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Menta Narasimhaswamy and Company Vs. the State of Andhra Pradesh - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case NumberTax Revision Case No. 59 of 1979
Judge
Reported in[1983]54STC6(AP)
ActsMadras General Sales Tax Act - Sections 14(1), 14(4), 20, 20(1) and 20(2); Madras General Sales Tax Rules - Rules 14(2), 17(1), 17-C and 17-D; Andhra Pradesh General Sales Tax Act - Sections 20;
AppellantMenta Narasimhaswamy and Company
RespondentThe State of Andhra Pradesh
Appellant AdvocateS. Dasaratharama Reddi, Adv.
Respondent AdvocateGovernment Pleader for Commercial Taxes
Excerpt:
.....act, rules 14 (2), 17 (1), 17-c and 17-d and section 20 of andhra pradesh general sales tax act - deputy commissioner invoked his powers under section 20 (2) and revised tax officer's order - petitioner contended that deputy commissioner's order must be related to section 14 (4) and cannot be related to section 20 (2) - whether amplitude of language used in section 20 in relation to revisional powers can be whittled down by reference to section 14 (4) which specifically relates to power of an assessing authority who has already made an assessment but not of revisional authority - revisional power cannot be whittled down - these are two independent and distinct powers - one to be exercised by assessing authority and other by revising authority - this position is no way altered by..........at 3 per cent only, which is evidently contrary to law. when this fact come to the notice of the deputy commissioner, he invoked his powers under section 20(2) of the act and revised the c.t.o.'s order and subjected the said turnover to tax at the rate of 5 per cent. on appeal, the tribunal held that inasmuch as the petitioner has not complied with the requirements of rule 17-d (which at the relevant time was numbered as 17-c), the c.t.o. was in error in charging tax straightaway at 3 per cent; it accordingly held that the deputy commissioner was right in revising the order of the c.t.o. 3. in this revision, mr. dasaratharama reddi's contention is that the deputy commissioner's order really falls under, and must be related to, section 14(4) of the act and cannot be related to section.....
Judgment:

Jeevan Reddy, J.

1. The main contention urged by Mr. Dasaratharama Reddi in this tax revision case is one of limitation. The petitioner is a dealer in paddy and rice. For the assessment year 1970-71, it was assessed on a net turnover of Rs. 10,48,999.02. While completing the assessment, the C.T.O. subjected the turnover in a sum of Rs. 3,18,597.85, pertaining to paddy, to tax at 3 per cent. During the relevant year, paddy was exigible to tax at the rate of 5 per cent under entry 8 to the Second Schedule, which read as follows :

------------------------------------------------------------------------ Description of goods Point of levy Rate of tax ------------------------------------------------------------------------ 'Entry 8 : Paddy At the point of 5 paise in the1st purchase in rupee providedthe State. that a rebateof 2 paise inthe rupee shallbe allowed onthe paddypurchased andconsumed inthe Statein accordancewith such rulesas may beprescribed.' ------------------------------------------------------------------------

2. According to the above entry, the rate of tax was 5 paise on the first purchase of paddy in the State, but a rebate of 2 paise in the rupee was allowed on the paddy purchased and consumed in the State in accordance with the prescribed rules. According to rule 17-D, every dealer in paddy was entitled to be allowed a rebate of two paise in the rupee on the paddy purchased and consumed in the State, provided that the turnover of paddy is included in his total turnover and tax paid by him thereon at the rate of five paise in the rupee on the purchases of such paddy. In other words, according to this rule, a dealer must first pay tax at the rate of 5 per cent and then claim rebate and if he satisfies the appropriate authority by producing the necessary material that paddy has been consumed within the State, he will entitled to a rebate of 2 paise. In this case, however, the C.T.O. straightway levied tax at 3 per cent only, which is evidently contrary to law. When this fact come to the notice of the Deputy Commissioner, he invoked his powers under section 20(2) of the Act and revised the C.T.O.'s order and subjected the said turnover to tax at the rate of 5 per cent. On appeal, the Tribunal held that inasmuch as the petitioner has not complied with the requirements of rule 17-D (which at the relevant time was numbered as 17-C), the C.T.O. was in error in charging tax straightaway at 3 per cent; it accordingly held that the Deputy Commissioner was right in revising the order of the C.T.O.

3. In this revision, Mr. Dasaratharama Reddi's contention is that the Deputy Commissioner's order really falls under, and must be related to, section 14(4) of the Act and cannot be related to section 20(2). His contention is that inasmuch as the Deputy Commissioner's order is beyond 4 years from the end of the relevant assessment year, it is barred by limitation.

4. For appreciating the contention, it is necessary to notice the relevant provisions in the Act. Section 14(1) provides for making an assessment, if the assessing authority is satisfied about the correctness and completeness of the return. If he is not so satisfied, he may make a best judgment assessment. Sub-section (4) of section 14 deals with what is generally known as escaped assessment. In cases 'where the whole or any part of the turnover of business of a dealer has escaped assessment to tax, or has been under-assessed or assessed at a rate lower than the correct rate, ........... the assessing authority may, after issuing a notice to the dealer and after making such inquiry as he may consider necessary, by order', determine to the best of his judgment the escaped assessment and assess the turnover so determined; in cases where the correct rate has not been applied, he can apply the correct rate and where exemption has been wrongly granted, can correct it. This action however has to be taken within the time prescribed under sub-section (4), which at the relevant time provides two periods of limitation : in cases where escapement of assessment or under-assessment or assessment at a lower rate, as the case may be, had occurred on account of the failure of the dealer to disclose the turnover or any other particulars correctly, action could be taken within six years, but in all other cases, action had to be taken within four years. Now, coming to section 20, sub-section (1) thereof, vests the power of revision in the Commissioner. The Commissioner is empowered to suo motu call for and examine the record of any order passed by any authority, officer or persons subordinate to him under the provisions of the Act for the purpose of satisfying himself as to the legality or property of such order or as to the regularity of such proceeding and pass such order thereon as he thinks fit. Sub-section (2) empowers the Deputy Commissioner as well as the Commercial Tax Officer to exercise the power under sub-section (1) in cases of orders passed by the authorities, officers or persons subordinate to them. Sub-section (3) provides the period of limitation within which the power under sub-section (1) or for that matter sub-section (2), has to be exercised. It says that the power has to be exercised within a period of 4 years of the service of the order to be revised.

5. Now, the contention of Mr. Dasaratharama Reddi is that inasmuch as the present case is one where a lower rate than the correct rate was charged and that is sought to be rectified, the case squarely falls under sub-section (4) of section 14 and must be taken within the period of limitation prescribed in sub-section (4-A) of section 14. He submits that, in such a case, resort to revisional power under section 20(2) is not permissible. For understanding this argument, it is necessary to refer to sub-section (4-C) of section 14 which confers power under sub-section (4) of section 14 upon the Deputy Commissioner as well. It is with reference to this sub-section that the learned counsel contends that the Deputy Commissioner must be deemed to have exercised his power under sub-section (4) read with sub-section (4-C) of section 14, but not his power under section 20(2). For answering the above contention, it is necessary to delineate and distinguish the fields occupied by section 14(4) and section 20(1), respectively. In our opinion, both these powers are independent and distinct powers and there is no room for confusing one for the other. Section 20 contemplates revising the order or proceeding of a subordinate authority, on the material available at the time of assessment. Under section 20, the legality, propriety and regularity of an order is examined on the material upon which it was passed. Of course, in exercise of this power, the revising authority can direct such subordinate authority to make further enquiry as it may direct. Whereas, the power under sub-section (4) of section 14 deals with what is generally known as escaped turnover. This power is invoked, when on the basis of some fresh material or information, not available at the time of making the assessment, it appears that certain turnover or business has escaped assessment, or that it has been underassessed or assessed at a lower rate. The power under section 14(4) cannot, in short, be exercised for reviewing the order, on the same material. As Rajamannar, C.J., has observed in State of Madras v. Louis Dreyfus and Company Ltd. [1955] 6 STC 318 (FB) dealing with similar provisions under the Madras General Sales Tax Act :

'No doubt in a general sense both rule 14(2) as well as rule 17(1) serve a common purpose, viz., to gather revenue which has improperly escaped but while rule 14(2) is directed to the correction of improper or illegal assessment orders which have levied less or more tax than justified, rule 17(1) lays emphasis on escaped turnover. The distinction between the two provisions might be expressed by saying that rule 14(2) deals with escaped assessments and rule 17(1) with escaped turnovers, notwithstanding that the latter also would mean that a lesser amount of tax has been levied. So understood the two provisions would be completely reconcilable and the two jurisdictions - to revise assessments and to reopen them - would each be assigned to the proper authority.

The language of rule 17(1) is consistent with this construction. The 'escape' that serves as the foundation of the jurisdiction to reopen an assessment is that of 'turnover' and not, be it noted, an assessment. 'Turnover' escapes when it is not noticed by the officer either because it is not before him by reason of an inadvertence, omission or deliberate concealment on the part of the assessee, or because of want of care on the part of the officer the turnover though in the books has not been taken notice of. This would be the natural and normal meaning of the expression 'turnover which has escaped' in rule 17(1).'

6. We may mention that rule 14(2) of the Madras Rules corresponds to section 20(1), while rule 17(1) corresponds to section 14(4) of our Act.

7. This decision was followed and applied by a Full Bench of this Court in Pitchaiah v. State [1969] 24 STC 390 (FB); ILR 1970 AP 252 (FB). In that case, the assessment was completed by the Deputy Commercial Tax Officer which was later on revised by the Commercial Tax Officer. Appeals preferred by the assessee were dismissed. The first contention urged before this Court was that the action of the C.T.O. must be held to be one taken under section 14(4) but not under section 20(2). This was negatived by the Full Bench holding that the action taken by him must be properly related to his revisory power under sub-section (2) read with sub-section (1) of section 20. The assessee's next contention, which is relevant for our purpose, was that the power under section 20 was not available to increase the taxable turnover and that such an increase amounts to redetermination of the turnover to the best of judgment which cannot be done under section 20. On the other hand, it was contented for the State that the revisional power under section 20 ought not to be curtailed or whittled down by reference to section 14. The Full Bench posed the question arising before them in the following words :

'The question for consideration is, whether the amplitude of the language used in section 20 in relation to revisional powers can be whittled down by a reference to section 14(4), which specifically relates to the power of an assessing authority who has already made an assessment but not of a revisional authority.'

8. On a consideration of the several decisions of the Supreme Court and the Madras High Court, the Full Bench answered the question holding that the revisory power cannot be so whittled down and further that they are two independent and distinct powers - one to be exercised by the assessing authority and the other by the revising authority. This position is, in our opinion, in no way altered by the introduction of sub-section (4-C) in section 14, which empowers the authorities higher to the assessing authorities to exercise the power under sub-section (4) of section 14. Following the above Full Bench decisions, it must be held that the order of the Deputy Commissioner, which is not only one passed avowedly under section 20 of the Act, but is also based on the same material and record upon which the assessment order is based, cannot be treated as one under section 14(4) nor can it be subjected to the period of limitation prescribed in sub-section (4-A) of section 14, as it then stood. Merely because the rate of tax is revised or under-assessment is rectified, the action need not necessarily be related to section 14(4). The proper basis to distinguish these two powers as pointed out hereinabove is to see whether the order is revised on the basis of the material already on record or it is based upon some fresh information or material received or gathered since the passing of the order sought to be revised.

9. In Sri Balaganesh Textiles v. Commercial Tax Officer [1978] 41 STC 445, a Bench of this Court observed that while exercising the revisory power, the revising authority would be restricted to the examination of the record and that the legality, propriety or regularity of the order shall have to be determined on such record already available. Inasmuch as in that case it was found that the revisional order was based upon certain facts which were not disclosed by assessment records, it was held that the order cannot be related to or justified under section 20 of the Act, but must be related to section 14(4).

10. Mr. Dasaratharama Reddi, the learned counsel for the petitioner, however, relied upon S.M. Brothers v. Deputy Commissioner of Commercial Taxes [1977] 39 STC 182 and an unreported decision of this Court in T.R.C. Nos. 68 of 1976 and 8 of 1977 dated 31st October, 1977 [Reported as State Representative before S.T.A. Tribunal, Hyderabad v. National Rubber . [1978] 42 STC 392], in support of his proposition. In S.M. Brothers v. Deputy Commissioner of Commercial Taxes [1977] 39 STC 182, the question was whether seat covers are accessories or not. This aspect was not at all considered by the assessing authority who subjected the goods to a lower rate of tax. That was sought to be rectified by the Deputy Commissioner. It was held by the Bench following an earlier decision of this Court in State of A.P. v. Sri Rama Laxmi Satyanarayana Rice Mill [1975] 35 STC 601 that :

'..... the reopening would fall under section 14(4) because at the time when the matter was originally before the Sales Tax Officer, he had not considered whether the seat covers were accessories or not and that question was not agitated before him. Under these circumstances, it cannot be said that the decision of the Sales Tax Officer was wrong which needed revision or which can be revised under section 20 of the A.P. General Sales Tax Act. The cases would therefore fairly and sequarely fall under section 14(4), and therefore, the bar of limitation under section 14(4-A) would clearly apply to Writ Petitions Nos. 4570 and 4659 of 1975.....'

11. Unfortunately, neither the decision of the Full Bench in Pitchaiah v. State [1969] 24 STC 390 (FB); ILR 1970 AP 252 (FB) nor the earlier Full Bench decision of the Madras High Court appears to have been brought to the notice of the Bench which led the Bench to make the above observations. We may also mention that the decision in State of A.P. v. Sri Rama Laxmi Satyanarayana Rice Mill [1975] 35 STC 601, which too lays down the principle that a question not considered by the assessing authority cannot be revised under section 20 was also arrived at without noticing the judgment of the Full Bench. In our view, the two Full Bench decisions referred to above have clearly demarcated the respective fields occupied by section 14(4) and section 20. The two Bench decisions not having referred to the same and also because they lay down a principle which does not appear to be consistent with the Full Bench decisions, cannot be followed.

12. The next decision relied upon by Mr. Dasaratharama Reddi is in State Representative before S.T.A. Tribunal, Hyderabad v. National Rubber . (T.R.C. Nos. 68 of 1976 and 8 of 1977 dated 31st October, 1977) [1978] 42 STC 392. In this decision too, there is no reference to either of the Full Bench decisions. It was held that because the Deputy Commissioner corrected the rate of tax, his order must be related to section 14(4) and not to section 20. For the reasons which have been recorded by us with respect to State of A.P. v. Sri Rama Laxmi Satyanarayana Rice Mill [1975] 35 STC 601 and S.M. Brothers v. Deputy Commissioner of Commercial Taxes [1977] 39 STC 182, this decision too cannot be said to have been correctly decided.

13. We accordingly hold that the period of limitation prescribed in sub-section (4-A) of section 14, as it stood at the relevant time, is not at all applicable in the instant case. The proper period of limitation is the one prescribed by sub-section (3) of section 20, and admittedly, the order has been passed within the period of limitation prescribed by section 20(3).

14. Mr. Dasaratharama Reddi then contended that on the facts and circumstances of the case, the assessee must be now given an opportunity to apply for rebate as contemplated by entry 8 to the Second Schedule, as it stood at the relevant time, and the relevant rules in that behalf. We feel that such a course must be left open to the assessee in the facts and circumstances of the case. We therefore observe that it shall be open to the petitioner to apply to the assessing authority for rebate in accordance with law and if and when such application is made, the same shall be considered on merits and in accordance with law.

15. The T.R.C. is accordingly dismissed, subject to the above observations. No costs. Advocate's fee Rs. 250.


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