Skip to content


Jameel and Co. and ors. Vs. the Commercial Tax Officer - Court Judgment

LegalCrystal Citation
SubjectSales Tax;Limitation
CourtAndhra Pradesh High Court
Decided On
Case Number Writ Petition Nos. 2206, 2212 and 2215 of 1968
Judge
Reported in[1973]30STC321(AP)
AppellantJameel and Co. and ors.
RespondentThe Commercial Tax Officer
Appellant Advocate S. Dasaratharama Reddy, Adv.
Respondent AdvocateGovernment Pleader for sales tax cases
DispositionPetition dismissed
Excerpt:
- maximssections 2(xv) & 3(1) & (3): [v.v.s. rao, n.v. ramana & p.s. narayana, jj] ghee as a live stock product held, [per v.v.s. rao & n.v. ramana, jj - majority] since ages, milk is preserved by souring with aid of lactic cultures. the first of such resultant products developed is curd or yogurt (dahi) obtained by fermenting milk. dahi when subjected to churning yields butter (makkhan) and buttermilk as by product. the shelf life of dahi is two days whereas that of butter is a week. by simmering unsalted butter in a pot until all water is boiled, ghee is obtained which has shelf life of more than a year in controlled conditions. ghee at least as of now is most synthesized, ghee is a natural product derived ultimately from milk. so to say, milk is converted to dahi, then butter......sriramulu, j.1. the petitioners, in all the above three writ petitions, are dealers in groundnuts. during the year 1963-64 the petitioners effected sales of groundnuts in the course of inter-state trade and became liable to pay central sales tax under the central sales tax act, 1956, (hereinafter referred to as the act). none of the petitioners filed returns for the assessment year 1963-64 in respect of the said turnover. after issuing notices, the commercial tax officer made best judgment assessments against the petitioners in respect of the said turnover, which had; escaped assessments. all the assessments against the petitioners were made in march, 1968, i.e., after the expiry of three years but before the expiry of four years from the end of the assessment year 1963-64.2. in these.....
Judgment:

Sriramulu, J.

1. The petitioners, in all the above three writ petitions, are dealers in groundnuts. During the year 1963-64 the petitioners effected sales of groundnuts in the course of inter-State trade and became liable to pay Central sales tax under the Central Sales Tax Act, 1956, (hereinafter referred to as the Act). None of the petitioners filed returns for the assessment year 1963-64 in respect of the said turnover. After issuing notices, the Commercial Tax Officer made best judgment assessments against the petitioners in respect of the said turnover, which had; escaped assessments. All the assessments against the petitioners were made in March, 1968, i.e., after the expiry of three years but before the expiry of four years from the end of the assessment year 1963-64.

2. In these writ petitions, the petitioners challenge the validity and the legality of those sales tax assessments.

3. The learned counsel Sri Dasaratharama Reddy, appearing for the petitioners, raised two contentions before us. They are: (1) Rule 14-A(8) of the Central Sales Tax (Andhra Pradesh) Rules (hereinafter called the Rules) fixing the time-limit for making best judgment assessments in respect of escaped turnover, when read with Sub-section (2) of Section 9 and Sub-sections (3) and (4) of Section 13 of the Act goes beyond or is in excess of, the rule-making power of the State Government. Hence Rule 14-A(8) of the Rules is ultra vires and is void. (2) Assuming that Rule 14-A(8) of the Rules was validly made, the Act incorporates and assimilates into it the provisions of the General Sales Tax Act, which were in force in the State of Andhra Pradesh in the year 1956, when the Central Sales Tax Act, 1956, came into force. At the time when the Central Sales Tax Act, 1956, came into force, the Madras General Sales Tax Act, and the Rules made thereunder, were adopted by our State for application to Andhra area. Three years was the period fixed under those Rules for assessing the escaped turnover by making best judgment assessment. Since the assessments in question were made beyond the expiry of three years from the end of the assessment year 1963-64, they are without jurisdiction, time-barred and hence illegal and void.

4. The Central Sales Tax Act is a short enactment with a few sections. Section 6 of the Act is the main charging section. Sales effected in the course of inter-State trade are made liable to tax. Section 9(1) of the Act empowers the Central Government to levy tax in respect of sales in the course of inter State trade, but leaves the collection of tax so levied to the State, from which the movement of the goods commenced in respect of inter-State sales. The Central Government has not set up an independent and separate machinery or establishment of its own for collecting Central sales tax. Section 9(2) of the Act empowers the officers of the State Government, who are for the time being authorised to make assessments, reassessments, collect tax and enforce payment of general sales tax under the General Sales Tax Act in force in the State, to assess, reassess, collect and enforce payment of the Central sales tax, on behalf of the Central Government. For that purpose those State officials shall exercise all or any of the powers they possess under the general sales tax law in regard to those matters. Section 13 of the Central Sales Tax Act empowers the Central Government to make rules in regard to the matters specified in Clauses (a) to (g) of that sub-section. Section 13(3) empowers the State Government to make rules to carry out the purposes of the Act, not inconsistent with the Rules made by the Central Government under Sub-section (1) of Section 13 of the Act. In particular and without prejudice to the powers conferred under Sub-section (3), Sub-section (4) of Section 13 empowers the State Government to make rules for the purposes enumerated in Clauses (a) to (g) of that sub-section. In pursuance of the powers conferred on it under Sub-sections (3) and (4) of Section 13 of the Act, the State Government made the Central Sales Tax (Andhra Pradesh) Rules, 1957. The impugned Rule 14-A(8) reads as follows :

14-A. (8) If, for any reason, the whole or any part of the turnover of business of a dealer has escaped assessment to tax or has been under-assessed in any year, the assessing authority may after issuing a notice to the dealer and after making such inquiry as he considers necessary determine to the best of his judgment the correct turnover, and assess the tax payable on such turnover

(a) within a period of six years from the expiry of the year to which the tax relates, if any such event has occurred on account of the failure of the dealer to disclose the turnover or any other particulars correctly ;

(b) within a period of four years from the expiry of the year to which the tax relates, if any such event has occurred due to any other causes.

5. The argument of the learned counsel for the petitioners was that the provision fixing the period of limitation was a substantive law and not a mere rule of procedure. The impugned provisions of the Central Sales Tax Act have not fixed any time-limit for making best judgment assessments in respect of escaped turnover and so the State Government under its delegated powers cannot make a rule fixing the time-limit for making best judgment assessments in respect of escaped turnovers. Section 13(3) of the Act empowers the State Government to make rules to carry out the purposes of the Central Sales Tax Act. The purpose of the Central Sales Tax Act is to assess and collect the Central sales tax and that power did not include the power to fix any time-limit for making the assessments. Hence Rule 14-A(8) of the-Rules is in excess of the rule-making power of the State Government and is, therefore, illegal and void.

6. In order to decide whether Rule 14-A(8) of the Rules is within or beyond the rule-making power of the State Government, two questions have to be considered: (1) Whether the time-limits fixed under Rule 14-A(8) of the Rules are periods of limitation and form part of the substantive law or mere rules of procedure (2) Whether Rule 14-A(8) of the Rules is within the rule-making power conferred on the State Government by Section 13(3) or 13(4) of the Central Sales Tax Act ?

7. The substantive law defines the right and the remedy, while the law of procedure defines the mode and conditions of application of one to the other. If the provisions impair or destroy the right or remedy they will be substantive law. The procedure for making an assessment under the taxing statute cannot be considered as a statute for adjudication of a civil dispute. Tax proceedings are not in the nature of judicial proceedings between contesting parties. Sales tax authorities, who have got power to assess and recover tax are not judges deciding a litigation between a citizen and the State. They are administrative authorities, whose proceedings are regulated by a statute and whose function is to determine the taxable turnover and to assess it. The legislation insists setting up of a machinery to ascertain the taxable turnover and to assess it to tax. But that does not impress the procedure with the character of an action between the citizen and the State.

8. Their Lordships of the Supreme Court observed in S.S. Gadgil v. Lal & Co. [1964] 53 I.T.R. 231 (S.C.) that:

The period prescribed by Section 34 of the Income-tax Act for assessment is not a period of limitation. The' section in terms imposes a fetter upon the power of the Income-tax Officer to bring to tax escaped income.

9. In that case their Lordships were considering the nature of the time-limit fixed under Section 34 of the Indian Income-tax Act, 1922, for the purpose of reopening of an assessment and for making an assessment or revised assessment. Although that is a case under the Income-tax Act, still the principle that the time-limit within which the assessment should be made, fixed under the taxing law, is a fetter and not a period of limitation, is applicable to all proceedings under tax laws.

10. The question now under consideration before us also came up for consideration before a Full Bench of this Court in Allied Exports and Imports, Gudur v. State of Andhra Pradesh T.R.C. No. 25 of 1966. Gopal Rao Ekbote, J., speaking for the court, at page 190 of the judgment observed that:

This is plain because whether it is a question of limitation or a question of fetter on the jurisdiction, in either case it falls within the domain of adjective or procedural law and it cannot be argued that such fetter placed on the jurisdiction creates any sort of vested right in the assessee. Such fetter can always be relaxed by the Legislature. That any restriction or fetter. placed on jurisdiction is also a matter of procedural law can be seen from Lalitabai v. Dominion of India A.I.R. 1954 Bom. 527.

11. Even assuming that the time-limit imposed upon the powers of the assessing authorities to make the best judgment assessment in respect of escaped turnover within a particular time is not a fetter, but a period of limitation, still as held by a Division Bench of this Court in Employees' State Insurance Corporation v. Andhra Pradesh State Electricity Board (1970) 1 A.L.T. 20, it is sometimes an adjective law. Gopal Rao Ekbote, J., speaking for the court observed that: .

It will thus be clear that the law of limitation is not always a law of procedure, that is to say, a purely adjective law. In so far as it takes away or restricts the right to take legal proceedings it is a substantive law and not a procedural law.

12. The liability to pay Central sales tax arises as soon as sales are effected in the course of inter-State trade. That liability is independent of time but remains for all times. By fixing a time-limit a fetter is imposed on the jurisdiction of the taxing official that he cannot exercise that power after expiry of that time-limit. Since the tax proceedings are not actions or judicial proceedings between a citizen and the State, the imposition of a fetter On the powers and jurisdiction of the taxing officer, cannot be said to destory or abridge the right of an assessee. Rule 14-A(8) of the Rules is not, therefore, a substantive law, but is a rule of procedure, which falls within the domain of adjective law.

13. We will then consider whether Rule 14-A(8) of the Rules is within or beyond the rule-making power conferred upon the State under Section 13(3) and 13(4) of the Central Sales Tax Act. In Haji J. A. Kareem Sait v. Deputy Commercial Tax Officer [1966] 18 S.T.C. 370, a Division Bench of the Madras High Court observed as follows :

Power to assess escaped turnover is an original power, whether it is applied to a case of failure to make returns or reopening of an order of assessment already made in order to bring to tax what has escaped assessment. In either case, the power is part of and included in the power to make assessments. But it does not follow from it that by reason of the existence of such a power, the State Government could provide for limitation for exercise of the power to assess escaped turnovers by best judgment. No doubt limitation is procedural but it is also substantive. A rule covering those matters cannot, therefore, be made unless it be in exercise of specific conferment of enabling rule-making power.

14. The above observations were made by the learned Judges of the Madras High Court in considering the validity of Rule 7 of the Central Sales Tax (Madras) Rules, prescribing time-limit for making best judgment assessments, which is similar to Rule 14-A(8) of the Central Sales Tax (Andhra Pradesh) Rules.

15. In that case the revenue relied upon Section 13(3) of the Central Sales Tax (Madras) Rules-to sustain Sub-rule (7). The learned Judges repelled that contention with the following observations :

But Section 13(3) is in general terms and confers power to make rules only to carry out the purposes of the Act. Nowhere in the Central Act is there any indication that one of its purposes is to provide for limitation for the exercise of the power to assess escaped turnover and to determine such turnover by best judgment. We hold that Sub-rule (7) at least in so far as it provided for limitation and determination of escaped turnover by best judgment is in excess of the rule-making power and the sub-rule, as a whole, should be struck down as invalid.

16. In Shah & Co. v. State of Madras [1967| 20 S.T.C. 146, a Division Bench of the Madras High Court, following the decision in Haji J. A. Kareem Sait v. Deputy Commercial Tax Officer [1966] 18 S.T.C. 370 , held that :

Under Section 9(3) of the Central Sales Tax Act, 1956, only the local procedure is applied for the assessment, collection and enforcement of penalty, which is payable by a dealer under the Central Act. Unless a penalty can be levied Under the provisions of the Central Act, like the tax on the turnover under that Act, there will be no liability to penalty only by reason of the provisions of the Madras Act. In other words, Section 12(3) of the Madras General Sales Tax Act, 1959, is not adopted for the purposes of Section 9(3)of the Central Sales Tax Act, 1956. The only provision in the Central Act providing for penalty is Section 10 and that does not cover a penalty of the type contemplated by Section 12(3) of the Madras Act. Therefore, the imposition of penalty under Section 9(3) of the Central Sales Tax Act, 1956, read with Section 12(3) of the Madras General Sales Tax Act, 1959, for failure to disclose the turnover brought to tax under the Central Sales Tax Act, 1956, is not legal.

17. The third case, our attention was invited to, was Sales Tax Officer v. K. I. Abraham [1967] 20 S.T.C. 367 at p. 372 (S.C.). Construing the expression 'in the prescribed manner' occurring in Section 8(4) of the Central Sales Tax Act, their Lordships of the Supreme Court observed that :

It confers power on the rule-making authority to prescribe a rule stating what particulars are to be mentioned in the prescribed form, the nature and value of the goods sold, the parties to whom they are sold, and to which authority the form is to be furnished. But it does not take in the time element. In other words, the section does not authorise the rule-making authority to prescribe a time-limit within which the declaration is to be filed by the registered dealer.

18. The fourth case relied upon by the petitioners' counsel was the State of Madras v. Angappa Chettiar [1968] 22 S.T.C. 226, where it was held that the power to collect penalty under Section 9(3) of the Central Sales Tax Act, 1956, will cover only the penalty payable under the Act and will not include a power to impose a penalty itself for a contravention or omission when the Act does not contain a provision apart from the Madras General Sales Tax Act.

19. As against the above four decisions of the Madras High Court relied upon by the learned counsel for the petitioners in support of his contention that Rule 14-A(8) of the Rules is beyond the rule-making power of the State Government, the learned Government Advocate relied upon the decision in State of Kerala v. M. Appukutty [1963] 14 S.T.C. 242 (S.C.). The facts in that case are : The Deputy Commercial Tax Officer, Kozhikode, imposed sales tax on the respondent on a net turnover of Rs. 12,56,178-14-0 and the appeal taken against that order to the Commercial Tax Officer was dismissed. The Deputy Commissioner of Commercial Taxes issued notice to the assessee to show cause why escaped turnover for the period of assessment should not be determined. After hearing the assessee the Deputy Commissioner determined the revised turnover. Appeal against the revised assessment before the Sales Tax Appellate Tribunal failed. The matter was taken up in revision to the High Court of Kerala. One of the contentions raised before the High Court was that the notice issued by the Deputy Commissioner of Commercial Taxes, proposing to assess the escaped turnover was without jurisdiction. That contention was upheld by the High Court of Kerala. The State of Kerala filed an appeal to the Supreme Court. The Supreme Court reversed the decision of the High Court.

20. It was contended before the Supreme Court by the assessee that Section 12(3) contains the totality of the powers of the Deputy Commissioner and the power to assess escaped turnover is merely incidental to the power of revision and may be exercised only when revisional jurisdiction under Section 12(3) is invoked under that section and the record is sent for suo motu or on application and the legality or propriety of the order made by the subordinate officer is scrutinised. Therefore the Deputy Commissioner was not, in the absence of any substantive proceeding for exercise of revisional powers, competent to-assess escaped turnover. But the power to assess escaped turnover does not arise out of the revisional jurisdiction. In exercising revisional jurisdiction the Deputy Commissioner would be restricted to the examination of the record for determining whether the order of assessment was according to law. Rule 17 confers power to assess escaped turnover which may normally be exercised on matters de hors the record of assessment proceedings before the Deputy Commercial Tax Officer. Therefore the notice issued by the Deputy Commissioner was bad in law, That contention was rejected by their Lordships of the Supreme Court with the following observation :

It is true that the substantive provisions of the Act do not expressly deal with the power and procedure for assessment of escaped turnover. The Legislature has left it to be dealt with by statutory rules to be framed under Section 19, and Rule 17 has been framed thereunder, Rule 17(1) and (3-A) ex facie properly fall under Section 19(2)(f). In any event as was said by the Privy Council in King Emperor v. Sibnath Banerji and Ors. (1945) 72 I.A. 241 (P.C.), the rule-making power is conferred by Sub-section (1) of that section and the function of Sub-section (2) is merely illustrative and the rules which are referred to in Sub-section (2) are authorised by and made under Sub-section (1). The provisions of Sub-section (2) are not restrictive of Sub-section (1) as expressly stated in the words 'without prejudice to the generality of the foregoing power' with which Sub-section (2) begins and which words are similar to the words of Sub-section (2) of Section 2 of the Defence of India Act which the Privy Council was considering. Now Sub-section (1) of Section 19 of the Act provides that 'the State Government may make rules to carry out the purposes of this Act' and the long title of the Act is an Act to provide for the levy of general tax on the sale of goods in the State of Madras. Therefore in our opinion Rule 17 and the various clauses thereof made under Section 19 are not beyond the rule-making power of the State Government as contained in Section 19.

21. Similar are the provisions of the Central Sales Tax Act and hence the decision fully applies to the present case.

22. The next case relied upon by the learned Government Advocate was C. A. No. 1034 of 1966, on the file of the Supreme Court of India in Kangra Valley Slate Co., Ltd. v. The State of Punjab and Ors. Mr. Gupta for the appellant in that case contended that:

Rule 28 laying down the period of limitation for renewal application was ultra vires Section 13(3) of the Act as the time-limit prescribed in the rule does not fall under any of the matters set out in that sub-section.

23. That contention was rejected by their Lordships of the Supreme Court as without substance with the following observation :

Therefore the provisions of Sub-section (2) were not restrictive of Sub-section (1) and indeed was expressly stated by the words 'without prejudice to the generality of the powers conferred by Sub-section (1)', The general language of Sub-section (1), therefore, amply justified the terms of Rule 26 and avoided the contention that it was not justified under Sub-section (2).

24. From the aforesaid discussion it is clear that the imposition of time-limit on the powers of the assessing authority to make a best judgment assessment is a fetter and not a period of limitation. It is a rule of procedure in contradistinction to a substantive law. The decision of the Madras High Court in Haji J. A. Kareem Sait v. Deputy Commercial Tax Officer [1966] 18 S.T.C. 370 proceeds on the footing that the imposition of a time-limit On the powers or jurisdiction of the assessing authority is a substantive law and not a procedural law. Their decision is, therefore, influenced by the view that fixing of time-limit was a substantive law, and could not be introduced into the Rules when the main Act did not give that power. Moreover the decision of the Supreme Court in State of Kerala v. M. Appukutty [1963] 14 S.T.C. 242 (S.C.) was not brought to the notice of the learned Judges, who decided the cases in Haji J. A. Kareem Sait v. Deputy Commercial Tax Officer [1966] 18 S.T.C. 370 and Shah & Co. v. State of Madras [1967] 20 S.T.C. 146.

25. Fixing of time-limit for the furnishing of a declaration form under Section 8(4) of the Central Sales Tax Act is something wholly different from the fixing of a time-limit for the exercise of the power to assess by the assessing officer. The former deprives the assessee of a valuable right in case he does not furnish the C form in the prescribed manner and to the prescribed authority. It is, therefore, a substantive law and not a mere rule of procedure, whereas the fixing of a time-limit on the power of the assessing authority to assess is not a substantive law but a rule of procedure.

26. The power to impose penalty is an original power. Unless the power is given in the main Act, no penalty can be imposed. Power to levy tax and penalty must be found in the Central Sales Tax Act. Then alone they can be imposed and collected by the State authority as if they were tax and penalty imposed under the general sales tax law. There cannot be any dispute about those propositions.

27. We, therefore, hold that the decision in Haji J. A. Kareem Sait v. Deputy Commercial Tax Officer [1966] 18 S.T.C. 370 cannot be considered as good law in view of the decision of the Supreme Court in State of Kerala v. M. Appuhutty [1963] 14 S.T.C. 242 (S.C.). The other decisions in Sales Tax Officer v. K. I. Abraham [1967] 20 S.T.C. 367 (S.C.) and State 6f Madras v. Angappa Chettiar [1968] 22 S.T.C. 226, do not help the petitioners. We will then proceed to examine the provisions of the Central Sales Tax Act to find out whether Rule 14-A(8) of the Rules made by the State Government in pursuance of the power conferred by Section 13 of the Central Sales Tax Act is or is not beyond the rule-making power Of the State Government.

28. Now Section 9 of the Central Sales Tax Act was substituted for the old Section 9, by Act No. 28 of 1969 with retrospective effect.

29. New Section 9(1) of the Central Sales Tax Act empowers the Central Government to levy tax in respect of inter-State sales and leaved the collection of such tax to the State Government from where the movement of the goods commenced. New Sub-section (2) of Section 9, which is by far the most important section, reads as follows:

9. (2) Subject to the other provisions of this Act and the rules made thereunder, the authorities for the time being empowered to assess, re-assess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, re-assess, collect and enforce payment of tax, including any penalty, payable by a dealer under this Act as if the tax or penalty payable by such a dealer under this Act is a tax or penalty payable under the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, penalties, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly.

30. Thus from the above provision of new Section 9(2) it is evident that the Central sales tax, which the Central Government is empowered to levy on inter-State sales, has to be assessed and collected by the State officials, who perform the functions of assessments, reassessments, collection of tax and enforcement of payment of tax. For that purpose the procedure laid down for making the assessment and reassessment has to be followed by the State officials.

31. The argument of the learned counsel, Sri Dasaratharama Reddy, is that the words 'subject to the other provisions of this Act and the Rules made thereunder' only apply to the first limb of that sub-section and to the officers, who make assessments, etc., but not to the second limb, which lays down the procedure for making assessments and reassessments, etc. We are unable to accept this contention in view of the plain wording of the above section. Those words do apply for both the limbs of the sub-section.

32. Section 13(3) of the Central Sales Tax Act provides that the State Government may make rules, not inconsistent with the provisions of the Central Sales Tax Act and the Rules made by the Central Government under Sub-section (1) and to carry out the purposes of the Central Sales Tax Act. Sub-section (4) of Section 13 provides that in particular and without prejudice to the powers conferred by Sub-section (3), the State Government may make rules for all or any of the purposes named in clauses (a) to (g) of that sub-section.

33. From the aforesaid provisions of Section 13(3) and (4), it is obvious that the State Government has got power to make rules for carrying out the purposes of the Central Sales Tax Act. One of the purposes of the Central Sales Tax Act is to levy Central sales tax, make assessments and recover the tax so levied. Since the Central Government has not established any separate department for that purpose and prescribed procedure for making such assessments, Sub-section (2) of Section 9 empowers the State authorities under the general sales tax law to do the same and to follow the procedure laid down under the general sales tax law of the State. Under the general sales tax law, the time-limit has been fixed for making the best judgment assessment and that time-limit under Section 14(3) of the Andhra Pradesh General Sales Tax Act is four years from the expiry of the year to which the assessment relates. As has already been stated in the earlier portion of our judgment, the fixing of time-limit is only a fetter on the jurisdiction of the assessing authority not to make assessments after expiry of that period.

34. Thus, irrespective of the power conferred upon the State Government under Section 13(3) of the Central Sales Tax Act, the State Government is empowered to apply the Rules of the Andhra Pradesh General Sales Tax Act and complete the assessment within the time fixed for bringing the escaped turnover to tax. That power is independent of Section 13 of the Central Sales Tax Act.

35. Apart from that, we are also of the opinion that Rule 14-A(8) of the Central Sales Tax Rules is within the rule-making power of the State Government. Section 13(3) gives a general power to the State Government to make rules to carry out the purposes of the Act and Sub-section (4) of Section 13(3) mentions various matters, which are only illustrative of the power to be exercised by the State Government under Sub-section (3) of Section 13. That is made clear by the words 'in particular and without prejudice to the powers conferred by Sub-section (3)' occurring under Sub-section (4) of Section 13(3). The State Government can also make Rules on matters, which are not specifically enumerated in Clauses (a) to (g) of Section 13 and under the powers conferred on it under Section 13(3) of the Act. As has already been stated, one of the purposes for which the Rules can be made is to make assessments and reassessments. Fixation of time-limit for making assessments and reassessments is a procedural matter for making assessments. Power to make assessments includes power to provide procedure for making the assessments. Fixing a time-limit for making an assessment is a part of the procedure for making an assessment. We are, therefore, of the opinion that Rule 14-A(8) of the Central Sales Tax (Andhra Pradesh) Rules is within the rule-making power of the State Government. The contention of the learned counsel is, therefore, rejected.

36. We will then proceed to consider the second contention raised by the learned counsel for the petitioners. The Central Sales Tax Act (No. 74 of 1956) came into force on 5th January, 1957. The Andhra Pradesh General Sales Tax Act (No. 6 of 1957) came into force on 15th June, 1957. On the date on which the Central Sales Tax Act came into force in the State of Andhra Pradesh and before the Andhra Pradesh General Sales Tax Act was enacted, the Madras General Sales Tax Act and the Rules made thereunder were applicable to the Andhra area of the State of Andhra Pradesh. Under Rule 17 of the Madras General Sales Tax Rules, the period within which an assessing officer can determine, to the best of his judgment, the turnover which had escaped assessment and assess the tax payable thereon, is a period of three years, next succeeding that to which the tax related. On passing the Andhra Pradesh General Sales Tax Act, 1957, with effect from 15th June, 1957, the Madras General Sales Tax Act and the Rules made thereunder, which were till then applicable to the Andhra area of the State of Andhra Pradesh were repealed by Section 41 of the Andhra Pradesh General Sales Tax Act, 1957. Under Section 14(3) of the Andhra Pradesh General Sales Tax Act, which was in force in the State of Andhra Pradesh during the relevant assessment year 1963-64, the time-limit for making best judgment assessment in respect of escaped turnover in a case where no return was filed, was fixed at four years.

37. The simple contention of the learned counsel appearing for the petitioners was that the Madras General Sales Tax Act and the Rules made thereunder were incorporated into Section 9(2) of the Central Sales Tax Act, which was introduced by Act 28 of 1969 on 30th August, 1969, with retrospective effect. Since the Central Sales Tax Act incorporated into it. the provisions of the Madras General Sales Tax Act, the time-limit, which was fixed under Rule 17 of the Madras General Sales Tax Rules, would apply to the instant case, and not the time-limit of four years fixed under the Andhra Pradesh General Sales Tax Act, which was enacted after repealing the Madras General Sales Tax Act and the Rules.

38. In other words, the short question that has to be decided is whether the general sales tax law prevailing in the State of Andhra Pradesh at the time when the Central Sales Tax Act came into force, was incorporated into the latter Act or was merely referred to in that Act.

39. It is now well-settled that the rule of construction of statutes is that where a statute is incorporated by reference in a second statute, the repeal of the first statute by a third, does not affect the second. This rule of construction refers to the situation in which the first Act has been altogether repealed. But where the Act repealed has been re-enacted with or without modifications, references (according to Section 8 of the General Clauses Act) in any other enactment or in any instrument to the provisions so repealed, shall, unless a different intention appears, be construed as references to the provisions so re-enacted.

40. This rule of interpretation was approved by the Privy Council in The Secretary of State v. Hindustan Co-operative Insurance Society Ltd. A.I.R. 1931 P.C. 149 In that case their Lordships of the Privy Council observed that :

It is an accepted principle of construction that where a statute is incorporated by reference into a second statute, the repeal of the first statute does not affect the second.

41. We find very useful discussion with regard to the difference between an enactment incorporating into it another enactment and an enactment merely making a reference to another enactment in Collector of Customs v. Sampathu Chetty A.I.R. 1962 S.C. 316. The contention raised in that case was that Section 178A of the Sea Customs Act, which was introduced by the main Act 21 of 1955, was not attracted to the prohibitions enacted by Section 23A of the Foreign Exchange Regulation Act. The learned Judges while dealing with the above contention observed as follows :

The reasoning on which this conclusion was reached was that Section 23A, whose terms we have set out, when enacted in 1952 in effect incorporated into the provisions of the Foreign Exchange Regulation Act all the relevant provisions of the Sea Customs Act, 1878, as that enactment stood in 1952, with the result that any subsequent amendments to the Sea Customs Act did not and could not affect, modify or enlarge the scope of the incorporated Sea Customs Act which had become part of the Foreign Exchange Regulation Act.... We consider that the legislation regarding which the Privy Council rendered the decision bears no resemblance whatever to the matter now on hand and that the ruling in The Secretary of State v. Hindustan Co-operative Insurance Society Ltd. (1932) I.L.R. 59 Cal. 55 , cannot therefore furnish any guidance or authority applicable to the interpretation of Section 23A of the Foreign Exchange Regulation Act. To consider that the decision of the Privy Council has any relevance to the construction of the legal effect of the terms of Section 23-A of the Foreign Exchange Regulation Act is to ignore the distinction between a mere reference to or a citation of one statute in another and an incorporation which in effect means the bodily lifting of the provisions of one enactment and making it part of another so much so that the repeal of the former leaves the latter wholly untouched.

42. From this decision and the well-settled principles of interpretation of statutes, it is manifest that the law draws a distinction between a mere reference to or a citation of one statute in another and incorporation of one statute into another, which in fact means bodily lifting the provisions of one enactment and making them a part of another. If one enactment is merely referred to in another enactment and if the former is repealed and re-enacted, it is the re-enacted provisions that apply and the sections of the repealed Act are not saved; whereas if an enactment is incorporated bodily into another, the repeal of the former would not affect the provisions which are incorporated into the latter enactment. This position of law has been recognised and followed by the Full Bench of this court in Allied Exports and Imports, Gudur v. State of Andhra Pradesh (T.R.C. No. 25 of 1966) [1971] 28 S.T.C. 175. The short question that arose for decision of the Full Bench was:

Whether the petitioner had acquired, as is argued, any right to be reassessed only within three years under Rule 17 made under the repealed Act, in other words had he acquired any right not to be reassessed after the expiry of the period prescribed in Rule 17 ?

43. After considering the matter at great length and after discussing the various decisions cited before it, the learned Judges held as follows:

What must follow from the above-said discussion is that since the period prescribed for the exercise of the power to re-assess under Rule 17 of the Rules made under the repealed Act has not expired on the date when the repealing Act came into force, and since the right to tax and liability to pay were subsisting and were saved and as Section 14(4-A) enlarged the period of limitation, it is the new Act, that is to say Section 14(4-A), that would apply to the present case. Section 41 preserves the subsisting rights and liabilities arising out of the repealed Act, but prescribes procedure and limitation for their enforcement under the new Act. From that point of view also, it is the period prescribed under Section 14(4-A) that would govern the instant case.

44. The decision of the Full Bench is binding on us.

45. The learned counsel placed strong reliance upon the cases in Haji J.A. Kareem Sail v. Deputy Commercial Tax Officer [1966] 18 S.T.C. 370 and Shah & Co. v. State of Madras [1967] 20 S.T.C. 146, which have been referred to in this judgment in another connection. Our attention has been drawn by the learned counsel for the petitioners to the following passage occurring in the head note in Haji J.K. Kareem Sait v. Deputy Commercial Tax Officer [1966] 18 S.T.C. 370, which reads thus ;

While it is competent for the Parliament to adopt the existing provisions of a local law as part of the Central legislation without repeating those provisions in the Central Act, it cannot make a law adopting the provisions of a local law which did not exist at the time. But in applying this principle the court should look at the substance and not the form of the matter. Section 16 of the Madras General Sales Tax Act, 1959, substantially re-enacted the provisions under the Madras General Sales Tax Act, 1939, relating to assessment of escaped turnover and the period of limitation for exercising that power, and the subject-matter of Section 16 was not something which the Parliament had not applied its mind to when it enacted Section 9(3). Therefore Section 9(3) is not unconstitutional.

46. The other passage in Shah & Co. v. State of Madras [1967] 20 S.T.C. 146, which has been strongly relied upon by the learned counsel for the petitioners, is as follows:

While it is competent for the Parliament to adopt the existing provisions of a local law as part of the Central legislation without repeating those provisions in the Central Act, it cannot make a law adopting the provisions of a local law which did not exist at that time.

47. In the State of Madras v. Angappa Chettiar & Sons [1968] 22 S.T.C. 226, it has been held that :

The Legislature cannot with propriety make a law to adopt by reference the provisions of a statute law as it stands amended by the Legislature from time to time and the Madras General Sales Tax Act, 1939, which was incorporated by reference by Section 9(3) of the Central Sales Tax Act, 1956, did not contain a provision for levy of a penalty referred to in Section 16(2) of the Madras General Sales Tax Act, 1959.

48. All these decisions which were strongly relied upon by the assessees' counsel would apply when one legislative enactment is incorporated into another legislative enactment without repeating the provisions of the former enactment. Those cases do not apply to a case, where one enactment is merely referred to or cited in another. This distinction has been brought out by the Supreme Court in Collector of Customs v. Sampathu Chetty A.I.R. 1962 S.C. 316.

49. On a reading of Section 9, which was introduced in the Central Sales Tax Act in 1959 with retrospective effect, it is obvious to our mind that all the provisions of the general sales tax law of a State have not been incorporated in the Central Sales Tax Act. The Legislature merely referred to the provisions of the General Sales Tax Act in a State in the Central Sales Tax Act. In such a case as is held by the Full Bench of this Court in Allied Exports and Imports, Gudur v. State of Andhra Pradesh (T.R.C. No. 25 of 1966) [1971] 28 S.T.C. 175 , the Madras General Sales Tax Act and the Rules made thereunder, which were repealed by Section 41 of the Andhra Pradesh General Sales Tax Act, are not saved. It is also particularly to be noted that the Andhra Pradesh General Sales Tax Act was enacted even before the expiry of three years from the date of the commencement of the Central Sales Tax Act, which was the period fixed under Rule 17 of the Madras General Sales Tax Rules for making assessments and reassessments. Respectfully following the decision of the Full Bench of this Court, we hold that this is a case where one enactment has been referred to in another, but not a case where one enactment is incorporated and its provisions bodily lifted and put in the second enactment. It, therefore, follows that all the subsequent amendments to the general sales tax law, which were made, are applicable to the facts of this case. Since the operation of Section 9 has been made retrospective, it relates back to the date on which the Central Sales Tax Act had come into force. We, therefore, hold that Section 14(3) of the Andhra Pradesh General Sales Tax Act is applicable to the facts of this case and also Rule 14-A(8) of the Central Sales Tax Rules. In either case the assessments made are within the period of four years from the end of the relevant assessment year. The assessments are, therefore, valid. Both the contentions raised by the learned counsel fail and are therefore rejected.

50. At the end, the learned counsel submitted that the petitioners have paid by way of Andhra Pradesh general sales tax on groundnuts for the year 1963-64 and they are, therefore, entitled to a refund of that amount even without filing an application to that effect. If any Andhra Pradesh general sales tax is refundable to the petitioners, the petitioners may approach the proper authorities. We cannot in these writ petitions order refund of that amount.

51. All the three writs fail and are accordingly dismissed with costs. Advocate's fee Rs. 100 in each case.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //