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Commissioner of Sales Tax Vs. Tansukhdas Madanlal - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 190 of 1980
Judge
Reported in[1983]53STC349(MP)
AppellantCommissioner of Sales Tax
RespondentTansukhdas Madanlal
Appellant AdvocateM.V. Tamaskar, Government Adv.
Respondent AdvocateP.R. Padhye, Adv.
Cases ReferredMadhya Pradesh v. Mohanlal Harprasad
Excerpt:
.....viz. the prescribed form of the notice as well as rule 60 to which it relates show that the power of enhancement under section 38(5)(a) can be exercised in the same manner as in the revision by the commissioner under section 39 of the act inasmuch as the prescribed procedure is the same. reference to an 'appeal' in addition to 'revision' in rule 60 and to section 38 of the act expressly in form xxviii would be meaningless, unless the power to enhance the assessment in the assessee's appeal was available to the appellate authority as mentioned specifically in section 38(5)(a). reading these provisions separately as well as collectively the clear indication is that the statute expressly confers on the appellate authority the power to enhance the assessment in an assessee's appeal..........xxviii to the person likely to be affected adversely, viz., the assessee, before exercising the power of enhancement. the prescribed form of the notice as well as rule 60 to which it relates show that the power of enhancement under section 38(5)(a) can be exercised in the same manner as in the revision by the commissioner under section 39 of the act inasmuch as the prescribed procedure is the same. reference to an 'appeal' in addition to 'revision' in rule 60 and to section 38 of the act expressly in form xxviii would be meaningless, unless the power to enhance the assessment in the assessee's appeal was available to the appellate authority as mentioned specifically in section 38(5)(a). reading these provisions separately as well as collectively the clear indication is that the.....
Judgment:

J.S. Verma, J.

1. This is a reference made under Section 44(1) of the M.P. General Sales Tax Act, 1958, to answer the following question, namely :

Whether, in the facts and circumstances of this case, the Tribunal was competent in refusing to enhance the turnover of Rs. 95,795 under Section 38(5) of the M.P. General Sales Tax Act on the application made in this regard by the applicant-Commissioner, Sales Tax ?

2. The material facts giving rise to the reference may now be stated. The relevant period of assessment is Diwali 1966, to Diwali 1967, i.e., 13th November 1966 to 2nd November, 1967. The assessee is a dealer in vegetable oils. The assessee claimed that 23,338 tin containers had been sold along with the vegetable oil contained in them and the price charged for the containers alone was Rs. 1.25 each. The assessing authority estimated Rs. 3 as the cost of each container and assessed accordingly. The assessment order is annexure A dated 23rd October, 1972. The assessee preferred a first appeal under Section 38(1) of the Act to the Deputy Commissioner which was rejected by order annexure B dated 17th November, 1973. The assessee then preferred a second appeal under Section 38(2) of the Act to the Sales Tax Appellate Tribunal (Board of Revenue), which has been allowed by the Order annexure C dated 7th February, 1976. At the time of hearing of the second appeal on 22nd January, 1976, the revenue made an application for enhancement of the tax assailing the correctness of the exemption granted by the assessing authority on the sale of 'ruskat gur' worth Rs. 95,795 on the ground that it was covered by the term'fodder'. This application was rejected by the Tribunal while disposing of the appeal by its order annexure C dated 7th February, 1976. The reasons given by the Tribunal for rejecting the application are that provisions exist in Section 19(1) as well as Section 39(2) of the Act enabling the revenue to initiate appropriate action for reopening the assessment in such a situation; and in case the Tribunal entertained the revenue's request the assessee would be deprived of the remedy of appeal ordinarily available against the original assessment order.

3. Aggrieved by the rejection of its application by the Tribunal for examining the correctness of the exemption given by the assessing authority, the revenue has sought reference of the aforesaid question of law arising out of the Tribunal's order.

4. In our opinion, the question referred is not properly worded and therefore, with the consent of both sides the question is refrained in order to bring out the real point in controversy. The Tribunal refused to consider the question of enhancement and rejected the revenue's application as not maintainable without going into its merits. The real point involved is 'refusal to consider the question of enhancement' and not 'refusal to enhance' as the stage for considering the question of enhancement on merits did not reach. Refraining the question referred is necessary keeping in mind this real distinction which was overlooked by the Tribunal. The reframed question is as under :

Whether, in the facts and circumstances of this case, the Tribunal was competent in refusing to consider the question of enhancement of turnover by Rs. 95,795 under Section 38(5) of the M.P. General Sales Tax Act on the application made in this regard by the Commissioner, Sales Tax ?

* * *

5. The contention of the learned Government Advocate is that there being no remedy of appeal or cross-objection available to the revenue against an assessment prejudicial to the interests of the revenue, it is open to the revenue to invoke the appellate authority's power under Section 38(5) of the Act to enhance the assessment, and if necessary to order a remand for a fresh assessment on this ground. The learned Government Advocate does not dispute that the Commissioner of Sales Tax has also the power to reopen the assessment under Section 19(1) of the Act as well as the power of suo motu revision under Section 39(2) of the Act for this purpose. However, he contends that this additional remedy of invoking the power of the appellate authority under Section 38(5) of the Act cannot be excluded for this reason alone. The learned counsel for the assessee on the other hand contended that the Commissioner, Sales Tax, instead of exercising the power under Section 19(1) or 39(2) of the Act could not resort to this method and thereby enlarge the scope of the appeal before the appellate authority when admittedly the department has no right of appeal or the right to file a cross-objection in the assessee's appeal. The question is which of the two contentions should be accepted as correct.

6. There is no dispute that there is power under Section 19(1) to reopen an assessment within the prescribed period in case any part of the turnover has escaped assessment and similarly under Section 39(2) there is power of suo motu revision available to the Commissioner to interfere in case the assessment made is prejudicial to the interests of the revenue. It is also not in dispute that there is no provision for an appeal by the revenue or a cross-objection by it in the assessee's appeal under the M.P. General Sales Tax Act, 1958, and the right of appeal is given in Section 38 only to the assessee. It is in this background that the revenue's contention that it has right to apply for enhancement in the assessee's appeal by virtue of Sub-section (5) of Section 38 which enables the appellate authority even to enhance the assessment in an appeal filed by the assessee has to be examined.

7. The relevant provisions may now be quoted. Sub-section (5) of Section 38 of the M.P. General Sales Tax Act, 1958, the scope of which is to be examined reads as under :

38. (5) Subject to such procedure as may be prescribed and after such further inquiry as it may think fit the appellate authority, in disposing of any appeal under Sub-section (1) or (2) may-

(a) confirm, reduce, enhance or annul the assessment or the penalty or both, or

(b) set aside the assessment or the penalty or both, and direct the officer whose assessment order, has been appealed against to make a fresh assessment, after such further inquiry, as may be directed; or

(c) pass such orders, as it may think fit. * * *

The procedure, subject to which the appellate authority is to exercise its power to enhance the assessment is laid down in Rule 60 of the M.P. General Sales Tax Rules, 1959, framed under the Act. Rule 60 is as under :

60. Notice to person likely to be affected adversely.--Before any appellate or revising authority passes any order against any person in appeal or revision, enhancing an assessment or penalty or both it shall send or if he is present deliver to the person a notice in form XXVIII and give him a reasonable opportunity of being heard.

* * *

The prescribed notice in form XXVIII is as under :

Form XXVIII

Notice to a dealer when it is proposed to pass an order which affects him prejudicially under Sections 38 and 39 of the Madhya Pradesh General Sales Tax Act, 1958.

(See Rule 60)

To.(dealer)

of...

Registration No....

Licence No....

Whereas it is proposed to pass an order to the effect mentioned below you are hereby informed that if you wish to prefer any objection against such order, you should attend either personally or by agent duly authorised for the purpose at the office of the undersigned at...on the...day of...197.Gist of the order proposed to be passed.......Seal (Signed)...Dated...19. (Designation)...* * *

8. The plain meaning of Section 38(5)(a) is that the appellate authority has unrestricted power to 'confirm, reduce, enhance or annul the assessment or the penalty or both', subject only to the procedure as may be prescribed and after such further inquiry as it may think fit. This power to also enhance the assessment is clearly in the assessee's appeal which alone is provided in Sub-sections (1) and (2) of Section 38. The procedure prescribed in Rule 60 requires a notice in the prescribed form XXVIII to the person likely to be affected adversely, viz., the assessee, before exercising the power of enhancement. The prescribed form of the notice as well as Rule 60 to which it relates show that the power of enhancement under Section 38(5)(a) can be exercised in the same manner as in the revision by the Commissioner under Section 39 of the Act inasmuch as the prescribed procedure is the same. Reference to an 'appeal' in addition to 'revision' in Rule 60 and to Section 38 of the Act expressly in form XXVIII would be meaningless, unless the power to enhance the assessment in the assessee's appeal was available to the appellate authority as mentioned specifically in Section 38(5)(a). Reading these provisions separately as well as collectively the clear indication is that the statute expressly confers on the appellate authority the power to enhance the assessment in an assessee's appeal subject only to a reasonable opportunity to the assessee to show cause against the same in the manner prescribed. The appellate authority is also empowered to make such further inquiry as it may think fit for this purpose.

9. No other provision has been shown to us which may be relevant for deciding this point. The question now is whether there is any other reason to take a different view than the above which follows from a plain construction of the relevant provisions in which there is no ambiguity. We shall now refer to some decisions throwing light on some facts of the question before us.

10. A similar question arose for decision of the Supreme Court in State of Kerala v. Vijaya Stores [1978] 42 STC 418 (SC) in the context of analogous provision contained in the Kerala Act. However, in the Kerala Act there was also a right of appeal as well as of filing a cross-objection in the assessee's appeal, conferred on the revenue. In that context, it was, therefore, held by the Supreme Court that the power to enhance the assessment contained in Section 39(4)(a)(i) of the Kerala Act worded in the same manner as Section 38(5)(a) of the M. P. Act quoted above must be read as relatable to an appeal or cross-objection filed by the revenue and not to an appeal filed by the assessee, in which there was no cross-objection. That decision is clearly distinguishable inasmuch as the power to enhance the assessment in appeal given by the provision in the Kerala Act could be related to the revenue's appeal or cross-objection alone without rendering the same redundent by not extending it to the assessee's appeal. The ratio of that decision does not apply to a case like the present where there is no right to appeal or cross-objection given to the revenue and the only question is of exercising the power of enhancement in the assessee's appeal without there being any cross-objection therein.

11. The first decision of the Madras High Court cited before us is V. Krishnappa Chettiar v. State of Tamil Nadu [1980] 46 STC 52. The corresponding provisions in the Tamil Nadu General Sales Tax Act, 1959, were similar to the provisions in the M. P. Act and there was no right of appeal or cross-objection available to the revenue. The above Supreme Court decision was distinguished on this basis by the Madras High Court and it was held that an application made before the Tribunal by the revenue for enhancement of tax was maintainable. The next decision of the Madras High Court is Deputy Commissioner of Commercial Taxes, Tiruchirapalli Division, Tiruchirapalli v. Panayappan Leather Industries [1981] 47 STC 88 taking the same view. The corresponding provisions of the Tamil Nadu Act, as stated earlier, were similar to the provisions of the M.P. Act. Ismail, C.J., speaking for the court held as follows:

The question that arises now for consideration is what exactly is the scope of this power of the Tribunal. Clearly, the power of the Tribunal has been couched in the widest possible terms. Section 36(3)(a)(i) clearly contemplates not only the reduction of assessment and penalty which will be in favour of the appellant, but also confirmation of assessment or penalty and even enhancement of the assessment or penalty. The enhancement of the assessment or penalty will be one adverse to the appellant, who had preferred the appeal. It is the common case that under Section 36 the revenue has no right to prefer an appeal against the order of the Appellate Assistant Commissioner or the Deputy Commissioner and it is only the assessee who is entitled to prefer an appeal. Consequently, the scope of Section 36(3)(a){i) will indicate that even in an appeal preferred by the assessee, the Tribunal has got a power to decide the appeal prejudicial to the assessee in the sense, not only by way of dismissing the appeal but even by way of enhancing the assessment or penalty. This flows from the very clear and emphatic language contained in Section 36(3)(a)(i). That is further strengthened by the fact that Section 36(3)(a)(ii) refers to the setting aside of the assessment and directing the assessing authority to make a fresh assessment. It has been noticed that Section 36(3)(a)(ii) does not refer to the setting aside of the order of the Appellate Assistant Commissioner or the order of the Deputy Commissioner, but it contemplates the setting aside of the assessment itself and directing the assessing authority to make a fresh assessment after such further enquiry as may be directed. Consequently, having regard to the wide language contained in Section 36(3), which corresponds to Section 31(3) of the Act, it is clear that when an assessee prefers an appeal either to the Appellate Assistant Commissioner or to the Tribunal, the entire assessment is set at large, and the Appellate Assistant Commissioner or the Tribunal is given power to redo the entire assessment according to law. If either of the appellate authorities comes to the conclusion that the assessing authority had not assessed the turnover according to law either by way of omitting a turnover liable to tax or assessing a turnover at a rate lower than the rate which is applicable to the same, the appellate authorities have the power to go into the entire matter and revise the assessment or direct the assessing authority itself to make a fresh assessment. * * *

Ismail, C. J., then summarised the position as under:

Having regard to all these circumstances, we are clearly of the opinion that in an appeal preferred by an assessee, the entire assessment is set at large before the Tribunal, and the Tribunal can go into the correctness or otherwise of the order of the assessing authority himself, and if it comes to the conclusion that the assessing authority has not assessed a turnover which is liable to be assessed under the law or assessed a turnover at a rate lower than that sanctioned by the law, it is certainly open to the Tribunal to set aside the order of the assessing authority and revise the assessment or direct him to make a fresh assessment in the light of the opinion expressed by it. All that is necessary in such a case will be that since the revenue has requested the Tribunal to pass an order adversely or prejudicial to the assessee, the assessee should be given a reasonable opportunity to put forward his case with reference to the proposed enhancement. * * *

12. The Madras view is taken on the basis that there being no provision for an appeal or cross-objection by the revenue the power of enhancement given to the appellate authority must necessarily be available in the assessee's appeal and there being nothing to limit its exercise the expression has to be given full effect. Accordingly, the view taken is that even in the assessee's appeal the entire assessment is reopened and the power of enhancement available to the appellate authority can be exercised without any limitation for enhancing the assessment if the assessment is found prejudicial to the revenue, and if necessary, even a remand can be ordered. This view taken by the Madras High Court clearly supports the revenue.

13. Reference may now be made to a Full Bench decision of the Andhra Pradesh High Court in State of Andhra Pradesh v. Sri Venkata Rama Lingeshwara Rice Mill [1977] 39 STC 57 (FB). The Madras High Court in the aforesaid decision in Panayappan Leather Industries's case [1981] 47 STC 88 disagreed with the wide observations made by the Andhra Pradesh High Court in this decision. That apart, we are of the opinion that the Andhra Pradesh case is clearly distinguishable and the wide observations therein must be confined only to the context in which they were made. In the Andhra Pradesh case the question was about the assessee's right to widen the scope of his appeal by agitating matters which were outside the scope of his appeal and against which no grievance was made by him earlier. It was in this context that it was stated that the scope of the appeal could not be widened so as to cover any part of the assessment which was not the subject-matter of the appeal. The context in which those observations were made was different and the question whether the revenue had a right to claim enhancement in the assessee's appeal was not directly involved therein. This alone is sufficient to distinguish the Andhra Pradesh case.

14. We shall now refer to two decisions of this Court, which, in our opinion, support the construction made by us earlier of the relevant provisions. The first case is Mohanlal Hargovinddas [Firm) v. State of Madhya Pradesh 1962 MPLJ 935. That decision was rendered in a writ petition filed for quashing the notices issued to the assessee for enhancement of the assessment in his appeal by the appellate authority. This power was exercised under Section 22(4)(a) of the C.P. and Berar Sales Tax Act, 1947, corresponding to Section 38(5)(a) of the M.P. General Sales Tax Act, 1958. The question arose in this manner. The assessee was granted exemption by the assessing authority from payment of sales tax on purchase of tobacco used as raw material for manufacture of bidis. The assessee preferred an appeal to the Deputy Commissioner, Sales Tax, against the assessment. In that appeal the Deputy Commissioner, Sales Tax, issued notice for enhancement of the assessment by setting aside the exemption from tax granted by the assessing authority. The assessee then filed the writ petition in this Court. One of the contentions urged in support of the petition was that the appellate authority had no jurisdiction to make a fresh assessment and to enhance the assessment, in the assessee's appeal. This contention was repelled by a Division Bench of this Court. It was held that 'when the assessee goes up in appeal, he exposes the assessment as a whole to scrutiny of the appellate authority'. It was also held relying on the leading authority in Rex v. Special Commissioners of Income-tax [1937] 20 TC 381 that the assessee cannot be permitted to withdraw the appeal after it has been entertained to thwart the true assessment on the facts found, including the enhancement. This decision clearly supports the revenue's contention in the present case of there being a power of enhancement available to the appellate authority in the assessee's appeal by virtue of the provisions contained in Section 38(5)(a) of the M.P. General Sales Tax Act, 1958, and there being no provision for appeal or a cross-objection by the revenue under the Act.

15. Another relevant decision is Commissioner of Sales Tax, Madhya Pradesh v. Mohanlal Harprasad [1966] 17 STC 1. In that case, the revenue filed an application in the assessee's appeal before the Tribunal under Section 38(5) of the M.P. General Sales Tax Act, 1958, for enhancement of the assessment. When the appeal along with the application made by the revenue for enhancement came up for hearing before the Tribunal the assessee did not press the appeal and the same was, therefore, dismissed as not pressed with the result that the application for enhancement of the assessment made by the revenue also stood dismissed. On a reference being made to this Court under Section 44(1) of the Act for deciding whether it was incumbent on the Tribunal to decide the question of enhancement of tax and whether the appeal could be dismissed as not pressed by the Tribunal, this Court held that the assessee could not be permitted to withdraw the appeal resulting in the dismissal of the application for enhancement and that it was incumbent upon the Tribunal to decide the question of enhancement of tax. While taking this view the Division Bench observed as under:

In this case, the Tribunal allowed the assessee to withdraw his appeal and dismissed it as not pressed without passing any order on the application for enhancement of the assessment. It appears that, in so doing, it did not duly advert to the position that it could consider the application for enhancement only so long as the appeal was pending. The consequence was that, with the dismissal of the appeal, the application for enhancement also came to be disposed of without even being considered. In our opinion, that application could not be dealt with in this manner. The Tribunal is empowered to enhance the tax. That power is coupled with the duty imposed on it to ascertain what the true assessment ought to be and also to enhance the assessment, if the circumstances so require or justify. This is a public duty imposed on it in the interest of the general body of taxpayers and it cannot neglect or decline to perform that duty only because the assessee, realising that if he pursues his appeal it may be the worse for him, has sought leave to withdraw it. * * *

16. The true position appears to be that the appeal is merely another step at the instance of the assessee to enable discharge of the duty to make a true assessment of liability to pay tax, and if necessary, to enhance the tax assessed in the order under appeal; and once the appeal is entertained by the appellate authority, this power coupled with the duty of the appellate authority cannot be thwarted by withdrawal of the appeal by the assessee or his remaining absent at the hearing.

17. No decision was cited before us taking the view that the appellate authority has no power to enhance the assessment at the instance of the revenue in an appeal filed by the assessee, so as to limit the scope of the ordinary meaning of Section 38(5)(a). The aforesaid Andhra Pradesh decision is distinguishable, as already pointed out.

18. The result, therefore, is that the true import and meaning of Section 38(5)(a) of the Act summarised by us earlier, particularly in paragraphs 8 and 16 above, is not only in consonance with the direct decision on the point of the Madras High Court but also finds support from the two decisions of this Court which throw light on the question. We are, accordingly, of the. opinion that this is the correct construction of Section 38(5), and with respect, we are in agreement with the view taken by the Madras High Court while construing a similar provision in the Tamil Nadu General Sales Tax Act.

19. Consequently, the question referred to us, as we have reframed, is answered in the negative in favour of the revenue and against the assessee. It was incumbent upon the Tribunal to consider the question of enhancement of tax under Section 38(5) of the Act on the application made by the revenue and it was not justified in refusing to consider that question, treating the application as not maintainable. The reference is answered accordingly. No order as to costs.


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