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1984 DIGILAW 294 (MP)

COMMISSIONER OF SALES TAX v. TULSIRAM BHAGWANDAS

1984-07-03

K.M.AGRAWAL, U.N.BHACHAWAT

body1984
JUDGMENT : ( 1. ) THIS is a reference under Section 44 (1) of the madhya Pradesh General Sales Tax Act, 1958 (for short, hereinafter referred to as the Act) at the instance of the Department, whereby the following question has been referred by the Sales Tax Tribunal (Board of Revenue, Madhya Pradesh, gwalior), for our answer :- "whether in the facts and circumstances of the case the order passed by the Sales Tax Officer, Gwalior subsequent to the order of the tribunal could not be re-opened by the assessing authority u/s 19 (1)of the M. P. General Sales Tax Act, 1958?" ( 2. ) THE material facts, available from the Statement of the Case, giving rise to the present reference, are these: The relevant year of assessment is the Diwali year 1971 -72. The assessee deals in hardware and iron goods. He was assessed tax under the Act for the abovesaid assessment year. Deductions were allowed to him under Section 2 (r) (ii) of the Act in respect of sale of G. I. sheets, which were purchased after payment of tax. Penalty of Rs. 1,200/- was also imposed on the assessee under Section 17 (3) of the Act. The assessee filed first and second appeals against the assessment. In second appeal before the Tribunal, the only point agitated was that penalty could not have been imposed under Section 17 (3) of the. Act. ( 3. ) THE Tribunal partly accepted the contention of the assessee and reduced the amount of penalty to Rs. 600/ -. Thereafter, the assessment was reopened on the ground that in the initial assessment, galvanised sheets were treated as taxable at the first point and deduction was allowed under Section 2 (r) (ii) of the act. The assessing authority found that the galvanised sheets were declared goods and were taxable at the last point and not at the first point. Hence, holding that the deduction that was granted to the assessee earlier was improper, the sale of galvanised sheets was assessed to tax, the tax being Rs. 910. 98. ( 4. ) THE matter travelled upto the Tribunal against this order of reassessment. ( 5. Hence, holding that the deduction that was granted to the assessee earlier was improper, the sale of galvanised sheets was assessed to tax, the tax being Rs. 910. 98. ( 4. ) THE matter travelled upto the Tribunal against this order of reassessment. ( 5. ) THE assessees sole contention before the Tribunal against the order of reassessment was that since the second appeal of the assessee had already been decided, the assessment had become final and under Section 38 (6) of the Act, it could not have been reopened under Section 19 (1) of the Act. ( 6. ) THE contention of the Department was that deduction allowed in respect of galvanised sheets was not proper as they were taxable at the last point. ( 7. ) IT was further contended by the Department that under Section 19 (1) of the Act, if the assessing authority was satisfied, the turnover could be reassessed to tax. ( 8. ) THE Tribunal, relying on its decision in the case of M/s. Bhagat devidayal Nandlal vs. C. S. T. , Appeal No. 325 PBR/77 dt. 26-12-1978, held that the assessing authority cannot reopen a case in which final orders had been passed by the Tribunal. The Tribunal further observed that Section 38 (6) of the Act clearly lays down that subject to the provisions of Section 44, the order passed in second appeal is final. It, therefore, held that when the second appeal of the assessee had been finally decided by the Tribunal, it was not open to the assessing authority to reopen the assessment under Section 19 (1) of the Act. ( 9. ) THEREAFTER, on an application by the Department, the present question, extracted hereinabove in paragraph 1 of this Judgment, has been referred. ( 10. ) THE learned counsel for the Department submits that in the instant case, Section 38 (6) of the Act, is not attracted inasmuch as the matter before the tribunal in the second appeal in the original assessment that was agitated was only with regard to the penalty. Regarding the galvanised sheets, as to whether they are taxable at the first point or at the last point, was not before the Tribunal. Regarding the galvanised sheets, as to whether they are taxable at the first point or at the last point, was not before the Tribunal. He submitted that in this matter, it cannot be said that the order of the assessing authority merged in the order of the second appellate court so as to debar the reassessment under Section 19 (1) of the Act by virtue of Section 38 (6) of the Act. ( 11. ) THE learned counsel for the assessee, in his argument, in counter, contended that there could be no reassessment under Section 19 (1) of the Act as it is not a case of escaped assessment and that the order of the Tribunal in the original assessment had attained finality. Therefore, Section 38 (6) of the Act is very much attracted, debarring the power of the assessing authority for reassessment under Section 19 (1) of the Act. ( 12. ) FOR the reasons to follow, we are of the opinion that the question has to be answered in the negative, that is, in favour of the Department and against the assessee. ( 13. ) ERE we proceed to dwell upon the question, it would be useful to point out that the question referred to us is only with regard to the applicability of section 38 (6) of the Act and not whether it is a case of escaped assessment or not. While answering a reference, we cannot travel beyond the scope of the question referred to us. In this view of the matter, whether it is a case of escaped assessment or not, we are not required to go into that factual aspect and the law to be applied with regard to that. Thus, we confine ourselves to the question referred to us. We would like to set out herein below Section 38 (6) of the Act : "in the case of an order passed in first appeal under this section against which an application for revision is filed to the Commissioner under sub-section (1) of section 39, the order passed in revision shall be final and in the case of every other order passed in first appeal or second appeal under this section, such order shall, subject to the provisions of this section, section 39 or section 44, as the case may be, be final. " On a plain reading of this Section, it is obtainable that the finality to the order of the Tribunal in second appeal is attached only on the question that was the subject-matter of appeal before the Tribunal. We, shall, on this point, refer to the decision of their Lordships of the Supreme Court in the State of -Madras v. Madurai Mills Co. Ltd. , (1967) 19 S. T. C. 144. The relevant excerpt of the judgment is set out herein below : "on behalf of the appellant, the argument was put forward that if a statutory appeal is provided against an order passed by a Tribunal, the decision of the appellate authority is the operative decision in law. It was said that if the appellate authority modifies or reverses the order of the Tribunal, there was a merger of the latter order with the appellate order and it was the appellate order alone that is effective and can be enforced. But if the appellate order affirms the order of the tribunal, there is a merger of the original order in the appellate order and it is the appellate order alone which is operative and capable of enforcement In support of this argument reliance was placed upon the observation of Gajendragadkar, J. as he then was. in commissioner of Income-tax, Bombay v. Amritlal Bhogilal and co. , (1958) 34 I. T. R. 130 at 136. But the doctrine of merger is not a doctrine of rigid and universal application and it cannot be said that wherever there are two orders, one by the inferior tribunal and other by a superior tribunal, passed in an appeal or revision, there is a fusion or merger of two orders irrespective of the subject-matter of the appellate or revisional order and the scope of the appealer revision contemplated by the particular Statute. In our opinion, the application of the doctrine depends on the nature of the appellate or revisional order in each case and the scope of the statutory provisions conferring the appellate or revisional jurisdiction. For example in Amritlal bhogilal and Cos. case (Supra) it was observed by this Court that the order of registration made by the Income-tax Officer did not merge in the appellate order of the Appellate Commissioner, because the order of registration was not the subject matter of appeal before the appellate authority. For example in Amritlal bhogilal and Cos. case (Supra) it was observed by this Court that the order of registration made by the Income-tax Officer did not merge in the appellate order of the Appellate Commissioner, because the order of registration was not the subject matter of appeal before the appellate authority. It should be noticed that the order of assessment made by the Income-tax Officer in that case was a composite order, viz. an order granting registration of the firm and making an assessment on the basis of the registration. The appeal was taken by the assessee to the Appellate Commissioner against the composite order of the Income-tax Officer. It was held by the High court that the order of the Income-tax Officer granting registration to the respondent must be deemed to be merged in the appellate order and that the revisional power of the Commissioner of Income-tax cannot, therefore, be exercised in respect of it. The view taken by the high Court was overruled by this Court for the reason that the order of the Income-tax Officer granting registration cannot be deemed to have merged in the order of the Appellate Commissioner in an appeal taken against the composite order of assessment. Similarly, in The state of Uttar Pradesh v. Mohammad Nooh, (1958) S. C. R. 695 it was held by this court that the principle of merger cannot apply in the case of an order of dismissal of a public servant which was made by the departmental tribunal on the 20th April, 1948, and against which the appeal was dismissed by the appellate authority on the 7th May, 1949 and the revisional application was rejected on the 22nd April, 1950. In the circumstances of the present case, it cannot be said that there was a merger of the order of assessment made by the Deputy Commercial tax Officer dated the 28th November, 1952, with the Order of the deputy Commissioner of Commercial Taxes dated the 21st August, 1954, because the question of exemption on the value of yarn purchased from outside the State of Madras was not the subject-matter of revision before the Deputy Commissioner of Commercial taxes. The only point that was urged before the Deputy commissioner was that the sum of Rs. 6,57,971-4-9 collected by the respondent by way of tax should not be included in the taxable turnover. The only point that was urged before the Deputy commissioner was that the sum of Rs. 6,57,971-4-9 collected by the respondent by way of tax should not be included in the taxable turnover. This was the only point raised before the Deputy commissioner and was rejected by him in the revision proceedings. On the contrary, the question before the Board of Revenue was whether the Deputy Commercial Tax Officer, Madurai, was right in excluding from the net taxable turnover of the respondent the sum of rs. 7,74*62,706-1-6 which was the value of cotton purchased by the respondent from outside the State of Madras. We are, therefore, of opinion that the doctrine of merger cannot be invoked in the circumstance of the present case. " On the question of merger of the decision of a subordinate authority in the judgment of its appellate authority, assistance can be drawn from the cases under section 263 of the Income-tax Act. On this point, we would, therefore, like to refer to a Full Bench decision of this Court in Commissioner of I. T. v, R. S. Banwarilal, 1982 MPLJ 296 = 1982 JLJ 520 . which has taken the account of a decision, which was referred to by the learned counsel during the course of his argument. The relevant excerpt from this decision is set out below : "the result, therefore, is that the doctrine of merger applies to income tax proceedings but the extent of its application depends on the scope and subject matter of the appeal and the decision rendered by the appellate authority. Where an appeal has been preferred by the assessee to the A. A. C. from an order of assessment made by the i. T. O. , in respect of only some of the items covered by the i. T. O. s order and the remaining items, forming part of the i. T. Os. Where an appeal has been preferred by the assessee to the A. A. C. from an order of assessment made by the i. T. O. , in respect of only some of the items covered by the i. T. O. s order and the remaining items, forming part of the i. T. Os. assessment order, were not agitated by either party, though it was open also to the revenue to agitate them or the a. A. C. to consider them suo motu and no decision of the A. A. C. is, therefore, made in respect of the remaining items, the i. T. O. s order merges with the appellate order of the A. A. C. only to the extent it was considered and decided by the A. A. C. but the matters which are not covered by the appellate order of the A. A. C. are left untouched and to that extent the I. T. Os. assessment order survives, permitting exercise of revisional jurisdiction by the Commissioner under section 263, of the income Tax Act, 1961. It necessarily follows that the items considered and decided by the A. A. C. in his appellate order are beyond the scope of the revisional power of the C. I. T. under section 263, inasmuch as the I. T. O. s" order merges to the extent with that of the A. A. C; and the Commissioner has no revisional power over the a. A. C. The question whether the I. T. O. s order has merged with that of the A. A. C. has to be answered on this basis. " (Emphasis supplied)In view of the forequoted decision of the Supreme Court and the Full Bench decision of this Court, the point at hand need not detain us further, this being an admitted position that the matter of tax on galvanised iron sheets was not the subject-matter of the appeal before the Tribunal in the original assessment. ( 14. ) THE upshot of the foregoing discussion is that since there was no appeal before the Tribunal in the matter of original assessment regarding the galvanised iron sheets, the decision of the Tribunal does not, by virtue of section 38 (6) of the act, operate as a bar to the reassessment in question. ( 15. ( 14. ) THE upshot of the foregoing discussion is that since there was no appeal before the Tribunal in the matter of original assessment regarding the galvanised iron sheets, the decision of the Tribunal does not, by virtue of section 38 (6) of the act, operate as a bar to the reassessment in question. ( 15. ) IN the result, as already stated hereinabove, the question is answered in the negative, that is, in favour of the Department and against the assessee. No order as to costs.