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Madura Mills Company Limited Vs. the State of Madras - Court Judgment

LegalCrystal Citation
SubjectCivil;Sales Tax
CourtChennai High Court
Decided On
Case NumberTax Case No. 96 of 1961 (Revision No. 60 of 1961)
Judge
Reported in[1964]15STC90(Mad)
AppellantMadura Mills Company Limited
RespondentThe State of Madras
Appellant AdvocateC.S. Padmanabhan, Adv., i/b., King and ;Partridge, Advs.
Respondent AdvocateG. Ramanujam, Adv. for ;Government Pleader
DispositionPetition allowed
Cases ReferredCentral Indian Insurance Co. Ltd. v. Income
Excerpt:
- - against this order made in revision an appeal was taken to the sales tax appellate tribunal which was dismissed and from that order of dismissal a revision petition was taken to the high court which also failed. - normally when an appeal is pending before the commercial tax officer and he also resorts to the course of suo motu revision, a combined order is passed, so that the aggrieved assessee can canvass both the revision as well as the appeal in an appeal before the sales tax appel late tribunal. a further appeal to the sales tax appellate tribunal failed. in the light of the limited construction which we placed upon the coffee board case, we are satisfied that it was open to the tribunal to have dealt with the question whether the canteen sales were liable to sales tax or not......of the sales at the canteen. against this order made in revision an appeal was taken to the sales tax appellate tribunal which was dismissed and from that order of dismissal a revision petition was taken to the high court which also failed. during all this time it may be mentioned that the appeal filed by the assessee still remained undisposed of. in the meantime the act of 1939 was replaced by act 1 of 1959 and under the provisions of that act the pending appeal stood transferred to the corresponding appellate authority, the appellate assistant commissioner. the appellate authority took the view that when the commercial tax officer made the order in revision under section 12(1) of the act of 1939, the original asseesment was replaced by the revised assessment and that the.....
Judgment:

Srinivasan, J.

1. The Madura Mills Company Limited is the peti tioner. For the assessment year 1952-53 the petitioner (assessee) was assessed on a turnover which included sales in a canteen. The rest of the assessee's turnover covered its dealings in cotton yarn and staple fibre yarn. In so far as the assessment of the turnover relating to sales at the canteen was concerned, the assessee filed an appeal to the Commercial Tax Officer. The appellate authority did not however dispose of the appeal but kept it pending to await the decision of the Supreme Court in Gannon Dunkerley's case wherein it was finally laid down that the turnover of sales in a canteen primarily run for the benefit of the workers in a factory did not represent taxable turnover in the course of business liable to sales tax. While the appeal was still pending, the Commercial Tax Officer in the exercise of his powers of revision under Section 12 of the Madras General Sales Tax Act, 1939, issued a notice and revised the order of assessment. He did not however deal with the appeal that was before him at the same time. That revision order dealt with the turnover other than the turnover of the sales at the canteen. Against this Order made in revision an appeal was taken to the Sales Tax Appellate Tribunal which was dismissed and from that Order of dismissal a revision petition was taken to the High Court which also failed. During all this time it may be mentioned that the appeal filed by the assessee still remained undisposed of. In the meantime the Act of 1939 was replaced by Act 1 of 1959 and under the provisions of that Act the pending appeal stood transferred to the corresponding appellate authority, the Appellate Assistant Commissioner. The appellate authority took the view that when the Commercial Tax Officer made the Order in revision under Section 12(1) of the Act of 1939, the original asseesment was replaced by the revised assessment and that the original assessment order was no longer in force. Notwithstanding that the appeal was pending, the Commercial Tax Officer revised the turnover, which included the disputed canteen sales. Since the turnover had been revised in that manner, the Appellate Assistant Commissioner thought that he had no jurisdiction to sit in appeal over that Order. The view that he took was that the original assessment order or the revised assessment order could not be split up into several portions and that since the assessment order was one indivisible unit, the original order was no longer in force. In the view that he had no jurisdiction to interfere at this stage, he purported to dismiss the appeal.

2. This Order was taken up in appeal to the Sales Tax Appellate Tribunal before whom it was contended that notwithstanding the suo motu revision by the Commercial Tax Officer, the original order of assessment was still in force. Relying upon certain decisions, to which reference will be made in due course, the Tribunal came to the con clusion that the revised order of assessment took the place of the original order of assessment and that it is not open to the assessee to contend that a portion of the original order of assessment is still at large for being dealt with in an appeal therefrom. The Tribunal observed:-

Normally when an appeal is pending before the Commercial Tax Officer and he also resorts to the course of suo motu revision, a combined order is passed, so that the aggrieved assessee can canvass both the revision as well as the appeal in an appeal before the Sales Tax Appel late Tribunal. A certain amount of hardship has been caused to the assessees in the present case, because at the time when the assessment order was revised, the Commercial Tax Officer kept the appeal before him pending ignoring the fact that if once he had revised an order of assessment he cannot thereafter exercise jurisdiction in appeal....But the act of the authorities in keeping the appeal pending lulled the assessees into a false sense of security that they still had a remedy by way of appeal from the original order of assessment, while in fact that remedy had come to an end, and they should have sought for relief against the assessment on the canteen sales only by including it in the appeal from the Order of revision. The position has been altered fur ther by the fact that an order in revision has been passed by the High Court against the appellate order of the Sales Tax Appellate Tribunal from the Order in revision passed by the Commercial Tax Officer. It is not for us to indicate how the appellants, who no doubt find themselves in an awkward position, should work out their relief at this stage, in regard to the canteen sales which have been held to be not assessable, both by the High Court of Madras in the Gannon Dunkerley case and the Supreme Court in appeal therefrom....

3. The Tribunal thus concluded that the Order of the Appellate Assistant Commissioner holding that the appeal before him was liable to be dismissed is correct.

4. It is against this Order that the present revision petition has been filed.

5. All the authorities including the Tribunal appear to be fully conscious of the fact that the procedure adopted by the Commercial Tax Officer was wholly erroneous and improper. Under the 1939 Act the Com mercial Tax Officer is both an appellate and a revisional authority. There was an appeal pending before him from the Order of assessment in so far as the turnover of the canteen sales was concerned. At the same time the Commercial Tax Officer, as the revisional authority issued a notice seeking to revise the Order of assessment to the extent to which he thought that that part of the turnover other than canteen sales required to be modified. It is no doubt true that in the revised assessment order he left the canteen sales intact. Even assuming that when once he had made an Order in revision his power to dispose of the appeal that was before him came to an end, it does not mean that the hierarchy of the Appellate Tribunals over the Order of the Commercial Tax Officer are equally deprived of their rights to entertain an appeal or revision as the case may be. When in the circumstances stated, the Commercial Tax Officer did not dispose of the appeal but by making an Order in the exercise of his powers of revision deprived himself of the power to dispose of the appeal, the normal inference that should follow would be that the appeal also stood dismissed. If that is so, that is to say, if the appeal of the assessee in so far as the canteen sales are con cerned was dismissed by the Commercial Tax Officer, the assessee has a right to approach the Tribunal and seek relief; as the Tribunal itself points out, since no specific order had been made by the departmental officers on the appeal petition, the assessee in its appeal to the Tribunal against the revisional order necessarily confined itself to obtaining the relief against the revision only. When however after Act 1 of 1959 was passed, the Appellate Assistant Commissioner took up that pending appeal, he thought that he had no jurisdiction to interfere with the original order of assessment which no longer existed in view of the revised order of assessment and he dismissed that appeal in express terms. It was from that Order that an appeal was brought to the Sales Tax Appellate Tribunal and the question is whether the Sales Tax Appellate Tribunal was right in the view that it took that the remedy by way of appeal which the law gives to an assessee stands destroyed by reason of the improper procedure adopted by the department.

6. In State of Madras v. India Coffee Board, Batlagundu [1960] 11 S.T.C. 1, it was laid down by a Bench of this Court that though the statute envisages two sets of remedies, appeals and revision, the former being available only to the taxpayer and the latter both to the taxpayer and the State, the Order of assessment itself is not treated as a severable one with respect to each item of the total turnover. It was also laid down that there is no basis for the view that the Act provides two independent hierarchies of tribunals, one to exercise appellate jurisdic tion and the other to exercise revisional jurisdiction each functioning independent of the other in their respective fields with reference to the same order of assessment. It is principally relying upon this decision that the Tribunal came to the conclusion that the revised order having taken the place of the original order of assessment and that revised order having been the subject-matter of appeal to the Tribunal and revision to the High Court, it is not open to the assessee to attack any part of the original order of assessment. The facts of the above decision require to be referred to in order to understand the implications thereof. An assessment was challenged by an appeal to the Commercial Tax Officer. A further appeal to the Sales Tax Appellate Tribunal failed. A revision to the High Court also proved ineffectual. During the pendency of the revision before the High Court, the Deputy Commis sioner of Commercial Taxes initiated proceedings suo motu to revise the assessment confirmed by the Commercial Tax Officer on appeal. Over ruling the objections of the assessee the assessable turnover was revised by the Deputy Commissioner. Against this Order an appeal was taken to the Sales Tax Appellate Tribunal which held that as the Order of original assessment had become final by proceedings taken up to the High Court, the Deputy Commissioner had no longer any power to reopen that assessment. It was this contention that was accepted by the High Court. It will be noticed that suo motu power of revision given to the Deputy Commissioner was to revise any order of a subordinate authority, that is the Commercial Tax Officer, and when no order of that subordinate authority was available that power of revision came to an end. That was the principle upon which the decision proceeded. We are unable to apply it wholly to the present case. In another decision, Madura Mills Co., Ltd. v. State of Madras [1962] 13 S.T.C. 124, we referred to this decision and pointed out that the limit of revisional jurisdiction conferred by Section 12 was confined by the expression 'legality, propriety and regularity of the proceedings' sought to be revised. We also indicated that the decision in the Coffee Board case [1960] 11 S.T.C. 1 was not rested on the ground of any theory of merger and explained that since the Order of the particular authority no longer existed, the foundation for the exercise of the revisional jurisdiction was also equally absent.

7. It seems to us that on no conceivable principle can we hold that the appeal, which the law permitted and which was properly initiated, has become impossible of a proper disposal. It may be that the Com mercial Tax Officer having purported to exercise his revisional jurisdic tion could no longer hear the appeal that was before him. The Order that he made in revision only meant that the original order of assess ment had been replaced by another order, and any portion of an order which the Commercial Tax Officer himself had passed could no doubt be not susceptible of an appeal at his own hands. The result then is that the appeal that was directed against a part of the turnover included in the original order of assessment became really one directed against that same part of the turnover in the revised assessment. It is important to emphasise that that part of the turnover in dispute was mot revised in any manner by the Commercial Tax Officer. The result therefore would be that when the Order in revision was brought up before the Tribunal, the Tribunal would have been competent to deal with that part of the Order of assessment which had been impliedly dismissed by the Commercial Tax Officer. The Tribunal overlooking this feature and the circumstance that it dealt with only the revised part of the assessment did not give an effective disposal to the disputed part of the turnover, the dispute with regard to which was at no time adjudicated upon. When all the Tribunals constituted under the Act were conscious of the fact that one part of the turnover was the subject-matter of an appeal and was pending disposal, we can see no principle either of equity or of law which compels us to hold that the right of the assessee to be afforded relief against the taxation of a part of the turnover which has been declared to be illegal by the highest Court of the land should still (sic) be maintained.

8. On behalf of the petitioner a decision in Central Indian Insurance Co. Ltd. v. Income-tax Officer : [1963]47ITR895(MP) has been referred to. That was a case where the Appellate Assistant Commissioner held that the the losses of earlier years should be allowed to be carried forward and set off against the income for the assessment year 1950-51. Though an appeal in respect of the assessment was taken up to the Tribunal, the question of the carry forward of the losses of the earlier years was not in fact the subject-matter of the further appeal and was not considered in that appeal. The question arose whether subsequent to the disposal of the appeal by the Income-tax Appellate Tribunal it was open to the department to rely upon Section 35 of the Income-tax Act and rectify that part of the assessment order which dealt with the carry forward of losses. The learned Judges held that the principle of merger would not apply to such a case and relied upon certain observations of the Supreme Court in Commissioner of Income-tax v. Amritlal Bhogilal and Co. : [1958]34ITR130(SC) in reaching their conclusion.

9. In our view the Sales Tax Appellate Tribunal was not right in the conclusion it reached. In the light of the limited construction which we placed upon the Coffee Board case, we are satisfied that it was open to the Tribunal to have dealt with the question whether the canteen sales were liable to sales tax or not. It is conceded on behalf of the department that in view of the decision of the Supreme Court in the Gannon Dunkerley case, the turnover of the canteen sales is not turn over within the meaning of the Act liable to sales tax. Though in different circumstances if the dispute called for any further enquiry we would have remitted the matter to the Tribunal for determination, in the present case since the question has been settled, the relief that the petitioner asks can be granted by us. We accordingly direct the deletion of the disputed turnover from the Order of assessment. The petition is allowed but there will be no order as to costs.


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