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Andhra Steel Corporation Ltd. Vs. the Commercial Tax Officer, Company Circle, Visakhapatnam - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Petition No. 6150 of 1979
Judge
Reported in[1982]51STC265(AP)
ActsAndhra Pradesh General Sales Tax Act - Sections 14(1), 14(4), 14(4-A) and 14(7); Central Sales Tax Act; Constitution of India - Article 226
AppellantAndhra Steel Corporation Ltd.
RespondentThe Commercial Tax Officer, Company Circle, Visakhapatnam
Appellant AdvocateT. Anantha Babu, Adv.
Respondent AdvocateGovernment Pleader for Commercial Taxes
Excerpt:
.....be cancelled - tribunal cancelled reassessment made after such notice and matter remanded back to commercial tax officer (cto) for disposal - cto issued new show cause notice for cancellation of another amount escaped from taxation after such remand - whether second show cause notice issued after period of limitation can said to be valid on ground of pendency of matter before tribunal - pendency of matter before tribunal was pertaining to show cause notice issued for first instance - second show cause notice issued after period of limitation cannot be validated on ground of pendency of matter before tribunal regarding another show cause notice. - motor vehicles act (59 of 1988)section 149 (2): [v. gopala gowda & jawad rahim, jj] insurers entitlement to defend the action joint appeal..........circle, visakhapatnam, the respondent herein, took up the matter after remand and issued a fresh notice dated 3rd july, 1979, calling upon the assessee to once again show cause why a turnover of rs. 7,89,385.01 (proposed in the original show cause notice dated 12th january, 1976), which had allegedly escaped assessment, should not be now assessed to tax and directed the assessee to produce his accounts. not stopping at that, he issued a revised notice dated 29th august, 1979, which is now impugned in this writ petition, in which he proposed to levy tax not only on the escaped turnover of rs. 7,89,385.01, but also on an additional turnover of rs. 53,08,954.83. according to the said impugned notice, in respect of a turnover of rs. 3,84,779.49 exemption was wrongly granted and he proposed.....
Judgment:

Madhava Reddy, J.

1. This is a petition under article 226 of the Constitution of India by a manufacturer of steel products and registered as a dealer under the Andhra Pradesh General Sales Tax Act and the Central Sales Tax Act, calling in question a notice G.I. No. 4974/72-73 dated 29th August, 1979, issued by the Commercial Tax Officer, Company Circle, Visakhapatnam. The circumstances in which the impugned notice was issued may be briefly stated to appreciate the contentions stated in this writ petition.

2. The petitioner-dealer returned a net turnover of Rs. 1,49,37,196.29 for the year 1972-73 and claimed certain exemptions. Some of the exemptions claimed were allowed and an assessment order was made on 10th March, 1975, and was served on the assessee on 12th March, 1975. The assessee neither preferred any appeal nor got the assessment order revised, with the result that the order became final. However, on 12th January, 1976, the Commercial Tax Officer (OFA), Visakhapatnam, issued a show cause notice why a turnover of Rs. 7,89,385.01 representing sales made by the petitioner-dealer at Hyderabad during the year 1972-73, which had escaped assessment, should not be treated as a turnover liable to tax. The assessee submitted his representation on 28th February, 1976, against the proposed additional assessment. The Commercial Tax Officer, however, proceeded to pass an order of additional assessment on 19th March, 1976, levying a tax of Rs. 23,681.55 on the escaped turnover of Rs. 7,89,385.01 as proposed in the show cause cause notice. He also later issued a notice on 20th March, 1976, requiring the petitioner to show cause why a sum of Rs. 1,18,406.75 (representing five times the tax leviable) should not be levied by way of penalty for the alleged wilful suppression of the turnover of Rs. 7,89,385.01. By his order dated 21st May, 1976, he levied the penalty proposed. The assessee preferred appeals against the additional assessment order and the penalty imposed against him, and the same were dismissed by the Assistant Commissioner (CT), Kakinada, by an order dated 24th March, 1977. The assessee carried the matters in appeal to the Sales Tax Appellate Tribunal in T.A. Nos. 454/77 and 432/77. The Sales Tax Appellate Tribunal by its order dated 14th July, 1978, set aside the order of the Assistant Commissioner as well as that of the Commercial Tax Officer and remanded the matter to the Commercial Tax Officer. The Commercial Tax Officer, Company Circle, Visakhapatnam, the respondent herein, took up the matter after remand and issued a fresh notice dated 3rd July, 1979, calling upon the assessee to once again show cause why a turnover of Rs. 7,89,385.01 (proposed in the original show cause notice dated 12th January, 1976), which had allegedly escaped assessment, should not be now assessed to tax and directed the assessee to produce his accounts. Not stopping at that, he issued a revised notice dated 29th August, 1979, which is now impugned in this writ petition, in which he proposed to levy tax not only on the escaped turnover of Rs. 7,89,385.01, but also on an additional turnover of Rs. 53,08,954.83. According to the said impugned notice, in respect of a turnover of Rs. 3,84,779.49 exemption was wrongly granted and he proposed to bring the same to assessment as taxable turnover. Another item of Rs. 46,50,879.34 was also found to have been wrongly exempted from tax and he proposed to bring that amount also within the taxable turnover. A further sum of Rs. 2,73,296.00 was also, according to him, wrongly excluded from the taxable turnover.

3. The main contention of the petitioner-assessee is that this notice proposing to include Rs. 53,08,954.83 in the taxable turnover for the first time on remand, is barred by time and without jurisdiction. Mr. Anantha Babu, the learned counsel for the assessee, contends that in view of sub-section (4-A) of section 14 of the A.P. General Sales Tax Act, hereinafter referred to as 'the Act', any assessment or levy under sub-section (4) cannot be made beyond the period of four years from the date on which any order of assessment or levy was served on the dealer. This is countered by the learned Government Pleader, Sri J. V. Suryanarayana, by pointing out that under sub-section (7) of section 14 of the Act, the period between the date of such assessment and the date on which it has been set aside shall have to be excluded in computing the period of four years. When that period is excluded, the proceedings under section 14(4) to make an additional assessment would be within time and so long as those proceedings are within time, the Commercial Tax Officer is competent not only to include the escaped turnover of Rs. 7,89,385.01 mentioned in the notice first issued under section 14(4) but also to include the additional turnover of Rs. 53,08,954.83, which was found to have been incorrectly exempted under the assessment order dated 10th March, 1975.

4. To appreciate these respective contentions, it is necessary to bear in mind that an assessment under section 14(1) is required to be made 'only within a period of four years from the expiry of the year to which the assessment relates'. The assessment in question relates to the year 1972-73 ending with 31st March, 1973. The assessment under section 14(1) has, therefore, to be made on or before 31st March, 1977. Where the whole or any part of the turnover of a dealer has escaped assessment to tax or has been under-assessed, the assessing authority is given the power under sub-section (4) of section 14 to determine to the best of his judgment, the turnover that has escaped assessment and assess the turnover so determined and assess the correct amount of tax payable on the turnover that has been under-assessed. He is also given the power in this behalf to assess the correct amount of tax payable in a case where any deduction or exemption has been wrongly allowed. The notice first issued, in which a sum of Rs. 7,89,385.01 was proposed to be included in the taxable turnover, comes squarely within section 14(4) of the Act. Even the present amount of Rs. 53,08,954.83 which, according to the Commercial Tax Officer was wrongly exempted, is also a turnover in respect of which the Commercial Tax Officer could have issued a notice under sub-section (4) of section 14. Whether that amount was liable to be included in the taxable turnover and whether the exemption granted was valid or not, are all matters which have to be decided on the merits of the case after the scrutiny of the evidence. But there is no dispute that if the notice is within time, the Commercial Tax Officer can go into the matter and determine it.

5. The contention of the learned counsel for the petitioner, Sri Anantha Babu, is that the proposal made for the first time under the impugned notice dated 29th August, 1979, which is beyond four years after the assessment under section 14(1) of the Act, is barred by time and merely because, pursuant to the remand order, the question whether the turnover of Rs. 7,89,385.01 can be enquired into and decided by the Commercial Tax Officer, the Commercial Tax Officer is not competent to propose the inclusion of Rs. 53,08,954.83 as turnover liable to tax on the ground that it was incorrectly exempted or it had escaped assessment under the original assessment order made on 10th March, 1975, under section 14(1) of the Act. It must be borne in mind, that for the completion of the assessment under section 14(1), the period prescribed under the Act itself is four years from the expiry of the year to which the assessment relates. So also for making assessment in respect of the escaped turnover or turnover wrongly exempted from tax, the period of limitation, within which the assessment has to be made, is prescribed under section 14(4-A) as a period of four years. That provision reads as follows :

'(4-A) Any assessment or levy under sub-section (4) shall be made within a period of four years from the date on which any order of assessment or levy was served on the dealer.'

6. The period of four years prescribed under sub-section (4-A) in respect of an assessment made under sub-section (4) of section 14 has to be computed, as laid down in that sub-section, from the date on which any order of assessment or levy was served on the dealer.

7. In the instant case, it is common ground that the original order of assessment under section 14(1) was served on the petitioner on 12th March, 1975. Any proceeding under section 14(4), if in view of sub-section (4-A) of section 14, it has to be made within a period of four years, it should have been made before 12th March, 1979. The impugned notice is, however, dated 29th August, 1979, which is beyond the period of four years. Viewed in this light, there cannot be two opinions that this notice is barred by time prescribed under sub-section (4-A) of section 14.

8. However, the fact remains that proceedings under sub-section (4) of section 14 were initiated by the respondent in respect of the assessment under section 14(1) which was made on 10th March, 1975, within a period of four years. Inasmuch as the first show cause notice under section 14(4) was issued on 12th January, 1976, and served on the assessee on 20th January, 1976, the proceedings under section 14(4) under the said notice proposing to bring the escaped turnover of Rs. 7,89,385.01, to tax were initiated within the period prescribed by the Act. Even this proceeding, which was initiated by way of a notice as required by sub-section (4) of section 14 within time, was required to be completed within a period of four years as laid down by sub-section (4-A) of section 14. In fact it was completed by the Commercial Tax Officer on 19th March, 1976. But the matter was carried in appeal to the Assistant Commissioner (CT) and later to the Sales Tax Appellate Tribunal, The Sales Tax Appellate Tribunal set aside the entire proceedings and remanded the matter to the Commercial Tax Officer by an order dated 14th July, 1978. After that order was received, the Commercial Tax Officer issued a notice dated 3rd July, 1979, calling upon the dealer to show cause why Rs. 7,89,385.01 should not be assessed to tax. This notice itself was beyond the period of four years from the date of the original assessment order dated 10th March, 1975. If the matter had rested with sub-section (4-A) of section 14, then clearly the proposal to bring the escaped turnover of Rs. 7,89,385.01, to tax being beyond four years of the original assessment order dated 10th March, 1975, would be barred by limitation.

9. But sub-section (7) of section 14 makes provisions for excluding the period spent in proceedings which resulted in setting aside an assessment. That sub-section reads as follows :

'(7) Where an assessment made under this section has been set-aside by any court or other competent authority under this Act for any reason, the period between the date of such assessment and the date on which it has been set aside shall be excluded in computing the period of four years or six years, as the case may be, specified in this section for the purpose of making any fresh assessment.'

10. In view of sub-section (7) of section 14 the period between the date of the additional assessment order made by the Commercial Tax Officer on 19th March, 1976, and the date on which it has been set aside by the Sales tax Appellate Tribunal, i.e., 14th July, 1978, has to be excluded in computing the period of four years prescribed by sub-section (4-A) of section 14. If that period is excluded, the assessment made in pursuance of the notice dated 3rd July, 1979, proposing to bring the escaped turnover of Rs. 7,89,385.01 to tax, in respect of which proceedings under sub-section (4) of section 14 where initiated within four years of the date of the original assessment under section 14(1) which was made on 10th march, 1975, can still be completed for the period for completion of the proceedings, would be not only four years from the date of the Commercial Tax Officer's order dated 19th March, 1976, but also the additional period of nearly 2 years 4 months intervening the date of the said order and the order of the Appellate Tribunal dated 14th July, 1978, setting aside the assessment order. Inasmuch as sub-section (7) of section 14 directs that in computing the period of four years within which the assessment under sub-section (4) of section 14 has to be completed, the period between the date of such assessment and the date on which it has been set aside should be excluded. The petitioner-dealer cannot contend that the Commercial Tax Officer is not competent to bring the turnover of Rs. 7,89,385.01 which has allegedly escaped assessment to tax on the ground that it was barred by limitation. The notice dated 3rd July, 1979, or the impugned notice dated 29th August, 1979, cannot be said to be either without jurisdiction or barred by time. This position is not seriously disputed by Sri Anantha Babu, the learned counsel for the petitioner.

11. Sri Anantha Babu, however, contends that the proposal to include Rs. 53,08,954.83, for the first time on 29th August, 1979, in the taxable turnover on the ground that it was incorrectly exempted is certainly barred by time. This contention, in our opinion, is well-founded. Though the learned Government Pleader, Sri, J. V. Suryanarayana, contends that if a proceeding under section 14(4) has been initiated within a period of four years from the date on which the original assessment order was served on the petitioner - in this case it has been admittedly initiated within a period of four years of that order - then during the pendency of that proceeding, any other turnover, which has escaped assessment or wrongly exempted, could validly be included in the taxable turnover and such an inclusion cannot be said to be barred by time under section 14(4). This contention has to be rejected for more reasons than one. Under section 14(1) the period within which an assessment could be made is four years from the expiry of the year to which the assessment relates. In this case, as already pointed out, the assessment related to the year 1973-73 and it has to be completed before 31st March, 1977. The proposed escaped turnover of Rs. 53,08,954.83 could have been brought to tax under sub-section (4) of section 14 before 31st March, 1977. That has not been done. The Appellate Tribunal was concerned only with the question whether Rs. 7,89,385.01, which was proposed to be brought to tax by way of additional assessment by the Commercial Tax Officer by his order dated 19th March, 1976, should be included and for that purpose, by setting aside the order of the Commercial Tax Officer and that of the Assistant Commissioner passed on appeal, it remanded the matter to the Commercial Tax Officer. The order of remand made by the Appellate Tribunal was confined to the turnover of Rs. 7,89,385.01. Apart from the fact that the remand order itself does not empower the Commercial Tax Officer to bring any other turnover to tax, the fact that the proposal to include Rs. 53,08,954.83 in the taxable turnover is made after a period of four years envisaged by sub-section (4-A) of section 14 of the Act stands in the way of the Commercial Tax Officer exercising any jurisdiction in this behalf.

12. Sri J. V. Suryanarayana, the learned Government Pleader, invited our attention to a judgment of this Court reported in Andhra Steel Corporation Ltd. v. State of A.P. [1981] 47 STC 13. That was a case arising under section 14(1) of the Act and the questions that came up for consideration were whether in respect of the assessment year 1962-63 a dealer, who was assessed to tax by the Commercial Tax Officer Tax Officer on 31st March, 1964, could be assessed to tax in pursuance of the remand order made by the appellate authority dated 16th November, 1973, and whether the assessment so made on 26th August, 1976, was valid. The court held that the entire period spent from 31st March, 1964, to 16th November 1973, the date on which the assessment order dated 31st March, 1964, was finally set aside, was to be excluded under sub-section (7) of section 14 in computing the period of four years of four years prescribed by the Act. That was not a case relating to an assessment of escaped turnover covered by sub-section (4) of section 14. Further, the question now before us is whether in such a proceeding, a turnover, which was not sought to be brought to tax in a proceeding, a turnover, which was not sought to be brought to tax in a proceeding under sub-section (4) of section 14, could be brought to tax under that sub-section for the first time beyond a period of four years the date of the original order merely because by virtue of the order of remand, the proceedings under sub-section (4) of section 14, which were validly initiated within a period of four years, were pending and in respect which the period was envisaged by sub-section (7) of section 14 has to be excluded. This decision does not not throw any light on this aspect.

13. On the other and, the decision of this Court reported in C.P. Hastimal Co. v. Commercial Tax Officer [1972] 29 STC 694 which, no doubt, related to penalty proceedings, dealt with the question whether penalty proceedings could be initiated beyond a period of four years in respect of escaped assessment under sub-section (4) of section 14 initiated within a period of four years. The Court held :

'Penalty proceedings having regard to the period of limitation prescribed by sub-section (4-A) of section 14 of the Act must be initiated by the assessing authority within the period of four years or six years, as the case may be, form the assessment year, Sub-section (7) of section 14 comes into play only when a fresh assessment is sought to be made as a result of the assessment having been set aside by a competent tribunal or a court of law and not as a result of an assessing authority or a superior authority as mentioned in sub-section (4-C) of section 14 discovering that a part of the turnover of the business of a dealer has escaped assessment to tax and assessing the dealer on that escaped turnover. The period of limitation in cases where action is taken under sub-section (4) of section 14 is prescribed in sub-section (4-A) of section 14.'

14. The court also observed that where proceedings are taken under sub-section (4) of section 14 not as a result of any order of the Appellate Tribunal or court setting aside the assessment made, the question of excluding any period would not arise. In that case, the notice dated 1st March, 1969, proposing to assess on the escaped turnover was not as a result of any order of the Appellate Tribunal or the court setting aside the assessment to say that that period between the date of the assessment and the date of the order of the appellate court should be excluded. The court observed :

'The proceedings initiated under sub-section (4) of section 14 should not be mixed up or confused with proceedings initiated afresh as a result of an assessment order being set aside by any court or other competent authority. Sub-section (7) can be availed only when an assessment made has been set aside by any court or other competent authority and not otherwise.'

15. The turnover of Rs. 53,08,954.83, in the instant case, is sought to be included not as a consequence of the appellate order or as a consequence of the discovery of the escaped turnover within a period of four years. But it is an amount which is sought to be brought to tax for the first time after the period of four years to which sub-section (7) of section 14 has no application.

16. The contention of the learned Government Pleader that since a proceeding under section 14(4) is pending, this additional turnover also could be included in the said proceeding ignores the fact that any proceeding under sub-section (4) of section 14 has to be preceded by a notice to the dealer and the proceeding so initiated has to be completed by way of an additional turnover within a period of four years from the date on which the order of assessment was served. In this case no proceeding in respect of this turnover of Rs. 53,08,954.83, was initiated under sub-section (4) of section 14 within a period of four years from the date of service of the original assessment order, i.e., 12th March, 1975. Hence the question of completing any such proceeding within a period of four years as laid down by sub-section (4-A) of section 14 does not arise. What all sub-section (7) of section 14 authorises is the deduction of 'the period between the date of such assessment and the date on which it has been set aside'. It does not either enlarge or restrict the scope of the proceeding that has been initiated under sub-section (4) of section 14. An assessment under section 14(1) is distinct from an assessment under section 14(4). In respect of an assessment under section 14(4), which, in this case, related to the dispute as to whether Rs. 7,89,385.01, should be included in the taxable turnover or not on the ground that it had escaped turnover, in computing the period of four years, the period between the date of the order of the Commercial Tax Officer dated 19th March, 1976, and the date of the order of the Appellate Tribunal dated 14th July, 1978, could be excluded. But when there is no order of the Commercial Tax Officer under sub-section (4) of section 14 with respect to the turnover of Rs. 53,08,954.83, the question of exempting any period under sub-section (7) of section 14 does not arise. Sub-section (7) of section 14 merely deals with the period which can be excluded in computing the period of four years or six years, as the case may be, in respect of an assessment made under that section. It does not deal with what amount can be included or what amount can be brought to tax on the ground that it had escaped assessment or what amount can be brought to tax on the ground that it had escaped assessment or exemptions were granted incorrectly. For that purpose, one has to look to sub-section (4) of section 14 and any such proceeding has to be initiated as laid down by that sub-section, by issuing a notice to the dealer. Notwithstanding the fact that a notice was issued on 19th March, 1976, proposing to include Rs. 7,89,385.01, which had escaped turnover, if, within a period of four years from the date of service of the assessment order on the dealer under section 14(1), any additional turnover was, in the opinion of the Commercial Tax Officer, liable to be brought to tax or any turnover was wrongly exempted from tax and must be brought to tax, perhaps it would have been within his powers to issue another notice. The power to issue a notice under sub-section (4) of section 14 in respect of turnovers which have escaped assessment may not be exhausted until the period of four years from the date of service of the original order of assessment on the dealer under section 14. When once that period of four years expires, we do not see how, by reporting to sub-section (7) of section 14, such a turnover could be proposed to be brought to tax. In respect of a proceeding initiated within a period of four years, there was a remand order by the Appellate Tribunal. All that sub-section (7) enables the Commercial Tax Officer is to complete the assessment under sub-section (4) of section 14 within a period of four years from the date of the service of the original order on the dealer and in computing the period of four years, the period between the date of his assessment order under section 14(4) and the date on which that order was set aside may be excluded. It is necessary to note that sub-section (7) of section 14 lays emphasis on the words 'when an assessment order is set aside'. It is only then that the question of excluding the period spent between the date of that assessment order and the date on which it is set aside arises. In this case the date of the assessment order is 19th March, 1976, and it related to Rs. 7,89,385.01. Since it is this order that is set aside, it is in respect of this turnover that the period has to be excluded. There was never any proceeding with respect to the amount of Rs. 53,08,954.83, now proposed to be brought to tax under sub-section (4) of section 14. Hence no question of excluding any period for that purpose arises.

17. In view of the above discussion, it must be held that the impugned notice, in so far as it proposes to bring to tax the sum of Rs. 53,08,954.83, which, according to the Commercial Tax Officer, was wrongly exempted from tax earlier, is barred by time and the Commercial Tax Officer has no jurisdiction to issue a notice under sub-section (4) of section 14 beyond a period of four years. That part of the notice cannot be sustained. However, in respect of the turnover of Rs. 7,89,385.01, since the period of four years after excluding the period envisaged by sub-section (7) of section 14 has not expired, no exception can be taken and the same can be completed within the said period.

18. It is however faintly argued by Sri Anantha Babu, the learned counsel for the petitioner-dealer, that since the notice is a composite notice, it must be quashed. We are however, unable to agree with this contention. A perusal of the impugned notice would show that these two items, one of Rs. 7,89,385.01 and the other of Rs. 53,08,954.83, comprising of three sub-items, are clearly severable. There is no reason why the entire notice should be quashed.

19. We, therefore, quash the notice in so far as it relates to the sum of Rs. 53,08,954.83. The Commercial Tax Officer may complete the proceedings in accordance with law in respect of the turnover of Rs. 7,89,385.01. It is declared that the impugned notice proposing to include Rs. 53,08,954.83 in the taxable turnover is clearly barred by limitation and the Commercial Tax Officer has no jurisdiction to proceed with the same.

20. The writ petition is accordingly allowed in part with costs. Advocate's fee Rs. 250.

21. Sri. J. V. Suryanarayana, the learned Government Pleader, makes an oral request for grant of leave to appeal to the Supreme Court. We are unable to certify that this matter involves such substantial question of law of general importance as requires the consideration of the Supreme Court or that it is otherwise a fit case for granting leave. The oral request is, therefore, rejected.

22. Petition partly allowed.


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