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2006 DIGILAW 491 (MP)

NEPA LIMITED v. COMMISSIONER OF COMMERCIAL TAX

2006-04-04

R.S.JHA

body2006
ORDER R. S. Jha, J. - The petitioners have challenged the tenability of the order dated November 13, 1998 passed under section 39(2) of the M.P. General Sales Tax Act, 1958 ("the Act") by the Additional Commissioner of Commercial Tax, Indore, by which the proceedings initiated under section 19A of the M.P. General Sales Tax Act which had been closed by order dated September 30, 1996 have been revised and tax at 12 per cent on the sale of coal ash has been imposed. The facts in brief are that the petitioner, a Central Government undertaking, was assessed to tax vide order dated February 10, 1993. In this order no tax on the sale of coal ash was levied. The appeal filed by the petitioner against this order was also dismissed vide order dated July 13, 1993. On July 14, 1994, proceedings for reassessment were initiated under section 19A of the Act, in view of the order of the Board of Revenue passed in the case reported in Burn Standard Co. Ltd., Jabalpur v. Commissioner of Sales Tax [1994] 18 CTJ 8, wherein it was held that the sale of coal ash was liable to tax. These proceedings were ultimately closed vide order dated September 30, 1996 in view of the directions issued by the Commissioner under section 42B of the M.P. General Sales Tax Act dated February 6, 1991. On May 23, 1998, order dated September 30, 1996 passed in the reassessment proceedings was sought to be revised in exercise of powers under section 39(2) of the Act and in pursuance thereof notices were issued to the petitioner on May 23, 1998 which culminated in passing of the impugned order dated November 13, 1998 imposing liability upon the petitioner to pay tax at 12 per cent on the sale of coal ash. The learned counsel for the petitioner assails the impugned order on three grounds : (a) Firstly, that for the purpose of invoking the powers under section 39, it is a mandatory precondition that the order sought to be revised is both erroneous as well as prejudicial to the interest of Revenue in view of the law as laid down in a series of decisions of this court as well as by the judgment of the Supreme Court reported in the case of Malabar Industrial Co. Ltd. v. Commissioner of Income-tax [2000] 243 ITR 83 and as in the instant case, the authorities have failed to record a finding that the order dated September 30, 1996 was in any way erroneous therefore, the entire proceedings under section 39 of the Act deserve to be quashed. (b) Secondly, that the law relating to the taxability of sale of coal ash was in fact laid down by the judgment of this court dated August 4, 1987 in the case of Hukumchand Mills Ltd. v. Commissioner of Sales Tax [1988] 71 STC 101 [FB] and the order of the Board of Revenue reported in Burn Standard Co. Ltd., Jabalpur [1994] 18 CTJ 8 was only passed following the law laid down and declared by this court in the case of Hukumchand [1988] 71 STC 101 [FB]. Under the circumstances, the proceedings for reassessment initiated under section 19A, being beyond the period of three years from August 4, 1987, i.e., the date on which the law was declared and laid down by this court, were barred by limitation in view of the judgment of this court in the case of Dharamchand Sikharchand v. Assistant Commissioner of Sales Tax, Sagar [1997] 30 VKN 171 and therefore, could not have been revised in exercise of revisional powers under section 39(2) of the Act. (c) Thirdly, that the initiation of the proceedings for revision under section 39(2) can be taken up only within a period of three years from the date of the original order of assessment and if this period is counted from the date of the original order of assessment, i.e., February 10, 1993, the statutorily prescribed period had expired, and therefore the revisional proceedings could not have been initiated being barred by time. The learned counsel appearing for the respondents has vehemently opposed the submissions of the learned counsel for the petitioner. It is submitted that undisputedly the petitioner is liable to pay tax on the sale of coal ash at 12 per cent. The learned counsel appearing for the respondents has vehemently opposed the submissions of the learned counsel for the petitioner. It is submitted that undisputedly the petitioner is liable to pay tax on the sale of coal ash at 12 per cent. It is also submitted that the order sought to be revised under section 39 is the order dated September 30, 1996 closing the proceedings under section 19A which is within the period of three years and as apparently the assessing authority had not levied tax on the sale of coal ash, the impugned order is erroneous as well as prejudicial to the interest of Revenue and therefore, the proceedings initiated and the order passed under section 39(2) of the Act are in accordance with law and do not deserve to be interfered with. I have heard the learned counsel for the parties at length. I have heard the learned counsel for the parties at length. From a perusal of the documents on record, the following undisputed and admitted facts emerge : That the sale of coal ash attracted sales tax at 12 per cent as per the law laid down by this court in the case of Hukumchand Mills [1988] 71 STC 101 [FB] vide judgment dated August 4, 1987, that this law was very much in existence on the date the petitioner was assessed to tax, i.e., on February 10, 1993; that the proceedings for reassessment were initiated under section 19A on July 14, 1994 within a period of three years from the date of the order of assessment in view of the order of the Board of Revenue which simply followed the law as laid down in the case of Hukumchand Mills [1988] 71 STC 101 (MP) [FB]; that the proceedings under section 19A were closed in view of the clear and specific direction and order of the Commissioner under section 42B of the Act dated February 6, 1991; that the issuance of the direction and the fact that the proceedings for reassessment under section 19A of the Act were rightly closed in compliance with the direction of the Commissioner dated February 6, 1991 have not been found to be erroneous by the authorities; that the revisional proceedings initiated under section 39(2) of the Act on May 23, 1998 are within three years from the date of the order dated September 30, 1996 closing the proceedings under section 19A but are beyond the period of three years from the date of the initial order of assessment dated February 10, 1993. As is evident from the undisputed facts stated above, the authorities in the impugned order as well as in the show cause notice dated May 23, 1998 itself have clearly stated that the proceedings under section 19A were closed in view of the directions issued by the Commissioner under section 42B dated February 6, 1991. The authorities have not recorded any finding that the order dated September 30, 1996 closing the proceedings under section 19A in accordance with the orders and the directions issued by the Commissioner under section 42B of the Act is in any way erroneous. The authorities have not recorded any finding that the order dated September 30, 1996 closing the proceedings under section 19A in accordance with the orders and the directions issued by the Commissioner under section 42B of the Act is in any way erroneous. Under the circumstances, the initiation of proceedings under section 39(2) of the Act deserves to be quashed as admittedly there is no finding recorded by the authorities that the order dated September 30, 1996 is erroneous. The Supreme Court in the case of Malabar Industrial [2000] 243 ITR 83, has laid down that it is prerequisite for exercise of suo motu revisional powers that the order is both erroneous as well as prejudicial to the interest of Revenue. In the case of Malabar Industrial [2000] 243 ITR 83, the Supreme Court while interpreting the provisions of section 263 of the Income-tax Act, which is similarly worded as section 39(2) of the M.P. General Sales Tax Act and is therefore, applicable with full force in respect of section 39(2) of the Act, observed thus : To consider the first contention, it will be apt to quote section 263(1) which is relevant for our purpose : "'263. Revision of orders prejudicial to Revenue. - (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation. - ...' A bare reading of this provision makes it clear that the prerequisite to the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of the twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of the twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue - recourse cannot be had to section 263(1) of the Act. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the Revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. ... The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the assessing officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. It has been held by this court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue." In the case at hand, admittedly, the order dated September 30, 1996 closing the proceedings initiated under section 19A was passed in compliance with the order dated February 6, 1991 issued by the Commissioner under section 42B of the Act and therefore cannot be, and has rightly not been, held to be erroneous. As the order is not erroneous it cannot be revised under section 39(2) of the Act in view of the law as laid down by the Supreme Court in the case of Malabar Industrial [2000] 243 ITR 83. In the facts and circumstances of the case, I find myself to be in full agreement with the first ground raised by the petitioner. From a perusal of the undisputed and admitted facts, it is apparent that the law in respect of taxability of sale of coal ash was laid down by this court in the case of Hukumchand Mills [1988] 71 STC 101 [FB] vide judgment dated August 4, 1987 and this fact was ignored by the assessing authority while assessing the petitioner to tax on February 10, 1993. In other words, the assessment was not rendered erroneous consequent to or in light of any judgment or order passed subsequent to the assessment proceedings. As is apparent from a perusal of section 19A of the Act reassessment proceedings can be initiated only within three years from the date of the judgment or order of any court or Tribunal due to which the order of assessment has been rendered erroneous and prejudicial to the interest of Revenue. A Division Bench of this court in the case of Dharamchand Sikharchand [1997] 30 VKN 171, has held that the period of three years as prescribed under section 19A has to be counted from the date, the law is initially declared and laid down and not from the date of any subsequent order following the said judgment. The relevant part of the judgment reads as under : "5. The Commissioner has been given power to reopen the assessment proceedings within a period of three years from the date of order or judgment. The relevant part of the judgment reads as under : "5. The Commissioner has been given power to reopen the assessment proceedings within a period of three years from the date of order or judgment. The relevant judgment given by this court was dated December 14, 1979 [Karelal Kundanlal Trust v. Commissioner of Sales Tax [1980] 46 STC 202 (MP)] and not the subsequent order passed on November 23, 1982 in M.P. No. 526 of 1981 because this order dated November 23, 1982 was not the final order. Final order declaring the law was in the case of Karelal Kundanlal Trust v. Commissioner of Sales Tax [1980] 46 STC 202 (MP) dated December 14, 1979 and subsequent order dated November 23, 1982 was only an order directly in compliance with earlier order and refund. Therefore, the order dated November 23, 1982 cannot be made a ground for issuing notices. If the department wanted to issue notice pursuant to order passed by this court which prejudicially affected the interest of the Revenue, then it was the order dated December 14, 1979 whereby a law was declared and not the subsequent order dated November 23, 1982. Subsequent order dated November 23, 1982 was, in fact, in the nature of consequential order passed in pursuance of order dated from December 14, 1979. The period of limitation shall be counted from December 14, 1979 and not from the date of subsequent order dated November 23, 1982. Notices issued by counting the period of limitation from the date of subsequent order are therefore illegal and such notices are barred by time as the period prescribed is three years. Hence, the notices issued (annexures P5 to P9) are barred by time and are quashed." In the instant case the law regarding taxability of coal ash was declared and laid down by a Full Bench of this court in the case of Hukumchand Mills [1988] 71 STC 101 on August 4, 1987 and not on August 28, 1993 on which date the Board of Revenue passed orders in the case of Burn Standard Co. [1994] 18 CTJ 8 by following the law laid down and declared in the case of Hukumchand Mills case [1988] 71 STC 101 (MP) [FB]. Therefore, the initiation of proceedings under section 19A was clearly barred by time being beyond the period of three years from August 4, 1987. [1994] 18 CTJ 8 by following the law laid down and declared in the case of Hukumchand Mills case [1988] 71 STC 101 (MP) [FB]. Therefore, the initiation of proceedings under section 19A was clearly barred by time being beyond the period of three years from August 4, 1987. The second ground raised by the petitioner is answered accordingly. As is evident from a perusal of section 39(2) of the Act, the Commissioner has the power to take up any order in revision if he finds that the order is erroneous so far as it is prejudicial to the interest of Revenue provided that no such proceeding can be initiated after expiry of three years from the date of the order sought to be revised. The facts and documents on record clearly establish that by revising and reopening the proceedings for reassessment which had been closed by order dated September 30, 1996 the respondents, in fact, seek to reassess and levy tax on the sale of coal ash which was not imposed by the initial order of assessment dated February 10, 1993. In other words, if the proceedings under section 39(2) of the Act are permitted to stand it would amount to permitting revision of proceedings which are otherwise barred by limitation as the real intention of the authorities is to revise the initial order of assessment dated February 10, 1993 in the garb of taking up revision proceedings against the order dated September 30, 1996 closing the proceedings under section 19A. If the authorities are permitted to do so, it would render the statutory object of prescribing the three-year limitation under section 19A and section 39(2), redundant and meaningless. In my considered opinion the method adopted by the respondents is not permissible in law and therefore, deserves to be quashed. Apart from the above facet of the case, if the impugned order under section 39 of the Act is permitted to stand, it would amount to perpetuating an illegality as this court has already held that the initiation of proceedings for reassessment under section 19A was itself misconceived. In the light of the above, the third ground raised by the petitioner is also decided in his favour. In the light of the above, the third ground raised by the petitioner is also decided in his favour. As all the three grounds raised by the petitioner are decided in his favour, in the facts and circumstances of the case, I am of the considered opinion that the impugned order dated November 13, 1998 deserves to be quashed and the petition deserves to be and is hereby allowed. There shall be no order as to costs.