PATHAK, J. - (1.) THIS reference has been made under section 11(1) of the U.P. Sales Tax Act and is in respect of six dealers. The questions referred are :- "(1) Whether an exemption application in form V, which is accompanied by deposit of deficit fee [as being not in accordance with rule 20-B(a)] must necessarily be rejected as incompetent, not maintainable or not in order ? (2) Whether the assessing authority has jurisdiction to demand the deficiency in the initial deposit of the fee ? If so, must he demand the initial deficiency during the currency of the assessment year before rejecting the exemption application as such ? (3) Whether in case of initial deficit deposit the assessing authority is competent after the expiry of the assessment year, to finalise the exemption case in terms of sub-clauses (h) and (i) of rule 20-B and then demand the total deficiency ? (4) Whether a default assessment under rule 23 can be made only upon the failure of the assessee to deposit the deficiency on demand ?"
(2.) THE dealers carry on business in foodgrains. They applied under rule 20-B(a) of the U.P. Sales Tax Rules for exemption from sales tax, the applications being made on different dates. One of them, M/s. Basdeo Ram Manohar Lal, applied for exemption for the assessment year 1958-59, while the rest applied for exemption for the assessment year 1957-58. With the exemption application each dealer deposited an amount towards the exemption fee purporting to be in compliance with rule 20-B(a). The Sales Tax Officer took up the exemption applications after the close of the assessment year and holding that the deposit made by each dealer fell short of the true amount which he should have deposited, he rejected the exemption applications and assessed each dealer to sales tax by virtue of rule 23. The dealers appealed but without success. Thereafter, they applied in revision, and the revision applications were allowed by the Additional Revising Authority who took the view that rule 20-B(a) was merely directory in nature and that the failure to deposit the instalment of the exemption fee contemplated by that provision was not fatal to the exemption applications. He expressed the view that it was open to a dealer to deposit the entire amount of the exemption fee when the fee was finally under rule 20-B(h). At the instance of the Commissioner of Sales Tax the present reference has been made. A comparative table setting out the amount deposited by each dealer as against the deposit which he should have made is set out below :- Initial deposit Fee required Name of the dealer with exemption to be deposited application under rule 20-B(a) 1 2 3 Behari Lal Ram Krishna Rs. 250.00 Rs. 750.00 Basdeo Ram Manohar Lal Rs. 18.00 Rs. 100.00 Girdhari Mal Jai Dayal Rs. 150.00 Rs. 250.00 Ramnath Ram Dularey Rs. 400.00 Rs. 1,000.00 Narain Das Prahlad Ram Rs. 75.00 Rs. 250.00 Chandrika Pd. Munni Lal Rs. 150.00 Rs. 500.00 The essential question before us is whether the exemption applications filed by the dealers were rightly rejected because of the failure of the dealers to deposit the amount of fee required by rule 20-B(a). Section 4(1)(b) of the U.P. Sales Tax Act provides for exemption from tax of sales of goods by such persons or class of persons, and on such condition and on payment of such fees, it any, not exceeding Rs. 8,000 annually, as may be specified by the State Government by notification in the official Gazette. The State Government decided to grant exemption to dealers on the sale of foodgrains by Notification No. ST. 6068/X-1097-56 darted 30th September, 1956, on condition that the dealer "(a) obtains an exemption certificate from the assessing authority on payment of the appropriate annual fee mentioned below : (i) Rs. 18 where the turnover does not exceed Rs. 12,000, (xii) Rs. 8,000 where the turnover exceeds Rs. 7,00,000; and (b) observes the conditions laid down in the rules framed under the Act." Rule 20-B, which deals with the matter, provides : "20-B. Application for certificate of exemption by foodgrains dealers. - (a) Every dealer in foodgrains seeking to obtain exemption certificate in accordance with a notification issued under section 4, shall submit to the Sales Tax Officer an application for exemption in form V, which, unless otherwise provided, shall be presented within thirty days of the commencement of the years for which it has been made, and shall be accompanied by a treasury chalan showing deposit of one-fourth of the exemption fee calculated on his turnover of the previous year : Provided that the exemption fee for the year ending March 31, 1957, shall, when business has been done during the whole year, be calculated on the basis of the turnover for the period from April 1 to December 31, 1956, increased by one-fourth thereof, three-fourths of the exemption fee so calculated shall be paid before submitting the application and the remaining one-fourth by April 30, 1957. (b) If a dealer in foodgrains commences business after the issue of the notification under section 4, or has not done business in foodgrains during the whole of the year 1956-57, he shall estimate his turnover for the period from the date of commencement of business up to the end of the assessment year and shall calculate exemption fee thereon. The fee so calculated shall be divided into quarterly instalments for the number of quarters of the year during which the dealer would do business; and he shall pay one such instalment before submitting his application for exemption which shall be submitted in form V within thirty days of the commencement of the business accompanied by a treasury chalan showing deposit of the first instalment. (c) Subsequent instalment of the fee, other than the first payable under sub-rule (a) or (b) except such payment as is prescribed in the proviso to sub-rule (a), shall be paid within thirty days of the commencement of each quarter, that is, before July 31, October 31 and January 31. (d) If a dealer has not done any business in foodgrains during the whole of the previous year, he shall deposit the exemption fee on the basis of the turnover of the assessment year, and the provisions of sub-rule (b) shall mutatis mutandis apply to the case. (e) If the Sales Tax Officer after such enquiry as he may deem necessary, is satisfied that the application is in order and the fee has been correctly calculated, he shall issue a provisional exemption certificate to the dealer in form VI-A. (f) A certificate issued under sub-rule (e) on an application filed within the period specified in sub-rule (a) or (b) shall have effect from the beginning of the assessment year or from the date from which the dealer becomes entitled to exemption, as the case may be. If the application is filed after the due date, the exemption certificate shall have effect from the date of application. (g) Every exemption certificate issued under this rule shall remain valid up to the expiry of the assessment year for which it is granted. (h) The fee deposited under any of the forgoing sub-rules shall be provisional and upon the expiry of the assessment year the Sales Tax Officer shall, after such enquiry as he may deem necessary, determine the turnover of the assessment year and finally fix the exemption fee payable thereon. (i) If the exemption fee fixed under sub-rule (h) differs from the total amount deposited during the year the difference shall be paid by the dealer, or refunded by the Sales Tax Officer, as the case may be. If the dealer fails to pay the amount found so due from him within the period fixed by the Sales Tax Officer, he shall be assessed to tax for the whole year. (j) If no amount is found to be due from the dealer under sub-rule (i), or if any such amount found due is paid within the period fixed by the Sales Tax Officer, the Sales Tax Officer shall pass an order declaring the exemption certificate issued under sub-rule (e) final."
(3.) AFTER carefully considering the relevant provisions of the Act, the notification and the Rules it appears to me that the requirement of rule 20-B(a) that the dealer should deposit one-fourth of the exemption fee calculated on his turnover of the previous year within thirty days of the commencement of the year for which he claims exemption is a mandatory provision if exemption is to be granted for the entire assessment year. There are several considerations which persuade me to that view.;