Vazhakkal Rubbers Kottayam v. Sto Kottayam — 1968 DIGILAW 144 (KER)

JUDGMENT M.U. Issac, J. 1. A common question arises for decision in these cases; and it is whether the power of revision under S.15 of the General Sales Tax Act, 1125 (hereinafter referred to as the Act) can be used to assess escaped turnover after the period of three years prescribed under R.33 of the General Sales Tax R.1950 (hereinafter referred to as the Rules) for assessment of escaped turnover. S.15(3) fixes a period of four years from the date on which the order of assessment was communicated to the assessee, for exercise of the revisional power. 2. In O. P. 3988, the petitioner is a dealer in rubber. For the year 1960-61. the petitioner made a return, showing a total sale turnover of Rs. 11,45,012.47, and he claimed exemption for a sum of Rs. 8,49,146.52, on the ground that it represented inter State sales, and for the balance of Rs. 2,95,865.95, on the ground that he was not the first seller in the State in respect of that part of the turnover. The petitioner's claim was accepted by the assessing authority; and he passed an order on 13-11-1962, declaring that the petitioner was not liable to tax. The Deputy Commissioner found out that the petitioner's claim that he was not the first seller in respect of the turnover of Rs. 2,95,865.95 was false, and issued notice on 9-4-1965 under S.15(1) of the Act, to show cause why the order of assessment should not be revised and the aforesaid turnover charged to tax. The petitioner maintained that he was not the first seller; and he also contended that, in the light of the decisions of this Court in Ninan v. The State of Kerala ( 1965 KLT 1107 ) and Sarvothama Srinivasa Shenoy v. Deputy Commissioner of Agricultural Income tax and Sales tax, Kozhikode ( 1965 KLT 304 ), the power of revision cannot be exercised beyond the period of three years prescribed by R.23 of the Rules, and that the proposed proceedings were, therefore, time barred. The Deputy Commissioner overruled the petitioner's objection; and passed an order on 30-5-1966, revising the assessment, and charging tax on the turnover of Rs. 2,95, 865.95. 3. In O. P. 4137, the petitioner is the owner of an oil mill, who buys copra, produces oil therefrom and sells oil and cake. The Deputy Commissioner overruled the petitioner's objection; and passed an order on 30-5-1966, revising the assessment, and charging tax on the turnover of Rs. 2,95, 865.95. 3. In O. P. 4137, the petitioner is the owner of an oil mill, who buys copra, produces oil therefrom and sells oil and cake. For the year 1961-62, he returned the turnover of the purchase of copra as Rs. 38,752.13. The assessing authority did not accept the return; and he passed an order of assessment on 20-9-1962, fixing the purchase turnover of copra at 48,440.16, and charging 2% tax thereon. This was a gross error. He should have determined the turnover in accordance with the notification No. HI-14364!57!RD-2 dated 25-3-1958. Under the Act, copra is taxable at the point of last purchase in the State, and oil and cake are taxable on sales. The above notification granted an exemption on the sale of coconut oil and cake to the extent of the price of copra purchased during the assessment year, and necessary to produce the said oil and cake. In other words, the assessment must be on the total purchase turnover of copra, plus the total sale turnover of oil and cake, minus the purchase, price of copra during that year and necessary to produce the said oil and cake. The assessing authority failed to take into account the turnover in respect of sale of oil and cake, when making the assessment. On detecting this mistake, the Deputy Commissioner issued a notice on 22-8-1966 to the petitioner under S.15(1) of the Act to how cause why the assessment should not be revised by recomputing the turnover in accordance with law, and assessed accordingly. The petitioner objected to the proposed proceedings on the ground of limitation. The Deputy Commissioner overruled his objection, and passed an order on 17-9-1966, revising the order of assessment, and determining the turnover and tax payable by the petitioner according to law. Under this order, the taxable turnover was fixed at Rs. 65,058.82. 4. In both the above petitions, the orders of the Deputy Commissioner are sought to be quashed on the ground that they were without jurisdiction, as they were passed after the period of limitation prescribed under R.33 of the Rules for assessment of escaped turnover. I shall now quote the relevant parts of S.15 of the Act and the above rule. In both the above petitions, the orders of the Deputy Commissioner are sought to be quashed on the ground that they were without jurisdiction, as they were passed after the period of limitation prescribed under R.33 of the Rules for assessment of escaped turnover. I shall now quote the relevant parts of S.15 of the Act and the above rule. S.15(1) - The Deputy Commissioner may - (i) suo motu, or (ii) 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: (Proviso omitted) (2) x x x x (3) In relation to an order of assessment passed under this Act. the power of the Deputy Commissioner under Clause (i) of sub-s.(1) and that of the Board of Revenue under Clause (i) of sub-s.(2) shall be exercisable only within a period of four years from the date on which the order was communicated to the assessee. (Sub-sections 4 and 5 omitted) R.33(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 of sub-r.(2) may at any time within three years next succeeding that to 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 or levy the licence fee in such turnover after issuing a notice to the dealer or licensee and after making such enquiry as he considers necessary. (Sub-rules (2), (3) and (4) omitted) 5. (Sub-rules (2), (3) and (4) omitted) 5. The powers conferred by sub-rs.(1) and (4) on the assessing authority or licensing authority may also be exercised by the appellate authority referred to in S.14, or as the case may be, by the revising authority referred to in S.15, at any time within a period of three years next succeeding that to which the tax or as the case may be, the licence fee relates, provided that such authority shall give the dealers concerned a reasonable opportunity of being heard before passing orders under this sub-rule. (Sub-rs.(6), (7) and (8) omitted). 5. There has been some judicial controversy regarding the scope and amplitude of the revisional power. In Appukutty v. The State of Kerala ( 9 STC 710), a Full Bench of this Court took the view that the revisional power is confined to calling for and examining the record of any order or proceeding of a subordinate authority for the purpose of satisfying as to its legality or propriety, and passing such order in respect thereto as the revising authority thinks fit; and that it has no power to make any enquiry or take any evidence for the above purpose. The correctness of the above view was canvassed in this Court in the State of Kerala v. Cheria Abdulla & Co.( 1960 (XI) STC 295). This court reaffirmed its original view. Though the decision of this Court in the first case was set aside by the Supreme Court in the State of Kerala v. Appukutty (1963 (XIV) STC 242), the above view was apparently affirmed. The Court said: - "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." But it appears that the Supreme Court took a different view in the State of Kerala v. Cheria Abdulla & Co.(1965 (XVI) STC 875). The Court said:- "There is no doubt that the revising authority may only call for the record of the order or the proceeding, and the record alone may be scrutinised for ascertaining the legality or propriety of an order or regularity of the proceeding. The Court said:- "There is no doubt that the revising authority may only call for the record of the order or the proceeding, and the record alone may be scrutinised for ascertaining the legality or propriety of an order or regularity of the proceeding. But there is nothing in the Act that for passing an order in exercise of his revisional jurisdiction, if the revising authority is satisfied that the subordinate officer has committed an illegality or impropriety in the order or irregularity in the proceeding, he cannot make or direct any further enquiry. The words of sub-s.(2) of S.15 that the Deputy Commissioner "may pass such order with respect thereto as he thinks fit" means such order as may in the circumstances of the case for rectifying the defect be recorded by him as just. Power to pass such order as the revising authority 1 thinks fit may in some cases include power to make or direct such further enquiry as the Deputy Commissioner may find necessary for rectifying the illegality or impropriety of the order, or irregularity in the proceeding. It is therefore not right baldly to propound that in passing an order in the exercise of his revisional jurisdiction, the Deputy Commissioner must in all cases be restricted to the record maintained by the officer subordinate to him, and can never make enquiry outside that record." This view has been reiterated by the Supreme Court in a recent decision. Dealing with the amplitude of the revisional jurisdiction in Swastik Oil Mills Ltd. v. H.B. Munshi, (1968 (XXI) STC 383) the Court said:- "Whenever a power is conferred on an authority to revise an order, the authority is entitled to examine the correctness, legality and propriety of the order, and to pass such suitable orders as the authority may think fit in the circumstances of the particular case before it. When exercising such powers, there is no reason why the authority should not be entitled to hold an enquiry or direct an enquiry to be held and, for that purpose, admit additional material. The proceedings for revision, if started suo motu, must not, of course, be based on a mere conjecture, and there should be some ground for invoking the revisional powers. The proceedings for revision, if started suo motu, must not, of course, be based on a mere conjecture, and there should be some ground for invoking the revisional powers. Once those powers are invoked, the actual interference must be based on sufficient grounds, and if it is considered necessary that some additional enquiry should be made to arrive at a proper and just decision, the can be no bar to the revising authority holding a further enquiry to be held by some other appropriate authority. This principle has been clearly recognised by this Court in the State of Kerala v. R. M. Cheria Abdulla and Company. ( 1965 (16) STC 875 at p. 884)." In the light of the last two decisions of the Supreme Court, it is now well settled that the revising authority is entitled to hold an enquiry and admit additional material for the purpose of satisfying himself as to the legality or propriety of the order or proceeding sought to be revised and passing the appropriate order. 6. The contention of the learned counsel for the petitioners was that these are cases where the turnover escaped assessment; that such cases fall under R.33(1) of the Rules, which empowers the assessing authority to assess the escaped turnover within three years next succeeding to which the tax relates; and that, in a case which falls under the above rule, the power of revision under S.15(1) cannot be exercised. The learned counsel for the petitioners relied on three decisions of this Court in support of their contention. The first is the decision of Mathew, J. in Ramaswami v. Sales Tax Officer ( 1965 KLT 254 ). The assessee in that case was a dealer in sugar; and during the year 1957-58, sale of sugar was liable to a tax at three pies in the rupee on every point of sale, and an additional tax of one anna in the rupee on the first sale in the State. In making the assessment, the assessing authority did not notice the statutory provision relating to the levy of additional tax: and he assessed the dealer only at 3 pies in the rupee. The Deputy Commissioner found out the error after the period of three years from the end of the year to which the assessment related, but within the period he is entitled to act under S.15(1) of the Act. The Deputy Commissioner found out the error after the period of three years from the end of the year to which the assessment related, but within the period he is entitled to act under S.15(1) of the Act. He issued notice to the assessee under S.15(1) and revised the assessment by charging the petitioner to the additional tax also. His Lordship held that the Deputy Commissioner was not entitled to exercise his revisional jurisdiction. He has stated the reason for the decision as follows:- "It is a well known cannon of construction that when a special power is given to an authority and also a general one, the authority can only exercise the special power when the facts attracting the exercise of that power arises. So if there is an escapement of turnover or an assessment of the turnover at too low a rate, the revisional authority must resort to its jurisdiction under R.33(5), and if it is to resort to that, the limitations attendant upon the exercise of that jurisdiction would also be attracted." 7. The next decision is that of Govindan Nair, J. in Sarvothama Srinivasa Shenoy v. Deputy Commissioner of Agricultural Income tax and Sales Tax, Kozhikode.(1952 KLT 304). In that case, the assessing authority issued notices under R.17(1) of the Madras General Sales Tax R.1939, which corresponds to R.33(1) of the Travancore - Cochin Rules, and assessed the turnover found to have escaped assessment. The assesses filed appeals; and the appeals were allowed on the ground that there was no escape. Then the Deputy Commissioner took action under S.12(1) of the Madras General Sales Tax, 1939, which corresponds to S.15(1) of the Travancore - Cochin Act. He set aside the appellate orders, and directed the appellate authority to decide the question afresh. His Lordship followed the decision of Mathew J. in Ramaswami v. Sales Tax Officer ( 1965 KLT 254 ), and held that as the case would fall under R.17(1) of the Madras Rules, which was a special provision for the assessment of an escaped turnover by the assessing authority, the Deputy Commissioner was not entitled to act under S.12(1) of the Madras Act, which was only a general provision. Dealing with the powers under the above section and the rule, His Lordship said:- "Powers are distinct and separate; but there is overlapping in the sense that even in relation to the escaped turnover action can be taken under S.12(2) provided that the escape of turnover is discernible from the records of the case. The question is whether in such cases it is the period of four years provided by sub-s.4 of S.12 that should apply or whether it is the period of three years provided in R.17(1) that should apply. If escape of turnover is a special matter, I feel no doubt that such action must be taken within the period provided by R.17(1). Otherwise, that provision according to me becomes nugatory and practically ineffectual. The purpose of the provision seems to be that there should be finality at least regarding the question of escaped turnover after the expiry of three years from the end of the assessment year. This purpose will not be served if assessment orders could be reopened after the expiry of the said three years. And such construction of S.12 would have the effect of overriding the provision in R.17(1) which is as much law as the section and will be against the rule of harmonious construction." 8. The Third case relied on by the learned counsel is a decision of a Division Bench of this Court in Ninan v. State of Kerala ( 1965 KLT 1107 ). The facts of that case are not quite clear from that decision. It followed the decision in Sarvothama Srinivasa Shenoy v. Deputy Commissioner of Agricultural Income tax and Sales Tax Officer (1952 KLT 304 ), and held that the revisional power conferred on the Deputy Commissioner by S.15 of the Act cannot be exercised after the expiry of the period of three years mentioned in R.33 of the Rules. The Court also said:- "All that we wish to add is that the revisional power conferred by S.15 can be exercised by the revisional authority only in such circumstances where the Sales Tax Officer himself could have taken action under R.33. The Court also said:- "All that we wish to add is that the revisional power conferred by S.15 can be exercised by the revisional authority only in such circumstances where the Sales Tax Officer himself could have taken action under R.33. After the lapse of three years from the end of the assessment year, the Sales Tax Officer cannot and should not act under R.33." The above statement indicates that the revising authority can, under S.15(1) of the Act, assess an escaped turnover, if the case falls within the ambit of the said section; but it can exercise that jurisdiction only within the period of three years mentioned in R.17 (1) of the Rules. This is because of the fact that R.17(1) is a special provision. 9. The learned Government Pleader submitted that the above three decisions of this Court were based on the view which this Court took regarding the restricted scope of the revisional jurisdiction, and which had found approval in the decision of the Supreme Court in The State of Kerala v. Appukutty (1963 (XIV) STC 242); and that in the light of the later decisions of the Supreme Court on the question, the three decisions of this Court relied on by the petitioners' learned counsel cannot be said to lay down the correct law. It is true that reference has been made in the first two decisions of this Court to the above decision of the Supreme Court; but it is not correct to say that the decisions of this court are based on a restricted view said to have been wrongly taken regarding the scope of the revisional jurisdiction. All the same, I venture to think with the greatest respect, that the view taken by this Court in the above three decisions that the revisional power, which can be exercised under the Act within four years from the date of communication to the assessee of the order sought to be to be revised, cannot be exercised in a case, which would also fall under R.33(1) of the Rules, after the expiry of three years mentioned therein, would not hold good in the light of the decision of the Supreme Court in Swastik Oil Mill Ltd. v. H. B. Munshi (1968 (XXI) STC 383). In that case, the assessee claimed exemption from tax under the Bombay Sales Tax Act, 1946 in respect of turnover representing goods transferred from its head office at Bombay to its branch offices in Indian States, and also in respect of inter state sales after 26th January 1950. The Sales Tax Officer rejected the claim; but the appellate authority accepted the claim in respect of the goods transferred to the branch offices. About 12 years after the end of the last of the assessment years, the Deputy Commissioner issued notice intimating the assessee that he proposed to revise the appellate orders, on the ground that the appellate authority wrongly allowed the exemption claimed by the assessee in respect of the goods transferred to the branch offices outside Maharashtra, without noticing the relevant provisions contained in the Bombay Sales Tax (Amendment) Act, 1948. The assessee objected to the notice on several grounds; but as the objection was rejected, it moved the High Court of Bombay under Art.226 of the Constitution to quash the notice, and restrain the Deputy Commissioner from taking any action pursuant thereto. The petition was dismissed by the Court; and the assessee went in appeal to the Supreme Court. One of the contentions raised before the Supreme Court was that though the exercise of revisional power under the Bombay Act was not subject to any period of limitation, it must be implied in the Statute itself. In rejecting this contention, the court said :- "In fact, when a revisional power is to be exercised, we think that the only limitations, to which that power is subject, are those indicated by this Court in K. M. Cheria Abdulla & Co.'s case ( 1965 (16) STC 875 ). Those limitations are that the revising authority should not trench upon the powers which are expressly reserved by the Acts or by the Rules to other authorities and should not ignore the limitations inherent in the exercise of those powers. In the present case, the Deputy Commissioner, when seeking to exercise his revisional powers, is clearly not encroaching upon the powers reserved to other authorities." The power under R.33(1) of the Rules is a power vested in the assessing authority, while the power under S.15(1) of the Act is a power vested in the Deputy Commissioner, who is a superior authority. They are distinct and separate powers; and different periods of limitation are prescribed for the exercise of these powers. The power of revision created and vested in a superior authority by the Act cannot be taken away or controlled by, or be subject to, a power created and vested in a subordinate authority by the Rules. I may also observe with great respect that the rule of construction "that when a special power is given to an authority and also a general one, the authority can exercise only the special power, when the facts attracting the exercise of that power arises", may apply only when both powers are vested in the same authority or in coordinate authorities. It may not also apply, when the general power is created by a statute, and the special power is created by rule making authority. Therefore, the question for consideration is whether the action taken by the Deputy Commissioner falls within the ambit of S.15(1) of the Act. 10. I have already referred to the circumstances under which the Deputy Commissioner took action under S.15(1) of the Act in these two cases. The first was a case, where the assessing authority granted an exemption claimed by the petitioner on the ground that the turnover related to second sales' while he was actually the first seller in the State, and was liable under the Act. The petitioner's case before the assessing authority was that, out of the total purchases of rubber amounting to Rs. 10,34,955.44, purchases for Rs. 7,72,688.88 were made from one Ahammed Moosa Kunni Rowther, who was said to be a dealer in rubber. Really no such person existed; and if there was one, he could have been assessed as a first seller. The assessing authority failed to notice that aspect of the matter, with the result the false claim made by the petitioner happened to be allowed. In the second case, turnover escaped assessment due to the failure of the assessing authority to apply the relevant provisions of the law; and the error was apparent on the face of the record. In my view, both these cases fall squarely within the ambit of S.15(1) of the Act; and action taken by the Deputy Commissioner would be right in the light of the decision of the Supreme Court in Swastik Oil Mills Ltd. v. H. B. Munshi (1968 (XXI) STC 383). 11. In my view, both these cases fall squarely within the ambit of S.15(1) of the Act; and action taken by the Deputy Commissioner would be right in the light of the decision of the Supreme Court in Swastik Oil Mills Ltd. v. H. B. Munshi (1968 (XXI) STC 383). 11. In the result, I dismiss these Original petitions. There will be no order as to costs.