STATE OF MADHYA PRADESH & ORS. versus SHYAMA CHARAN SHUKLA

Citation: [1972] 1 S.C.R. 861 · Decided: 22-09-1971 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
c 
D 
E 
F 
G 
H 
STATE OF MADHYA PRADESH & ORS. 
v. 
SHYAMA CHARAN SHUKLA 
September 22, 1971 
[K. S. HEGDE AND A. N. GROVER, JJ.] 
861 
States Reorganisation ·Act, 1956, ss. 78, 91-"'Arrears", 
meaning-
Amount due by way of tax need not be quantified. 
The respondent was, assessed to sales tax under the Madhya Pradesh 
General Sales Tax Act, 1958, for the period October I, 1953 to December 
26, 1958 in respect of sales of manganese ore including the sales from the 
mines in two districts in the erstwhile State of Madhya Pradesh which 
were· transferred to the State of Maharashtra 
on Isl November 
1956 
under the States Reorganisation Act, 1956. 
The respondent challenged 
the order of assessment on the ground, among others, that by virtue of 
s. 78 of the States Reorganisation Act, 1956, the State of M.P. bad no 
juriSdiction to recover the amount of tax in respect of sales made in the 
two districts after Novemb~r 1, 1956 .. The High Court, without deciding 
t!Je other points, which had been raised in the writ petition, quashed the 
assessment by referring to s. 78 of the States Reorganisation Act which, 
inter alia, provided : "The right to recover arrears of any tax or duty on 
property including arrears of land revenue shall belong to the successor 
State in which the property is_ situated and the right to recover any other 
tax or duty shall belong to the successor State, in \vhose territories the 
place o'f assessment for that tax or duty· is included". The High Court 
held that before the assessment proceedings were completed and the final 
amount due was determined, it could 
not be said that any particular 
amount was due against the assessee and so long as there was no determi-
nation and no demand for payment o'f tax was raised the assessee. could 
not be said to be in "arrears" of any tax \Vithin the meaning of s. 78. 
Allowing the appeal and remanding the cage to the High Court, 
HELD : (I) The word "arrears" in section 78 must be held to have 
been used in the sense of dues or what has l)ecome due by way of t"x and 
that does not depend upon proceedings for quantification of the ~mount. 
The word "arrears" cannot he given a narrow meariing 
in the 
manner 
done by the High Court. If the view of the 
High 
Court is acce~ted, 
arrears Of tax can refer to only that amount of tax which has been quan-
tified after proper assessment. 
This would lead to the result that \vhere 
there has been no quantification or assessment orde·r. the positio·• would 
be whollv uncertain and it would not be possible to say which State would 
be entitled to realise those taxes or duty: in other words, until the tax 
liability had been determined and quantified. there would be no arrears 
of tax and s. 78 would be inapplicable. The word "arrears" should be 
given its proper meaning as understood in the ordinary sense of the 'vord. 
It. is a part of the general scheme of sales tax laws that taxes bccomo due 
the moment a dealer makes either purchases or sales which are subject to 
tax and the obligafon to pay tax arises. Although the tax liability which 
comes into existence cannot be enforced till the quantification is effected 
by assessment proceedings, the liability for payment of tax is independent 
of the assessment. [865 F-866 DJ 
862 
SUPREME CO~T :REPORTS 
[1972] l S.C.R. 
(2) Section 78 deals with arrears and s. 83 de~ with refund of taxes. 
Both the sections indicate that when the question 1s of any tax o~ ~~ty 
other than that on property, the right has been conferred and the bab1bty 
imposed on the successor State in whose territories the place of assess-
ment of that tax or duty is included. Further the amounts due .by way 
of tax are not covered by the residuary provisions as mentioned rn s. 91 
of the Act. [865 B-D] 
Kedarnath Jule Mfg. co. Ltd. v. C .I. T., Central Calcutta, (1972] I 
S.C.R. 277 referred to. 
CIVIL. APPELLATE JURISDICTION : Civil Appeal No. 2272 of 
1968. 
A 
B 
Appeal from the judgment and order dated September 12, 1967 
of the Madhya Pradesh High Court in Misc. ·Petition No. 178. of c 
i966. 
I. N. Shroff and R. P. Kapur, for the appellants. 
M. N. Phadke, U. N. Bachawat, K. L. Hathi and P. C. Kapur, 
for the respondent. 
The Judgment of the Court was deliwred by 
D 
Grover, J. This is an appeal by certificate from a judgment 
of the Madhya Pradesh High Court in a wr\t petition filed by the 
respondent challenging certain orders relating to assessment of 
sales tax. 
The respondent he

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