State of Kerala Vs. Shri M. Appukutty
[1962] INSC 284 (11 October 1962)
KAPUR, J.L.
SHAH, J.C.
CITATION: 1963 AIR 796 1963 SCR Supl. (1) 563
CITATOR INFO :
D 1976 SC1545 (18)
ACT:
Sales Tax-Escaped turnover-Issue of notice by
Deputy Commissioner-Jurisdiction-Rules, if ultra vires-Madras General Sales Tax
Act, 1939 (Madras IX of 1939), ss. 9 (1), 9(2), 12 (2), 19 (1), 19 (2)
(f)-Madras General Sales Tax Rules, rr. 17(1), 17A (1A), 17 (3A).
HEADNOTE:
The Deputy Commercial Tax Officer imposed
sales tax under the Madras General Sales Tax Act, 1939, on the respondent for
the assessment year and the appeal taken against the assessment order was
dismissed. Thereafter the Deputy Commissioner of Commercial Taxes issued a
notice proposing to determine the escaped turnover for the period of assessment
and in pursuance of this notice he determined the revised turnover. On the
dismissal of the appeal filed by the respondent before the Sales Tax Appellate
Tribunal lie filed a revision petition before the High Court. The High Court
allowed the revision petition on the ground that the notice by the Deputy
Commissioner of Commercial Taxes was issued without jurisdiction.
The State appealed to the Supreme Court with
special leave.
The main questions in the appeal were whether
the notice was issued without jurisdiction and whether the rules under which
the notice was issued were ultra vires the Act.
Held, that the power of the Deputy
Commissioner to assess escaped turnover under r. 17 (3A) framed under s. 19 of
the Act does not arise out of the revisional jurisdiction exercised tinder s.
12 (2) of the Act. The Deputy Commissioner is therefore not bound to restrict
himself to the examination of the 564 evidence already on record. Section 9
does not deal with escaped turnover but is a provision for determination of the
turnover of a dealer in the first instance. Rule 17 deals with a separate and
independent jurisdiction in regard to determining and taxing escaped turnovers.
There is no conflict between s. 12 (2) and rr. 17 (1), 17 (IA) and 17 (3A).
Therefore the notice was not issued without jurisdiction, nor was r. 17 (1)
vires the substantive provisions of the Act.
King Emperor v. Sibnath Banerji, (1945) L. R.
72 I. A. 241, followed.
State of Madras v. Louis Dreyfus & Co.
Ltd., (1955) 6 S. T.
C. 318, distinguished.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 621 of 1961.
Appeal by special leave from the judgment and
order dated September 25, 1958, of the Kerala High Court in Tax Revision Case
No. 11 of 1957.
S. T. Desai and V. A. S. Muhammed, for the
appellant.
T. V. R. Tatachari, for the respondent.
1962. October 11. The judgment of the Court
was delivered by KAPUR, J.-In this appeal by special leave against the judgment
and order of the High Court of Kerala the appellant is the State of Kerala and
the respondent is the assessec. The appeal arises out of proceedings under the
Madras General Sales Tax Act, 1939, (Madras Act No. IX of 1939) read with the
rules made under s. 19 of that Act. In this judgment the former will be
referred to as the Act and the latter as the rules. The area of Kozhikode was
originally within the State of Madras, but by the States Reorganisation Act was
transferred to the State of Kerala.
The Madras General Sales Tax Act, however,
continued to apply.
565 The assessment period for the purposes of
the turnover in dispute is 1952-53. By an order dated March 27, 1954 the Deputy
Commercial Tax Officer, Kozhikode, imposed sales tax on the respondent on a net
turnover of Rs. 12,56,178-14-0 and the appeal taken against that order to the
Commercial Tax Officer was dismissed. On March 15, 1956 a notice was issued by
the Deputy Commissioner of Commercial Taxes against the assessee proposing to
determine the escaped turnover for the period of assessment. By an order dated
March 31, 1956, the Deputy Commissioner determined the revised turnover. An
appeal was taken against that order to the Sales Tax Appellate Tribunal,
Trivandrum, but that appeal was dismissed on March 23, 1957. Against that order
a revision was taken to the Kerala High Court and by its judgment dated
September 25, 1958 the High Court set aside the order of the Deputy
Commissioner on the ground that the notice issued by the Deputy Commissioner of
Commercial Taxes was without jurisdiction and the order of the appellate
tribunal was therefore erroneous. Another question which had been raised before
the High Court that the rule under which the Deputy Commissioner purported to
act was ultra vires the Act was not decided because of the decision on the
first question i.e. of ,jurisdiction. Against that judgment and order the State
of Kerala has come in appeal by special leave to this court.
In appeal, before us, two main contentions
have been raised:
One on behalf of the appellant the State of
Kerala that the notice issued by the Deputy Commissioner was not without
jurisdiction and the High Court's opinion on that point is erroneous; and the
second on behalf of the respondent assessee that if the notice was not without
jurisdiction then the rule under which the notice was issued was altra vires as
it was beyond the substantive provisions of the Act. For this purpose it is
necessary to refer to some of the relevant provisions of the Act and the 566
rules. The procedure to be followed and the power of assessment of the
Assessing Authority is contained in s. 9 of the Act and we need only quote
sub-ss. 1 and 2 of that section which read as under:"9 (1) Every dealer
whose turnover is ten thousand rupees or more in a year shall submit such
return or returns relating to his turnover in such manner and within such
periods as may be prescribed.
(2) (a) If the assessing authority is
satisfied that any return submitted under subsection (1) is correct and
complete, he shall assess the dealer on the thereof.
(b) If no return is submitted by the dealer
under sub-section (1) before the date prescribed or specified in that behalf or
if the return submitted by him appears to the assessing authority to be
incorrect or incomplete, the assessing authority shall assess the dealer to the
best of his judgment.
Provided Section 11 deals with appeals and s.
12 with the power of the Sales tax authorities to pass orders in revision. One
of the arguments relating to ultra vires was based on sub-s. 2 of s. 12 of the
Act. That sub-section is as follows:"S. 12 (1) The Commercial Tax Officer
may(i) (i).......................
(ii)......................
(2) The Deputy Commissioner may(i) suo motu
or 567 (ii) in respect of an 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 _Appellants Tribunal
under s. 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".
Section 12-A provides for appeals to the
Appellate Tribunal and s. 12-B for revision to the High Court. Section 19 gives
power to the Government to make rules and the relevant provisions of that
section are 119 (1) and 19 (2) (f).
They are as under:"19 (1) The State
Government may make rules to carry out the purposes of this Act".
(2) In particular and without prejudice to
the generality of foregoing power such rules may provide for(f) the assessment
to tax under this Act of any turnover which has escaped assessment and the
period within which such assessment may be made, not exceeding three years;
" Under the rule making power conferred by s. 19 rules have been framed
and we are concerned in this appeal with rr. 17 (1), 17 (IA) and 1.7 (3A). They
read as under:568 "17 (1) If for any reason the whole or any part of the
turnover of business of a dealer or licensee has escaped assessment to the tax
in any year or if the licence fee has escaped levy in any year, the assessing
authority or licensing authority, as the case may be, (subject to the
provisions) in sub-rule (1-A) may, at any time within three years next
succeeding that which the tax or licence fee relates (determine to the best of
his judgment the turnover which has escaped assessment and assess the tax
payable in such turnover) or levy the licence fee after issuing a notice to the
dealer or licensee and after making such enquiry as he considers
necessary".
"17 (1A) Where in respect of the
turnover referred to in sub-rule 1 an order has already been passed under
section 11 or 12 the assessing authority shall make a report to the appropriate
appellate or revising authority as the case may be, which shall thereupon after
giving the dealer concerned reasonable opportunity of being heard, pass such
orders as it deems fit".
" 17 (3A) The powers conferred by
sub-rules 1 and 3 on assessing authority or licensing authority may also be
exercised by the appelIate authority referred to in section II; or as the case
may be, by the revising authority referred to in section 12, at any time within
a period of three years next succeeding that which the tax, or as the case may
be, the licence fee relates provided that such authority shall give the, dealer
concerned a reasonable opportunity of being heard before, passing orders under
this subrule".
569 We shall first take up the question of
jurisdiction raised by the appellant. The tribunal held that the powers
conferred on the Deputy Commissioner of Commercial Taxes under s. 12(2) and r.
17(3A) are distinct powers and action taken under r. 17(3A) was not without
jurisdiction. This finding was reversed by the High Court. Now s. 12(2) confers
on the Deputy Commissioner the power suo motu or on an application to call for
and examine the record of the proceedings of any officer subordinate to the
Deputy Commissioner for the purpose of satisfying himself as to the legality or
propriety of such order and he can pass such order with respect thereto as he
thinks fit. The respondent's argument was, and that argument was accepted by
the High Court, that this provision contains the totality of the powers of the
Deputy Commissioner and the power to assess escaped turnover is merely
incidental to the power of revision and may be exercised only when revisional
jurisdiction under s. 12(2) is invoked under that section and the record is
sent for suo motu or on application and the legality or propriety of the order
made by the Subordinate Officer is scrutinized. Therefore the Deputy
Commissioner was not in the absence of any substantive proceeding for exercise
of revisional powers competent to assess escaped turnover. But the power to
assess escaped turnover does not arise out of the revisional jurisdiction. In
exercising revisional jurisdiction the Deputy Commissioner would be restricted
to the examination of the record for determining whether the order of
assessment was according to law. Rule 17 confers power to assess escaped
turnover which may normally be exercised on matters dehors the record of
assessment proceedings before the Deputy Commercial Tax Officer. It is true
that the substantive provisions of the Act do not expressly deal with the power
and procedure for assessment of escaped turnover, the legislature has left it
to be dealt with by statutory rules to be framed under s. 19, and r. 17 has
been framed there under. Rule 17(1) and (3A) 570 ex facie Properly fall under
s. 19(2)(f). In any event as was said by the Privy Council in King Emperor v.
Sibnath Banerji(1) the rule making power is conferred by sub-s. (1) of that
section and the function of subs. (2) is merely illustrative and the rules
which are referred to in sub-s. 2 are authorised by and made under sub-s. 1.
The provisions of sub-s. 2 arc not restrictive of sub-s. (1) as expressly
stated in the words "without prejudice to the generality of the foregoing
power with which sub-s. (2) begins and which words arc similar to the words of
sub-s. (2) of s. 2 of the Defence of India Act which the Privy Council was
considering. Now sub-s. 1 of s. 19 of the Act provides that "the State
Government may make rules to carry out the purposes of this Act" and the
long title of the Act is an Act to, provide for the levy of general tax on the
sale of goods in the State of Madras. Therefore in our opinion r.
17 and the various clauses thereof made under
s. 19 are not beyond the rule making power of the State Government as contained
in s. 19.
The first sub-rule of r. 17 provides that the
assessing authority may subject to sub-r. IA at any time within three years
next succeeding that to which the tax relates determine the turnover which has
escaped assessment and assess the tax payable on such turnover. That is the
power of the assessing authority.
Sub-rule IA deals with those cases where an
order has already been passed by the appellate authority under s. 11 or by a
revising authority under s. 12. In those cases the assessing authority has to
make a report to the appropriate appellate or revising authority and that
authority can, after giving the dealer concerned reasonable opportunity of
being heard pass such orders as it thinks fit. There is then a third case and
that is where there has been no appeal or revision under ss. 11 and 12 of the
Act and therefore (1) (1945) L. R. 72 I. A. 241.
571 no order of the appellate authority or of
revisional authority as contemplated in s. 12(2) of the Act and in those cases
the appellate authority or the revising authority as the case may be has, under
sub-r.(3A), the same power as the assessing authority had under sub-r. 1 of r.
17. In the present case after an appeal to
the Commercial Tax Officer there was no further proceeding and therefore the
Deputy Commissioner who is the revising authority acted under r. 17 (3A) and
issued a notice which, according to that sub-rule he had power to issue and
then determined the escaped turnover. We have already held that r. 17 is a
valid rule under s. 19 of the Act. Sub-rule 3A of r. 17 on its plain
construction confers jurisdiction on the revising authority to issue the notice
which it did issue and in our opinion, and we say, so with respect, the
judgment of the High Court is, to that extent, erroneous and it cannot be said
that the notice was without jurisdiction. Therefore the impugned order was not
incorrect.
The respondent then argued that r. 17 is
ultra vires of the provisions of the Act and he put his argument like this;
that the power to assess is given to the
assessing authority under s. 9(1) & (2) which has been quoted above. The
assessing authority is defined in S. 2(a-2) to mean any person authorised by
the State to make any assessment under this Act. Therefore the assessment of
escaped turnover can only be done, if at all, by an "assessing
authority" and not by a revising authority as he has not been authorised
by the State Government. The answer to this is in s. 2B. That section
authorises the State Government to appoint as many Deputy Commissioners of
Commercial Taxes as it thinks fit for the purpose of performing the functions
conferred on them under the Act add such officers shall perform their functions
within such local limit as the State Government in this behalf may assign to
them. Rule 17 confers on the Deputy Commissioners the power to determine and
572 tax escaped turnovers in cases where revisions have been taken to them
(sub-r. IA) and also where revisions have not been taken to them (sub-r. 3A).
Provisions of s. 9(1) and (2) therefore are no bar to the exercise of power of
assessing escaped turnovers. Moreover s. 9 does not deal with escaped turnovers
but is a provision for the determination of the turnover of a dealer in the
first instance nor can it be said that r. 17 is in conflict with s. 12(2). That
section deals with another state of affairs and another jurisdiction i.e. where
the Deputy Commissioner suo motu or on an application made calls for the record
and determines the legality or propriety of an order made by one of the
subordinate officers. It cannot be said in view of r. 17 that the power of
revision by the Deputy Commissioners is limited to powers under s. 12(2). Rule
17 deals with a separate and independent jurisdiction in regard to the
determining and taxing escaped turnovers. The provisions of s. 12(2) are in no
way in conflict with the powers conferred under r. 17(1), 17(IA) and 17(3A).
The further argument that sub-r. 3A is
confined to cases where the revision filed under s. 12(2) is pending is not
supported by the language of that-rule. Our attention was drawn to the judgment
of the Madras High Court in the State of Madras v. Louis Dreyfus & Co.
Ltd.(1) But that case does not deal with r. 3A which came into force later.
In our opinion the order of the High Court is
erroneous and must be set aside. The appeal is allowed with costs.
Appeal allowed.
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