Trace Your Case

KHEMKA & CO. (AGENCIES) PVT. LTD. AND ORS V. STATE OF MAHARASHTRA AND ORS.

Khemka and Company (Agencies) Pvt. Ltd. v. State of Maharashtra and Ors, AIR 1975 SSC 1549

ISSUE:

  • Whether assessees under the Central Sales Tax Act 1956 (“Central Act”) could be made liable for penalty under the provisions of the State Sales Tax Act (“State Act”)?

RULE:

  • The doctrine of ejusdem generis states that where general words follow specific words, the general words are to be construed as limited and apply only to the same kind/class as mentioned. Courts have to find genus – the common strand of characteristics.

FACTS:

  • Two civil appeals arising from the imposition of penalties under the State Sales Tax Act were brought before the Supreme Court.
  • The assessees were governed by the provisions of the Central Act. However, the Assistant Commissioner of Sales Tax levied penalties under the State Sales Tax Act due to default in payment of taxes within the prescribed time.
  • The petitioners argued that the Central Act did not contain any provisions for the imposition of penalty for delay or default in tax payment rendering the imposition of penalty under the State Act illegal.
  • The Department of Revenue countered that Section 9(2) of the Central Act encompassed penalties imposed under both the Central and State Acts.
  • The Bombay Sales Tax Tribunal and the Bombay High Court ruled in favour of the Department of Revenue, while the Mysore High Court decided the case in favour of the petitioners.
  • Both the appeals from Bombay and Mysore were consolidated and brought before the Supreme Court via special leave.

HELD:

  • The Supreme Court held that the penalty provision in the State Act cannot be applied to impose a penalty for tax payable under the Central Act.
  • The Court applied the doctrine of ejusdem generis to decipher that liability for tax and penalty under the State Act cannot be extended to the provisions of the Central Act.
  • Only the penalty provisions contained in the Central Act are applicable to transactions governed by the Central Act. The mere existence of similar provisions in the State Act does not permit the application of such provisions to dealers under the Central Act.
  • The Court accepted the Appellant’s appeal and held that the Tribunal was wrong in holding that the penalty could be levied under the State Act.