State of Madras Vs. P.M. Batcha &
Company  INSC 107 (12 April 1967)
12/04/1967 SHAH, J.C.
CITATION: 1967 AIR 1537 1967 SCR (3) 617
Madras General Sales Tax Act, 1939, ss. 5 and
11; Madras General Sales Tax Act, 1959, s. 32-'Nil' assessment made by
Commercial Tax Officer under s. 5 of 1939 Act-Order not communicated to
assessee-Change of judicial view regarding taxing provisions-Power of Deputy
Commissioner of Commercial Taxes under s. 32 of 1959 Act to revise order of
'Nil' assessment-Assessee's whether had right to file appeal against 'Nil'
assessment under s. 11 of 1939 Act-Effect of such right on powers of Deputy
Commissioner under s. 32.
The respondent firm carried on business in
hides and skins in Madras. For the assessment year 1953-54 they applied for a
licence under s. 5 of the Madras General Sales Tax Act, 1939. The Commercial
Tax Officer relying on a judgment of the Madras High Court held that the
respondent was not liable to tax and made a 'Nil' assessment. The order was
however not communicated to the respondent. The aforesaid judgment of the
Madras High Court was later reversed by this Court. The Deputy Commissioner of
Commercial Taxes Madras, being of the view that the order of 'nit' assessment
relating to 1953-54 was illegal commenced proceedings under s. 32 of the Madras
General Sales Tax Act, 1959 and thereafter assessed the respondent. The Sales
Tax Tribunal confirmed the order of Commercial Tax Officer. The High Court in
revision held that since the Commercial Tax Officer had not communicated his
order to the assessee the time for appeal had not expired and therefore the
Deputy Commissioner had no power to revise the order under s. 32 of the Act of
1939. The State appealed.
HELD : In the present case no tax was
assessed, not even the taxable turnover was determined. No appeal could
therefore lie under s. 11 of the Act of 1939 against the order of 'Nil'
assessment. There was thus no bar against the exercise of jurisdiction of the
Deputy Commissioner under s.
32(1) to commence Proceedings of
re-assessment. [621D] M/s. M.A. Noor Mohamed & Company v. State of Madras
& Anr., A.I.R. 1957 Mad. 33 and State of Madras & Anr. v. Mls. M. A.
Noor Mohamed & Company, A.I.R. 1960 S.C. 1254, referred to.
S. B. Periasami Nadar and Company v. State of
Madras, 13 S.T.C. 328, approved.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 578 of 1966.
Appeal by special leave from the judgment and
order dated August 31, 1964 of the Madras High Court in Tax Case No. 127 of
1963 (,Revision No. 83).
P. Ram Reddy and A. V. Rangam, for the
R. Ganapathy Iyer, for the respondent.
618 The Judgment of the Court was delivered
by Shah, J. The respondents are a firm carrying, on business in bides and skins
in the State of Madras and is registered as a "dealer" under the
Madras General, Sales Tax Act 9 of 1939. For the assessment year 1953-54 the
respondents applied for a licence under s. 5 of the Madras General Sales 'Fax
Act and provisionally paid a sum of Rs. 450 towards licence fee. The
respondents were directed to pay an additional amount of Rs. 400. The
respondents declined to pay the additional amount and informed the assessing
authority that the transactions carried on by them were of the nature of export
of hides and skins and no sales-tax was payable on goods exported to places
The Commercial Tax Officer scrutinised the
accounts of the respondent for the year 1953-54 and by order dated March 29,
1957 determined their turnover from purchases of hides and skins from dealers
outside the State and from dealers within the State both tanned and untanned
and of sales of tanned hides and skins ,on behalf of resident and non-resident
principals. But, following the judgment of the Madras High Court in Messrs. M.
A. Noor Mohamed & Company v. The State of Madras and Another(1), the
Commercial Tax Officer held that the respondents were exempt from tax and no
licence fee for the year 1953-54 was payable. He, therefore, declared that
there was no demand under s. 8 (B) (2) of the Act, that the tax due for the
year was nil and that a notice in Form 'C' be issued for refund of Rs. 450 paid
by the respondents.
No intimation of this order was given to the
The judgment of the Madras High Court in M.
A. Noor Mohamed's case(1) was carried in appeal to this Court and this Court
reversed the judgment : see State of Madras & Another v. Mls. M. A. Noor
Mohammed & Company (2 ). In the meantime the Madras General Sales Tax Act 9
of 1939 was repealed and was replaced by the Madras General Sales Tax Act 1 of
1959. The Deputy Commissioner of Commercial Taxes, Madras, being of the view
that the "order of nil assessment" dated March 29, 1957 was illegal
and that the respondents were liable to pay sales-tax on their turnover of
hides and skins for the year 1953-54, commenced proceeding under s. 32 of the
Madras General Sales Tax Act 1 of 1959 and issued a notice to the respondents
calling upon them to file their objections, if any, to the proposal to revise
the "order of nil assessment". The Deputy Commissioner rejected the
contention of the respondents that he had no jurisdiction to revise the
assessment and determined the turnover of The respondents at Rs. 11,25,000 odd.
The Sales Tax Appellate (1) A.I.R. 1957 Mad. 33.
(2) A.I.R. 1960 S.C. 1254- 619 Tribunal
substantially confirmed the order of the Deputy Commissioner.
The High Court in exercise of their
revisional jurisdiction under s. 38 of Act 1 of 1959 set aside the order of the
Tribunal holding that it was obligatory upon the Commercial Tax Officer to
communicate the order dated March 29, 1957 :
if it was not so communicated the time to
appeal against the order cannot be deemed to have expired and the Deputy
Commissioner had no jurisdiction under s. 32 of the Madras General Sales Tax
Act 1 of 1959 to revise the order. In recording their conclusions the learned
Judges followed the judgment in The State of Madras v. M/s A. M. Safiulla &
Company(1) in which the rule was stated ,is follows "To sum up in the case
of an assessment completed and signed by the Officer, but not communicated to
the assessee, our conclusions are as follows :
(a) The order of assessment can be
communicated to the assessee without any time limit, but no liability would
arise till communication;
(b) The limitation for the assessee to prefer
either an appeal or a revision would commence to run only after the order is
communicated to him;
(c) The time for exercising powers of
revision would commence to run from the date of the order itself and there
cannot be an enlarged period of limitation merely because the Department takes
its own time to communicate the order." In our judgment, the order of the
High Court cannot be sus- tained. The Commercial Tax Officer commenced proceeding
in the manner provided by S. 9 of Act.9 of 1939 for assessment of sales-tax due
by the respondents, but ultimately held that no tax was due by the respondents.
Section 11 of the Act provided that an assessee objecting to an. assessment
made on him under s. 9 sub-s. (2) may within thirty days from the date on which
he was served with notice of the assessment, appeal to such authority as may be
Rule 15 of the rules framed by the Governor
of Madras under the Madras General Sales Tax Act required the dealers in hides
and skins to submit a return in Form A-4 to the assessing authority on or
before the 25th day of every month. The Commercial Tax Officer had to process
the return submitted by the dealer. If no return was submitted in respect of
any month or if the return was submitted without payment of the full amount of
tax, or the return was otherwise defective, the Commercial Tax Officer could
determine the turnover to the best of his judgment. Rule 620 16 dealt with the
levy of tax on hides and skins. There was no provision in the Act or the Rules
framed by the State Government which required that an order made under S. 9
shall, before it may be regarded as validity made, be communicated to the
dealer. An appeal lay under S. II by an assessee objecting to an assessment
made on him under s. 9(2). Since the assessment was "nil", no
question of the respondents objecting to the assessment arose, and no appeal
could be contemplated to be filed by them.
We agree with the view of the Madras High
Court in S. B. Periasami Nadar and Company v. The State of Madras(1) at p. 333
"In a case where the assessee is not
levied with tax, there is no rule which compels the assessing authority to
inform the assessee that the tax levied against him is nil. The word
"assessment" may have a wide connotation including several aspects of
the assessment proceedings.
But however wide the significance of the
expression "assessment" may be, it is impossible to hold that an
assessment is incomplete or invalid in the absence of the order of assessment
being served upon the assessee. Once the competent authority makes an
assessment under the Madras General Sales Tax Act after scrutinising the return
submitted by the assessee, and after giving the assessee a reasonable opportunity
of proving the correctness and completeness of any return submitted by him it
is complete and valid." It is true that when proceedings for re-assessment
were com- menced, Act 9 of 1939 stood repealed and was replaced by Madras Act 1
of 1959, and the authority which the Deputy Commissioner could exercise was
under S. 32 (1) which read as follows :
"The Deputy Commissioner may, of his own
motion,, call for and examine an order passed or proceeding recorded by the
appropriate authority under section 4-A, section 12, section 14, section 15, or
sub-sections (1) and (2) of section 16 and may make such inquiry or cause such
inquiry to be made and, subject to the provisions of this Act, may pass such
order thereon as he thinks fit." Sub-section (2) provided, insofar as it
is material "The Deputy Commissioner shall not pass any order under
sub-section (1) if- (1) 13 S.T.C. 328.
621 (a) the time for appeal against the order
has not expired;" There was, however, no assessment of tax against the
respon- dents. There could be no appeal against the order of "nil
assessment" under s. 11 of Act 1 of 1959, and no bar to the jurisdiction
of ',,he Deputy Commissioner under sub-s. (1) of s. 32 of the Act could arise.
The High Court was, in our judgment, in error in holding that because "the
order of nit assessment" was not communicated, the respondent could not
appeal against that order, and the time for appealing against that order had
not expired within the meaning of sub-s. (2) of s. 32 of Act 1 of 1959. We are
unable also to agree with the High Court that in an appeal under s. 11 of Act 9
of 1939 an assessee may object to, a mere statement setting out the sales and
purchases during the course of his business, or even his turnover. An appeal
lies against the assessment of tax. In the present case, no tax was assessed :
not even the taxable turnover was determined. No appeal, in our judgment, could
lie under s. II of Act 9 of 1939 against the order of "nil
assessment". There was therefore no bar against the exercise of jurisdiction
of the Deputy Commissioner under s. 32(1) to commence proceedings for
Our attention was invited to s. 31 (1) of Act
1 of 1959, which confers a right of appeal upon any person who objects to an
order passed by the appropriate authority under various sections including s.
4A, s. 12, s. 14 and others.
But if no appeal lay against the order of
"nil assessment" under s. 11 of Act 9 of 1939, it is difficult to
appreciate how an appeal could still be filed by the respondents against that
order under Act 1 of 1959, which came into force two years after the order.
It is unnecessary in that view to consider
the alternative argument advanced by counsel for the State that it was open to
the Deputy Commissioner to revise the order of "nil assessment"'
under the power reserved to him to revise a "proceeding recorded".
The order passed by the High Court is set
aside, and the order passed by the Sales Tax Tribunal restored, with costs in
this Court and the High Court.
G.C. Appeal allowed.