1. The petitioner, T. Nanjappa & Sons, is a firm of partners carrying on business of general merchants at Krishnarajpet, Mandya District.
They are assessed to sales tax as dealers. In the course of an inspection of their business premises, the Assistant Commissioner of Commercial Taxes, Mysore Division, discovered several irregularities which in his opinion amounted to offences punishable under section 29 of the Mysore Sales Tax Act, 1957. Thereupon, he issued notice to them dated 4th April, 1966, expressing his opinion as stated above and giving them all opportunity to compound the offences departmentally by paying Rs. 500 in respect of each of the offences and calling upon them to appear before him for the said purpose on 19th April, 1966. On that date, two partners, namely, T. Nanjappa and H. N. Janardhana, were present and after hearing them and discussing the matter with them, he made the following record in his order of that date :-
"Sri T. Nanjappa was present in person along with his son Sri H. N. Janardhana, another partner of the firm in response to a notice issued on 4th April, 1966, and filed the said reply. He accepted the facts and offences mentioned in our show cause notice and finally lie agreed to compound the offences departmentally in lieu of prosecution for a sum of Rs. 800 only for all the offences committed. Since the offences committed by the assessees were noticed by me on the first time, I agreed to, accept the said compounding fee of Rs. 800 for the offences committed by them. Accordingly he came forward and had given his acceptance in the form of a statement to pay Rs. 800 and since he had not brought the cash he had agreed to send a cheque for the said amount of Rs. 800 tomorrow itself, i.e., on 20th April, 1966."
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"Because the assessees pleaded for consideration and lenient view I have accepted their offer of Rs. 800 compounding fee without prejudice to the examination of their books of accounts for the previous period of four years aid to reopen the case if there are serious omissions and suppressions even for the earlier period."
2. The petitioners, however, did not pay the said sum of Rs. 800, although some time was granted by the Assistant Commissioner for payment. Ultimately, he applied to the Special First Class Magistrate at Srirangapatna under section 13(b) of the Sales Tax Act for collection of the said sum of Rs. 800. On 19th August, 1966, the Magistrate issued a warrant for collection returnable by 31st August, 1966. When the warrant was returned unexecuted it was reissued on 31st August, 1966, for collection by 15th September, 1966.
3. In the meanwhile, the petitioners presented this civil revision petition to this Court which was admitted on 13th September, 1966.
4. In support of the revision petition, the principal arguments addressed by Mr. K. Srinivasan for the petitioners are :
(1) That composition of an offence under section 31 of the Mysore Sales Tax Act means and could only mean, the actual receipt by the prescribed authority of the amount determined by him in terms of the section for composition of the offence;
(2) That the composition is complete only on payment of the compounding fee by the assessee and acceptance thereof by the prescribed authority as composition;
(3) That if the compounding fee is not paid, there is no composition at all and that therefore the proper authority under the Act is free to prosecute the assessee for the alleged offence, but has no right to call for payment of the composition amount; and,
(4) That, in any event, the amount fixed by way of composition under section 31 is not an amount which can be said to be due under the Act so as to be recoverable by taking proceedings under sub-section (3) of section 13 of the Act.
5. The principal point for consideration, determination of which will answer all the questions raised by Mr. Srinivasan, is the exact meaning to be assigned to composition of the offence within the framework of section 31 of the Act and at what point of time the composition may be said to have become complete.
6. The essential principles governing the idea of compounding offences as known to the law of criminal procedure are well-known. Offences are defined and punished by the law. Normally or ordinarily, it is the State that has the right or power to punish offences, although individuals might be directly and personally aggrieved by the commission of the offences. The criminal law regards the punishment imposed by the law at the instance of the State on the offender as the proper and sufficient satisfaction, not only for the society as a whole, but also for the individual or individuals personally aggrieved by the offence. But, in the case of certain offences, the law permits the aggrieved person himself to agree to receive or receive satisfaction other than actual punishment or satisfaction in substitution of punishment for his grievance caused by the commission of the offence. That satisfaction is permitted to be substituted for the punishment prescribed by the law by an agreement between the offender and the aggrieved person.
7. In actual event, therefore, compounding of an offence or composition of an offence otherwise than by regular punishment is a matter of agreement between the offender and the aggrieved party which the law permits them to arrive at in substitution of actual imposition of the punishment prescribed by law. According to the relevant provisions of the Code of Criminal Procedure, composition of an offence means an acquittal in the eye of the law.
8. It is in the light of the above general principles that one has to understand the provisions of section 31 of the Mysore Sales Tax Act, 1957. The said section reads as follows :
"31. Composition of offences. - The prescribed authority may accept from any person who has committed or is reasonably suspected of having committed an offence punishable under this Act, by way of composition of such offence -
(a) where the offence consists of the failure to pay or the evasion of, any tax or other amount recoverable under this Act in addition to the tax or amount so recoverable, a sum of money not exceeding one thousand rupees or double the amount of the tax or amount recoverable, whichever is greater, and
(b) in other cases, a sum of money not exceeding one thousand rupees."
If regard be had for the principles already explained by me, there could be little doubt that a composition under the section would amount to an acquittal or must be regarded as amounting to an acquittal, disentitling the department from prosecuting the dealer. This position is not disputed by either side and indeed it cannot be.
9. The argument of Mr. Srinivasan based on the language of the section is that an offence can be considered to have been compounded only when the prescribed authority accepts a certain sum of money by way of composition of the offence. His further argument is that the expression "accept money" means and could only mean, actual physical receipt of the money and that, therefore, unless there is actual physical receipt of the money by the prescribed authority, there could not possibly be any composition.
10. He points out that there is a marked difference between section 31 and section 17 which also deals with another type of composition. The composition under section 17 is in respect of tax or licence fee to certain sum of money set out in the tabulated statement, in the case of turnovers not exceeding Rs. 25,000. The language of the first sub-section is more or less the same or, at any rate, to the same effect as the language of the first sub-section of section 31, except that the amount to be accepted is described as being accepted in lieu of the amount of tax or licence fee. He points out that sub-section (2) makes further provision for an application by a dealer and payment by him of amounts by way of composition, which, he emphasizes, does not find anything corresponding to it in section 31.
11. Another aspect developed by him is, section 31 does not seem to contemplate an order being passed by the prescribed authority and that therefore any action taken by the prescribed authority for composition of an offence is not capable of being appealed against under section 20 of the Act.
12. I do not wish to express any opinion on the last-mentioned question of appealability; because, even on principle, an absence of a right of appeal may not affect the position because, composition is essentially a matter of agreement and even in the normal rules of procedure, an order by consent is never subject to appeal.
13. The more difficult question is whether we should read the word "accept" as amounting to actual physical receipt of the money. Depending upon the context, the word "accept" may mean "to take or receive what is offered"; "to take or receive as adequate"; "to take or receive with a consenting mind"; "to take upon oneself as a responsibility"; (as, for example, when one accepts a bill or a draft). In all circumstances, it would mean or imply that he who accepts a thing regards what he is accepting as adequate, sufficient or satisfactory. In the context of composition of an offence, it may and should reasonably be regarded as indicating that the satisfaction received or agreed to be received is as sufficient a satisfaction as actual punishment or as a sufficiently satisfactory substitute for punishment.
14. It will be seen that the prescribed authority acting under section 31 or proposing to exercise its power thereunder, is required to apply its mind to two matters : (1) whether the offence should be compounded, and (2) what sum of money would be a sufficient substitute for punishment if the offender is to be prosecuted. In my opinion, the matter of greatest importance is the decision that a payment of a certain sum of money may be regarded as a sufficient satisfaction for punishment or sufficiently satisfactory substitute for punishment.
15. It should be noted further that it is not enough if the authority determines the amount or makes up its mind as to the amount which may be regarded as sufficient payment by way of composition. It is necessary that the dealer should also agree to pay it. If he does not agree to pay, then there cannot be any composition. The authority is left with the question whether in the interests of due administration of the statute it should proceed to prosecute the dealer. Where, however, the dealer agrees to pay a certain sum of money and the prescribed authority agrees to receive that sum of money as sufficient by way of composition, it appears to me that the offer of the dealer is accepted within the meaning of the section. To hold otherwise and to say that the whole question of composition is in suspense or in abeyance until the money is actually paid would lead to very incongruous and unsatisfactory, if not, unjust consequences. In the first place, the amount to be paid by way of composition is an amount which has to be determined by the prescribed authority and not by the dealer. When therefore the authority determines the amount he simultaneously determines that the sum is acceptable by way of composition. It is not as if that the authority makes an offer and the dealer accepts it. Actually what the authority does is to determine the amount and leave it to the dealer to offer to pay it telling him that if he offered to pay the same, the authority will accept it as sufficient composition.
16. Secondly, if after the said stage of acceptance has been reached, the question of composition is still to be regarded as being at large, it would permit either the authority or the dealer to resile from the agreement, solemnly arrived at, which is not a matter countenanced by law. There must be in the nature of things some time-lag between the acceptance at the time mentioned above and the actual receipt of the composition money. If between the two points of time, the dealer is to be regarded as still retaining the option of not paying the composition amount, the officer should also be regarded as still retaining the option of prosecuting the dealer. If so, an agreement involving an offer by the dealer and an acceptance by the authority would not be an agreement at all; whereas if the ordinary principles of the law of contract are to be applied it would certainly be an agreement binding on both the parties and therefore capable of being enforced by each of them as against the other. An interpretation which would permit what is in fact a binding agreement to be broken or refused to be performed by the parties should not in my opinion be accepted, especially when one of the parties thereto is a statutory authority exercising a statutory power.
17. From the point of view of the dealer, it should not be forgotten that composition confers upon him a very valuable right, namely, of its amounting to an actual acquittal, preventing or disentitling the department from prosecuting him.
18. Having regard to these considerations, which appear to me of great value from the point of view of correct and just administration of the statute, I do not think that it would be proper to place on the section the interpretation which Mr. Srinivasan seeks to do.
19. I hold therefore that a composition within the meaning of section 31 of the Sales Tax Act would be complete when the prescribed authority and dealer have agreed that a certain sum of money if paid by the dealer will be regarded by the prescribed authority as a payment by way of composition and that at that point of time, the prescribed authority must be held to have accepted the said sum of money by way of composition of the offence and that the same immediately operates as an acquittal of the dealer in respect of the offences committed or reasonably regarded as having been committed by him in respect of which the said sum of money is fixed as composition amount.
20. As at that point of time there is an agreement between the authority on behalf of the State and the dealer, binding on both of them, it is enforceable by each of them against the other. The dealer can resist any attempt on the part of the department to prosecute him. The department can enforce payment of the composition amount by the dealer.
21. For the said reason, the composition amount in such circumstances becomes an amount due under the Act from the dealer, because it is an amount which by reason of the relevant provisions of the Act and the exercise of the power thereunder he becomes liable to pay. It can therefore rightly be recovered by taking action under sub-section (3) of section 13 of the Act.
22. The civil revision petition is dismissed. Petitioner will have time to pay till end of June.
23. Petition dismissed.