- (1.)BY this reference under section 61 (1) of the Bombay Sales Tax Act, 1959, read with section 9 (2) of the Central Sales Tax Act, 1956, made at the instance of the assessee, the Maharashtra Sales Tax Tribunal has referred the following questions of law to this Court for opinion : " (i) Whether, on the facts and under the circumstances of the case and upon true and correct interpretation of section 55 (6) (b) and section 36 (2) (c) of the Bombay Sales Tax Act, 1959, the Tribunal was justified in holding that the first appellate authority can invoke rule of evidence contained in Explanation (2) to section 36 (2) (c) and confirm the penalty levied by the Sales Tax Officer under section 36 (2) (c) of the Act ? (ii) Whether, on the facts and circumstances of the case, the Tribunal erred in holding that the presumption of deemed concealment was not rebutted even after acceptance of the closed and adjusted books of accounts by the Sales Tax Officer ? (iii) Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that even when the assessment of the applicant was made on the basis of returns, which were filed late, still Explanation (2) to section 36 (2) (c) is attracted and the appellate authority could invoke that Explanation for confirming the penalty levied by the Sales Tax Officer under section 36 (2) (c) of the Act ?"
(2.)THE assessee M/s. Indoswe Engineers (P) Ltd. , is a manufacturer of non-ferrous extrusions and extruded products. It is registered as a dealer both under the Bombay Sales Tax Act, 1959 ("the Bombay Act") and the Central Sales Tax Act, 1956 ("the Central Act" ). It was assessed for the period July 1, 1977 to June 30, 1978, under both the Bombay Act and the Central Act by the Sales Tax Officer, Pune, on December 31, 1981. THE tax position as per the assessment orders passed by the Sales Tax Officer is as under : Bombay Act Central Act Returned Determined Returned Determined Tax assessed 3,16,539 3,21,758 1,76,802 1,61,934 Set-off 1,11,839 44,676. . . . . .-------- -------- --------- -------- Net amount payable 2,04,700 2,77,082 1,76,802 1,61,934 Add : Additional tax under section 15a-I 16,482 16,625. . . . . .--------- -------- -------- -------- Total tax payable 2,21,182 2,93,707 1,76,802 1,61,934 Tax paid 2,21,182 2,21,182 1,76,802 1,76,802 --------- -------- -------- -------- Balance of tax due Nil 72,525 Refundable 14,868 Add : Penalty under section 36 (2) (c) 25,000 27,000 -------- -------- 97,525 12,132
In the course of assessment proceedings, the Sales Tax Officer noticed that (i) the assessee had filed all the returns late and taxes were paid late and (ii) the amount of tax paid with the returns was less than 80 per cent of the amount of tax assessed and, therefore, the assessee was liable to penalty under section 36 (3) and under section 36 (2) (c), Explanation (1) of the Act. The Sales Tax Officer, therefore, issued two separate notices, one under section 36 (3) and another under section 36 (2) (c), Explanation (1 ). The notices were replied by the assessee on December 24, 1981. In regard to penalty under section 36 (3), it was stated by the assessee that the taxes could not be paid in time due to financial difficulties caused by labour trouble, strikes, credit squeeze, etc. In regard to penalty under section 36 (2) (c), it was stated that the extra dues had arisen for the following reasons : (i) The tax under the Bombay Act was wrongly paid under the Central Act; (ii) the levy of tax on sale of assets was not free from doubt and hence tax on such sales was not paid with returns; (iii) the levy of purchase tax under section 14 was also not free from doubt. The contravention in respect of oil and lubricants used in job-work was worked out on presumption basis. The purchase tax levied under section 14 should be excluded while considering the penalty under section 36 (2) (c ). The assessee's representative was also heard by the Sales Tax Officer on December 24, 1981. At the time of hearing, it was submitted on behalf of the assessee that if the excess payment made through oversight under the Central Act was taken into consideration along with the set-off allowed, then the difference between the assessed amount of tax and the tax paid would be less than 20 per cent and no penalty would be leviable under section 36 (2) (c) as per the assessment order.

The Sales Tax Officer accepted the cause shown by the assessee in reply to the show cause notice under section 36 (3) of the Act and did not impose any penalty under section 36 (3) of the Act. He, however, levied penalty under section 36 (2) (c) of the Act. The amount of penalty levied under the Bombay Act was Rs. 25,000. Similarly, penalty of Rs. 27,000 was levied under the Central Act under section 36 (2) (c) of the Bombay Act read with section 9 (2a) of the Central Act. It is pertinent to note that though the Sales Tax Officer dropped the proceedings initiated for levy of penalty under section 36 (3) of the Act for failure, without reasonable cause, to pay the tax in time, he took the said default in consideration while levying penalty under section 36 (2) (c) of the Act which is evident from his following observation in the order of penalty : " However, on taking a lenient view, penalty under section 36 (2) (c) is levied at Rs. 25,000 which otherwise would have been leviable under section 36 (3) had returns been filed in time, but tax was paid late. "

(3.)AGGRIEVED by the orders of the Sales Tax Officer levying penalty under section 36 (2) (c) of the Bombay Act, in the orders of assessment both under the Bombay Act and the Central Act, the assessee appealed to the Assistant Commissioner. At the time of hearing, it was contended before the Assistant Commissioner by the assessee that if the amount of set-off was also considered as tax paid with the returns, the total payment made by the assessee would be more than 80 per cent of the amount of tax assessed. Reliance was placed in support of this contention on the decision of this Court in Commissioner of Sales Tax v. Empico Traders [1981] 47 STC 426 where it was held that for the purpose of levying penalty under section 36 (2) (c), expression "tax paid" appearing in Explanation (1) to that section could not be restricted only to the amount of tax paid by the dealer into the Government treasury but would also include the amount of set-off granted to that dealer under rule 43 of the Bombay Sales Tax Rules, 1959. It was contended that in view of the above decision and the uncontroverted factual position, Explanation (1) to section 36 (2) (c) would not be attracted and hence penalty levied with the aid of said Explanation should not be sustained. The Assistant Commissioner found force in the above submission of the assessee that Explanation (1) to section 36 (2) (c) was not attracted to the facts of the case and hence accepted the same. He, however, felt that the assessee having filed the returns beyond the prescribed date, the rule of evidence contained in Explanation (2) could be invoked and penalty could be sustained with reference to the same. He, therefore, issued a show cause notice to the assessee on October 5, 1982, asking him to show cause why penalty under section 36 (2) (c) should not be sustained with the aid of Explanation (2) thereto. By the said notice, the assessee was asked to show cause that the failure to furnish return within the prescribed time was not without any reasonable cause and, in the event of its failure to do so, to show cause why penalty should not be imposed in respect of the said default. In reply to the said notice, the assessee informed the Assistant Commissioner that the tax paid by him being not less than 80 per cent of the tax assessed, no penalty was leviable under section 36 (2) (c) of the Act. The assessee also appeared before the Assistant Commissioner in pursuance of the above notice through his Sales Tax Practitioner and objected to the proposal of the Assistant Commissioner to impose penalty under section 36 (2) (c) of the Act by invoking the rule of evidence contained in Explanation (2) to the said section. It was contended that the Assistant Commissioner had no jurisdiction to do so. It was also submitted that assessment having been completed under section 33 (3) of the Act on the basis of the returns furnished by the assessee, though belatedly, Explanation (2) had no application. The Assistant Commissioner did not accept any of the above contentions of the assessee and confirmed the penalty by his order dated August 31, 1983, with the aid of Explanation (2 ). He however, reduced the quantum of penalty from Rs. 25,000 to Rs. 20,000 and from Rs. 27,000 to Rs. 22,500 under the Bombay Act and the Central Act respectively.
The assessee appealed against the above orders of the Assistant Commissioner to the Maharashtra Sales Tax Tribunal ("the Tribunal" ). Before the Tribunal it was contended on behalf of the assessee that while hearing the appeal, the Assistant Commissioner had no power to convert the penalty levied under section 36 (2) (c), Explanation (1) to penalty under section 36 (2) (c), Explanation (2 ). According to the assessee, the Assistant Commissioner had no jurisdiction to do so under section 55 (6) (b) of the Act. The Tribunal did not accept this contention of the assessee as, according to it the two Explanations appended to section 36 (2) (c) are merely rules of evidence and whenever any penalty is imposed by the authorities under section 36 (2) (c), it is penalty under section 36 (2) (c) and not under the Explanation (1) or Explanation (2) thereto. The Tribunal held that the Assistant Commissioner did not commit any error in invoking the rule of evidence contained in Explanation (2) which was not invoked by the Sales Tax Officer. According to the Tribunal, the only requirement for doing so is to give an opportunity to the assessee to challenge the applicability of a particular Explanation or to rebut the presumption thereunder. The Tribunal noticed that in the present case such an opportunity had been given to the assessee. The Tribunal also noticed that the returns for all the four quarters had been submitted belatedly by the assessee. The Tribunal also did not accept the contention of the assessee that the assessee having maintained books of account which had been accepted as correct and no discrepancy having found in any transaction recorded therein, the presumption of concealment stood rebutted as according to it, the presumption of deemed concealment raised under Explanation (2) could be rebutted only by showing that no turnover was liable to tax. The Tribunal, however, reduced the quantum of penalty to Rs. 18,000 and Rs. 20,000 under the Bombay Act and the Central Act respectively.