THE ASSOTD. CEMENT COMPANIES LTD. vs. THE COMMERCIAL TAX OFFICER

C.A. No.-000852-000852 - 1980Supreme Court02 September 198133 pages
For Petitioner: GAGRAT AND CO
AI SummaryPartly Allowed

What were the facts?

The appellant-assessee, Associated Cement Co. Ltd., filed sales tax returns for the assessment year 1974-75 under the Rajasthan Sales Tax Act, 1954, and the Central Sales Tax Act, 1956. The assessee initially did not include freight charges in the taxable turnover, believing them to be non-taxable based on prevailing judicial interpretations. Following a Supreme Court decision on August 29, 1978, which held freight charges as includible in taxable turnover, the assessee filed revised returns on October 20, 1978, including freight charges and depositing the balance tax. The Assessing Authority levied penalties under Section 7AA of the State Act and interest under Section 11B of the State Act for the delay in depositing tax on freight charges.

What did the Supreme Court hold?

The Supreme Court, in a majority decision, held that the levy of penalties for not including freight charges in the taxable turnover in the original returns and for not paying the tax thereon was unsustainable and liable to be quashed. The Court reasoned that the assessee had acted bonafide based on the prevailing legal understanding at the time of filing the original returns. However, regarding the interest, the Court held that the statutory liability under Section 11B(a) arises wherever there is a default in payment of tax within the period allowed by law, irrespective of any doubts the assessee may have entertained about the taxability. Since the tax on freight charges was payable under Section 7(2) before filing the returns and was not paid within the allowed period, Section 11B was attracted, and the assessee was liable to pay interest. The Court dismissed the appeal concerning the levy of interest but allowed it concerning the penalties.

What were the issues?

1. Whether the Assessing Authority was correct in imposing penalties on the assessee under the assessment orders for not depositing tax on freight charges at the time of filing the original returns under the State and Central Acts, and if so, under which provisions? 2. Whether the assessee was liable to pay interest under Section 11B of the State Act on the tax in respect of freight charges for the period between the filing of the original return and the filing of the revised return. Assessee's Contentions: The assessee argued that the penalties were unsustainable as they acted bonafide based on prior judicial pronouncements. Regarding interest, the assessee contended that no interest was payable as they had paid the tax as per their understanding in the original return, and the revised return was filed promptly after the Supreme Court decision. They relied on the interpretation that interest under Section 11B(a) is not leviable if the tax due is paid as per the self-assessed return. Revenue's Contentions: The revenue contended that the statutory liability under Section 11B(a) arises due to any default in payment of tax within the period allowed by law, irrespective of the assessee's doubts about the taxability. They argued that the Supreme Court's decision merely declared an existing liability, and the delay in payment triggered the interest liability.

Which sections of the Income-tax Act were involved?

Section 7AA,Section 10,Section 11B,Section 9,Section 7,Section 11,Section 16

AI-generated summary — verify with the full judgment below

http://JUDIS.NIC.IN SUPREME COURT OF INDIA PETITIONER: ASSOCIATED CEMENT CO. LTD.

Vs. RESPONDENT: COMMERCIAL TAX OFFICER, KOTA & ORS. DATE OF JUDGMENT02/09/1981 BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. SEN, A.P. (J) VENKATARAMIAH, E.S. (J) CITATION: 1981 AIR 1887 1982 SCR (1) 563 1981 SCC (4) 578 1981 SCALE (3)1338 ACT: Rajasthan Sales Tax Act 1954 Ss. 7AA, 10, 11B and Central Sales Tax Act 1956, S. 9-Scope of.

Assessee not depositing the tax in respect of amount of freight at the time of filing original return-Revised return filed and tax deposited-Assessing authority whether competent to impose penalty-Assessee whether liable to pay interest on the tax due. HEADNOTE: The appellant-assessee a company manufactured cement which was sold partly in the State of Rajasthan and partly outside the State. The sales tax returns relating to the sales were filed by the assessee under the Rajasthan Sales Tax Act, 1954 and under the Central Sales Tax Act 1956 before the Assessing Authority for the period August 1, 1973 to July 31, 1974 i.e. for the assessment year 1974-75. In those returns the

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