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K. Banappa M. Basappa Vs. State of Karnataka - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation;Sales Tax
CourtKarnataka High Court
Decided On
Case NumberS.T.R.P. Nos. 30 to 36 of 1975
Judge
Reported in1978(2)KarLJ108; [1978]42STC251(Kar)
ActsCentral Sales Tax Act, 1956 - Sections 15; Karnataka Sales Tax Act, 1957 - Sections 5(4), 8, 22, 22(1)(6A), 23, 23(1), 23(7A), 25A and 25A(1)
AppellantK. Banappa M. Basappa
RespondentState of Karnataka
Appellant AdvocateB.P. Gandhi, Adv.
Respondent AdvocateS.G. Doddakalegowda, I Additional High Court Government Adv.
Excerpt:
.....and the proviso thereto. what does it do for starting or initiating a proceeding ? it will look into the order requiring rectification and make an order directing an officer of the court to issue notice to the assessee as well as the department intimating them about the proposed rectification......orders were made by the deputy commissioner of commercial taxes (appeals), bangalore - the appellate authority under the principal act - on 28th january, 1969, and 25th march, 1969, respectively, directing refund of taxes to the assessee having regard to the state of law then prevailing. however, consequent upon the amendment of section 15 of the central sales tax act, 1956, by the central sales tax (amendment) act, 1972, with effect from 1st october, 1958, the validation provision contained in section 15 of the central sales tax (amendment) act, 1972, and consequential amendments made to the principal act by karnataka act 7 of 1973, the deputy commissioner of commercial taxes (appeals), bangalore - the appellate authority - with the object of rectifying the earlier orders made.....
Judgment:
ORDER

Venkatachala, J.

1. Since a common question of law arises for decision in these revision petitions under section 23(1) of the Karnataka Sales Tax Act, 1957, hereinafter to be referred to as the principal Act, they are disposed of by this common order.

2. The petitioner in these revision petitions is a partnership firm and a registered dealer in cotton seeds which are 'declared goods' within the meaning of the Central Sales Tax Act. It is also an assessee under the principal Act. In Appeal Petitions Nos. 521, 522, 523, 525 and 526 of 1968-69 relating to the assessment years 1961-62, 1962-63, 1963-64, 1965-66 and 1966-67 and Appeal Petitions Nos. 658 and 659 of 1968-69 relating to the assessment years 1959-60 and 1960-61, orders were made by the Deputy Commissioner of Commercial Taxes (Appeals), Bangalore - the appellate authority under the principal Act - on 28th January, 1969, and 25th March, 1969, respectively, directing refund of taxes to the assessee having regard to the state of law then prevailing. However, consequent upon the amendment of section 15 of the Central Sales Tax Act, 1956, by the Central Sales Tax (Amendment) Act, 1972, with effect from 1st October, 1958, the validation provision contained in section 15 of the Central Sales Tax (Amendment) Act, 1972, and consequential amendments made to the principal Act by Karnataka Act 7 of 1973, the Deputy Commissioner of Commercial Taxes (Appeals), Bangalore - the appellate authority - with the object of rectifying the earlier orders made by him on 28th January, 1969, and 25th March, 1969, in the appeals referred to earlier, initiated proceedings under section 25-A of the principal Act, which was introduced by the Karnataka Sales Tax (Second Amendment) Act, 1970, hereinafter to be referred to as the Amendment Act, for rectification by issuing to the assessee a notice dated 13th August, 1973, informing it of the proposed rectification and calling upon it to appear and show cause against such proposal on the date of hearing of the cases, fixed for 15th August, 1973. As a result of an adjournment of the cases on 15th August, 1973, another notice was issued to the assessee, fixing the adjourned date of hearing of the cases on 29th December, 1973, which notice was returned to the Commercial Tax Officer with the report that the party was not in station. A further notice is said to have been issued to the assessee by registered post intimating that the cases relating to the proposed rectification would be taken up for hearing by the appellate authority on 18th January, 1974, at Bangalore. Even though there was nothing on record to show that the assessee was served with the notice of the proposed rectification, the Deputy Commissioner of Commercial Taxes (Appeals), Bangalore, made an order dated 18th January, 1974, in the said rectification cases numbered by him as R.A.P. Nos. 11 to 17 of 1973-74, holding that the assessee was not entitled to the refund of taxes ordered in the previous orders dated 28th January, 1969, and 25th March, 1969, and directing the assessing authority to recover from the assessee the tax which had been refunded to it. Aggrieved by the said order of the Deputy Commissioner of Commercial Taxes (Appeals), Bangalore - the appellate authority under the principal Act - the assessee preferred appeals under section 22 of the principal Act before the Karnataka Sales Tax Appellate Tribunal in S.T.A. Nos. 175 to 181 of 1974. The Tribunal, on a consideration of the said appeals, took the view that the common order of rectification made in these cases was 'premature' having regard to the admitted fact that it was made without service of notice of the proposed rectification on the assessee which was adversely affected by such an order. Consequently, the Tribunal set aside the order of the appellate authority and remanded the cases back to it for disposal according to law after affording a reasonable opportunity of hearing to the assessee. Aggrieved by the said common order of the Tribunal, the assessee preferred the revision petitions under consideration.

3. It was contended before us by Sri B. P. Gandhi, learned counsel appearing for the petitioner in these revision petitions, that the Tribunal having rightly set aside the order under appeal, ought not to have remanded the cases for reconsideration as, according to him, the rectification proceedings before the appellate authority could not be considered to have even commenced in the absence of service of notice of the proposed rectification on the assessee. The said contention of the learned counsel for the petitioner was attempted to be made good on the interpretation sought to be placed by him on sub-section (1) of section 25-A of the principal Act as amended by the Amendment Act and the proviso thereto. But, when his attention was invited by us to the provision in section 8 of the Amendment Act as the one which would squarely meet the contention raised by him, he was not able to demonstrate before us as to how the said provision was not applicable to those cases, even though a feeble attempt was made by him in the said regard.

4. Having regard to the contention raised on behalf of the petitioner and the provision enacted in section 8 of the Amendment Act, the question of law which arises for our decision in these revision petitions can be formulated thus :

5. Whether proceedings under section 25-A to rectify mistakes apparent from the record in any order made under the principal Act, by an assessing authority, appellate authority, revising authority, the Appellate Tribunal or the High Court, at any time before the commencement of the Amendment Act, can be considered to have not commenced within the meaning of section 8 of the Amendment Act, until a notice of the proposed rectification is served on the assessee

6. Sub-section (6-A) of section 22, sub-section (7-A) of section 23 and sub-section (1) of section 25-A, which confer on the several authorities constituted under the principal Act, the Appellate Tribunal and the High Court, the power of rectification of an order made by any of them under the principal Act, are introduced into the principal Act for the first time by the Amendment Act which came into force on 9th June, 1970. As the said power of rectification is also made exercisable in respect of orders made under the principal Act prior to the date of coming into force of the Amendment Act, the period of limitation within which the power of rectification could be exercised in respect of such orders is specifically prescribed under section 8 of the Amendment Act as a necessary concomitant. The provisions in sub-sections which are material for proper appreciation of the question under consideration read thus :

7. Sub-section (6-A) of section 22 : 'With a view to rectifying any mistake apparent from the record, the Appellate Tribunal may, at any time, within five years from the date of any order passed by it under sub-section (4) or sub-section (6), amend such order :

Provided that no order under this sub-section shall be made without giving both parties affected by the order a reasonable opportunity of being heard.'

8. Sub-section (7-A) of section 23 : 'With a view to rectifying any mistake apparent from the record, the High Court may, at any time, within five years from the date of the order passed by it under sub-section (4) amend such order :

Provided that no order under this sub-section shall be made without giving both parties affected by the order a reasonable opportunity of being heard.'

9. Sub-section (1) of section 25-A : '25-A. Rectification of mistakes. - (1) With a view to rectifying any mistake apparent from the record, the assessing authority, appellate authority or revising authority, may, at any time within five years from the date of an order passed by it, amend such order :

Provided that an amendment which has the effect of enhancing an assessment or otherwise increasing the liability of the assessee shall not be made unless the assessing authority, appellate authority or revising authority, as the case may be, has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard.'

10. Though the provisions of sub-section (6-A) of section 22, sub-section (7-A) of section 23 and sub-section (1) of section 25-A of the principal Act as amended by the Amendment Act, require that the person or the department to be adversely affected by the proposed rectification should be given a reasonable opportunity of being heard before an order of rectification is actually made, the language of the provisos does not even remotely suggest the inference that the proceedings for rectification of orders made under the principal Act prior to the coming into force of the Amendment Act, cannot be considered to have commenced unless notices of the proposed rectification are served on the parties who are likely to be adversely affected. The provisions contained in the sub-sections referred to earlier no doubt provide that an order passed by an assessing authority, appellate authority, revising authority, the Appellate Tribunal or the High Court, as the case may be, may be rectified by amending such an order at any time within the period specified therein. However, it may not be out of context to mention that on a consideration of the scope and ambit of sub-section (1) of section 25-A along with the proviso thereto, which sub-section and proviso are similar to sub-section (6-A) of section 22 and sub-section (7-A) of section 23 and the provisos thereto, it is held by one of us (Venkataramiah, J.) following the decision of the Supreme Court in Sales Tax Officer, Special Circle, Ernakulam v. Sudarsanam Iyengar & Sons : [1970]1SCR859 that the proceedings for rectification under section 25-A commence with the issue of notice to the assessee within the period of five years specified therein and that an order of rectification passed pursuant to such notice, even after the expiry of the period of five years, is valid [vide Sha Vajeshankar Vasudeva and Company v. Assistant Commissioner of Commercial Taxes (Assessments), Mangalore ([1974] 34 S.T.C. 257.)]. It has to be mentioned here that since section 8 of the Amendment Act was not relied on by any of the parties in that case, the decision in the case had to rest on the interpretation of section 25-A. But it is not now necessary for us to have recourse to the provisions relating to the period within which rectification should be made which are found in section 25-A, for examining the question whether a proceeding for rectification of an order made prior to the commencement of the Act, will not commence unless notice of such proposed rectification is served on the party likely to be adversely affected, as we are of the view that section 8 of the Amendment Act does not permit us to do so. In fact, the opening words of section 8 of the Amendment Act, namely, 'notwithstanding anything contained in sections 22, 23 and 25A of the principal Act as amended by this Act' in unmistakable terms forbid us from doing so. In the said view of the matter, we cannot accede to the contention of the learned counsel for the petitioner that the provision in sub-section (1) of section 25-A read with the proviso thereto, should be looked into for coming to the conclusion that unless a notice as required under the provision is served on the assessee, rectification proceedings under sub-section (1) of section 25-A in respect of orders made under the principal Act prior to the coming into force of the Amendment Act, cannot be considered to have commenced.

11. It is, however, not necessary for us to express any opinion on the correctness of the construction placed on section 25-A(1) and its proviso, as we propose to rest our decision on the question as to when the proceedings of rectification in respect of orders made under the principal Act prior to the coming into force of the Amendment Act commence, upon the construction we would be placing on the express and unambiguous language of the provision in section 8 of the Amendment Act, which reads :

'8. Limitation for making order of rectification of mistakes in certain cases. - Notwithstanding anything contained in section 22, 23 and 25-A of the principal Act as amended by this Act, proceedings to rectify mistakes apparent from the record in any order made under the principal Act by an assessing authority, appellate authority, revising authority, the Appellate Tribunal or the High Court, at any time before the commencement of this Act may be commenced within five years from the date of such order or one year from the date of the commencement of this Act whichever is later.'

12. Though a cursory look at the provision gives the first impression to the person who looks at it that it is a redundant provision in view of 5 years' period of time allowed for rectification, in sub-section (6-A) of section 22, sub-section (7-A) of section 23 and sub-section (1) of section 25-A, which are introduced into the principal Act by the Amendment Act solely for the purpose of empowering the assessing and appellate authorities, the revising authority, the Appellate Tribunal and the High Court with the power to rectify mistakes in their orders, a deeper look at the provision will make it obvious that it is intended to arm the assessing authority, appellate authority, the revising authority, the Appellate Tribunal and the High Court with special power to commence rectification proceedings not only in respect of orders made by them before the commencement of the Amendment Act within 5 years from the date of such order but also in respect of orders made by them at any anterior point of time, however remote it may be, provided the rectification proceedings to rectify them are commenced within one year.

13. As the circumstances which led to the enactment of the Amendment Act for inserting into the principal Act the provisions relating to rectification proceedings and the time-limit within which such proceedings could be commenced as are bound to assist us in properly appreciating the scope and ambit of the provisions in section 8 of the Amendment Act, we propose to advert to them at this stage. Section 15(b) of the Central Sales Tax Act, as it stood prior to the coming into force of the Amendment Act, provided that where a tax has been levied under the State law in respect of intra-State sale or purchase of any declared goods, and such goods are sold by the purchaser or a subsequent purchaser, in the course of inter-State trade or commerce, then the State tax levied on the intra-State sale or purchase shall be refunded to such person, in such manner and subject to such conditions as may be provided in the State law in force. In order to give effect to section 15(b) of the Central Sales Tax Act, rule 39-A was framed under the Karnataka Sales Tax Rules, 1957, the relevant part of which rule reads as follows :

'(1) The tax levied under sub-section (4) of section 5 in respect of the sale or purchase inside the State of any goods specified therein shall, if such goods are sold in the course of inter-State trade or commerce, be refunded in the manner and subject to the conditions prescribed in this rule to the dealer who has made the inter-State sale and has paid tax under the Central Sales Tax Act, 1956 (Central Act 74 of 1956), in respect of such sale ...'

14. But in Munshi Abdul Rahiman and Bros. v. Commercial Tax Officer ([1967] 20 S.T.C. 89.), a Division Bench of this Court struck down a part of the rule which read :

'and has paid tax under the Central Sales Tax Act, 1956 (Central Act 74 of 1956), in respect of such sale.'

15. This decision made it possible for the assessees of declared goods to claim the benefit of refund on the ground that the sales effected by the assessees are second sales and without showing that their sellers had in fact paid tax. Refunds were also obtained by the assessees in innumerable cases, pursuant to the said decision. Further, the validity of rule 38(1) made under the Mysore Sales Tax Act, which provided for rectification, was under challenge in several writ petitions filed before this court. It is these circumstances and other circumstances following the decision of the Supreme Court in Yaddalam Lakshminarasimhiah Setty's Case : [1965]2SCR129 and the consequent amendment of the Central Sales Tax Act by the Central Sales Tax (Amendment) Act (28 of 1969), which led the State Legislature to enact the Amendment Act, containing comprehensive provisions for commencing rectification proceedings in respect of orders which had been made and became final under the principal Act. This background in which section 8 of the Amendment Act was enacted will show that the legislature has expressed itself in clear terms in the said provision that what was necessary for the authorities, the Appellate Tribunal or the High Court was to commence rectification proceedings within the time specified therein with a view to correct mistakes in the orders which had otherwise become final under the principal Act. The above background is also useful in interpreting the said provisions while applying them to cases of rectification consequent upon the Central Sales Tax (Amendment) Act, 1972, and the Karnataka Sales Tax (Amendment) Act (7 of 1973).

16. While construing section 8, we have also to bear in mind that in prescribes a special period of limitation in respect of orders which had been passed prior to the coming into force of the Amendment Act for purposes of their rectification under section 25-A of the principal Act. Thus, section 25-A is a machinery section in a taxing statute. It is now a settled rule of construction that a machinery provision in a taxing statute should be construed in such a way as to make the charge effective and machinery workable. Any construction which enables the person liable to tax to avoid it by resorting to dilatory or evasive tactics should be avoided. This is clear from the following observations of the Supreme Court in India United Mills Ltd. v. Commissioner of Excess Profits Tax, Bombay : [1955]27ITR20(SC) :

'That section is, it should be emphasised, not a charging section, but a machinery section and a machinery section should be so construed as to effectuate the charging sections.'

17. The above view is followed in Gursahai v. Commissioner of Income-tax, Punjab : [1963]1ITR48(SC) , in which it is observed as follows :

'The provisions in a taxing statute dealing with machinery for assessment have to be construed by the ordinary rules of construction, that is to say, in accordance with the clear intention of the legislature, which is to make the charge levied effective.'

18. This is also the view expressed in Commissioner of Income-tax v. Mahaliram Ramjidas , in which it is held :

'The section, although it is part of a taxing Act, imposes no charge on the subject, and deals merely with the machinery of assessment. In interpreting provisions of this kind the rule is that that construction should be preferred which makes the machinery workable, ut res valeat potius quam pereat.'

19. We shall now examine section 8 of the Amendment Act in the light of the above rule of construction.

20. There is nothing in section 8 of the Amendment Act which would suggest the making of the commencement of the proceedings of rectification depend upon the service of notice of the proposed rectification either on the assessee or on the assessee and the department, as the case may be. Moreover, such a possibility cannot even be envisaged, for it would lead to anomalous results and may even lead to evasion of tax which has been validly imposed.

21. Let us consider a case where the High Court has to exercise its power of rectification in respect of an order made by it prior to the coming into force of the Amendment Act. What does it do for starting or initiating a proceeding It will look into the order requiring rectification and make an order directing an officer of the court to issue notice to the assessee as well as the department intimating them about the proposed rectification. If such notice is not served on both the parties within 5 years from the date of the order to be rectified or one year from the date of commencement of the Amendment Act, as the case may be, can it be said that the proceedings of rectification have not commenced Again, if the notice issued to the department is served in time, but the notice issued to the assessee is not served in time, can it be said that the proceedings of rectification against the assessee has not commenced Similar would be the position when the Appellate Tribunal starts a proceeding for rectification. The position cannot be different when the rectifying authority is the assessing authority, the appellate authority or the revising authority under the Act. Hence it is difficult for us to think that the legislature, when it enacted section 8 of the Amendment Act, intended that the rectification proceedings shall not be considered to have commenced unless the party likely to be adversely affected by the rectification is served with notice of such proposed rectification. If such a construction is placed on the provision contained in section 8 of the Amendment Act, it would only be an invitation to the assessees likely to be adversely affected by the proposed rectification to evade service of notice of such proceedings. Such an intendment can never be attributed to the legislature which specially enacted section 8 of the Amendment Act in the circumstances already adverted to, inasmuch as attribution of such intendment will have the effect of defeating the very purpose of the provision. There is also no reason to take the view that the legislature by enacting section 8 of the Amendment Act intended to make the date of commencement of rectification proceeding uncertain. On the other hand, the express and unambiguous language employed in section 8 of the Amendment Act, namely, 'proceedings to rectify mistakes apparent from the record in any order made under the principal Act by an assessing authority, appellate authority, revising authority, the Appellate Tribunal or the High Court, at any time before the commencement of this Act may be commenced within five years from the date of such order or one year from the date of the commencement of this Act whichever is later' confers in clear terms wide power on the authority concerned or the Appellate Tribunal or the High Court, to commence the proceeding of its own accord. We are of the view that the words 'may be commenced' used in section 8 of the Amendment Act are to be construed as 'may be originated' or 'may be begun' and such commencement, origination or beginning of the proceeding to rectify may be made by the authority concerned or the Appellate Tribunal or the High Court by resorting to any overt act including the issue of notice to the party likely to be adversely affected. When once such overt act is found to be available in a given case within the period of limitation prescribed under section 8 of the Amendment Act, then the rectification proceeding shall be considered to have commenced. This is our decision on the question of law which has arisen for consideration in these petitions.

22. It is not disputed by the learned counsel appearing for the petitioner assesses, that notice of rectification proceeding was in fact issued to the assesses petitioner within the period of limitation prescribed under section 8 of the Amendment Act. In the said view of the matter, we do not see any reason to disagree with the finding of the Tribunal that the appellate authority had commenced the proceedings for rectification within the time allowed by law.

23. The contention of the learned counsel for the petitioner that the Tribunal was not justified in remanding the case to the appellate authority for disposal after affording an opportunity of hearing to the assessee is, in our view, untenable. The decisions in Nawabkhan Abbaskhan v. State of Gujarat : 1974CriLJ1054 and Ponkunnam Traders v. Additional Income-tax Officer, Kottayam : [1972]83ITR508(Ker) , relied upon by the learned counsel for the petitioner in support of his contention that the Tribunal was not justified in remanding the cases to the appellate authority for disposal afresh, after affording an opportunity of hearing to the petitioner assesses, do not in any way support such a contention. In the case of Nawabkhan Abbaskhan : 1974CriLJ1054 , the Supreme Court considered the question whether the appellant was liable to be prosecuted under section 142 of the Bombay Police Act, 1951, for contravention of the externment order issued under section 56 of that Act. After declaring that there was no valid quit order, it held that there was no offence committed by the appellant. It further found that since the fundamental right of the appellant had been encroached upon by the Police Commissioner, the order of punishment was liable to be quashed. The said decision, in our view, does not assist the learned counsel for the petitioner in showing that it was necessary for the Tribunal to have declared the notice of rectification proceeding issued by the appellate authority as void.

24. In the case of Ponkunnam Traders : [1972]83ITR508(Ker) , the Kerala High Court held that the order of the Income-tax Officer questioned in the High Court of Kerala was made without giving notice of the materials gathered by the Income-tax Officer on the basis of the inquiry conducted by him under section 142(3) of the Income-tax Act, 1961. But the fact that such an order was quashed by the Kerala High Court does not lead to the inference that a proceeding validly commenced by the issue of an appropriate notice should not be continued when the order made pursuant to such notice is quashed on the ground that it was made without observing the principles of natural justice.

25. Before concluding this part of the case, we have to observe that some of the decisions cited before us which were based on the provisions of section 34 of the Income-tax Act, 1922, or sections 147 to 149 of the Income-tax Act, 1961, have no bearing on these cases as the scheme of those sections is different from the scheme of section 25-A of the principal Act. Hence we have not chosen to deal with them specifically.

26. Thus no justifiable grounds are made out for interfering with the order of remand made by the Tribunal.

27. The only other contention raised before us by the learned counsel for the petitioner was that the Tribunal was not justified in not refunding the institution fee in the appeals before it when it remanded the cases to the appellate authority for fresh disposal on the ground that the orders appealed against were made by the appellate authority without affording the assesses appellant a reasonable opportunity of hearing. We have perused the order of the Tribunal and found that no reasons are given for refusing the refund of the institution fee. We feel that there is no valid reason for the Tribunal to deny the refund of the institution fee which it was authorised to refund under rule 30(3) of the Karnataka Sales Tax Rules. We direct the Appellate Tribunal to refund to the petitioner assesses the institution fee paid in the appeals before it. Subject to the above modification, the common order of the Tribunal challenged in these revision petitions shall stand.

28. We make it also clear that we should not be taken as having expressed any opinion on the view of law taken by the Tribunal on the interpretation of section 25-A of the principal Act as the need for expressing our opinion in the said regard did not arise.

29. These revision petitions are accordingly dismissed subject to our direction regarding the refund of the institution fee by the Appellate Tribunal in respect of the appeals before it. There will be no order as to costs.

30. Petition dismissed.


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