Orissa & Ors Vs. M/S. Krishna Stores
 INSC 56 (21 January 1997)
AHMADI, SUJATA V. MANOHAR
V. Manohar. J.
is a partnership firm carrying on business as agents of Hindustan Lever Ltd.,
Indian Oil Corporation and various other corporations. The respondent carries
on whole-ale business in the products of these companies and has its registered
office at Kanatabanji District Bolangir in the State of Orissa. For the assessment year 1969-70
the respondent was assessed under Section 12(4) of the Orissa Sales Tax Act,
1947 (hereinafter referred to as the said Act) by order dated 23.9.1970.
Thereafter on 26.11.1970, the Vigilance Unit of the Sales Tax Department seized
the books of account and other documents of the respondent. On the basis of the
report which was submitted by the Vigilance Unit the assessment for assessment
year 1969-70 was reopened. The respondent was reassessed under Section 12(8) of
the said Act under an order dated 27.5.1972. By another order of the same date,
namely 27.5.1972, an assessment order for assessment year 1970-71 was also
passed under Section 12(4) of the said Act. The respondent filed appeals in
respect of both these orders.
appeals were defective. The requisite court fees were not paid and the memo of
appeal did not contain grounds of appeal. The respondent was called upon to
remove these defects by the office of the Sales Tax Department. But despite
reminders and notices, the respondent did not remove these defects; with the
result that the appeals were summarily rejected under Rule 49 of the Orissa
Sales Tax Rules.
notices dated 15th of March, 1975 issued under Rule 80 of the Orissa Sales Tax
Rules, the Commissioner of Sales Tax in exercise of his power under Section
23(4) of the said Act proposed revising the assessment orders dated 27.5.1972
for assessment years 1969-70 and 1970-71. The Commissioner proposed a suo motu
revision of the said orders because in his opinion the respondent had been
under-assessed and a large amount of turn-over had escaped assessment. These
notices were served on the respondent on 21.3.1975. Pursuant to the said
notices, the respondent appeared before the Commissioner of Sales Tax. After
taking several adjournments the respondent requested the Commissioner of Sales
Tax for reasons for issuing the notice of suo motu revision. The reasons were
thereupon communicated to the respondent on .5.1975. Hearing of the case was
fixed on 7.5.1975. The respondent made his submissions in writing before the
Commissioner of Sales Tax. These submissions were considered by the
Commissioner of Sales Tax. The respondent, however, did not explain the
accounts or the entries appearing in the seized documents. By a detailed order
dated 26.5.1975, the Commissioner of Sales Tax, after considering the
submissions made by the respondent, revised the assessment orders and demanded
excess taxes to the tune of Rs. 1,12,620 for the assessment year 1969-70 and Rs.
79,710 for the assessment year 1970-71.
respondent filed writ petitions before the High Court of Orissa being O.J.C.
Nos. 1680 and 1681 of 1975 challenging the said orders of the Commissioner of
Sales Tax. The challenge was two-fold. The respondent challenged the
jurisdiction of the Commissioner of Sales Tax under Section 23(4) of the said
Act read with Rule 80 of the Orissa Sales Tax Rules to revise the assessment.
The respondent also submitted that it had not been given a reasonable
opportunity of hearing before the Commissioner of Sales Tax. Both these contentions
were upheld by the High Court which quashed the impugned orders dated
26.5.1975. The present appeals are from the judgment and order of the High
Court dated 28.4.1977.
23(4) of the said Act is as follows:
Subject to such rules as may be made and for reasons to be recorded in writing
the Commissioner, may, upon application by a dealer or on his motion revise any
order made under this Act or the rules made thereunder by any person other than
the Tribunal or Additional Tribunal, as the case may be, appointed under
sub-section (3) of Section 3 to assist him:
that the Commissioner shall not entertain any such application for revision if
the dealer filing the same having a remedy by way of appeal under sub- section
(1), or sub-section (3) did not avail of such remedy or the application is not
filed within the prescribed period." Rule 80 of the Orissa Sales Tax Rules
is as follows:
The Commissioner may of his own motion, at any time within three years from the
date of passing of any order by the Assistant Sales Tax Officer or by the Sales
Tax Officer and within two years from the date of passing of any order other
than an appellate order by the Additional Commissioner, Deputy Commissioner or
the Assistant Commissioner, as the case may be, call for the record of the
proceedings in which such order was passed and revise any such order.
respondent has contended that the Commissioner has no power to suo motu revise
the orders dated 27.5.1972 of the Sales Tax Officer because in the present case
appeals were preferred by the respondent from the said orders of the Sales Tax
Officer before the Assistant Commissioner of the respondent's failure to cure
various defects. It is the contention of the respondent that under Rule 80 a suo
motu power of revision by the Commissioner cannot be exercised in respect of an
appellate order. Since in the present case the orders of the Sales Tax Officer
have merged in the orders passed in the two appeals the power of revision
cannot be exercised by the Commissioner under Rule 80.
have, therefore, to consider whether in the present case the Commissioner is
seeking to revise any appellate order passed by the Assistant Commissioner of
Sales Tax within the meaning of Rule 80. The notices which have been issued by
the Commissioner under Rule 80 seek to revise the assessment orders passed by
the Sales Tax Officer, Undoubtedly, the respondent preferred two appeals from
these assessment orders before the Assistant Commissioner of Sales Tax. These
appeals, however, were rejected under Rule 49 of the Orissa Sales Tax Rules.
Rule 49 which deals with summary rejection of appeal is as follows:
Summary Rejection of Appeal:
the memorandum of appeal is not in the specified form or if all the
requirements of the form are not fully complied with, the appellate authority
may reject the appeal summarily, after giving the appellant such opportunity as
it may think fit to rectify the defects.
The appeal may also be summarily rejected on other grounds which shall be
reduced to writing by the appellate authority:
that before an order rejecting an appeal is passed the appellant shall be given
a reasonable opportunity of being heard." In the present case the appeals
have been rejected under Rule 49(1). This is clearly a rejection at the initial
stage of filing of an appeal which is defective. Such rejection is before the
appeal is taken up for consideration by the appellate authority. An order
rejecting the appeal on the ground that it is not in the specified form or that
all the requirements of the form are not fully complied with cannot be
considered an appellate order within the meaning of Rule 80. Rule 49(1) clearly
provides that such summary rejection can take place after giving the appellant
an opportunity to rectify the defects. This is not a rejection or dismissal of
an appeal after hearing the appellant on merit. Such an order would not qualify
as an appellate order under Rule 80. The purpose of a revision by the
Commissioner suo motu is to ensure that the assessee is correctly assessed
relating to his tax liability. If there is an appellate authority which has
considered the assessment order then the Commissioner cannot suo motu revise
the order. The department would then have to follow the procedure laid down for
challenging the appellate order.
however, an appeal is not accepted for consideration at all because of defects
there is no question of the department being required to follow the procedure
laid down for challenging such an order. Rule 80, when it refers to the
Commissioner exercising a suo motu power of revision in respect of orders other
than appellate orders, clearly contemplates an appellate order which has
considered the original assessment order on merit in some form or the other. An
order rejecting an appeal at the stage of filing cannot be considered as an
appellate order in the context of Rule 80.
attention has been drawn by learned advocate of the respondent to somewhat
similar provisions of Section 263 of the Income Tax Act of 1961, and cases
relating to it. We will refer only to a few of those cases. Under that section
the Commissioner has the power to suo motu revise any order passed by the
Income-tax Officer if it is erroneous in so far as it is prejudicial to the
interests of the revenue.
cases where the appellate authority had passed an order disposing of the assessee's
appeal against the assessment order of the Income-tax Officer but had not dealt
with all the points arising from the Income-tax Officer's order, a question
arose whether the Commissioner could exercise his power of revision in respect
of those points which were not considered in the appeal. Prior to the amendment
of Section 263 in 1988, there was a conflict of opinion among different High
Courts on this question. Some High Courts were of the view that even if all the
points arising from an Income-tax Officer's order were not considered in
appeal, or even if in appeal the order of the Income-tax Officer was confirmed,
the order of the Income- tax Officer merged in the appellate order and,
therefore, the Commissioner could not exercise his power of revision in respect
of any point arising out of the Income-tax Officer's order once an appellate
order had been passed. Some other High Courts, however, held that the power of
revision could not be exercised only in respect of those points which were
urged and decided in the appeal. In respect of points not so urged or decided
in appeal, the power of revision could be exercised by the Commissioner. It is
not necessary to examine this question here.
issue is now taken care of by an amendment made in 1988 in Section 263 of the
Income-tax Act. Explanation (c) to Section 263(1) after amendment provides that
where any order referred to in this sub-section and passed by the assess in
officer had been the subject-matter of any appeal filed on or before or after
the first day of June 1988, powers of the Commissioner under this sub-section
shall extend and shall be deemed always to have extended to such matters as had
not been considered and decided in such appeal.
to this amendment, however, in the case of Commissioner of Income-Tax, Bombay
v. Amritlal Bhogilal & Co. (1958  ITR 130) this Court was required to
consider a composite order passed by the Income-tax Officer granting
registration to a firm under Section 26A of the Indian Income-Tax Act, 1922
along with an order of assessment of the firm. The firm had filed an appeal
against the order of assessment which had been decided by the Appellate
Assistant Commissioner. The court was required to consider whether the order of
the Income-tax Officer registering the firm can be revised by the Commissioner
under Section 33B if he considers that as erroneous and prejudicial to the
Court held that he could. The order of registration was a separate non-appealable
order. While so holding, this Court said that if an appeal is provided against
an order passed by a tribunal, the decision of the appellate authority is the
operative decision in law if the appellate authority modifies or sets aside the
decision of the tribunal. It is obvious that it is the appellate decision that
is effective and can be enforced. In law the position would be just the same
even if the appellate decision merely confirmed the decision of the tribunal.
As a result of the confirmation of affirmation of the decision of the tribunal
by the appellate authority, the original decision merges in the appellate
decision and it is the appellate decision alone which subsists and is operative
and capable of enforcement. The respondent strongly relies on these
observations. However, in that case the court was not required to consider
whether the power of revision could be exercised in a case where the appeal was
rejected at the threshold without any application of mind by the appellate
authority on the issues arising therein.
case of State of Madras v. Madurai Mills Co. Ltd. (AIR 1967 SC 681) this Court,
however, observed that the doctrine of merger was not a doctrine of rigid and
universal application. The application of the doctrine depends on the nature of
the appellate or revisional order in each case and the scope of the statutory
provision conferring the appellate or revisional jurisdiction.
therefore, unless the appellate authority has applied its mind to the original
order or any issue arising in appeal while passing the appellate order, one
should be careful in applying the doctrine of merger to the appellate order.
respondent strongly relied upon a decision of this Court in Gojer Brothers Pvt.
Ltd. v. Ratan Lal Singh (1975  SCR 394). In that case a decree for
possession in favour of the plaintiff was passed by the Munsif's court. It was
confirmed in appeal and the second appeal was dismissed by the High Court. The
court said that the judgment of an inferior court if subjected to an
examination by the superior court ceases to have existence in the eye of law
and is treated as being superceded by the judgment of the superior court. In
other words the judgment of the inferior court loses its identity by its merger
wit the judgment of the superior court. This was clearly a case where at each
stage the appeal was decided on merit. It has no relevance here. The other case
relied upon by the respondent is of Sheodan Singh v. Daryao Kunwar (AIR 1966 SC
1332). In that case the trial court had decided two suits having common issues
on merit. There were two appeals therefrom. One of them was dismissed on the
ground of limitation and the other on account of default in printing. With the
result that the trial court's decision stood confirmed. This Court said that
the decisions of the appeal court will be res judicata as the appeal court must
be deemed to have heard and finally decided the matter. The entire controversy
before the court related to the application of the doctrine of res judicata.
power to revise in a taxing statute, however, will have to be examined in the
context of the statute. We have to consider whether an order rejecting the
appeals under Rule 49(1) precludes the Commissioner form exercising power under
Section 23(4) read with Rule 80. Under Section 23(4) the Commissioner can,
inter alia, on his own motion revise any order made under this Act or the Rules
by any person other than a tribunal or an additional tribunal. Therefore, under
this sub-section the Commissioner is not expressly prevented from revising an
appellate order if made by any person other than the tribunal or an additional
Rule 80, however, the Commissioner may, of his own motion revise any order
passed by the Assistant Sales Tax Officer or the Sales Tax Officer within three
years. The Commissioner can also suo motu revise within two years any order
other than an appellate order passed by the Additional Commissioner, the Deputy
Commissioner or the Assistant Commissioner. In the context of Section 23(4)
where the words any order other than an appellate order" are absent, the
prohibition against revising an appellate order in Rule 80 should be taken as
applying only to an appellate order in its full sense i.e. an order which is
passed after considering any issue arising in appeal. It would not cover an
order of rejection under Rule 49(1), when the appeal is not entertained at the
threshold for consideration.
next contended that the respondent was not given an opportunity to be heard by
the Commissioner. From the facts as set out, it is apparent that the respondent
was served with a notice of proposed revision on 21.3.1975. The reasons for
such revision were communicated to the respondent on 2.5.1975. The respondent
had furnished written submissions to the Commissioner which were considered at
the hearing of the case. After furnishing the grounds of revision the hearing
of the case was fixed on 7.5.19075.
is nothing on record to sow that the respondent wanted more time or had asked
for more time. The respondent appeared through his advocate on 7.5.1975 and
submitted his written arguments. Thereafter the Commissioner has passed a
detailed order on 26.5.1975. Looking to these facts it cannot be said that a
reasonable opportunity of hearing was not given to the respondent.
premises the appeals are allowed and the impugned judgment and order of the
High Court is set aside.
will, however, be no order as to costs.