1999 JTR(SC) 529
1999 AIR(SC) 2124 ; 1999 AIR(SCW) 1871 ; 1999 4 ALD(SC) 46 ; 1999 3 AndhWR(SC) 157 ; 1999 3 JT 420 ; 1999 3 Scale 121 ; 1999 4 SCC 192 ; 1999 2 SCR 925 ; 1999 KHC 1152 ; 1999 4 Supreme 526
SUPREME COURT OF INDIA
V. V. S. SUGARS
Versus
Govt. of Andhra Pradesh
Decided on : May 28, 1999
Interest can be levied and charged on delayed payment of tax only if the statute that levies and charges the tax makes a substantive provision in this behalf.
Act Referred :ANDHRA PRADESH SUGARCANE REGULATION OF SUPPLY AND PURCHASE ACT : S.45(4), S.21(3)(d)(4)(5)
(A) The Acts referred are the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961, as amended by Act 25 of 1976, specifically Sections 21(1), 21(3-D), 21(4), 21(5), and 21(3-C), together with Rule 45(3) and Rule 45(4) of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Rules 1961. Section 21(3-D), introduced by the amendment, operates as a savings clause that, for tax leviable on or after the commencement of the Amending Act, suspends the application of sub-sections (4) and (5) and modifies sub-section (3-C) to provide for additional penalties on removed or unaccounted sugar. It also preserves the power to prescribe the manner and authority for tax collection and provides for interest on arrears under sub-section (5), while sub-rule (4) of Rule 45 mandates interest at 16 per cent per annum from the day following the closure of the crushing season on any unpaid tax finalized under sub-section (3-B). The interplay is that the amendment purported to carve out the application of certain provisions for purchases made after 29/12/1975, leaving interest provisions under sub-section (5) inapplicable for that period, and the rules cannot validly supply what the statute has taken away.
(B) Key legal principles include: (i) A taxing statute must be interpreted strictly according to its plain wording, without adding or subtracting substance on the basis of legislative intent; (ii) Interest on arrears of tax can only be levied if the underlying statute contains a substantive provision authorizing it; (iii) An amendment that excludes a particular tax provision from a defined category of transactions operates prospectively from its commencement unless expressly stated otherwise; (iv) Rules made under the Act must conform to and not override the substantive provisions of the Act; (v) Where a statute creates an exception or omission, the onus is on those asserting the existence of an implied provision to rebut the clear textual position.
Facts of the case:
The appellants were required to pay tax on sugarcane purchases under the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act. After the amendment Act 25 of 1976, tax remained unpaid on certain purchases made on or after 29/12/1975. The assessing authority proceeded to revise the assessment under Rule 45(3) and sought to recover the tax along with interest under Rule 45(4), invoking sub-section (5) of Section 21 for arrears. The appellants contended that clause (a) of sub-section (3-D) rendered sub-section (5) inapplicable for purchases after the commencement of the Amending Act, and therefore no interest could be levied. The High Court held that sub-section (3-D) applied only to the crushing season 1975-76 and allowed the interest claim, a decision upheld by the subsequent orders.
Findings of Court:
The Supreme Court held that the plain wording of clause (a) of sub-section (3-D) clearly states that sub-sections (4) and (5) shall not apply in relation to tax levied on purchases of sugarcane after the commencement of the Amending Act, with no temporal limitation. It observed that sub-section (5) was the provision that mandated interest on arrears and that, in its absence, Rule 45 could not validly impose interest. Citing India Carbon Limited v. State of Assam, the Court reaffirmed that interest on delayed tax payments requires a substantive statutory provision, which was missing here. Consequently, the interest claimed under Rule 45(4) was unlawful for purchases made after 29/12/1975, and the appeals were allowed.
Issues:
Whether sub-section (5) of Section 21 continues to apply to purchases of sugarcane made after the commencement of Act 25 of 1976. Whether Rule 45(4) of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Rules 1961 can validly levy interest on arrears of tax for such purchases in the absence of a substantive statutory provision. Whether the High Court was correct in restricting the operation of sub-section (3-D) to the 1975-76 crushing season.
Ratio Decidendi:
The plain language of sub-section (3-D) excludes the application of sub-sections (4) and (5) for purchases of sugarcane made after the commencement of the Amending Act, thereby removing the basis for levying interest under sub-section (5). Since the Act contains no substantive provision authorizing interest on such arrears, Rule 45(4) cannot supply it, and interest on arrears for post-amendment purchases is invalid.
Result:
The appeals are allowed. The judgments and orders under appeal are set aside. The respondents must refund the amounts paid by the appellants within three months from the date of the order, with interest at 18 per cent per annum from the date of payment until refund. No order as to costs.
(A) The Acts referred are the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961, as amended by Act 25 of 1976, specifically Sections 21(1), 21(3-D), 21(4), 21(5), and 21(3-C), together with Rule 45(3) and Rule 45(4) of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Rules 1961. Section 21(3-D), introduced by the amendment, operates as a savings clause that, for tax leviable on or after the commencement of the Amending Act, suspends the application of sub-sections (4) and (5) and modifies sub-section (3-C) to provide for additional penalties on removed or unaccounted sugar. It also preserves the power to prescribe the manner and authority for tax collection and provides for interest on arrears under sub-section (5), while sub-rule (4) of Rule 45 mandates interest at 16 per cent per annum from the day following the closure of the crushing season on any unpaid tax finalized under sub-section (3-B). The interplay is that the amendment purported to carve out the application of certain provisions for purchases made after 29/12/1975, leaving interest provisions under sub-section (5) inapplicable for that period, and the rules cannot validly supply what the statute has taken away.
(B) Key legal principles include: (i) A taxing statute must be interpreted strictly according to its plain wording, without adding or subtracting substance on the basis of legislative intent; (ii) Interest on arrears of tax can only be levied if the underlying statute contains a substantive provision authorizing it; (iii) An amendment that excludes a particular tax provision from a defined category of transactions operates prospectively from its commencement unless expressly stated otherwise; (iv) Rules made under the Act must conform to and not override the substantive provisions of the Act; (v) Where a statute creates an exception or omission, the onus is on those asserting the existence of an implied provision to rebut the clear textual position.
Facts of the case:
The appellants were required to pay tax on sugarcane purchases under the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act. After the amendment Act 25 of 1976, tax remained unpaid on certain purchases made on or after 29/12/1975. The assessing authority proceeded to revise the assessment under Rule 45(3) and sought to recover the tax along with interest under Rule 45(4), invoking sub-section (5) of Section 21 for arrears. The appellants contended that clause (a) of sub-section (3-D) rendered sub-section (5) inapplicable for purchases after the commencement of the Amending Act, and therefore no interest could be levied. The High Court held that sub-section (3-D) applied only to the crushing season 1975-76 and allowed the interest claim, a decision upheld by the subsequent orders.
Findings of Court:
The Supreme Court held that the plain wording of clause (a) of sub-section (3-D) clearly states that sub-sections (4) and (5) shall not apply in relation to tax levied on purchases of sugarcane after the commencement of the Amending Act, with no temporal limitation. It observed that sub-section (5) was the provision that mandated interest on arrears and that, in its absence, Rule 45 could not validly impose interest. Citing India Carbon Limited v. State of Assam, the Court reaffirmed that interest on delayed tax payments requires a substantive statutory provision, which was missing here. Consequently, the interest claimed under Rule 45(4) was unlawful for purchases made after 29/12/1975, and the appeals were allowed.
Issues:
Whether sub-section (5) of Section 21 continues to apply to purchases of sugarcane made after the commencement of Act 25 of 1976. Whether Rule 45(4) of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Rules 1961 can validly levy interest on arrears of tax for such purchases in the absence of a substantive statutory provision. Whether the High Court was correct in restricting the operation of sub-section (3-D) to the 1975-76 crushing season.
Ratio Decidendi:
The plain language of sub-section (3-D) excludes the application of sub-sections (4) and (5) for purchases of sugarcane made after the commencement of the Amending Act, thereby removing the basis for levying interest under sub-section (5). Since the Act contains no substantive provision authorizing interest on such arrears, Rule 45(4) cannot supply it, and interest on arrears for post-amendment purchases is invalid.
Result:
The appeals are allowed. The judgments and orders under appeal are set aside. The respondents must refund the amounts paid by the appellants within three months from the date of the order, with interest at 18 per cent per annum from the date of payment until refund. No order as to costs.
Judgment
BHARUCHA, J.
( 1 ) WE are concerned with the interpretation of Section 21 of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961, as amended by Act 25 of 1976. Principally, the provisions to be dealt with are sub-sections 3-D, 4 and 5 of Section 21 which read thus :" (3-D) In relation to the tax levied under sub-section (1) and in respect of purchase of sugarcane on or after the date of commencement as aforesaid :- (A) Sub-sections (4) and (5) shall not apply, and the tax shall be deemed (sic) due date of purchase of sugarcane or the date of commencement as aforesaid, whichever is later, (B) Sub-section (3-C) shall apply with the modification that where the assessing authority is satisfied that the Occupier of a factory or Owner of Khandasari unit has removed or cause to be removed any sugar in contravention of the provision of this section or has failed to account fully for the sugar produced in the factory or Khandsari unit or deposited by him under the provision to sub-section (3), the person liable to pay the tax shall in addition to the amount payable under sub-section (3) in respect of the quantity of sugar so removed or caused to be removed or unaccounted for, be also liable to pay by way of penalty a further sum not exceeding one hundred per cent of the sum so payable; (C) The provisions of the sub-section shall be without prejudice to the provisions of sub-section (3-C ). (4) The tax payable under sub-section (1) shall be levied and collected from the Occupier of the factory or Owner of the Khandsari unit in such manner and by such authority as may be prescribed. (5) Arrears of tax shall carry interest at such rate as may be prescribed,"
( 2 ) THE question is whether, subsequent to the said provisions as amended, any interest could be levied on arrears of tax under sub-rule (4) of Rule 45 of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Rules 1961. Rule 45, so far as it is relevant, reads thus :"45 (3) Any amount of tax still remaining unpaid, as finally arrived at, at the end of the crushing season on the revised assessment of tax worked out and communicated by the assessing authority under sub-section (3-B) of Section 21, shall be treated as arrear under sub-section (5) of Section 21 of the Act. (4) Such arrears shall carry interest at the rate of 16 per cent per annum from the date following the date of closure of crushing till the amount is finally paid. "
( 3 ) THE argument on behalf of the appellants is that by reason of clause (a) of sub-section (3-D) of Section 21, as amended, sub-sections (4) and (5) thereof are not to apply in respect of purchases of sugarcane made on or after the date of the commencement of the Amending Act, which was 29/12/1975; that sub-section (5) of Section 21 was the provision that required the payment of interest on arrears of tax; and that, having regard to the inapplicability of that provision for the relevant period, no interest could be levied. The High Court in the principal judgment, which was followed in the subsequent orders, took the view that the scope of sub-section (3-D) of Section 21 and its application was restricted to the crushing season 1975-76 during which the Amending Act had come into force.
( 4 ) THE said Act is a taxing statute and a taxing statute must be interpreted as it reads, with no additions and no subtractions, on the ground of legislative intendment or otherwise.
( 5 ) ON the plain wording of clause (a) of sub-section (3-D) of Section 21 of the Act as amended, we find it difficult to agree with the High Court. The provisions thereof say that sub-section (5) shall not apply in relation to tax levied under sub-section (1) of Section 21 on purchase of sugarcane. The provisions came into force on the date of the commencement of the Amending Act. The provisions are open ended and are intended to apply upon the commencement of the Amending Act with no limitation in time.
( 6 ) THIS Court in India Carbon Limited v. State of Assam (1997) 6 SCC 479 : (AIR 1997 SC 3054 : 1997 AIR SCW 3091) has held, after analysing the Constitution Bench judgment in J. K. Synthetic v. CTO (1994) 4 SCC 276 : (1994 AIR SCW 2431 : AIR 1994 SC 2393) that interest can be levied and charged on delayed payment of tax only if the statute that levies and charges the tax makes a substantive provision in this behalf. There being no substantive provision in the Act for the levy of interest on arrears of tax that applied to purchases of sugarcane made subsequent to the date of commencement of the Amending Act, no interest thereon could be so levied, based on the application of the said Rule 45 or otherwise. THE appeals are allowed. The judgments and orders under appeal are set aside. THIS Court, by order dated 23/11/1983, had refused stay of the judgment and orders under appeal and had directed that, in the event the appeals succeeded and the respondents were held liable to refund the amounts recovered on account of refusal of stay, the entire amounts should be refunded within three months from the date of the order with 18 Per Cent interest from the date of the payment till the amounts were refunded. The appeals having succeeded, the respondents shall refund the amounts that the appellants have paid within three months from today with interest at the rate of 18 Per Cent per annum from the date of payment till the refund is made. No order as to costs. Appeals allowed.