ASSOCIATED CEMENT CO. LTD. versus COMMERCIAL TAX OFFICER, KOTA & ORS.

Citation: [1982] 1 S.C.R. 563 · Decided: 02-09-1981 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Case Partly allowed

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Judgment (excerpt)

A 
563 
ASSOCIATED CEMENT CO. LTD. 
v. 
COMMERCIAL TAX OFFICER, KOl A & ORS. 
September 2, 1981 
[P.N. BHAGWATI, A.P. SEN & E.S. VENKATARAMIAH, JJ.] 
Rajasthan Sales Tax Act 1954 Ss. 7AA, 10, JIB and Central Sales Tax Act 
1956, S. 9-Scope of. 
A 
B 
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 
C 
whether competent to inipose penalty-Assessee whether liable to pay interest on 
the tax due. 
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 assessee did not include in the taxable turn .. 
over the freight charges paid in respect of the goods sold under the bona fide 
impression that freight charges were not to be so includible in the taxable turn-
over in view of certain decisions rendered by the High Courts and the Supreme 
Court. 
The Supreme Court on August 29, 1978 in Sugar Mills Limited v. State of 
Rajasthan and others [1979] 1 SCR 276 held that freight charges formed part of 
the sale price and were includible in the taxable turn-over of an assessee and that 
sales tax was payable thereon. 
D 
E 
Coming to know of the aforesaid decision the assessee prepared and filed 
the revised returns in respect of the assessment year 1974-75 before the Commer-
F 
cial Tax Officer on October 20, 1978 including freight charges in the turn-over 
and also deposited alongwith the revised returns, challans showing payment of 
the balance of the tax payable under the State Act as well as under the Central 
Act. 
The assessing authority passed two orders of assessment one under section 
10(3) of the State Act and the other under section 9 of the Central Act. The 
former order of assessment levied a penalty of Rs. 53,353 under section 7 AA of 
the State Act on account of the delay in depositing the sales tax payable in 
respect of the amount of freight charges and also levied interest of Rs. 85910/-
under s. llB of the State Act. In the latter order of assessment a penalty of 
Rs. 1,34,205/~ was levied under section 7AA of the State Act read with section 
9(2) of the Central Act for the delay in depositing the tax payable in respe<t of 
the freight charges, and interest of Rs. 2,07,174/- was levied under section 11 B 
of the State Act read with section 9(2) of the Central Act, 
G 
H 
564 
SUPREME COURT REPORTS 
( 1982] ] S.C.R. 
A 
In the appeals to this Court on the question whether : (A) the Assessing 
Authority was right in imposing penalty on the assessee under the two assessment 
orders for not depositing the tax in respect of the an1ount of freight at the time 
of filing of the original returns under the State Act and the Central Act, and (B) 
the assessee was liable under section llB of the State Act to pay interest on the 
tax in res::iect of the amount of freight for the period between the date of filing 
of the original return and the date when such tax was actually paid while filing 
8 
the revised return. 
, 
c 
D 
E 
HELD : [By the Court] 
(A) The levy of penllties for not including the freight charges in the 
taxable turnover ifl the original returns and for not paying the tax in respect of 
such freight charges is unsustainable and the two orders of assessment in so far 
as they levy penalty are liable to be quashed and set aside. (571 B, .589 B] 
Cen1ent Marketing Co1npany of India Limited v. Co1n1nissioner of Sales Tax 
Indore (1980] l SCR 1098 referred to. 
[per Bhagwati J. dissenting] 
B(lJ So long as the assessee pays the a1nount of tax which according to 
him is due on the basis of tbe return filed by him, there would be no default on 
his part in complying with the obligation under sub-section (2) of section 7 and 
there would be no liability on him to pay interest under section lJB clause (a), 
because he would have paid the amount of tax quantitied by him through the 
process of self-assessment. The actual amount of tax payable by the assessee would 
be determined only when it is assessed by the Assessing Authority under section 
10 and that would not be payable until the expiration of the period specified in 
the notice o

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