- (1.) THIS is a reference under section 11(1) of the U.P. Sales Tax Act.
(2.) THE assessee, M/s. Swadeshi Cotton Mills Company Ltd., Kanpur, is a manufacturer of and dealer in cloth. On 2nd August, 1961, the assessee was assessed to tax for a sum of Rs. 12,28,764.57. A notice of demand was served upon the assessee on 11th August, 1961. The assessee did not make the payment of the tax within the time specified in the notice of demand. The Sales Tax Officer issued a notice under section 15-A(1)(c) requiring the assessee to show cause as to why penalty should not be imposed upon it for its failure to pay the tax within the time allowed in that behalf. The assessee submitted a written explanation in which it was stated that the assessee had approached the Government for the grant of instalments for the payment of the arrears of tax, as it was not in a position to pay the whole amount in a lump sum. The assessee further requested for four weeks' time within which to obtain appropriate orders from the State Government. It appears, however, that the assessee did not succeed in obtaining the necessary orders from the State Government and in due course the Sales Tax Officer issued a recovery certificate to the Collector for the recovery of the arrears of tax. By an order dated 25th May, 1963, the Sales Tax Officer also imposed under section 15-A(1)(c) a penalty of Rs. 2,45,758 at the rate of 20 per cent. of the tax due. The assessee filed an appeal and one of the contentions raised in the appeal was that the penalty order was invalid, because no notice of hearing as contemplated by section 15-A(3) was given to the assessee before passing the penalty order. The appellate authority did not accept this contention, even though it reduced the quantum of tax to 15 per cent. of the tax. It may be mentioned that in calculating the penalty, the appellate authority reduced the tax demand by a sum of Rs. 68,749 which the assessee had admittedly paid towards its tax liability before the assessment order was passed. The assessee then preferred a revision. The Judge (Revisions) also upheld the imposition of penalty, but reduced the amount of penalty to 10 per cent. The assessee then asked for a reference under section 11(1) of the U.P. Sales Tax Act. The revising authority has accordingly submitted a statement of the case and has formulated the following fourteen questions of law : "(a) Whether in the facts and circumstances of the case the notice of demand was not a valid one ? (b) Whether the Honourable Supreme Court's decision in [1964] 52 I.T.R. 538 [Income-tax Officer, Kolar Circle, Kolar v. Seghu Buchiah Setty] was validly distinguished ? (e) Whether under the law it was not necessary to give two notices, one for showing cause under proviso to section 15-A(1)(c) and the other for giving a reasonable opportunity for personal hearing under section 15-A(3) of the U.P. Sales Tax Act ? (d) Whether as a matter of law the two notices could be combined in one and the show cause notice dated 6th September, 1961, could be interpreted or treated as a composite notice giving also a reasonable opportunity for personal hearing ? (e) Whether in the absence of a demand by the assessee for an opportunity for personal hearing, the legal requirements of the issue of notice for such an opportunity could be deemed to be satisfied ? (f) Whether as a matter of law the Judge (Revisions) properly understood and applied the rulings reported in 28 I.T.R. 837 [Shrilal Sagarmull v. Commissioner of Income-tax, Bihar and Orissa], 30 I.T.R. 565 [Ayyasami Nadar and Bros., Colombo v. Commissioner of Income-tax, Madras] and 36 I.T.R. 140 [Maddula Appa Rao and Others v. Income-tax Officer, Eluru, and Another] ? (g) Whether under the facts and circumstances of the case the penalty imposed by the succeeding Sales Tax Officer without giving any notice to the applicant or allowing of an opportunity of being heard was legal and proper especially when there was no reply on record which could have been considered by him ? (h) Whether under the facts and circumstances of the case a penalty can be imposed under section 15-A for late payment when it was mentioned in the notice of demand that on failure to pay tax in time, the proceedings shall be started under section 14 of the Act ? (i) Whether under the facts and circumstances of the case there is any delay or default in the payment of sales tax, when the Collector, Kanpur, allowed instalments, for which a penalty can be imposed ? (j) Whether in the circumstances of the case and when the Collector, Kanpur, allowed the assessee to pay the tax in instalments, there was a reasonable cause for delay in payment of tax demanded ? (k) Whether under the circumstances of the case, the penalty of 10 per cent. can be imposed on the balance of tax due as per notice of demand or on the balance due on the date when the penalty was imposed ? (l) Whether the Additional Judge (Revisions), Sales Tax, Agra, took a legally correct view of the representations, explanation and correspondence filed by the assessee before the A.C. (J.) and treated by him as part of the record and dealt with by him in this order ? (m) Whether the default, if any, was not merely technical and whether the token penalty would not have met the ends of justice ? (n) Whether in the circumstances of the case the quantum of penalty imposed was not excessive, oppressive and unreasonable ?"
(3.) BEFORE proceeding to answer the questions, we may state a few more facts. It appears that the Collector to whom the recovery of tax was entrusted had granted instalments to the assessee. The penalty was imposed by the Sales Tax Officer, while these instalments were being paid by the assessee so that at the time when the penalty was imposed, a part of the tax had already been liquidated. It appears that during the currency of the assessment year the assessee had paid in two instalments a total sum of Rs. 68,749 towards its tax liability for the assessment year in question. The Sales Tax Officer did not deduct this amount while issuing the notice of demand to the assessee. The assessee contended that the notice of demand issued to it was not valid as the amount of tax specified as payable by it was in excess of the actual amount due.;