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V.N. Surulivel Nadar and Brothers Vs. the State of Madras - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberTax Case No. 12 of 1962 (Revision No. 4)
Judge
Reported in[1963]14STC1005(Mad)
AppellantV.N. Surulivel Nadar and Brothers
RespondentThe State of Madras
Appellant AdvocateM.K. Nambiyar, Adv. for ;K. Narayanaswamy and ;K. Mahadevan, Advs.
Respondent AdvocateG. Ramanujam, Adv. for ;Government Pleader
DispositionSuit allowed
Cases ReferredDeputy Commissioner of Commercial Taxes v. Sri Swami and Company
Excerpt:
.....accrued or incurred thereunder and the result of any proceeding under the 1959 act is made 'subject thereto'.under the 1939 act, an assessment made by the assessing authority did not become final for all purposes. but that peril effectively disappeared when under the new act, the revisional power was conferred upon the deputy commissioner for commercial taxes and not upon the appellate assistant commissioner. any interference by the appellate assistant commissioner with the assessment order passed by the deputy commercial tax officer to the prejudice of the assessee, in the purported exercise of his appellate power, is clearly violative of his vested rights......20th december, 1960, after the coming into force of the madras general sales tax act, 1959, the deputy commissioner purported to start proceedings under section 32 of that act. he issued a notice on that date, and despite the objections of the assessees, he made an order cancelling the exemption to the tune of a turnover of rs. 4,12,400. his order was to the effect that 'on further investigations, it was found that the documents produced by the dealers in certain cases in support of the purchases alleged to have been made from outside the state were not reliable and that the vouchers issued by the auctioneers at kallar in kerala state, and the vouchers for the transport by other means than by the ropeway prepared by the dealers themselves were not genuine and were designed to shift.....
Judgment:

Srinivasan, J.

1. The assessees are dealers in cardamom. For the the year 1955-56, the assessee-firm returned a turnover of Rs. 12,02,723 and claimed an exemption in respect of a turnover of Rs. 10,70,425 stated to be purchases of cardamom made in the Travancore-Cochin State. The Deputy Commercial Tax Officer, Theni, verified the purchase vouchers and the transport vouchers in detail and except for the purchase of one item covering a turnover of Rs. 4,119, he was satisfied that the purchases made outside the Madras State had been taken delivery of by the assessees at places outside the State. This was presumably established by the maintenance of proper vouchers for the transport of the purchased commodity from places outside the State to the assessees' place of business inside the State. He accordingly accepted the claim to exemption except in respect of the small turnover referred to. An assessment was made on that basis on 14th March, 1957.

2. On the 20th December, 1960, after the coming into force of the Madras General Sales Tax Act, 1959, the Deputy Commissioner purported to start proceedings under Section 32 of that Act. He issued a notice on that date, and despite the objections of the assessees, he made an order cancelling the exemption to the tune of a turnover of Rs. 4,12,400. His order was to the effect that 'on further investigations, it was found that the documents produced by the dealers in certain cases in support of the purchases alleged to have been made from outside the State were not reliable and that the vouchers issued by the auctioneers at Kallar in Kerala State, and the vouchers for the transport by other means than by the ropeway prepared by the dealers themselves were not genuine and were designed to shift the situs of purchase from the Madras State to places outside the State.'

3. Against this order, an appeal was taken to the Sales Tax Appellate Tribunal. The appeal of these assessees was heard along with some other appeals. The principal point that was urged before the Appellate Tribunal was that the Deputy Commissioner had no jurisdiction to pass the said order, inasmuch as the original order of assessment had become final. It was also urged that the view taken by the Deputy Commissioner was based on suspicion and not on any records and that the assessees were not given a proper opportunity, the Deputy Commissioner merely relying on the basis of information said to have been obtained behind the back of the assessees. Other contentions questioning the validity of the alteration of the point of taxation of cardamom from the point of purchase to that of sale were also raised. The Tribunal came to the conclusion that the Deputy Commissioner had jurisdiction to make the revision under Section 32 of the 1959 Act. It held that Section 61 of the 1959 Act did not bar the exercise of the powers conferred by Section 32 of that Act and that after the repeal of the 1939 Act, the Deputy Commissioner was competent to and in fact could invoke only the provisions in the 1959 Act. Dealing with the contention that under the 1939 Act the power of revision did not embrace the collection of fresh materials, the Tribunal took the view that if Section 32 was the only provision which could be invoked in the exercise of the power of revision, that provision gave a right to the Deputy Commissioner to make a further enquiry into the matter and did not restrict him to the material already on record. It accordingly rejected the appeal.

4. The assessees have now filed this revision petition, and the principal ground of attack is that the view taken by the Tribunal, that the power of revision exercised in the instant case authorised the Deputy Commissioner to secure fresh materials in the light of which the order sought to be revised can be examined is wholly erroneous. No other point has been raised.

5. The question that we have to decide falls into two parts : firstly, what is the nature of the power of revision in general; and secondly, whether in the present case, where the assessment was made under the 1939 Act, the power that is conferred by Section 32 of 1959 Act on the revising authority to make a further enquiry into the matter is or is not limited by the saving provisions contained in Section 61 of the Act.

6. The scope of the power of revision has been examined on several occasions in various decisions of this Court. The cases dealing with the powers conferred by Section 12 of the Madras General Sales Tax Act of 1939 have interpreted that provision to mean that it does not justify dependence upon any fresh material outside the record, the record being the record of the order sought to be revised and of ancillary records such as the files of assessment relevant thereto. In State of Madras v. Louis Dreyfus and Company Limited [1955]6 S.T.C. 318 the question arose as to the distinction between the power conferred by Rule 14(2) and Rule 17. Broadly stated, Rule 14(2) is directed to the correction of improper or illegal assessment orders, while Rule 17 is the power of assessment of escaped turnover. Rule 14 virtually reiterated the power of revision contained in Section 12 of the Act of 1939. It was held in the above decision by a Full Bench that the two powers were distinct from each other and covered two different jurisdictions. Rajamannar, C.J., observed :-

Now what exactly is the meaning to be attached to the expression 'the record of any order passed' The records which the revising authority calls for are the records of the assessment. They would include the assessment order as well as the other files of the assessing authority which would furnish the basis upon which the assessment order is passed. If in the assessment order the turnover which a dealer has returned or which has been gathered from his books is treated as not taxable or subject to any exemption and the revising authority is of the opinion that the order in this behalf is erroneous, the Commercial Tax Officer would have satisfied himself that such an order was not legal or proper. Up to this there could not be any room for controversy as regards the competency of the revising authority to revise an assessment order which in its opinion is not legal or proper.

7. This decision no doubt does not deal with the further aspect of the matter whether the revising authority is competent to embark upon a fresh enquiry, gather additional evidence in the light of which the order under review should be further examined.

8. In the State of Kerala v. Cheria Abdulla and Company [1960] 11 S.T.C. 295 the Kerala High Court had to examine the revisional provisions under the 1939 Madras General Sales Tax Act. The question that was specifically canvassed therein was whether the revisional authority could direct the gathering of additional evidence by an authority subordinate to him and thereafter proceed to effect a revision on the basis of the evidence so gathered. The learned Judges had no difficulty in reaching the conclusion that the order of the Deputy Commissioner in revision had to be based on the record of any order passed or proceeding recorded under the provisions of the Act by an officer subordinate to him and not on the basis of any fresh evidence recorded subsequently. They referred to a decision of Krishnaswami Naidu, J., in Louis Dreyfus and Company v. Province of Madras [1952] 3 S.T.C. 19 which took the same view and which led to the Full Bench decision in State of Madras v. Louis Dreyfus and Company Limited [1955] 6 S.T.C. 318. They referred to an earlier decision of their own High Court in Appukutty v. State of Kerala [1958] 9 S.T.C. 710 which was to the same effect.

9. The Andhra Pradesh High Court had to examine a similar question in Manepalli Venkatanarayana v. State of Andhra Pradesh [1959] 10 S.T.C. 524. The case came before it by way of writ petitions challenging the jurisdiction of the Deputy Commissioner of Commercial Taxes in re-opening the order of assessment and proposing to hold a further enquiry into the matter in the exercise of his powers of revision to assess escaped turnover. The learned Judges examined the scheme of the Act and came to the conclusion that the statute gave the power of reassessment in express terms only to the assessing authority and to no one else. Rule 31(5) of the Andhra Pradesh Sales Tax Rules, which purported to confer such a power upon the appellate or revisional authority, was attacked there as beyond the rule-making power of the Government. The learned Judges observed:

This section (Section 20) confers revisional jurisdiction upon the Board of Revenue, Deputy Commissioners and Commercial Tax Officers in the case of orders passed or proceedings recorded by officers subordinate to them. It also prescribes the limits within which this jurisdiction could be exercised. This power is not of such a wide amplitude so as to enable the revising authority to correct assessments based on information subsequently gathered. According to the learned Government Pleader, the revising authority need not confine itself to the material already on record but could call for fresh evidence and determine the assessment on the strength of it. We find it difficult to assent to this proposition. In our opinion, the legality or the propriety of the order under revision could be judged with reference to the material on record, i.e., the entire assessment file upon which the order questioned has been and could be based. But it does not authorise the authority concerned to go beyond the record. The power of revision has to be exercised within the limits specified in that section.

10. The learned Judges purported to follow the earlier cases in State of Madras v. Louis Dreyfus and Company Limited [1955] 6 S.T.C. 318 and Appukutty v. State of Kerala [1958] 9 S.T.C. 710.

11. The learned Additional Government Pleader places some reliance upon a decision of Krishnaswami Naidu, J., in Azeez Haji v. Government of Madras [1956] 7 S.T.C. 323 in support of his contention that fresh material could be looked into. In that case, the revisional power was exercised by the Commercial Tax Officer, who was also the appellate authority. What happened was that in the course of hearing the appeal, the Commercial Tax Officer came across certain material and purported to exercise his powers of revision, apparently on the basis of that material. The learned Judge took the view that it was open to the Commercial Tax Officer, who was empowered suo motu to call for and examine the record of any order, to take note of the facts of the case when it came to his notice in the course of the appeal preferred by the assessee and revise the turnover after giving notice to the assessee. The learned Judge observed that the order of the Commercial Tax Officer, though passed in an appeal preferred by the assessee, was not in pursuance of his powers as an appellate authority but by virtue of the powers which he had to revise the assessment under Section 12(1) of the Act. We do not understand this decision as laying down any principle that a revising authority has power to call for fresh evidence in a proceeding started in the exercise of his revisional jurisdiction conferred by Section 12 of the 1939 Act. This decision dealt with a somewhat singular case where the power of revision co-existed along with the power of appeal in the same authority and the proceeding was one and indivisible.

12. Nor does the Ashok Leyland Limited v. State of Madras [1957] 8 S.T.C. 210 referred to by the learned Additional Government Pleader give any support to his proposition. What was held there was that where only abstracts of accounts had been filed by the assessee, it was open to the Commercial Tax Officer to call upon the assessee to produce the original books themselves and if those entries in the accounts purported to be based upon other records, such other records can also be scrutinised. Virtually, therefore, this decision only supports the proposition later laid down by the Full Bench in State of Madras v. Louis Dreyfus and Company Limited [1955] 6 S.T.C. 318 that the records of assessment would include all the files of the assessment and the accounts and other material upon which the order under revision was passed.

13. It is clear from the above decisions that the revisional jurisdiction conferred by Section 12 of the Madras General Sales Tax Act of 1939 did not warrant the collection of additional material in the light of which the order sought to be revised could be examined.

14. In the present case, the power exercised by the Deputy Commissioner is that conferred by Section 32 of the Act. It is undoubtedly a revisional power. It reads:

The Deputy Commissioner may, of his own motion, call for and examine an order passed or proceeding recorded by the appropriate authority under section...and may make any such enquiry or cause such enquiry to be made and, subject to the provisions of this Act, may pass such order thereon as he thinks fit.

15. The corresponding section under the 1939 Act read thus :

Section 12(2)-The Deputy Commissioner may-

(i) suo motu, or

(ii) in respect of any order passed or proceeding recorded by the Commercial Tax Officer under Sub-section (1) or any other provision of this Act and against which no appeal has been preferred to the Appellate Tribunal under Section 12-A, on application, call for and examine the record of any order passed or proceeding recorded under the provisions of this Act by any officer subordinate to him, for the purpose of satisfying himself as to the legality or propriety of such order, or as to the regularity of such proceeding, and may pass such order with respect thereto as he thinks fit.

16. There are no doubt considerable differences between the language adopted in the two sections. But the revisional power conferred under the 1939 Act is undoubtedly subject to certain restrictions. Though there is apparently an enlarged jurisdiction conferred by Section 32 of the 1959 Act, the power that is conferred by this section is only a revi-sional power. It is not necessary for us to examine whether under the 1959 Act the exercise of the revisional power permitting making of further inquiry exceeds the scope of revisional jurisdiction, as ordinarily recognised. What has been argued before us is that in the case of an assessment that was made under the 1939 Act, even the revisional power exercised by the Deputy Commissioner under the new 1959 Act has to be exercised within the restrictions of that revisional power under the 1939 Act by reason of certain saving provisions contained in the 1959 Act. We shall now proceed to examine these provisions. We may point out that even under Section 32 of the 1959 Act, the order which the Deputy Commissioner can make is 'subject to the provisions of this Act.'

17. Section 6r repealed the 1939 Act. Sub-section (1) contains the following proviso:

Provided that such repeal shall not affect the previous operation of the said Act or any right, title, obligation or liability already acquired, accrued or incurred thereunder and subject thereto, anything done or any action taken...in the exercise of any power conferred by or under the said Act shall be deemed to have been done or taken in the exercise of the powers conferred by or under this Act....

18. The first part of the proviso clearly saves any right, title, obligation or liability already acquired, accrued or incurred thereunder and the result of any proceeding under the 1959 Act is made 'subject thereto'. Under the 1939 Act, an assessment made by the assessing authority did not become final for all purposes. There was always the possibility of the order of assessment being subjected to a revision contemplated under that Act. A liability must necessarily connote a corresponding right and if an order of assessment made under the 1939 Act stood under the danger of being revised by the proper authority, equally so it can be revised only within the ambit of the power of revision conferred by that Act. There was therefore a right on the part of the assessees that the assessment was subject to revision within the scope of the power of revision outlined in that Act. The saving of rights and liabilities contemplated by the proviso to Section 61(1) of the 1959 Act would be meaningless if by reason of any provision contained in the 1959 Act, the assessee should be regarded as likely to be prejudiced to a greater extent than under the 1939 Act. It is true that as observed by us in Deputy Commissioner of Commercial Taxes v. Sri Swami and Company [1962] 13 S.T.C. 468 no person acquires any vested right on the date of the assessment order to prevent future legislation. The facts of that case may be briefly referred to. After the passing of the 1959 Act, the Appellate Assistant Commissioner who corresponded to the Commercial Tax Officer under the 1939 Act became the appellate authority from an order of assessment. An assessment had been made under the 1939 Act and during the pendency of the appeal before the Commercial Tax Officer the 1959 Act came into force and the appeal was transferred to the Appellate Assistant Commissioner for disposal. There was a further appeal to the Appellate Tribunal from the decision of the Appellate Assistant Commissioner. Under the 1959 Act, the Appellate Tribunal has been conferred with a power of enhancement, a power which it did not possess under the 1939 Act. On an application made by the department for the enhancement of the assessment in the course of the appeal before the Appellate Tribunal, the Appellate Tribunal took the view that the assessee had a right to have his appeal disposed of under the provisions of the 1939 Act, that is to say, that the Appellate Tribunal did not have any power to enhance the assessment. This view was held to be incorrect by this Court for the reason that the Appellate Tribunal came to be seized of the appeal only after the passing of the 1959 Act at the instance of the assessee, invoking the provisions of the new Act, and that therefore the assessee could not maintain the position that any order of the Appellate Tribunal enhancing the assessment would amount to a deprivation of his vested right or violation of the provisions of Section 61(1). It was nevertheless pointed out that in so far as the proceedings before the Appellate Assistant Commissioner were concerned, since the appeal was one which had been filed under the provisions of the 1939 Act, the assessee could up to that stage claim to have his right protected by reason of Section 61 of the Act.

19. In another case decided by us, T.C. No. 9 of 1961 Deputy Commissioner of Commercial Taxes, Madras Division V.M. Balasundaram and Company [1963] 14 S.T.C. 996., we examined the scope of the saving provision. In that case, the Appellate Assistant Commissioner purported to enhance the turnover of the assessee. An appeal was taken to the Tribunal contending that the Appellate Assistant Commissioner had no jurisdiction to enhance the turnover and this contention was accepted by the Tribunal. The State preferred a revision petition contending that Section 31(3) of the 1959 Act specifically provided for the enhancement of the turnover during the appeal. We had to examine the scheme of the Act and the particular provisions enacted by Section 61(2) of the 1959 Act for the continuance of pending proceedings. We observed thus :

The assessee had undoubtedly a vested right at the time when the new Act came into force to prevent the then appellate authority, the Commercial Tax Officer, from enhancing the assessment in the course of an appeal preferred by him. It may be that there was always the peril of the Commercial Tax Officer, who was also the revising authority, revising the assessment to his prejudice in exercise of his revisional power. But that peril effectively disappeared when under the new Act, the revisional power was conferred upon the Deputy Commissioner for Commercial Taxes and not upon the Appellate Assistant Commissioner. Any interference by the Appellate Assistant Commissioner with the assessment order passed by the Deputy Commercial Tax Officer to the prejudice of the assessee, in the purported exercise of his appellate power, is clearly violative of his vested rights.

20. It seems to us accordingly on a consideration of these decisions that in a proceeding though started under Section 32 of the Act of 1959, the revisional jurisdiction of the Deputy Commissioner could in a case of assessment made under the 1939 Act be exercised only within the limits of such revisional jurisdiction as it existed under the 1939 Act. That revisional jurisdiction has been interpreted to mean that the revising authority has no right to gather additional or fresh evidence outside the limits of the record of assessment. In that view, therefore, the order of revision in the instant case is vitiated by an assumption of jurisdiction which did not exist.

21. We must not be taken as having decided the scope of the specific revisional power conferred by Section 32 of the 1959 Act which permits the making of such enquiry and whether the fresh evidence gathered as a result of such enquiry could be utilised in effecting the revision of an order, which is not protected by the saving clauses of Section 61 of the 1959 Act.

22. There is one further feature which may be referred to. It is not denied that in this case the evidence upon which the Deputy Commissioner purported to rely is evidence collected in the absence of assessees. While the Deputy Commercial Tax Officer stated in his order that he had examined all the records, vouchers, etc., in detail and reached the conclusion that the material fully supported the claim of the assessees that the purchases had been effected outside the State of Madras, the Deputy Commissioner seems to have doubted the genuineness of the vouchers in part. The order of the Deputy Commissioner does not state what material it was that he relied upon, but undoubtedly it seems to have comprised of statements from third parties secured in the absence of the assessees and which statements the assessees had no opportunity of challenging. There is no doubt that such material cannot be utilised to the prejudice of the assessees without their being afforded a proper opportunity in that regard.

23. In the result, the petition is allowed. The order of the Deputy Commissioner is set aside and the petitioner will be entitled to his costs. Counsel's fee Rs. 100.


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