K. BANAPPA v. STATE OF KARNATAKA — 1978 DIGILAW 83 (KAR)

VENKATACHALA, J. ( 1 ) SINCE a common question of law arises for decision in these revision petitions under Sec. 23 (1) of the Karnataka Sales Tax Act, 1957, hereinafter to be referred to as the principal Act, they are disposed of by this common order. The petitioner in these revision petitions is a partnership firm and a registered dealer in cotton seeds which are 'declared goods' within the meaning of the Central Sales Tax Act. It is also an. assessee under the principal Act. In App. Petn. Nos. 521, 522, 523, 525 and 526 of 1968-69 relating to the assessment years 1961-62, 62-63, 63-64, 64-65, 65-66 and 66-67 and App Petn nos,658, 659/1968-69 relating to the assessment years 1959-60 and 60-61, orders were made by the Deputy Commissioner of Commercial Taxes (Appeals), bangalore, the appellate authority under the principal Act, on 28-1-69 and 25-3-69 respectively, directing refund of taxes to the assessee haying regard to the state of law then prevailing. However, consequent upon the amendment of Sec. 15 of the Central Sales Tax Act, 1956, by the Central Sales tax (Amendment) Act, 1972, with effect from 1st Oct, 1958, the validation provision contained in Sec. 15 of the Central Sales Tax (Amendment) Act, 1972 and consequential amendments made to the principal Apt by karnataka Act 7 of 1973, the Deputy Commr of Comml Taxes (Appeals) bangalore-the appellate authority, with the object of rectifying the earlier orders made by him on 28-1-69 and 25-3-69 in the appeals referred to earlier, initiated proceedings under Sec. 25a of the principal Act, which was introduced by the Karnataka Sales Tax (Second Amendment) Act, 1970, hereinafter to be referred to as the Amendmemt Act, for rectification by issuing to the assessee a notice dated 13-8-73 informing it of the proposed rectification and calling upon it to appear and show causel against such proposal on the date of hearing of the cases, fixed for 15-8-73. As a result of an adjournment of the cases on 15-8-73, another notice was issued to the assessee, fixing the adjourned date of hearing of the cases on 29-12-73 which notice was returned by the Commercial Tax Officer with the report that the party was not in station. As a result of an adjournment of the cases on 15-8-73, another notice was issued to the assessee, fixing the adjourned date of hearing of the cases on 29-12-73 which notice was returned by the Commercial Tax Officer with the report that the party was not in station. A further notice is said to have been issued to the assessee by registered post intimating that the cases relating to the proposed rectification would be taken up for hearing by the appellate authority on 18-1-74 at Bangalore. Even though there wast nothing on record to show that the assessec was served with the notice of the proposed rectification, the Deputy Commr of Comml Taxes (Appeals), Bangalore, made an order dated 18-1-74 in the said Redtification Cases numbered by him as RAP Nos. 11 to 17 of 1973-74, holding thait the assessee was not entitled to the refund of taxes ordered in the previous orders dated 28-1-69 and 25-3-69 and directing the assessing authority to recover from the assessee the tax which had been refunded to it. Aggrieved by the said order of the Deputy Commr of Comml Taxes (Appeals), Bangalote the appellate authority under the principal Act, the assessee preferred appeals under Sec. 22 of the principal Act before the Karnataka Sales Tax appellate Tribunal in STA Nos. 175 to 181 of 1974. The Tribunal, on a consideration of the said appeals, took the view that the common order of rectification made in these cases was 'premature' having regard to the admitted fact that it was made without service of notice of the proposed rectification on the asgessee which was adversely affected by such an order. Consequently, the Tribunal set aside the order of the appellate authority and remanded the cases back to it for disposal according to law after affording a reasonable opportunity of hearing to the agsessee. Aggrieved by the. said common order of the Tribunal, the assegsee preferred the revision petitions under consideration. Consequently, the Tribunal set aside the order of the appellate authority and remanded the cases back to it for disposal according to law after affording a reasonable opportunity of hearing to the agsessee. Aggrieved by the. said common order of the Tribunal, the assegsee preferred the revision petitions under consideration. ( 2 ) IT was contended before us by Sri B. P. Gandhi, learned Counsel appearing for the petitioner in these revision petitions, that the Tribunal having rightly set aside the order under appeal, ought not to have remanded the cases for reconsideration, as, according to him, the rectification proceedings before the appellate authority could not be considered to have even commenced in the absence of service of notice of the proposed rectification on the assessee. The said contention of the learned Counsel for the petitioner wag attempted to be made good on the interpretation sought to be placed by him on sub-Sec (1) of Sec. 25a of the principal Act as amended by the Amendment Act and the proviso thereto. But, when his attention, was invited by us to the provision in Sec. 8 of the Amendment act as the one which would squarely meet the contention raised by him, he was not able to demonstrate before us as to how the said provision was not applicable to these cases, even though a feeble attempt was made by him in the Said regard. ( 3 ) HAVING regard to the contention raised on on behalf of the petitioner and the provision enacted in Sec. 8 of the Amendment Act, the question of law which arises for our decision in these revision petitions can be formulated thus : whether proceedings under Section 25a to rectify mistakes apparent from the record in any order made under the principal Act, by an assessing authority, appellate authority, revising authority, the Appellate tribunal or the High Court at any time before the commencement of the amendment Act, can be considered to have not commenced within the meaning of Sec. 8 of the Amendment Act, until a notice of the proposed rectification is served on the assessee?, ( 4 ) SUB-SEC (6a) of Sec. 22, sub-sec (7a) of Sec. 23 and sub-sec (i) of sec. 25a which confer on the several authorities' constituted under the principal Act, the Appellate Tribunal and the High Court, the power of rectification of an order made by any of them under the principal Act, are introduced in the principal Act for the first time by the Amendment Act which came into force on 9-6-70. AS the said power of rectification is also made exercisable in respect of orders made under the principal Act prior to the date of coming into force of the Amendment Act, the period of limitation within which the power of rectification could be exercised in respect of such orders is specifically prescribed under Sec. 8 of the amendment Act as a necessary concomitant. The provisions in the sub-sections which are material for proper appreciation of the question under consideration read thus : sub-section (6a) of Section 22 :" With a view to rectifying any mistake apparent from the record, the Appellatte Tribuhal may, at any time, within five years from the date of any order passled by it under sub-sec (4) or sub-sec (6), amend such order: provided that no order under this sub-section shall be made without giving both parties affected by the order a reasonable opportunity of being heard ";sub-section (7a) of Section 23 :" With a view to rectifying any mistake apparent from the record, the High Court may at any time, within five years from the date of the order passed by it under sub-sec (4) amend such order: provided that no order under this sub-secltion shall be made without giving both parties affected by the order a reasonable opportunity of being heard. "sub-section (1) of Section 25a :" 25. Rectification of mistakes- (1) With a view to rectifying any mistake apparent from the record, the assessing authority, appellate authority, or revising authority, may, at any time,. within. five years from the date of an order passed by it, amend such Order: provided that an amendment which has the effect of enhancing an assessment or otherwise increasing the liability of the assessee shall not be made unless the assessing authority, appellate authority or revising authority as the case may be, has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard. " ( 5 ) THOGH the provisions to sub-sec (6a) of Sec. 22, sub-sec (7a) of sec. " ( 5 ) THOGH the provisions to sub-sec (6a) of Sec. 22, sub-sec (7a) of sec. 23 and sub-sec (1) of Sec. 25a of the principal Act as amended by the amendment Act, require that the person or the department to be adversely affected by the proposed rectification should be given a reasonable opportunity of being heard before an order of rectification is actually made, the language of the provisoes does not even remotely suggest the inference that the proceedings for rectification of orders made under the principal Adt prior to the coming into force of the Amendment Act, cannot be considered to have commenced unless notices of the proposed rectification are served on the parties who are likely to be adversely affected. The provisions contained in the sub-sections referred to earlier no doubt provide that an order passed by an assessing authority, appellate authority, revising authority, the Appellate Tribunal or the High Court, as the case may be may be rectified by amending such an order at any time within the period specified therein. However, it may not be out of context to mention that on a consideration of the scope and ambit of sub-'sec (1) of sec. 25a along with the proviso thereto, which sub-section and proviso are similar to sub-sec (6a) of Sec. 22 and sub-sec (7a) of Sec. 23 and the provisos thereto, it is held by one of us (Venkataramiah, J), following the decision of the Supreme Court in Sales Tax Officer, Special circle, Ernakular v. Sudarsanam Iyengdr and Sons. , 1970 25 STC. 254. that the proceedings for a rectification under Sec. 25a commence with the issue of notice to the assessee within the period of five year sspecified therein and that an order of rectification passed pursuant to such notice, even after the expiry of the period of five years, is valid (Vide Sha Vajeshankar Vasudeva v. Asst Commr of Comml Taxes (Assessments), Mangalore. , 1974 34 STC. 257- (1974) 2 Karlj. 401 , it has to be mentioned here that since Sec. 8 of the Amendment Act was not relied on by any of the parties in that case, the decision in the case had to rest on the interpretation of Sec. 25a. , 1974 34 STC. 257- (1974) 2 Karlj. 401 , it has to be mentioned here that since Sec. 8 of the Amendment Act was not relied on by any of the parties in that case, the decision in the case had to rest on the interpretation of Sec. 25a. But it is not now necessary for us to have re-course to the provisions relating to the period within which, rectification should be made which are found in Sec. 25a, for examining the question whether a proceeding for rectification of an order made prior to the commencement of the Act, will not commence unless notice of such, propiosed rectification is served on the party likely to be adversely affected, as we fire of the view that Sec. 8 of the Amendment Act does not permit us to do so. In fact the opening words of Sec. 8 of the Amendment Act, namely, notwithstanding anything contained in Sees. 22, 23 and 25a of the principal Act as amended by this: Act" in unmistakeable terms forbid us from doing so. In the said view of the matter, we cannot accede to the contention of the learned Counsel for the petitioner that the provision in sub-sec (1) of Sec. 25a read with the proviso thereto, should be looked into for coming to the conclusion that unless a notice as required under the provision is served on the assessee, rectification proceedings under sub-sec (1) of sec. 25a in respect of orders made under the principal Act prior to the coming into force of the Amendment Act, cannot be considered to have commenced. ( 6 ) IT is however, not necessary for us to to express any opinion on the correctness of the construction placed on Sec. 25a (1) and its proviso, as we propose to rest our decision on the question as to when the proceedings of ectification in respect of orders made under the principal Act prior to the coming into force of the Amendment Act commence, upon the construction we would be placing on the express and unambiguous language of the provision in Sec. 8 of the Amendment Act, which reads :"8. Limitation for making order of rectification of mistakes in certain cases.-Notwithstanding anything contained in Secs. Limitation for making order of rectification of mistakes in certain cases.-Notwithstanding anything contained in Secs. 22, 23 and 25a of the principal Act as amended by this Act, proceedings to rectify mistakes apparent from the record in any order made under the principal Act by an assessing authority, appellate authority, revising authority, the Appellate Tribunal or the High Court, at any time before the commencement of this Act may be commenced within five years from the date of such order or one year from the date of commencement of this Act whichever is later. "though a cursory look at the provision gives the first impression to the person who looks at it that it is a redundant provision in view of 5 years' period of time allowed for rectification, in sub-sec (6a) of Sec. 22, sub-sec (7a) of Sec. 23 and sub-sec (1) of Sec. 25a which are introduced into the principal Act by the Amendment Act solely for the purpose of empowering the assessing and appellate authorities, the revising authority. , the appellate Tribunal and the High Court with the power to rectify mistakes in their orders, a deeper look at the provision will make it obvious that it is intended to arm the assessing authority, appellate authority, the reviling authority, the Appellate Tribunal and the High Court with special power to commence rectification proceedings not only in respect of orders made by them before the commencement of the Amendment Act within 5 years from the date of such order but also in respect of orders made by them at any anterior point of time, however remote it may be, provided the rectification proceedings to rectify them are commenced with one year. ( 7 ) AS the circumstances which led to the enactment of the Amendment act for inserting into the principal Act the provisions relating to rectification proceedings and time limit within which such proceedings could be commenced as are bound to assist us in properly appreciating the scope and ambit of the provisions in Sec. 8 of the Amendment Act, we propose to advert to them at this stage. Sec. 15 (fa) of the Central Sales Tax act as it stood prior to the coming into force of the Amendment Act provided that where a tax has been levied under the State law in respect of intra-State sale or purchase of any declared goods, and such goods are sold by the purchaser or a subsequent purchaser, in the course of inter-State trade or commerce, then the State tax levied on the intra-State sale or purchase shall be refunded to such person, in such manner and subject to such conditions as may be provided in the State law in force. In order to give effect to Sec. 15 (b) of the Central Sales Tax Act, Rule 39a was framed under the Karnataka Sales Tax Rules, 1957, the relevant part of which rule reads as follows :" (1) The tax levied under sub-sec (4) of Sec. 5 in respect of the sale or purchase inside the State of any goods specified therein shall, if such goods are sold in the course of inter-State trade or commerce, be refunded in the manner and subject to the conditions prescribed in this rule to the dealer who has made the inter-State sale and has paid tax under the Central Sales Tax Act, 1956 (Central Act 74 of 1956), in respect of such sale. . . . . . . " ( 8 ) BUT in Munshi Abdul Rahim Bros v. Comml Tax Officer. , 1967 20 STC. 89= 1967 1 Myslj 432=1967 Karlj 52. a Division Bench of this Court struck down a part of the rule which reads:"and has paid tax under the Central Sales Tax Act, 1956 (Central act 74 of 1956) in respect of such sale. "this decision made it possible for the assessees of declared goods to claim the benefit of refund on the ground that the sales effected by the assessees are second sales and without showing that their sellers had in fact paid tax. Refunds were also obtained by the assessees in innumerable cases, pursuant to the said decision. Further, the validity of Rule 38 (1) made under the Mysore Sales Tax Act, which provided for rectification, was under challenge in several writ petitions filed before this Court. It is these circumstances and other circumstances following the decision of the supreme Court in Yadalam Laxminarasimiah Setty's case, AIR. 1965 SC. 1510. Further, the validity of Rule 38 (1) made under the Mysore Sales Tax Act, which provided for rectification, was under challenge in several writ petitions filed before this Court. It is these circumstances and other circumstances following the decision of the supreme Court in Yadalam Laxminarasimiah Setty's case, AIR. 1965 SC. 1510. and the consequent amendment of the Central Sales Tax by the central Sales Tax (Amendment) Act (28 of 1969), which led the State Legislature to enact the Amendment Act, containing comprehensive provisions for commencing rectification proceeding in respect of orders which had been made and become final under the principal Act. This back-ground in which Sec. 8 of the Amendment Act was enacted will show that the Legislature has expressed itself in clear terms in the said pro ision that what was neeessary for the authorities, the Appellate tribunal or the High Court was to commence rectification proceedings within the time specified therein with a view to correct mistakes in the orders who had otherwise become final under the principal Act. The above background is also useful in interpreting the said provisions while applying them to cases of rectification consequent upon the Central Sales Tax. (Amendment) act, 1972 and the Karnataka Sales Tax (Amendment) Act, 7 of 1973. ( 9 ) WHILE construing Sec. 8, we have also to bear in mind that it prescribes a special period of limitation in respect of orders which had been passed prior to the coming into force of the Amendment Act for purposes of their rectification under Sec. 25a of the principal Act. Thus, Sec. 25a is a machinery section in a taxing statute. It is now a settled rule of constriction that a machinery provision in a taxing statute should be construed in such a way as to make the charge effective and machinery workable. Any construction which enables the person liable to tax to avoid it by resorting to dilatory or evasive tactics should be avoided. This is clear from the following observations of the Supreme Court in India United Mills Ltd v. Commr of Excess Profits Tax, Bombay , AIR. 1955 SC. 79. " That section is it should be emphasised, not a charging section but a machinery section and a machinery section should be so construed as to effectuate the charging sections. "the above view is followed in Gursahai v. Commr of income Tax, Punjab, AIR. 1955 SC. 79. " That section is it should be emphasised, not a charging section but a machinery section and a machinery section should be so construed as to effectuate the charging sections. "the above view is followed in Gursahai v. Commr of income Tax, Punjab, AIR. 1963 SC. 1062. in which it is observed as follows :" The provisions in a taxing statute dealing with machinery for assessment have to be construed by the ordinary rules of construction, that is to say in accordance with the clear intention of the Legislature, which is to make a charge effective. "this is also the view expressed in Commr of Income Tax v. Mohaliram Romjidas, AIR 1940 PC 124. in which it is held :" The section, although it is part of a taxing Act, imposes no charge on the subject and deals merely with the machinery of assessment. In interpreting provisions of this kind, the rule is that that construction should be preferred which makes the machinery workable ut res valeat polius quam pereat. "we shall now examine Sec. 8 of the Amendment Act in the light of the above rule of construction. ( 10 ) THERE is nothing in Sec. 8 of the Amendment Act which would suggest the making of the commencement of the proceedings of rectification depend upon the service of notice of the proposed rectification either on the assessee or on the assessee and the department as the case may be. Moreover, such a possibility cannot even be envisaged, for it would lead to anomalous results and may even lead to evasion of tax which has been validly imposed. ( 11 ) LET us consider a case where the High Court has to exercise its power of rectification in respect of an order made by it prior to the coming into force of the Amendment Act. What does it do for starting or initiating a proceeding? It will look into the order requiring rectincation and make an order directing an officer of the Court to issue notice to the assessee as well as the department intimating them about the proposed rectification. What does it do for starting or initiating a proceeding? It will look into the order requiring rectincation and make an order directing an officer of the Court to issue notice to the assessee as well as the department intimating them about the proposed rectification. If such notice is not served on both the parties within 5 years from the date of the order to be rectified or one year from the date of commcement of the Amendment Act, as the case may be, can it be said that the proceedings of rectification have not commenced? Again if the notice issued to the department is served in time, but the notice issued to the assessee is not served in time, can it be. said that the proceedings of rectification against the assessee has not commenced? Similar would be the position when the Appellate Tribunal starts a proceeding for rectification. The position cannot be different when the rectifying authority is the assessing authority, the appellate authority or the revising authority under the Act. Hence it is difficult for us to think that the Legislature when , enacted Sec. 8 of the Amendment Act, intended that the rectification proceedings shall not be considered to have commenced unless the party likely to be adversely affected by the rectification is served with notice of such proposed rectincation. If such a construction is placed on the provision contained in Sec. 8 of the Amendment Act, it would only be an invitation to the assessees likely to be adversely affected by the proposed rectification to evade service of notice of such proceedings. Such an intendment can never be attributed to the Legislature which specially enacted Section 8 of the Amendment Act in the circumstances already adverted to, inasmuch as attribution of such intendment will have the effect of defeating the very purpose of the provision. There is also no reason to take the view that the Legislature by enacting Sec. 8 of the amendment Act intended to make the date of commencement of rectification proceeding uncertain. There is also no reason to take the view that the Legislature by enacting Sec. 8 of the amendment Act intended to make the date of commencement of rectification proceeding uncertain. On the other hand, the express and unambiguous: language employed in Sec. 8 of the Amendment Act, namely, "proceed ings to rectify mistakes apparent from the record in any order made under the principal Act by an assessing authority, appellate authority, revising authority, the Appellate Tribunal or the High Court, at any time before the commencement of this Act may be commenced within 5 years from the date of such order or one year from the date of commencement of this Act whichever is later" confers in clear terms wide power on the authority concerned or the App Tri or the HC, to commence the proceeding of its own accord. We are of the view that the words "may be commenced" used in s. 8 of the Amendment Act are to be construed as 'may be originated' or "may be begun" and such commencement, origination or beginning of the proceeding to rectify may be made by the authority concerned or the appellate Tribunal or the High Court by resorting to any overt act including the issue of notice to the party likely to be adversely affected. When once such overt act is bound to be available in a given case within the period of limitation prescribed under Sec. 8 of the Amendment Act then the rectification proceeding shall be considered to have commenced. This is our decision on the question of law which has arisen for consideration in these petitions. ( 12 ) IT is not disputed by the learned Counsel appearing for the petitioner assessee that notice of rectification proceeding was in fact issued to the assessee-petitioner within the period of limitation prescribed under sec. 8 of the Amendment Act. In the said view of the matter we do not see any reason to disagree with the finding of the Tribunal that the appellate authority had commenced the proceedings for rectification within the time allowed by law. ( 13 ) THE contention of the learned Counsel for the petitioner that the tribunal was not justified in remanding the cases to the appellate authority for disposal after affording an opportunity of hearing to the assessee is in our view untenable. ( 13 ) THE contention of the learned Counsel for the petitioner that the tribunal was not justified in remanding the cases to the appellate authority for disposal after affording an opportunity of hearing to the assessee is in our view untenable. The decision in Nawabkhan Abbas Khan v. State of Gujarat, 1973 (3) SCR. 427. and Ponkunnam Traders v. Addl Income-tax Officer Kotayam, 1972 83 ITR. 50. relied upon by the learned Counsel for the petitioner in support of his contention that the Tribunal was not justified in remanding the cases to the. appellate authority for disposal afresh after affording an opportunity of hearing to the petitioner-assessee do not in any way support such a contention. In the case of Nawabkhan Abbaskhan (8) the Supreme Court considered the question. Whether the appellant was liable to be prosecuted under Sec. 142 of the Bombay Police Act 1951 for contravention of the externment order issued under Sec. 56 of that Act. After declaring that there was no valid quit order it held that there was no offence committed by the appellant. It further found that since the fundamental right of the appellant had been encroached upon by the Police commissioner the order of punishment was liable to be quashed. The said decision in our view does not assist the learned Counsel for the petitioner in showing that it was necessary for the Tribunal to have declared the notice of rectification proceeding issued by the appellate authority as void. ( 14 ) IN the case of ponkunnam Traders (9) the Kerala High Court held that the order of the Income Tax Officer questioned in the High Court of Kerala was made without giving notice of the materials gathered by the Income-tax Officer on the basis of the inquiry conducted by him under Sec. 142 (3) of the Income-tax Act 1961. But the fact that such an order was quashed by the Kerala High Court does not lead to the inference that a proceeding validly commenced by the issue of appropriate notice should not be continued when the order made pursuant to such notice is quashed on the ground that it was made without observing the principles of natural justice. But the fact that such an order was quashed by the Kerala High Court does not lead to the inference that a proceeding validly commenced by the issue of appropriate notice should not be continued when the order made pursuant to such notice is quashed on the ground that it was made without observing the principles of natural justice. ( 15 ) BEFORE concluding this part of the case we have to observe that some of the decisions cited before us which were based on the provisions of Sec. 34 of the Income-tax Act 1922 or Secs. 147 to 149 of the incometax Act 1961 have no bearing on these cases as the scheme of those sections is different from the scheme of Sec. 25a of the principal Act Hence we have not chosen to deal with them specifically. ( 16 ) THUS no justifiable grounds are made out for interfering with the order of remand made by the Tribunal. ( 17 ) THE only other contention raised before us by the learned Counsel for the petitioner was that the Tribunal was not justified in not refunding the institution fee in the appeals before it when it remanded the cases to the appellate authority for fresh disposal on the ground that the orders appealed against were made by the appellate authority without affording the assessee-appellant a reasonable opportunity of hearing. We have perused the order of the Tribunal and found that no reasons are given for refusing the refund of the institution fee. We feel that there is no valid reason for the Tribunal to deny the refund of the institution fee which it was authorised to refund under Rule 30 (3) of the Karnataka Sales Tax rules. We direct the Appellate Tribunal to refund to the petitionerassessee the institution fee paid in the appeals before it. Subject to the above modification the common order of the Tribunal challenged in these revision petitions shall stand. ( 18 ) WE make it also clear that we should not be taken as having expressed any opinion on the view of law taken by the Tribunal on the interpretation of Sec. 25a of the principal Act as the need for expressing our opinion in the said regard did not arise. ( 18 ) WE make it also clear that we should not be taken as having expressed any opinion on the view of law taken by the Tribunal on the interpretation of Sec. 25a of the principal Act as the need for expressing our opinion in the said regard did not arise. These revision petitions are accordingly dismissed subject to our direction regarding the refund of the institution fee by the Appellate Tribunal in respect of the appeals before it. There will be no order as to costs. --- *** --- .