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Periaswamy Vs. the Deputy Commercial Tax Officer - Court Judgment

LegalCrystal Citation
SubjectOther Taxes
CourtChennai High Court
Decided On
Reported in(1969)2MLJ399
AppellantPeriaswamy
RespondentThe Deputy Commercial Tax Officer
Cases ReferredMohamed Abdul Khader v. State of Madras I.L.R.
Excerpt:
- .....act was not appropriate to avoid the consequences flowing from failure to make prescription as to time by rules framed under section 7-b. after the above judgment was given, the required rules have been made on 4th april, 1967, prescribing a period of five years from the expiry of the period to which the tax relates for the purpose of taking action under section 7-b, sub-section (1) of the act.5. this notification purports to be issued under the rule-making power conferred by section 16 read with section 7-b of the madras entertainments tax act, 1939. the learned counsel appearing for the petitioner has attacked the vires of the rule thus framed on the ground that the power to prescribe a period of limitation is a statutory power and that it cannot be exercised by a delegated authority,.....
Judgment:
ORDER

P. Ramakrishnan, J.

1. In Writ Petition No. 4259 of 1965, V. Periaswamy, who was assessed to tax under the Madras Entertainment Tax Act, 1939, for the weeks ending 13th July, 1965 to 27th July, 1965 prays for the issue of a writ of certiorari under Article 226 of the Constitution. In Writ Petition N0.4260 of 1965, the same Periaswamy prays for the issue of a writ of Prohibition restraining the respondent, the Deputy Commercial Tax Officer, Bhavani, from taking any proceedings for compounding the offence, or prosecution in lieu of composition in respect of the returns relating to the entertainment tax for the period 13th July, 1965 to 27th July, 1965.

2. The circumstances which have led to the filing of these writ petitions as revealed in the affidavits filed by the petitioner are briefly the following : The petitioner in accordance with Section 7-A of the Madras Entertainments Tax Act, 1939, hereinafter called the Act, regularly submitted weekly returns of entertainment tax for the aforesaid period and the respondent, the assessing authority under the Act, accepted the returns and made an assessment on the basis of the returns. Subsequently, the respondent and the Assistant Commercial Tax Officer raided the petitioner's cinema house at Guruvareddiyur and it was alleged that in the course of the raid, a certain diary book and some slips were recovered from the petitioner. This diary book and the slips were alleged to contain figures which would provide evidence for the collections of money at the petitioner's cinema theatre and which were not reflected in his returns. The petitioner was questioned on 2nd August, 1965 and his statement was recorded. Relying upon the data alleged to have been discovered in the above manner, the respondent made a re-assessment in respect of the returns for the weeks mentioned above. He was also given a notice to pay the compounding fee of Rs. 500 in lieu of prosecution, because he had suppressed the true figures in the returns submitted by him for the purpose of levy of entertainment tax.

3. The petitioner's contentions are two-fold. The first contention is on a point of law, which is to the effect that there is no adequate provision in the Act enabling the assessing authority to re-assess an escaped assessment after an earlier assessment had been completed. Secondly, it was urged that on the merits the petitioner had not been afforded sufficient opportunity to show cause against the proposed revision in assessment.

4. Taking up the first point, though the objection about the legality of a revision of assessment in similar cases on the ground that the statute as well as the rules did not contain specific provisions for the purpose could have been maintained at an earlier stage, at the present moment, after the issue of the amendment in Section 7-B of the Act by Madras Act XX of 1966, and the Rules framed thereunder, the objection about the absence of a power to re-assess is no longer sustainable. Section 7-B as amended by Act XX of 1966 is in two parts. Section 7-B (1) with which we are now concerned read thus;

Where for any reason,:

(i) any payment for admission to any entertainment has escaped assessment to tax under Section 4; or

(ii) any cinematograph exhibition has escaped assessment to tax under Section 4-A, the authority prescribed under Sub-section (1) of Section 7-A may, subject to the provisions of Sub-section (3) and at any time, within such period as may be prescribed, assess to the best of its judgment the tax due on such payment or exhibition under Section 4 or 4-A, as the case may be, after making such enquiry as it may consider necessary and after giving the proprietor a reasonable opportunity to show cause against such assessment.

Section 7 of Act XX of 1966, has the effect of validating re-assessments of escaped assessment made at any time after the date of the commencement of the principal Act and before the date of the publication of Madras Act XX of 1966. The learned Counsel for the petitioner has referred me to certain decisions which explain the genesis of the above amendments made by Madras Act XX of 1966. For a long time the Courts had pointed out the failure of the Legislature to provide in the Act a provision for re-assessment of escaped assessment, unlike the corresponding provisions in the Sales Tax Act, or in the Income-tax Act. This defect was sought to be rectified in the first instance by the introduction of Section 7-B, by the Amendment Act (XX of 1966). While this amendment gave power to the assessing authority to assess to the best of its judgment escaped assessments, within such period as may be prescribed, corresponding Rules were not issued prescribing the period of limitation to re-assess the escaped assessments. The validity of this Act, including the validation provision contained in Section 7 to which I have made reference, came up for consideration before Veeraswami and Ramaprasada Rao, JJ., in Royappa Gounder v. Commercial Tax Officer : (1967)2MLJ546 . The Bench observed:

Where power is given by a legislative provision in terms that it can be exercised only within the time to be prescribed, it clearly follows, in our opinion, that, unless the limits of time are drawn, the power itself cannot be exercised.

They also considered that a re-assessment made at a time when the Rules did not prescribe the period within which re-assessment should be made could not be valid under the validating provision in Section 7. The learned Judges observed that the language used in Section 7 of the Amending Act was not appropriate to avoid the consequences flowing from failure to make prescription as to time by Rules framed under Section 7-B. After the above judgment was given, the required Rules have been made on 4th April, 1967, prescribing a period of five years from the expiry of the period to which the tax relates for the purpose of taking action under Section 7-B, Sub-section (1) of the Act.

5. This notification purports to be issued under the rule-making power conferred by Section 16 read with Section 7-B of the Madras Entertainments Tax Act, 1939. The learned Counsel appearing for the petitioner has attacked the vires of the rule thus framed on the ground that the power to prescribe a period of limitation is a statutory power and that it cannot be exercised by a delegated authority, unless the statute itself specifically provides for the exercise of that power by the authority to whom the rule-making powers are delegated. According to the learned Counsel, the provision in the Act which defines the nature of the powers which could be delegated is only Section 16, and even after the amendment of Section 7-B, there was no amendment of Section 16 of the Act so as to incorporate therein a power in the Government to frame a rule for the purpose of prescribing the period of limitation. In such circumstances it is contended by the petitioner that the Rules are ultra vires. The short answer to this argument is supplied by. the learned Government Pleader, that Section 7-B itself contains the necessary power of delegation when it uses the words ' at any time within such period as may be prescribed '. As in so many other enactments, the definition section, Section 3 (8) of the Act, lays down that ' prescribed ' means ' prescribed by Rules made under this Act '. According to the learned Government Pleader it is not necessary to transpose the power of delegation in respect of the prescription of time to make re-assessments from Section 7-B of the Act to Section 16 of the Act. Once the necessary power is found expressed by the Legislature in Section 7-B, it will be open to the rule-making authority to take that section as well as Section 16 (1) together, for drawing an inference that such a power had been delegated to the Government.

6. A somewhat parallel situation arose under the Madras General Sales Tax Act and it was considered in the decision in Mohamed Abdul Khader v. State of Madras I.L.R. (1960) Mad. 623 : (1960) 2 M.L.J. 416. (1960) 11 S.T.C. 247. Section 3 (4) of the Sales Tax Act, as it stood on the relevant date, contained a provision for prescription that turnover shall be determined in accordance with such Rules as may be prescribed. There was a general section, Section 19, which after prescribing for making of Rules to carry out the purpose of the Act, specified particular subjects regarding which the rule-making power was delegated to the Government. At page 252 of the report the Bench observed that:

It is a general rule of construction that every provision or word employed by a statute was intended to have effect or be of some use, and a tautology or superfluity of language should not be imputed to the Legislature except without necessity.

From this point of view, the Bench held that the provision for prescribing the rule contained in Section 3 (4) of the General Sales Tax Act could be read along with the general power conferred under Section 19 for determination of the turnover. In the present case also, what the rule-making authority has done is to read the power to prescribe rules for the purpose of re-assessment of escaped assessments in Section 7-B, along with the general power conferred on the State Government to make Rules for carrying into effect the purpose of the Act in Section 16 (1) as authority for framing the above rule. I am of the opinion that this method of deriving support for the exercise of delegated power from two provisions in the Act, one a general provision as is found in Section 16 (1), and the other a special provision as is found in Section 7-B (1) of the Act, is perfectly logical and should be given full force and effect, if we have to give meaning to every expression found in the statute. Consequently, I am of the opinion that the power delegated in this case is sufficient to give validity to the rule prescribing the period for re-assessment, and that therefore the re-assessment also will be valid, taking advantage also of the validating provision contained in Section 7 of the Act. Therefore, the attack made against the validity of the re-assessment in this case must fail.

7. The learned Counsel for the petitioner next referred to the claim in W.P. No. 4260 of 1965 regarding the legality of the demand for composition fee in lieu of prosecution. But it is stated by the Government Pleader that it is premature to issue a writ of prohibition because what the authorties have done so far is only to issue a notice to show cause against levy of composition fee. It will be open to the petitioner to give a reply to this notice and also make any representations contra before the actual compounding fee is levied on him. Consequently, it is unnecessary to issue a writ of prohibition as prayed for in W.P. No. 4260 of 1965.

8. Regarding the further argument on the plea of the petitioner that there has not been a proper opportunity given to the petitioner to peruse the incriminating documents including the diary and the slips and consequently there has been a failure of natural justice, a perusal of the records shows that the petitioner was given ample time to peruse these slips as well as the diary on the basis of which he was re-assessed. He has also categorically given a statement when questioned by the authorities of the Department that the documents relate to him and his business. In the above circumstances, there is no substance in this plea also, that the requirements of natural justice have not been complied with.

10. The writ petitions are dismissed. There will be no order as to costs.


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