M/s. Nemichand Dwarka Prasad, Shivpuri vs Commissioner of Sales Tax

S. K. Dubey, J.

This is a reference u/s 44 (1) of the M.P. General Sales Tax Act, 1958 (hereinafter referred to as the ''Act'') at the instance of the dealer-assessee whereby the Board of Revenue (for short, ''Tribunal'') has referred the following question of law to this Court for its opinion :

Whether under the facts and circumstances of the case, the Tribunal was justified in declaring that the endorsement dated 10.3.80 by the Appellate Deputy Commissioner amounted to consideration for admission of the appeal and thereby summary dismissal was proper.

The material facts giving rise to this Reference are these. The assessee, who deals in pulses, was assessed in respect to the period 10.11.1974 to 3.10.1975, by the Sales Tax Officer, Shivpuri, as against his return of gross turnover of Rs. 4,37,048/-, hut his gross turnover was estimated at Rs. 5,35,000. Therefore, the Sales Tax Officer, besides the imposition of tax. imposed a penalty of Rs. 3, 000/- u/s 43 (1) of the Act, vide order dated 31.12.1979. annexed as Annexure ''B'' with the Statement of the case. The assessee preferred an appeal against this order before the Appellate Deputy Commissioner. Gwalior. The memoranda of appeal was sent by registared post on which an endorsement was made by the Deputy Commissioner on 10.3.1980 stating that it was received in his absence on 7.3.1980. The Deputy Commissioner of Sales Tax recorded in his proceeding dated 13.3.1980 that as the penalty has been imposed, therefore, u/s 43 (1) of the Act. the appeal can be admitted only on the payment of 50% of the total demand, but the mamoranda of appeal is accompanied by a challan of deposit of 30% amount only. Therefore, the Deputy Commissioner directed to issue a notice to show cause to the assessee as to why the appeal be not rejected summarily. On 14.4.1980. the assessee tiled an application along with a receipt challan of Rs. 2,301/- and submitted that he has deposited the balance amount of 507%. The Deputy Commissioner, vide order dated 14.4.1980 (Annexure ''C'' summarily rejected the appeal holding that it was not possible to give extension of time under Rule 58(1) of the M. P. General Sales Tax Rules, 1959, as amended, for short, the ''Rules''. Against this order, a second appeal was filed which was also dismissed by the Tribunal. Hence, the assessee made an application u/s 44(1) of the Act in Reference Case No. 10-1/81 on 13.5.1981 to refer three questions framed therein for the opinion of this Court. The Tribunal, instead of referring the three questions, in the facts and circumstances of the case, fanned the question referred to the above which arises in the facts of the case, for the opinion of this Court.

Shri K. K. Lahoti, learned counsel for the assessee, placing raliance on the two decisions of this Court in Sadhana Enterprises v. Commissioner of Sales Tax, M. P. (1987) 64 STC 172. and in Babulal Mohanlal Kandela v. Commissioner of Salex Tax, M. P. (1980 MPLJ 504), contended that under the provisions of Sec. 38 (3) of the Act the appellate authority cannot admit the appeal unless the tax with penalty in respect to which the appeal had been tiled, is deposited; the non-deposit of the required lax under the provisions of Rule 57 (2) would not result in summary rejection of the appeal, unless an opportunity is given to bring the appeal in conformity with Rule 57. Endorsement dated 10.3.1980 does not amount to consideration of appeal for its entertainment or admission. As the appeal was considered on 14.4.1980 on the question of admission and that the assessee had, by the time, paid the required tax and produced challan in proof of payment thereof, the appellate authority was not justified in summarily rejecting the appeal for non-compliance with the provisions of Section 38 (3) of the Act and rule 57 of the Rules holding that the deposit requisite amount was a condition precedent for filing appeal, and for that time cannot be extended.

On the other hand, Shri J. D. Surya vanshi, learned Government Advocate, for the Department, contended that the payment of tax before or at the time of filing the appeal was mandatory and if the requirement of deposit of tax is not complied with, as the memoranda of appeal was not accompanied with a challan of requisite amount of tax and penalty the appeal being not in conformity with the requirements of Rule 57, the appellate authority rightly rejected the appeal summarily.

It would be appropriate to extract the relevant provisions of Section 38 of the Act which read thus :

Appeal.-(1) Any dealer or person objecting to an original order of assessment with or without penalty passed in respect of him u/s 18 or section 19 or to an original order imposing penalty on him or relating to refund u/s 24 of any order passed u/s 45 may, in the prescribed manner appeal against such order to the Appellate Deputy Commissioner of Sales Tax :

(3) No first or second appeal against an order of assessment, with or without penalty or against an order imposing penalty shall be admitted by the appellate authority unless out of the total balance due from the dealer;

(a) Where all the returns for the period to which the order appealed against relates, have been filed any lax payable according to such returns has been paid one tenth of such balance;

(b) where one or more of returns for the period to which the order appealed against relates have not been filed and tax has not been paid or where such return or returns have been filed but that has not been paid-

(i) one third of such balance; or

(ii) such pan thereof as beares the same proportion to the total balance due as the period for which the returns have not been submitted bears to the period for which the assessment has been made not exceeding seventy live percent of such balance, Whichever is more :-

(c) where a penalty u/s 43 has been imposed, one half of such balance;

(d) where the order appealed against has been passed u/s 19 and a penalty has been imposed under the said section one half of such balance; and

(e) in any other case, one-fourth of such balance; is paid and thereupon the appellate authority shall stay the recovery of the balance of tax and/or penalty till the decision of appeal.

(3-A) Any first or second appeal filed on or after the commencement of the Madhya Pradesh General Sales Tax (Amendment) Act, 1978 No. 25/1978), in respect of any order referred to in sub-section (1), passed before the date of such commencement shall be admitted in accordance with the provisions of sub-section (3).

(4)...

(5)...

(6)...

We may profitably extract the relevant parts of Rules 57 and 58 as well which read as follows:

Submission of memorandum of appeal or application for revision.-

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(2) (a) The memorandum of appeal shall be accompanied by :-

(i) an authenticated copy of the impugned order, and

(ii) a copy of the challan in proof of the payment of the amount of tax With penalty, if any, in accordance with the provisions of sub-section (3) of section 38; (h) The application for revision shall be accompanied by an authenticated copy of the impuged order.

(2-A)....

(3)....

(4)....

(5)....

(6)....

(7)....

57-A.....

Summary rejection. - (1) If the memorandum of appeal or application for revision does not comply with all or any of the requirements of rule 57 or the appellant fails to pay in accordance with the provisions of sub-section (3) of section 38 the tax with penalty, if any, in respect of which the appeal has been preferred, the appeal or application for revision may he summarily rejected :

Provided that no appeal or application for revision shall be summarily rejected under this sub-rule unless the appellant or applicant is given such opportunity as the appellate or application for revision so as to bring it into conformity with the requirements of rule 57.

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(3) Where an appeal is summarily rejected under sub-rule (1) on the ground that the appellant had failed to pay in accordance with the provisions of sub-section (3) of section 38, the amount of tax and/or penalty in respect of which the appeal has been preferred, the appellate authority may, where it is subsequently brought to its notice that the said amount was paid before filing the memorandum of appeal but the proof of payment was not furnished therewith, re-admit the appeal."

The expression "admitted" used in Section 38 (3) of the Act is of significance. It is not synonymous to expression ''filed''. The expression ''filed'' means only received or accepted for placing it before the Court for consideration, The word ''admit'' is synonymous to ''entertain'' the dictionary meaning of the word "entertain" is to "deal with, to admit to consideration". Therefore, the word "entertain" relates to the point of time when the appeal is being considered. That is the first occasion when the Court takes up the matter for consideration which may he the admission stage after the appeal has been filed.

The Supreme Court in the case of Lakshmi Rattan Engineering Works Ltd. Vs. Asstt. Commr. Sales Tax, Kanpur and Another, while considering the case of an appeal u/s 9 of the U. P. Sales Tax Act has observed that the expressions "appeal" and "memorandum of appeal" are used to denote two distinct things. The appeal is the judicial examination; the memorandum of appeal contains the ground on which the judicial examination is invited. In that case, the Supreme Court interpreted the Proviso to Section 9, wherein the word "entertained" has been used, and observed that the Legislature has used the word "entertained" in the proviso the section 9 of the U. P. Sales Tax. 1948. advisedly. The word "entertain" means "admit to consideration". The words ''admit'' and entertain'' in contrast to the word ''file'' refer to the stage when the appeal conies for consideration.

A Division Bench of this Court in the case of Prakash Electric Stores, Sagar v. Commissioner of Sales Tax, M. P. (1972 JLJ 496) has observed that from the language of sub-section (3) of Section 38 of the Act, it is clear that the deposit of the amount is not directed to be made along with the memorandum of appeal: nor it is made a condition of the filing of the memorandum of appeal before the appellate authority. The making of the deposit affects the entertainment or admission of the appeal and not the filing of the appeal. Rule 58 gives a power to the appellate or revising authority to summarily reject an appeal or revision if the amount mentioned in sub-section (3) of Section 38 is not deposited. This rule also refers to the appellate authority applying its mind to the entertainment of the appeal. It is therefore, quite clear that the filing of an appeal takes place if a memorandum of appeal complying with the requirements of Rule 57 of the Rule has been tiled.

In the case of Babulal Mohanlal Kandela (supra), while examining the provisions of Section 38 (3) (a) of the Act and Rule 58, this Court has observed that sub-sections (3) and (4) of Section 38 of the Act show that a distinction has to be made between filing of appeal and its admission or entertainment. Section 38 does not provide that the tax or penalty against which appeal is filed should also he deposited before or at the lime of filing of the appeal. If the appeal is filed within limitation it could not be rejected as barred by limitation simply on the ground that amount of tax has not been deposited by the assessee with the memo of appeal. The only prohibition is about admission if deposit directed is not made. The condition of deposit of tax is to he complied with before the appeal is taken up for admission which is a stage subsequent to filing of the appeal. When the appellate authority reduces the amount of tax to be deposited and giants timement to deposit it in effect postpones consideration of admission or entertain of the appeal and if the amount is deposited before the appeal is taken up for admission, the appeal cannot be rejected summarily for want of deposit of tax at the time of filing of the appeal.

In the case of Sadhana Enterprises (supra), a Division Bench of this Court, placing reliance on Supreme Court decision in the case of Lakshmiratan Engineering, Works Ltd. (supra) and or this Court in the case of Babulal Mohanlal Kandela (supra), has held that the appellate authority should consider the question of compliance with the condition of deposit of tax on the date when it last takes up the appeal for consideration of admission. Sub-rule (1) of Rule 58 cannot be pressed into Service for holding that unless the tax in respect of which the appeal was tiled, had been paid prior to or at the time of filing of the appeal as under sub-rule (1) of Rule 58, the appellate authority is not competent to summarily reject an appeal for non-compliance with the requirements of Rule 57 without giving opportunity to the assessee of bringing the appeal into conformity with the requirements of Rule 57.

Recently, this Court had an occasion to take the similar view in case of Commissioner of Sales Tax, M. P. v. M/s. Paper Plast Packing Pvt. Ltd. (M. C. C. No. 262/1986, decided on 25.3.94). wherein while considering a case of deposit of requisite tax as required by section 38 (3), and after following a recent decision of the Supreme Court in the case of Shyam Kishore and others Vs. Municipal Corporation of Delhi and another, wherein the case of M/s. Lakshmiratan (supra) and other cases have been considered, has held that the appellate authority can permit the deposit of lax in instalments. This depends upon discretion which is to be exercised judiciously. However, once a liberty of making payment given to a tax payer by way of instalments, this would enable the tax payer to get his appeal decided on merits and the appeal so filed cannot be rejected on the ground of non-payment of lax u/s 38 of the Act. As the lax was deposited in instalments, the appellate authority was not justified in dismissing the appeal.

From the above discussion, it is clear that when the appeal is filed, it is not the stage for its taking up for consideration of admission on merits or for adjudication. The word ''consideration'' connotes application of mind with a view to careful examination about the matter in its right perspective taking into consideration the pros and cons of the subject-matter in issue and the consideration can be at different stages of the appeal, i.e., at the time of admission or at the lime of final hearing of the appeal. Therefore, it is clear that when the appeal conies for consideration of admission, the appellate authority has to satisfy itself that prerequisite of deposit of tax and penalty as required u/s. 38(3) of the Act has been complied with, and whether the appeal is in conformity with Rule 57 or not. If the tax is not deposited as required by Section 38 (3) or the appeal so filed is not in conformity with Rule 57, the appeal is liable to be rejected summarily under Rule 58(1), but before summary rejection, the appellate authority under the proviso the Rule 58(1) has to give an opportunity to such party to bring the appeal in conformity with the requirements of Rule 57, Therefore, the proviso to Rule 58 (I) is a rider to summary rejection of the appeal, if it is not in conformity with the requirements of Rule 57 and if even after giving an opportunity to comply with the said requirements, the appellant fails to bring the appeal in conformity with Rule 57, certainly, the appeal so filed cannot be admitted and is liable to be rejected summarily,

In the case in hand, when the Deputy Commissioner made an endorsement on 10.3.1980. it cannot be said that at that stage, he applied his mind for consideration of the appeal for admission. Had it been so there was no occasion for the Deputy Commissioner to issue a show-cause notice. In fact, issuance of notice was in compliance with the proviso of Rule 58(1) to give an opportunity to the appellant to bring the appeal in conformity with Rule 57, and the requirement having been complied with the appeal could not have been rejected summarily. Therefore, considering the provisions of Section 38 (3) of the Act. Rule 57 (2) of the Rules as also Rule 58(1) and its proviso, it cannot be held that the Deputy Commissioner look the appeal for consideration on 10.3.1980 for its ''entertainment.

For reasons given above, the Reference is answered in favour of the assessee and against the Department. In the circumstances of the case, we leave the parties to beat their own costs. Let records be sent to the Tribunal.