S/S Kanpur Edibles
Pvt. Ltd. Vs. Commr.Trade Tax U.P. [2008] INSC 1837 (24 October 2008)
Judgment
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. OF 2008 (Arising out of
S.L.P. (C) No. 11004 of 2007) S/s Kanpur Edibles Pvt. Ltd. ...Appellant Versus
Commissioner, Trade Tax, U.P. ...Respondent WITH
Civil Appeal No. /2008 @ SLP (C) No. 11281/2007 Civil Appeal No. /2008 @ SLP
(C) No. 11691/2007 Civil Appeal No. /2008 @ SLP (C) No. 11811/2007
Dr. ARIJIT PASAYAT,
J.
1.
Leave
granted.
2.
These
four appeals involve common issues and, therefore, are disposed of by this
common judgment.
3.
Challenge
in each case is to the judgment of learned Single Judge of Allahabad High Court
holding that the order passed by the Commissioner of Trade Tax, U.P. under
Section 10-B of the U.P. Sales Tax Act, 1948 (in short the `Act') (also
described as U.P. Trade Tax Act, 1948) was within the period of limitation and
therefore the order passed by the Trade Tax Tribunal, Kanpur Bench-1 (in short
the `Tribunal') passed in four connected Second Appeal Nos.1 to 4 of 2007 for
the assessment years 1997-98 and 1998-99 in both the State Act and the Central
Sales Tax Act, 1956 (in short the `Central Act') was contrary to law.
4.
The
controversy lies within a very narrow compass relating to scope and ambit of
Section 10-B of the Act in the background of Section 21 of the Act.
5.
A
brief reference to the factual aspects would suffice. Orders of assessment were
passed for the two assessment years 1997- 98 and 1998-99 on 27.2.1999 and
17.6.2000 respectively. On 21.8.2001 notice for re-assessment in terms of
Section 21 of the Act with authorization of the Additional Commissioner,
Kanpur under Section 21(2) was issued. It is to be noted that for the period
during which such notice can be issued is normally two years, but with the
approval of the Commissioner it can be extended to 4 years from the end of the
concerned assessment year. The order was passed on 29.5.2003 holding that the
notice issued under Section 21 was cancelled. In other words, holding that
there was no need for any variation in the assessment orders. On 31.1.2006 and
8.2.2006 notices under Section 10-B of the Act for revision of the order dated
29.5.2003 in respect of two assessment years were issued. Preliminary
objections raised by the appellant relating to limitation were rejected by
order dated 23.12.2006.
Appeal was preferred
before the Tribunal which by order dated 13.3.2007 reversed the Joint
Commissioner's order and held that the notice under Section 10 was issued
beyond the period of limitation. Department filed Tax Revision cases before the
High Court. As noted above, the High Court has set aside the orders of the
Tribunal.
Learned counsel for
the appellant submitted that the crucial expression in Section 10-B (3)(c) is
"the order in question". In the instant case the initiation of
proceedings for revision in terms of Section 10-B related to the order dated
29.5.2003. While purporting to revise that order, in reality orders of
assessment have been passed which in substance substitutes the earlier orders
of assessment. The notices dated 31.1.2006 and 8.2.2006 cannot be related to
the orders of assessment dated 27.2.1999 and 17.6.2000. It is submitted that
even if under Section 10-B (1) an order is sought to be revised, the same
should be relatable to the order which is sought to be revised and cannot be extended
to an order which has become final and in respect of which no proceeding under
Section 10B(1) has been initiated.
With reference to the
conclusions of the Joint Commissioner it is submitted that by merely stating
that the order dated 29.5.2003 was revised, the exemption granted previously
has been withdrawn and it has been held that the tax is recoverable.
It is pointed out
that the effect of an order dropping the proceedings initiated for
re-assessment was considered by this Court in M/s Kundan Lal Srikishan, Mathura
(U.P.) v. Commissioner of Sales Tax, U.P. and Anr.
(1987 (1) SCC 684).
With the object of getting over the view expressed, an amendment was made by
U.P. Sales Tax (Amendment and Validation) Act, 1991 (in short the `Validation
Act') by adding Explanation III to Section 21 (1) w.e.f. 1.3.1973. It is
pointed out that in Kundan Lal's case (supra) this Court with reference to the
decision in The Deputy Commissioner of Commercial Taxes v. M/s H.R. Sri Ramulu
(1977 (1) SCC 703) held that once a notice is issued for the purpose of making
re-assessment, the assessment proceedings become re-opened and the initial
order of assessment ceases to be operative.
6.
In
response, learned counsel for the respondent submitted that the High Court has
correctly held that in a case where there was large scale of manipulation of
accounts, a purposive construction has to be made and the revisional order does
not suffer from any infirmity. Levy of tax has been made after holding that the
order dropping the proceedings was bad and, therefore, consequentially the
assessment of the escaped turnover has been directed to be done.
7.
A
few provisions which have relevance need to be noted. They are Sections 7,
10-B, 21 and 22 which read as follows:
Section 7.
Determination of turnover and assessment of tax.
(1) Every deader who
is liable to pay tax under this Act shall submit such return or returns of his
turnover at such intervals within such period, in such from and verified in
such manner, as may be prescribed; but assessing authority may in its
discretion, for reasons to be recorded, extend the date for the submission of
the return by any person or class of persons.
5 xxx xxx xxx xxx
(2) If the assessing authority, after such enquiry as he considers necessary is
satisfied that any returns submitted under sub section (1) are correct,
complete, he shall assess the tax on the basis thereof.
(3) If no return is
submitted by the dealer under sub section (1), within the periods prescribed in
that behalf or if the return submitted by him appears to the assessing
authority to be incorrect or incomplete, the assessing authority shall, after
making such enquiry as he considers necessary, determine the turnover of the
dealer to the best of his judgment and assess the tax on the basis thereof:
Provided that before
taking action under this Section the dealer shall be given a reasonable
opportunity of proving the correctness and completeness of any return submitted
by him.
Explanation -- In
this section and in sections 7-A, 7- B, 7-C, 7-D, 7-E, 8-A, 14, 15-A, 18, 21
and 24-D the expression, `turnover' means the turnover of sales or of purchases
or both, as the case may be.
xxx xxx xxx xxx xxx
Section 10-B: Revision by Commissioner (1) The Commissioner or such other
officer not below the rank of Deputy Commissioner as may be authorized in this
behalf by the State Government by notification may call for and examine the
record relating to any order (other than an order mentioned in section 10 -A)
passed by any officer subordinate to him, for the purpose of satisfying himself
as to the legality or propriety of such order and may pass such order with
respect thereof as he thinks fit.
(2) No order under
sub-section (1) affecting the interest of a party adversely shall be passed
unless he has been given a reasonable opportunity of being heard.
(3) No order under
sub-section (1) shall be passed- (a) to revise an order, which is or has been
the subject matter of an appeal under Section 9, or an order passed by the
Appellate Authority under that section:
Explanation - Where
the appeal against any order is withdrawn or is dismissed for non-payment of
fee payable under Section 32 or for non-compliance of sub section (1) of
Section 9, the order shall not be deemed to have been the subject-matter of an
appeal under section 9;
(b) before the
expiration of sixty days from the date of the order in question;
(c) after the
expiration of four years from the date of the order in question or after the
expiration of two years from the date of commencement of section 19 of the U.P.
Sales Tax (Amendment & Validation) Act, 1978, whichever is latter.
xxx xxx xxx xxx
Section 21. Assessment of tax on the turnover not assessed during the year:
(1) If the assessing
authority has reason to believe that the whole or any part of the turnover of
the dealer, for any assessment year or part thereof, has escaped assessment to
tax or has been under assessed or has been assessed to tax at a rate lower than
that at which it is assessable under this Act, or any deductions or exemptions
have been wrongly allowed in respect thereof, the assessing authority may,
after issuing notice to the dealer and making such inquiry as it may consider
necessary, assess or reassess the dealer or tax according to law:
7 Provided that the
tax shall be charged at the rate at which it would have been charged had the
turnover not except assessment, or full assessment as the case may be:
Explanation I:
Nothing in this
sub-section shall be deemed to prevent the assessing authority from making an
assessment to the best of its judgment.
Explanation II:
For the purposes of
this Section and section 22, "assessing authority" means the officer
or authority who passed the earlier assessment order, if any, and includes the
officer or authority having jurisdiction for the time being to assess the dealer.
Explanation III:
Notwithstanding the
issuance of notice under this sub-section, where an order of assessment or
re-assessment is in existence before the issuance of such notice, it shall
continue to be effective as such, until varied by an order of assessment or
reassessment made under this section in pursuance of such notice.
(2) Except as
otherwise provided in this section, no order of assessment or reassessment
under any provision of this Act for any assessment year shall be made after the
expiration of two years from the end of such year or March 31, 194, whichever
is later:
Provided that if the
Commissioner on his own or on the basis of reasons recorded by the assessing
authority, is satisfied that it is just and expedient so to do authorizes the
assessing authority in that behalf, such assessment or reassessment may be made
after the expiration of the period aforesaid but not after the expiration of
four years, from the end of such year notwithstanding that such assessment or
reassessment may involve a change of opinion:
8 xxx xxx xxx xxx
Section 22: Rectification of mistakes.
(1) Any officer or
authority, or the Tribunal or the High Court may, on its own motion or on the
application of dealer or any other interested person rectify any mistake in any
order passed by him or it under this Act, apparent on the record within three
years from the date of the order sought to be rectified:
Provided that where
an application under this sub- section has been made within such period of
three years, it may be disposed of even beyond such period:
Provided further that
no such rectification as has the effect of enhancing the assessment, penalty,
fees or other dues shall be made unless reasonable opportunity of being heard
has been given to the dealer or other person likely to be affected by such
enhancement.
(2) Where such
rectification has the effect of enhancing the assessment, the assessing
authority concerned shall serve on the dealer a revised notice of demand in the
prescribed form and therefrom all the provisions of the Act, and the rules
framed thereunder shall apply as if such notice had been served in the first
instance.
8. It is to be noted
that in Kundan Lal's case (supra) it was observed that on initiation of the
re-assessment proceedings the original order of assessment becomes inoperative.
But Explanation III to sub-Section (1) of Section 21 makes the position clear
that where an order of assessment or re- assessment is in existence before the
issuance of the notice under sub- section (1) it continues to be effective as
such until varied by an order of assessment or re-assessment made under Section
21 in pursuance of that notice. In other words, an order of assessment or
re-assessment which was in existence at the point of time the notice was issued,
continues to be effective unless it is varied. If it is not varied it goes
without saying that it continues to be operative and effective. The period for
making assessment or re-assessment is provided in sub-section (2) of Section
21. The period fixed for making assessment or re-assessment under any provision
of the Act for any assessment year is two years from the end of the concerned
assessment year. However, this period can be extended in terms of the proviso
to sub-section (2) if the Commissioner on his own or on the basis of reasons
recorded by the assessing officer is satisfied that it is just and expedient to
do so to make the assessment or the re-assessment after the expiration of the
period provided in sub-section (2) but in any event not after the expiration of
4 years from the end of such year notwithstanding that such assessment or
re-assessment may involve a change of opinion. In other words, the maximum
period available for making assessment or re- assessment is 4 years from the
end of the assessment year in question. That is no exception to this position
because sub-section (2) of section 21 itself provides that such assessment or
re-assessment may be made under any provision of the Act which includes Section
10-B. The power of revision by the Commissioner or such officer not below the
rank of Deputy Commissioner as may be authorized in this behalf by the State
Government by the notification, can be exercised by calling for and examining
the records relating to any order other than an order mentioned in Section 10A
passed by any officer subordinate to him for the purpose of satisfying himself
as to the legality or propriety of such order. The Commissioner or the
authorized officer is empowered to pass such order with respect thereof as he
thinks fit. The crucial expressions in Section 10B(1) are "for the purpose
of satisfying himself as to the legality or propriety of such order"
and "with
respect thereof". In the present case what the revisional authority was
empowered to test was the legality or propriety of the order cancelling the
notices issued under Section 21(1) by order dated 29.5.2003. Such an exercise
cannot encompass an order of assessment. It is of significance to note that the
original orders have not been varied and could not have been varied after the
period of limitation. What could not have been directly achieved has been
attempted to be done in an indirect manner. If the revisional authority was of
the view that the order dated 29.5.2003 was not legal, then that order would
have been varied if it was found that order lacked legality or propriety. The
expression "with respect thereof" makes the position clear that for
testing the legality or propriety of the order (in the instant case the order
dated 29.5.2003) if any order was to be passed that had to be passed with
respect thereof. Such an order does not empower the revisional authority to
make an order of assessment. As noted above, what the revisional authority has
done is to substitute the original orders of assessment in the garb of testing
the legality and/or propriety of the order cancelling the notices. Such a
course is not countenanced and has no legal basis. Therefore, the High Court
was not justified in interfering with the order of the Tribunal. The impugned
orders of the High Court are set aside and the appeals are allowed but without
any order as to costs.
........................................J.
(Dr. ARIJIT PASAYAT)
........................................J
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