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O. Kassim Kannu Vs. State of Kerala - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKerala High Court
Decided On
Case NumberT.R.C. No. 20 of 1968
Judge
Reported in[1970]26STC530(Ker)
AppellantO. Kassim Kannu
RespondentState of Kerala
Appellant Advocate P. Sukumaran Nair, Adv.
Respondent AdvocateThe Government Pleader
Cases ReferredThe State of Kerala v. Appukutty
Excerpt:
- - 137. the learned judge was considering in that case section 16 and rule 33 of the sales tax act of 1125 of kerala and the learned judge observed :it is a well-known canon of construction that when a special power is given to an authority and also a general one, the authority can only exercise the special power when the facts attracting the exercise of that power arise. ) is no more good after the supreme court has reversed the decision in nainan's case ([1970] 26 s......that the petitioner effected regular sales for a considerably higher amount. basing on these, the deputy commissioner of agricultural income-tax and sales tax called for the papers exercising his powers of revision and issued a notice to the assessee to show cause why the nil assessment should not be set aside and the sales tax officer be directed to make further investigation in the matter. the petitioner appeared and objected, but the deputy commissioner overruled his objection, set aside the nil assessment and directed the sales tax officer (since the escaped turnover was above rs. 20,000) to make further investigation with a view to assess the escaped turnover. the petitioner took up the matter in appeal before the appellate tribunal; and the tribunal confirmed the aforesaid.....
Judgment:

T.C. Raghavan, J.

1. Against the petitioner in this tax revision case the Assistant Sales Tax Officer completed a nil assessment fixing the turnover at Rs. 9,000. Subsequently, some secret accounts were recovered from the petitioner's shop and some information was also received from a third party that the petitioner effected regular sales for a considerably higher amount. Basing on these, the Deputy Commissioner of Agricultural Income-tax and Sales Tax called for the papers exercising his powers of revision and issued a notice to the assessee to show cause why the nil assessment should not be set aside and the Sales Tax Officer be directed to make further investigation in the matter. The petitioner appeared and objected, but the Deputy Commissioner overruled his objection, set aside the nil assessment and directed the Sales Tax Officer (since the escaped turnover was above Rs. 20,000) to make further investigation with a view to assess the escaped turnover. The petitioner took up the matter in appeal before the Appellate Tribunal; and the Tribunal confirmed the aforesaid decision of the Deputy Commissioner. In revision, the correctness of the order of the Appellate Tribunal is challenged.

2. The argument of the counsel of the petitioner, put in a nutshell, is that the power of revision of the Deputy Commissioner cannot be used to direct the assessment of escaped turnover, for which power is conferred on the assessing authority under a different provision of law. In other words, the contention is that the power of the Sales Tax Officer to assess escaped turnover under Section 19 of the Kerala General Sales Tax Act of 1963 is different and distinct from the power of revision of the Deputy Commissioner under Section 35 of the Act and that the latter power cannot be used to achieve the result contemplated by the use of the former power- the assessment of escaped turnover.

3. There are at least five decisions of the Supreme Court on the question, of which four are in cases arising from this State. The first decision is State of Kerala v. M. Appukutty [1963] 14 S.T.C. 242 (S.C.), a decision in a case from this State. The Supreme Court was considering in that case similar provisions of the Madras General Sales Tax Act, viz., Section 12(2) and Rule 17. Section 12(2) dealt with the Deputy Commissioner's power of revision and Rule 17 dealt with the power of the assessing authority to tax escaped turnover. The Supreme Court said :

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.

4.The Supreme Court said further towards the end of the judgment :

That Section [Section 12(2)] deals with another state of affairs and another jurisdiction, i.e., where the Deputy Commissioner suo motu or on an application made calls,for the record and determines the legality or propriety of an order made by one of the subordinate officers. It cannot be said in view of Rule 17 that the power of revision by the Deputy Commissioner is limited to powers under Section 12(2). Rule 17 deals with a separate and independent jurisdiction in regard to the determining and taxing (of) escaped turnovers.

5. The next decision of the Supreme Court is again in a case from this State, viz., The State of Kerala v. K.M. Cheria Abdulla and Company [1965] 16 S.T.C. 875 (S.C.). In that case also the Supreme Court was considering the Madras General Sales Tax Act and the Rules framed thereunder. The Supreme Court said :

It would not invest the revising authority with power to launch upon enquiries at large so as either to trench upon the powers which are expressly reserved by the Act or by the Rules to other authorities or to ignore the limitations inherent in the exercise of those powers. For instance, the power to reassess escaped turnover is primarily vested by Rule 17 in the assessing officer and is to be exercised subject to certain limitations and the revising authority will not be competent to make an enquiry for reassessing a taxpayer....The revisional power has to be exercised for ascertaining whether the order passed is illegal or improper or the proceeding recorded is irregular and it is in aid of that power that such orders may be passed as the authority may think fit.

6. The third decision of the Supreme Court is under the Bombay Sales Tax Act and the decision is The Swastik Oil Mills Ltd. v. H.B. Munshi, Deputy Commissioner of Sales Tax, Bombay [1968] 21 S.T.C. 383 (S.C.). In that case the Supreme Court followed its earlier decision in Cheria Abdulla's case [1965] 16 S.T.C. 875 (S.C.). and quoted with approval a passage therefrom, a portion of which we have already extracted. The reasoning of the Supreme Court therein is on the same lines as the reasoning in Cheria Abdulla's case [1965] 16 S.T.C. 875 (S.C.).

7. The fourth decision is again in a case from this State and that is The Deputy Commissioner of Agricultural Income-tax and Sales Tax, Quilon v. Dhanalakshmi Vilas Cashew Co., Quilon (1969) 1 S.C.W.R. 610. The Supreme Court referred to its earlier decision in Appukutty's case [1963] 14 S.T.C. 242 (S.C.) and followed the same.

8. The last decision is again in a case from Kerala: The State of Kerala v. K. E. Nainan case [1970] 26 S.T.C. 251 (S.C.), (Civil Appeals Nos. 2209 and 1777 of 1966). In this last decision the Supreme Court followed its earlier decisions in Dhanalakshmi Vilas Cashew Company's case (1969) 1 S.C.W.R. 610 and in Appukutty's cases [1963] 14 S.T.C. 242 (S.C.).

9. Now a word by way of explanation regarding the last two decisions of the Supreme Court. This court first decided Nainan's case [1970] 26 S.T.C. 251 (S.C.) and followed that decision in Dhanalakshmi Vilas Cashew Company's case (1969) 1 S.C.W.R. 610). Before the Supreme Court the appeal against the later decision of this court in Dhanalakshmi Vilas Cashew Company's case (1969) 1 S.C.W.R. 610 came up for hearing earlier and the appeal in Nainan's case [1970] 26 S.T.C. 251 (S.C.) camp up for hearing subsequently.

10. On a consideration of these five decisions of the Supreme Court, what emerges on the question before us is that the revisional power of the Deputy Commissioner is a separate and distinct power; an independent jurisdiction; and that the two powers operate in two fields, so that they cannot overlap and the revisional power of the Deputy Commissioner cannot trench upon the power of the Sales Tax Officer to assess escaped turnover. If it does, it oversteps its field and is thus beyond the Deputy Commissioner's jurisdiction.

11. During the arguments, four decisions of this court-three by Single Judges and one by a Division Bench-have also been brought to our notice. The first case is Ramaswami v. Sales Tax Officer, Ponnani (1965) 1 K.L.R. 137. The learned Judge was considering in that case Section 16 and Rule 33 of the Sales Tax Act of 1125 of Kerala and the learned Judge observed :

It is a well-known canon of construction that when a special power is given to an authority and also a general one, the authority can only exercise the special power when the facts attracting the exercise of that power arise.

12. The next decision is by another learned Judge of this court and that is K. Sarvothama Srinivasa Shenoy & Co. v. Deputy Commissioner of Agricultural Income-tax and Sales Tax, Kozhikode 1965 K.L.T. 304. In that case the learned Judge was considering Section 12(2) and Rule 17 of the Madras General Sales Tax Act of 1939; and the learned Judge followed the decision in Ramaswami's case (1965) K.L.R. 137. The learned Judge said :

The powers are distinct and separate but there is overlapping in the sense that even in relation to the escaped turnover action can be taken under Section 12(2) provided that the escape of turnover is discernible from the records of the case.

13. The third decision chronologically is the Division Bench ruling in Nainan v. State of Kerala, which was ultimately reversed by the Supreme Court. In that case the Division Bench was considering Section 15 and Rule 33 of the Kerala Sales Tax Act of 1125; and the Division Bench followed the earlier decision of the Single Judge in Sarvothama Srinivasa Shenoy's case 1965 K.L.T. 304.

14. The last decision is the yet unreported decision of another learned Judge in Vazhakkala Rubbers, Kottayam v. Sales Tax Officer, Special Circle, Kottayam 1968 K.L.R. 726. (O. P. Nos. 3988 and 4137 of 1966). In this last decision the learned Judge considered the aforesaid three decisions of this court and all the Supreme Court decisions then available (the first three). The learned Judge pointed out that the rule of construction mentioned in Ramaswami's case (1965) 1 K.L.R. 137. might apply only when both powers were 'vested in the same authority or in co-ordinate authorities' ; in other words, the learned Judge pointed out that if the special power and the general power vested in two different authorities, the principle mentioned in Ramaswami's case (1965) 1 K.L.R. 137. could not apply. We endorse this view. We also add that the reasoning in Sarvothama Srinivasa Shenoy's case 1965 K.L.T. 304 that there is overlapping of the powers-is not correct, because the powers operate in two fields and the revisional power cannot trench upon the power to assess escaped turnover. Still further, we point out that even in the last case-the case of Vazhakkala Rubbers 1968 K.L.R. 726 a small error has crept into the judgment. The learned Judge says in considering the decisions of the Supreme Court in Appukutty's case [1963] 14 S.T.C. 242 (S.C) and Cheria Abdulla's case [1965] 16 S.T.C. 875 (S.C.):

This court reaffirmed its original view. Though the decision of this court in the first case was set aside by the Supreme Court in The State of Kerala v. Appukutty [1963] 14 S.T.C. 242 (S.C) the above view was apparently affirmed.

15. In support of this conclusion our learned brother quotes the following sentence from the decision of the Supreme Court in Appukutty's case [1963] 14 S.T.C. 242 (S.C.).

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.

16. If this sentence alone is taken into consideration, it may give some colour to the conclusion of our learned brother. But there is a preceding sentence and a succeeding sentence; and if all the sentences are taken together, we are afraid the position will appear to be different. We have already extracted those sentences elsewhere in this jugdment as part of another quote; and, therefore, we do not extract them again (see the first extract). We also hasten to add that we are not expressing any opinion on the correctness or otherwise of the actual decision in the case, because an appeal appears to be pending against that decision.

17. The reasoning in the three decisions of this court in Ramaswami's case (1965) 1 K.L.R. 137, Sarvothama Srinivasa Shenoy's case 1965 K.L.T. 304. and Nainan's case [1970] 26 S.T.C. 251 (S.C.) is no more good after the Supreme Court has reversed the decision in Nainan's case ([1970] 26 S.T.C. 251 (S.C.). We summarise hereunder the effect of the five Supreme Court decisions discussed by us on the question before us in the following manner : that the revisional power of the Deputy Commissioner and the power of the Sales Tax Officer to assess escaped turnover are two different and distinct powers-two independent jurisdictions ; that these two powers operate in two different fields ; that the power of revision of the Deputy Commissioner cannot trench upon the power of the Sales Tax Officer to assess escaped turnover ; and that in exercising the revisional power, the Deputy Commissioner may call for the records and, on perusing them, if he finds that the order of the Sales Tax Officer is illegal, irregular or improper, may direct even a further investigation, but such further investigation cannot trench upon any power conferred by the Act or the Rules on any other authority, more particularly, the power of the Sales Tax Officer to assess escaped turnover. In other words, the revisional power of the Deputy Commissioner, including the power of further investigation, is to be used only to correct the illegality, irregularity or impropriety of the order which he is entitled to revise and is not to be used in another field or jurisdiction, the jurisdiction of the Sales Tax Officer to assess escaped turnover.

18. In the light of these principles drawn from the decisions of the Supreme Court, it is clear that the order of the Deputy Commissioner in this case directing the Sales Tax Officer to make further investigation regarding escaped turnover and to assess the same is illegal. We, therefore, set aside the said order, however, without costs.

19. But this does not close the case. In this case, the Sales Tax Officer started proceedings against the petitioner for assessing escaped turnover even before the Deputy Commissioner was seized of the matter ; and that proceeding is pending. But the counsel of the petitioner points out that, as a result of the direction by the Deputy Commissioner, the Sales Tax Officer's powers are controlled ; to that extent, the order of the Deputy Commissioner is prejudicial to the petitioner. Now that we have set aside that order, the Sales Tax Officer may proceed with the enquiry to assess escaped turnover untrammelled by the direction of the Deputy Commissioner.


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