resources and time at the disposal of the Department, and the secretive nature of the modus operandi, tax-evading activities of an unregistered dealer may go on undetected for years on end. That is why for taking action under Section 33(6) against a tax-evading unregistered dealer, the Legislature has not fixed any period of limitation. Thus, putting the unregistered dealer who, though liable to pay tax, fails to get himself registered and does not pay any tax, in a separate class, to be dealt with under Section 33(6), differently from other dealers falling under Section 35, rests on intelligible differentia having a rational nexus with the object of preventing tax-evasion. 28. The question of limitation apart, it cannot be said that the procedure provided in Section 33(6) is more onerous than the one specified in Section 35. The requirement as to issue of a notice to the defaulter and giving of an opportunity of being heard, is a common feature of both the sections. It is true that under Section 33(6), the assessment is made on best-judgment basis. Nevertheless, it cannot be made arbitrarily or capriciously. It has to be made after taking into account all relevant material gathered by the Taxation Officer or produced before him by the assessee in response to the notice. If an assessment under Section 33(6) is made upon inadequate materials, but on honest and fair guess-work, then it will be but due to the deliberate default of the assessee in supplying the necessary information. The differential mode of assessment under Section 33(6) is thus founded upon rational criteria. 29. The ratio of Anandji Haridas is not applicable to the facts of the present cases. Therein, this Court was dealing with the case of a registered dealer under the C.P. and Berar Sales Tax Act 1947. It was in that context that this Court, by a majority of 3 to 2, held that Section 11(4)(a) of that Act was violative of Article 14 of the Constitution. Here we are concerned with the cases of unregistered dealers under the Bombay Act. In our opinion, upon a proper construction of the two provisions, in juxtaposition to each other, such unregistered dealers can be proceeded against under Section 33(6) of the Bombay Act of 1959 or Section 14(6) of the Bombay Act of 1953, as the case may be, and not under Section 35/Section 15 of the said Acts. There is no overlapping between these two, because Section 35 cannot be applied to the case of an unregistered dealer falling within the purview of the special provision in Section 33(6). This was clear from Sub-section (2) of Section 35, as it stood at the time material to these cases. 30. For the foregoing reasons, we are of opinion that Section 33(6) of the 1959 Act and Section 14(6) of the 1953 Act do not violate Article 14 of the Constitution, and are valid. 31. We may mention in passing that the question raised with regard to the constitutional validity of the aforesaid provisions has become largely academic because mostly the impugned notices or assessments were within the period of limitation prescribed for taking action under Section 35 of the 1959 Act. In such cases, the question of subjecting the respondents to a more onerous procedure than the one envisaged in Section 35 in the matter of limitation, does not arise.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]Authorisation means an authorisation granted under Section 24. Dealer under Sub-section (6) of the same Section is defined to mean any person who carries on the business of selling or buying goods in the pre-Reorganisation State of Bombay, excluding the transferred territories, whether for commission, remuneration or otherwise and includes a State Government which carries on such business and any society, club or association which sells goods to or buys goods from its members. Then, there is an Exception appended to this definition which excludes an agriculturist who sells exclusively agricultural produce grown on land cultivated by him personally, from the definition.21. The definition of Dealer in Section 2(6) of the 1953 Act is substantially the same.25. An analysis of Section 33(6) of the 1959 Act (corresponding to Section 14(6) of the 1953 Act) will show that it applies to tot particular class of dealers, liable to pay tax, who-(i) fail to apply for registration as required by law (vide Section 22); and(ii) who fail to pay the tax in respect of any period.26. Thus, Section 33(6) is, in terms, restricted in its application to the case of an unregistered dealer whose modus operandi to evade tax involves ab initio disregard of the law. It does not apply to a registered dealer who has escaped assessment or has been under-assessed or assessed at a lower rate or has been wrongly allowed any deduction or has concealed any material particulars relating to sales or purchases or has knowingly furnished incorrect returns. The case of such a registered dealer will fall under Section 35 and not under Section 33(6). Section 33(6) is a special provision confined to a particular class of tax-evaders, namely, unregistered dealers; while Section 35 is a general provision to deal with cases of escaped assessment or under assessment. Generalia specialibus non derogant is a cardinal principle of interpretation. It means that the general provisions must always yield to the special provisions. Construed in accordance with this fundamental principle the special class of unregistered dealers covered by Section 33(6) must be taken to have been excluded from the purview of the general provisions in Section 35. Thus considered, it is clear that the case of an unregistered dealer who evades tax by committing the double default specified in Section 33(6), action can be taken only under that Section and not under Section 35.27. It is true that no limitation has been prescribed for taking action under Section 33(6) against an unregistered dealer falling thereunder. But, there is rational basis for not putting any restriction as to the length of time within which action can be taken under Section 33(6). The reason is that tax evasion by the unregistered dealers in this class because of the clandestine modus operandi adopted by them, and wholesale disregard of the law, is more contumacious in character, more sinister in its effect both on the law-abiding tax-payers and the collection of public revenue, and more difficult to detect than tax-evasion by a registered dealer. When a dealer applies for and obtains a registration certificate under the Act, he thereby admits his liability to pay tax. In his case, the Sales-tax Authorities, have basic information, in pursuance of which, they can, by the exercise of due vigilance , check and detect any tax-evasion by him within a reasonable time. This reasonable time is the period of limitation fixed by the Legislature, in its wisdom, in Section 35. But the case of a tax-evading unregistered dealer is different. In his case, the Authorities have on their record no such basic information such as the registration record which would supply them a lead to work upon. For lack of information, or want of adequate staff, resources and time at the disposal of the Department, and the secretive nature of the modus operandi, tax-evading activities of an unregistered dealer may go on undetected for years on end. That is why for taking action under Section 33(6) against a tax-evading unregistered dealer, the Legislature has not fixed any period of limitation. Thus, putting the unregistered dealer who, though liable to pay tax, fails to get himself registered and does not pay any tax, in a separate class, to be dealt with under Section 33(6), differently from other dealers falling under Section 35, rests on intelligible differentia having a rational nexus with the object of preventing tax-evasion.28. The question of limitation apart, it cannot be said that the procedure provided in Section 33(6) is more onerous than the one specified in Section 35. The requirement as to issue of a notice to the defaulter and giving of an opportunity of being heard, is a common feature of both the sections. It is true that under Section 33(6), the assessment is made on best-judgment basis. Nevertheless, it cannot be made arbitrarily or capriciously. It has to be made after taking into account all relevant material gathered by the Taxation Officer or produced before him by the assessee in response to the notice. If an assessment under Section 33(6) is made upon inadequate materials, but on honest and fair guess-work, then it will be but due to the deliberate default of the assessee in supplying the necessary information. The differential mode of assessment under Section 33(6) is thus founded upon rational criteria.29. The ratio of Anandji Haridas is not applicable to the facts of the present cases. Therein, this Court was dealing with the case of a registered dealer under the C.P. and Berar Sales Tax Act 1947. It was in that context that this Court, by a majority of 3 to 2, held that Section 11(4)(a) of that Act was violative of Article 14 of the Constitution. Here we are concerned with the cases of unregistered dealers under the Bombay Act. In our opinion, upon a proper construction of the two provisions, in juxtaposition to each other, such unregistered dealers can be proceeded against under Section 33(6) of the Bombay Act of 1959 or Section 14(6) of the Bombay Act of 1953, as the case may be, and not under Section 35/Section 15 of the said Acts. There is no overlapping between these two, because Section 35 cannot be applied to the case of an unregistered dealer falling within the purview of the special provision in Section 33(6). This was clear from Sub-section (2) of Section 35, as it stood at the time material to these cases.30. For the foregoing reasons, we are of opinion that Section 33(6) of the 1959 Act and Section 14(6) of the 1953 Act do not violate Article 14 of the Constitution, and are valid.31. We may mention in passing that the question raised with regard to the constitutional validity of the aforesaid provisions has become largely academic because mostly the impugned notices or assessments were within the period of limitation prescribed for taking action under Section 35 of the 1959 Act. In such cases, the question of subjecting the respondents to a more onerous procedure than the one envisaged in Section 35 in the matter of limitation, does not arise.