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The State of Andhra Pradesh Vs. J. Papaiah Ch. Simhachalam Company - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case Number T.R.C. No. 4 of 1969
Judge
Reported in[1972]29STC279(AP)
AppellantThe State of Andhra Pradesh
RespondentJ. Papaiah Ch. Simhachalam Company
Appellant Advocate Government Pleader for sales tax cases
Respondent Advocate T. Ramam, Adv. for N. Ramamohana Rao, Adv.
Disposition Petition dismissed
Excerpt:
.....by the respondent-assessee on grounds among others that the revisional powers exercised by the deputy commissioner were not exercised suo motu but were put in motion on an office note put up by the staff and that the exercise of revisional powers under section 20 of the andhra pradesh general sales tax act (hereinafter called the act) on the basis of an office note 'is clearly contrary to the spirit of the provisions of section 20 and therefore the assessment order made by the deputy commissioner was against the statutory provisions'.the other ground on which the appeal was allowed was that the deputy commissioner even before he heard the objections of the respondent-assessee to the show cause notice made up his mind to revise the assessment as is borne out by his letter to the joint..........by the respondent-assessee on grounds among others that the revisional powers exercised by the deputy commissioner were not exercised suo motu but were put in motion on an office note put up by the staff and that the exercise of revisional powers under section 20 of the andhra pradesh general sales tax act (hereinafter called the act) on the basis of an office note 'is clearly contrary to the spirit of the provisions of section 20 and therefore the assessment order made by the deputy commissioner was against the statutory provisions'. the other ground on which the appeal was allowed was that the deputy commissioner even before he heard the objections of the respondent-assessee to the show cause notice made up his mind to revise the assessment as is borne out by his letter to the.....
Judgment:

Obul Reddi, J.

1. The State has preferred this revision against the order of the Sales Tax Appellate Tribunal in Tribunal Appeal No. 742/67.

2. The Tribunal allowed the appeal preferred by the respondent-assessee on grounds among others that the revisional powers exercised by the Deputy Commissioner were not exercised suo motu but were put in motion on an office note put up by the staff and that the exercise of revisional powers under Section 20 of the Andhra Pradesh General Sales Tax Act (hereinafter called the Act) on the basis of an office note 'is clearly contrary to the spirit of the provisions of Section 20 and therefore the assessment order made by the Deputy Commissioner was against the statutory provisions'. The other ground on which the appeal was allowed was that the Deputy Commissioner even before he heard the objections of the respondent-assessee to the show cause notice made up his mind to revise the assessment as is borne out by his letter to the Joint Secretary, Board of Revenue, with the result that the well-known rule of audi alteram partem has been violated thus resulting in manifest injustice to the respondent-assessee.

3. The Government Pleader for sales tax cases has assailed the order under revision on the ground that the Tribunal was in error in observing that the revisional authority cannot be said to have acted suo motu when he acts on information furnished to him by the office or other sources and the interpretation placed upon the-words 'suo motu' by the Tribunal is not correct in law and does not accord with the accepted interpretation of that expression. It is also sought to be contended that the Tribunal was not justified in observing that the Deputy Commissioner had pre-judged the issue even before he heard the respondent-assessee. The order is sought to be sustained by Mr. T. Ramam, appearing for the respondent, relying upon the findings recorded by the Tribunal. To appreciate the contentions put forth it is necessary to state the facts leading up to the filing of the revision.

4. The respondent is a firm by name Messrs J. Papaiah Ch. Simhachalam Company, Rajahmundry, carrying on business as commission agents for sale of potatoes, onions, garlic, ginger etc. It submitted its returns on the turnover for the year 1962-63 showing a net turnover of Rs. 1,45,816.27. Though the total turnover was more than Rs. 26,00,000, a major part of it was commission agency business in respect of which exemption was claimed and granted. The net turnover determined by the Commercial Tax Officer was Rs. 2,05,876.35. A sum of Rs. 50,000 was included in both the gross and the net turnovers as estimated turnover of gunnies on the ground that the respondent sold the goods packed in gunnies but did not show the sales of gunnies separately. The respondent preferred an appeal disputing the estimated turnover of gunnies and the appeal was allowed by the Assistant Commissioner. Subsequently the Deputy Commissioner, Commercial Taxes, Kakinada, in exercise of his powers under Section 20 of the Act issued a notice to the respondent proposing to revise the order of the Assistant Commissioner on the ground that the Assistant Commissioner went wrong in holding that the turnover relating to gunny bags was not exigible to tax. On receipt of the objections from the respondent the Deputy Commissioner passed an order adding the estimated cost of the gunnies to the turnover as was done by the assessing authority. This order was carried in a further appeal to the Sales Tax Appellate Tribunal which reversed the order of the Deputy Commissioner for the reasons already stated above. We may now read Section 20 of the Act which empowers a Deputy Commissioner also to act suo motu in so far as it is material for the purpose of the case :

20. (1) The Board of Revenue may suo motu call for and examine the record of any order passed or proceeding recorded by any authority, officer or person subordinate to it, under the provisions of this Act, including Sub-section (2) of this section, for the purpose of satisfying itself as to the legality or propriety of such order or as to the regularity of such proceeding and may pass such order in reference thereto as it thinks fit.

(2) Powers of the nature referred to in Sub-section (1) may also be exercised by the Deputy Commissioner and the Commercial Tax Officer in the case of orders passed or proceedings recorded by authorities, officers or persons subordinate to them....

(3) In relation to an order of assessment passed under this Act, the powers conferred by Sub-sections (1) and (2) shall be exercisable only within such period not exceeding four years from the date on which the order was served on the dealer, as may be prescribed.

(4) No order shall be passed under Sub-section (1) or Sub-section (2) enhancing any assessment unless an opportunity has been given to the assessee to show cause against the proposed enhancement....

5. The scope of Section 20 of .the Act is this : The Board of Revenue is empowered to act suo motu and revise any order or proceeding recorded by any of its subordinate authorities by calling for and examining the records. The power to act suo motu and revise the order of an officer subordinate to a Deputy Commissioner is also conferred upon the Deputy Commissioner, the only limitation or restriction in the exercise of the power either by the Board of Revenue or the Deputy Commissioner being subject to the period of limitation prescribed, that no order in revision enhancing an assessment shall be made unless the assessee had been afforded an opportunity of being heard against the proposed assessment. That the Deputy Commissioner can act suo motu or on his own motion and revise the assessments made by his subordinates is not in dispute provided he follows the procedure laid down in Sub-sections (3) and (4) of Section 20 of the Act, What is questioned by the respondent is that the Deputy Commissioner, having regard to the language of Sub-section (2) of Section 20 of the Act, cannot rely upon the briefing of the office or the office note prepared by the members of his staff and that he should personally examine every assessment order and come to his own independent judgment before he exercises his powers to revise an assessment order made by a subordinate officer. There is no denying the fact that the members of the staff of the Deputy Commissioner appointed specially to assist him have gone through the assessment order passed by the Assistant Commissioner in appeal and put up a note pointing out that the Assistant Commissioner was in error in allowing the appeal preferred by the respondent. The Deputy Commissioner agreed with what was pointed out in the 'note' prepared by his staff and then issued a notice to the respondent to show cause why the order of the Assistant Commissioner should not be revised. The Tribunal was of the view that the procedure adopted, viz., the office staff preparing a brief to enable the Deputy Commissioner to issue a notice, cannot be said to be an action taken by him on his own motion or suo motu as that would not disclose that the Deputy Commissioner had applied his mind to the order of the Assistant Commissioner before he thought fit to issue a notice to the assessee. In other words, what is contended by the respondent is that the Deputy Commissioner simply adopted the opinion recorded by the members of his staff without applying his mind and therefore it is contrary to the requirements of Section 20 of the Act. We are unable to agree with the view adopted by the Tribunal that every order of a subordinate officer should be examined personally by the Deputy Commissioner himself without the aid of the members, of his staff and that in no case the members of the staff should prepare a note or place any material before him so as to enable him to take action under Section 20 of the Act. The question is not whether the members of the office staff prepared a factual note or whether they pointed out that a particular order of an assessing authority or an Assistant Commissioner was erroneous, but whether the Deputy Commissioner had applied his mind to the facts placed before him before he issued a show cause notice as required under Sub-section (4) of Section 20 of the Act. The reasoning of the Tribunal, we may say, does not at all appeal to us, for if we accept the reasons recorded by the Tribunal, it would only mean that the Deputy Commissioner should himself go through every order of an inferior authority whether the number of such orders is to a tune of 10,000 or 20,000. It is brought to our notice by the Government Pleader that on an average there will be not less than 10,000 dealers within the territorial jurisdiction of a Deputy Commissioner and if the reasoning of the Tribunal is to be accepted by us, it would be impossible for the Deputy Commissioner to go through every assessment order relating to the 10,000 or more dealers. It is because there are thousands of dealers and for proper exercise of control over the Assistant Commissioners and the assessing authorities that the post of a Deputy Commissioner is created with jurisdiction over five districts. It is the duty of the office staff for the sake of convenience and for easy disposal of administrative work to give a brief note of each assessment order pointing out what appears to them to be prima facie defects to enable the Deputy Commissioner to take a decision as to whether it is a case which calls for intervention by him under Section 20 of the Act or not. The fact that the Deputy Commissioner approves such a note does not amount to saying that he (the Deputy Commissioner) had not applied his mind but had only put his rubber stamp as a token of approval and that in effect and substance the power was exercised by the members of the staff. The fallacy of the reasoning of the Tribunal would be apparent from the following illustration : The Government may under Section 64A of the Motor Vehicles Act of its own motion or on an application made to it call for the records of any order passed or proceeding taken by any authority or officer subordinate to it for the purpose of satisfying itself as to the legality, regularity or propriety of such order or proceeding and after examining such records may pass such order in reference thereto as it thinks fit. The language of this provision, except that the Government in addition can act on an application made to it, is similar to, if not almost identical with, the language employed in Section 20(1) of the Act. To say that the State Government cannot act on a note prepared by its Secretariat would amount to denying the State Government the services of its Secretariat staff which is appointed solely for the purpose of putting up notes for the proper exercise of revisional powers of the Government. Therefore an office note put up by the members of the staff even if some prima facie errors are pointed out is nothing more than a factual statement of the case leaving the decision to the concerned authority. In this case that is all that the office did. The fact that the office note made out a prima facie case makes no difference, but the ultimate authority to decide whether action should be taken or not is the Deputy Commissioner. The fact that the Deputy Commissioner on the basis of the office note directs show cause notice to the assessee does not cause any prejudice to him, for he is afforded an opportunity to make his representation and it is only after that in the light of the objections raised by him that a final order is passed by the Deputy Commissioner against which an appeal is also provided under Section 21 of the Act to the Appellate Tribunal.

6. The words 'suo motu' only mean 'on his own motion' as opposed to 'on an application by a party'. Sometimes audit objections are raised either by internal audit made by the department or by the audit made by the audit department and to say that the Deputy Commissioner cannot take note of irregularities and objections pointed out by it in order to exercise his suo motu powers would be to defeat the very purpose of auditing the office of the Deputy Commissioner. The Deputy Commissioner would be free to act on any information that is supplied to him or that comes to his knowledge as a result of his own enquiries. All that is required of him is that he should apply his mind to the information that he receives and if he is prima facie satisfied, then his action is not liable to be questioned.

7. The two cases of this court relied upon by the learned counsel for the respondent, Kalluri Bheemalingam and Ors., In re [1967] 19 S.T.C. 116 and Sree Ramachandra Ginning and Oil Mills v. State of A.P. [1967] 19 S.T.C. 354, do not at all render any assistance to the respondent for the reason that the learned Judges were only concerned with the question whether Sub-section (1) of Section 20 of the Act provides for a right of revision at the instance of an assessee. There is a bar to such a revision at the instance of the assessee and, therefore, the learned Judges held that Section 20(1) of the Act does not provide for a right of revision at the instance of an assessee, but only provides for a revision by the Board of Revenue suo motu.

8. The power of revision suo motu or on his own motion is conferred on the Deputy Commissioner to safeguard the revenue of the State and the interests of the State are as much the interests of the assessee too. As pointed out by Ramaswami, J., of the Madras High Court in East Asiatic Company (India) Ltd. v. State of Madras [1956] 7 S.T.C. 299 at p. 315:

The jurisdiction of suo motu revision is not cribbed and cabined or confined by conditions and qualifications. The purpose of such an amplitude being given to suo motu revisions appears to be as much to safeguard the interests of the exchequer as in the interests; of the assessee. The State can never be the appellant and if there is an order against the State to its prejudice, and naturally the assessee in whose favour the order is passed does not prefer an appeal, the State would suffer unless its interests are safeguarded by the exercise of such supervisory jurisdiction as the one given to the authorities above-mentioned.

9. The Andhra Pradesh General Sales Tax Act, it should be borne in mind, does not give a right of appeal to the State against an assessment order or the first appellate order of an Assistant Commissioner, even if they be grossly erroneous, both on questions of fact and law. It is with a view to control officers, who may be prone to err in making assessments and to safeguard the interests of the State in the matter of collection of the revenue that is legally due to it, that the supervisory or revisional power is conferred upon the authorities specified in Section 20 of the Act. Where the Board of Revenue exercises the revisional jurisdiction it has naturally to be assisted by its secretaries or those subordinate to it for the purpose of getting factual statement or a gist of the orders passed by the subordinate officers. In the same way the Deputy Commissioner too has to be assisted in the discharge of his function by his subordinates and if the subordinate officer prepares a factual note or a gist of the order and points out the defects or errors in any orders, it cannot be said that any further action taken by the Board of Revenue or by the Deputy Commissioner is not on its or his own motion but would amount to initiation of proceedings by a subordinate member of the staff. As already adverted to by us, it will be an impossible task to expect thousands of orders to be perused either by the Board of Revenue or by the Deputy Commissioner unless there is a machinery to assist them by giving them a brief summary or a factual statement of the case. It is true that the power conferred upon the Deputy Commissioner under Section 20 of the Act is not administrative but quasi-judicial. It is for that reason that Sub-section (4) of the above section provides a notice being issued and an opportunity being afforded to the assessee before final orders are passed by the Deputy Commissioner or the Board of Revenue. It is too much to say that the Deputy Commissioner for the reason that he peruses the note prepared by the officer has abdicated the functions assigned to him under Section 20 of the Act. The test is 'has he applied his mind', and if he has applied his mind, the question of abdication of his functions does not arise. We are unable to agree with the Tribunal that the Deputy Commissioner did not act suo motu or on his own motion when he acted under Section 20 of the Act.

10. It is true that the power conferred upon the Deputy Commissioner under Section 20 of the Act is not administrative but quasi-judicial. What is expected of the Deputy Commissioner is that he should bring to bear an unbiased mind, consider impartially the objections raised by the aggrieved party and decide the dispute according to the procedure laid down consistent with the principles of natural justice. It is because he was sitting as a quasi-judicial authority he (the Deputy Commissioner) issued a notice and called for objections from the respondent. But the Deputy Commissioner committed a grave error and an act of impropriety in rendering it impossible to the respondent to contest before him that there was absolutely no warrant to revise the order of the Assistant Commissioner, by pre-judging the issue as is manifest from the letter that he addressed to the Joint Secretary, Board of Revenue. The relevant portion of the letter extracted in the Tribunal's order reads :

I enclose a copy of the show cause notice issued to the dealers proposing revision of the assessment.

ii. The revision proposed will be confirmed on receipt of reply from the dealers and final orders will be passed by... 15-3-1967. The matter may, therefore, be closed at your end.

11. We are constrained to observe that the Deputy Commissioner by writing this letter had failed to discharge his statutory functions assigned to him, but was willing to make himself a tool in the bands of the Board of Revenue forgetting the fact that while exercising his powers under Section 20 of the Act he was acting as a quasi-judicial authority and not as a subordinate to the Board of Revenue. We cannot but deprecate and condemn the way the Deputy Commissioner conducted himself by making up his mind even before he received the objections from the assessee in reply to his show cause notice. He has failed to bring to bear an unbiased mind and consider the issue before him impartially, thus failing to discharge the elementary judicial function. The Deputy Commissioner should not be oblivious to the fact that power under Section 20(2) of the Act is conferred upon him to revise an assessment made by an authority or an officer subordinate to him and that he cannot surrender his position to the Board of Revenue which does not come into the picture. As pointed out by the Supreme Court in B. Rajagopala Naidu v. S.T.A. Tribunal A.I.R. 1964 S.C. 1573:

It is of the essence of fair and objective administration of law that the decision of the Judge or the Tribunal must be absolutely unfettered by any extraneous guidance by the executive or administrative wing of the State. If the exercise of discretion conferred on a quasi-judicial tribunal is controlled by any such direction, that forges fetters on the exercise of quasi-judicial authority and the presence of such fetters would make the exercise of such authority completely inconsistent with the well-accepted notion of judicial process.

12. By drawing the attention of the Deputy Commissioner to the observation of the Supreme Court we do not mean to say that in this case the Board exercised its influence, but the Deputy Commissioner seems to have been under a misapprehension that the Board would be pleased to hear from him if he told the Board that he had already made up his mind in the matter pending before him. We hope there will be no repetition of such performances by quasi-judicial Tribunals functioning under the Andhra Pradesh General Sales Tax Act.

13. The Tribunal found on the question whether the revision made by the Deputy Commissioner was justified, that there is no justification whatsoever for the revision made by the Deputy Commissioner. In view of the finding of fact recorded by the Tribunal that there is no material at all to imply an implied contract to sell the gunnies, we do not propose to interfere with that finding.

14. In the result the revision is dismissed subject to the finding recorded by us that the construction placed by the Tribunal on the expression 'suo motu' occurring in Section 20 of the Act is erroneous in law. No costs. Advocate's fee Rs. 100.


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