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2008 DIGILAW 591 (KER)

CARDAMOM MARKETING CORPORATION v. STATE OF KERALA

2008-09-24

A.K.BASHEER, H.L.DATTU

body2008
ORDER H. L. DATTU C.J. – This revision petition relates to the assessment year 1991-92 under the provisions of the Central Sales Tax Act, 1956 ("the CST Act", for short). The petitioner is a firm, carrying on auction sale of cardamom brought by agriculturists and small traders. The assessee is also a dealer, registered both under the provisions of the Kerala General Sales Tax Act, 1963 ("the KGST Act", for short) and the CST Act. The original assessments under the provisions of the CST Act came to be completed by the assessing authority on March 3, 1994, granting exemption from payment of tax under the provisions of the CST Act, on the ground that the sales effected by the petitioner would come within the purview of section 5(3) of the CST Act. Subsequently, the assessing authority, being of the opinion that the whole of the turnover of the dealer has escaped assessment to tax in the orders of assessment passed earlier, had initiated reassessment proceedings under section 19(1) of the KGST Act read with section 9(2) of the CST Act. The assessing authority, after hearing the petitioner, has passed an order dated May 31, 1996 bringing to tax the turnover which had been exempted in the original order of assessment passed on March 3, 1994. The assessee, being aggrieved by the orders of reassessment passed by the assessing authority, had filed an appeal before the first appellate authority in S.T.A. No. 424 of 1996. The first appellate authority has set aside the reassessment orders passed by the assessing authority purely on the ground of limitation, without entering into the merits or demerits of the appeal filed by the assessee. In the interregnum, the Deputy Commissioner of Commercial Taxes has initiated suo motu revisional proceedings by issuing a notice under section 35(1) of the KGST Act to revise the original orders of assessment passed by the assessing authority dated March 3, 1994. In the interregnum, the Deputy Commissioner of Commercial Taxes has initiated suo motu revisional proceedings by issuing a notice under section 35(1) of the KGST Act to revise the original orders of assessment passed by the assessing authority dated March 3, 1994. The notice issued by the Deputy Commissioner of Commercial Taxes, in exercise of his powers under section 35(1) of the KGST Act, is as under : "In the circumstances, in the absence of any privity of contract for export from a foreign buyer, the purchases made by M/s. A.V. Thomas & Co., from the assessee cannot be to satisfy any foreign contract (since there is no contract with AIT) and hence the sale is not in the course of export as per section 5(3) of the CST Act. As such, the exemption allowed does not appear to be in order. Hence it is proposed to cancel the assessment orders dated March 3, 1994 for 1991-92 under GST (sic) and CST completed by the Inspecting Assistant Commissioner, Agricultural Income-tax and Sales Tax, Kumily, under section 35(1) of the KGST Act, 1963. Your objection, if any, against the proposal should be filed within seven days of receipt of this notice, failing which the case will be disposed of on its merits. You are also given an opportunity of personal hearing on October 16, 1997 at 11 a.m. in my office at Kattappana, with all evidences you rely on." After receipt of the aforesaid notice, the petitioner had filed its reply letter dated November 27, 1997. Apart from others, the assessee had specifically contended as under : "1. Event hough section 35 of the KGST Act, vests you with powers to revise an order passed by the Inspecting Assistant Commissioner, such revision can be made only in respect of an order which is live and existing at the time of issuing the notice under section 35. The order dated March 3, 1994, proposed to be revised under section 35 has been re-opened and vacated and set aside, and substituted by a fresh order dated May 31, 1996 passed by the Inspecting Assistant Commissioner himself and hence the initial order dated March 3, 1994 cannot be said to survive in any manner to any extent thereafter. The order dated March 3, 1994, proposed to be revised under section 35 has been re-opened and vacated and set aside, and substituted by a fresh order dated May 31, 1996 passed by the Inspecting Assistant Commissioner himself and hence the initial order dated March 3, 1994 cannot be said to survive in any manner to any extent thereafter. Further, the facts and allegations contained in the notice under section 35 have been duly considered by the Inspecting Assistant Commissioner in his fresh order passed on May 31, 1996 in substitution of the original order dated March 3, 1994. We may in this connection draw your kind reference to the observations of the honourable High Court of Kerala in Importex International (P.) Ltd. v. State of Kerala [1991] 81 STC 351; [1991] 1 KLT 281." The revisional authority, after considering the objections so filed by the assessee, in its cryptic order has observed as under : "I have gone through their contentions and perused the records of case. It is alleged that the order dated March 3, 1994 proposed to be revised under section 35 has already been re-opened and vacated and set aside and substituted by a fresh order dated May 31, 1996 passed by the Inspecting Assistant Commissioner, Kumily himself and hence the initial order dated March 3, 1994 cannot be said to survive in any manner to any extent thereafter. Further, it is argued that the facts and allegations contained in the notice under section 35 have been duly considered by the Inspecting Assistant Commissioner in his fresh order passed on May 31, 1996 in substitution of the original order dated March 3, 1994. But the Additional Deputy Commissioner (Appeals), Agricultural Income-tax and Sales Tax, Ernakulam in his order STA No. 424 of 1996 dated February 23, 1998 has quashed the order dated May 31, 1996 passed by the Inspecting Assistant Commissioner, Kumily in substitution of the original order dated March 3, 1994, being time-barred. Hence the contention of the assessee is not worth considering. All other contentions of the assessee merit no consideration. Hence the contention of the assessee is not worth considering. All other contentions of the assessee merit no consideration. In the circumstances, the following orders are passed : Order No. A4-5125/97 dated February 26, 1998 In exercise of the powers conferred upon me under section 35 of the KGST Act, 1963, the CST assessment order dated March 3, 1994 passed by the Inspecting Assistant Commissioner, Agricultural Income-tax and Sales Tax, Kumily in respect of M/s. Cardamom Marketing Corporation, Vandenmedu for the year 1991-92 is hereby cancelled." Aggrieved by the orders so passed by the revisional authority, the assessee was before the Sales Tax Appellate Tribunal in T.A. No. 656 of 1999. The Tribunal has rejected the appeal, by its order dated January 23, 2004. Correctness or otherwise of the said order is the subject-matter of this revision petition filed under section 41 of the KGST Act. Sri C. K. Thanu Pillai, learned counsel appearing for the assessee, would submit that the notice issued by the revisional authority in exercise of his powers under section 35(1) of the KGST Act read with section 9(2) of the CST Act is void, irregular, illegal and improper, for the reason that the orders passed by the assessing authority dated March 3, 1994 had been re-opened by the assessing authority in exercise of his powers under section 19(1) of the KGST Act and, therefore, the original order of assessment had merged with the orders passed by the assessing authority under section 19(1) of the KGST Act. The learned counsel would, further, contend, that, when the notice came to be issued by the revisional authority in exercise of his powers under section 35(1) of the KGST Act, the original order of assessment dated March 3, 1994 was not alive and, therefore, the revisional authority cannot revise an order which is not in existence. Per contra, Sri Muhammed Rafiq, learned counsel appearing for the Revenue, would submit that merely because the reassessment proceedings had been initiated by the assessing authority, it cannot be said that the original order of assessment was merged with the reassessment order. In support of that contention, the learned counsel intends to rely upon the observations made by the apex court in the case of Commissioner of Income-tax v. Alagendran Finance Ltd. [2007] 293 ITR 1; [2007] 162 Taxman 465. In support of that contention, the learned counsel intends to rely upon the observations made by the apex court in the case of Commissioner of Income-tax v. Alagendran Finance Ltd. [2007] 293 ITR 1; [2007] 162 Taxman 465. The one and only issue that would arise for our consideration and decision is, whether the revisional authority was justified in invoking his powers under section 35 of the KGST Act to revise the order which was not in existence. To resolve the issue that we have raised for our consideration and decision, the provisions of section 35 of the KGST Act require to be noticed. The said section reads as under : "35. Powers of revision of the Deputy Commissioner suo motu. - (1) The Deputy Commissioner may, of his own motion, call for and examine any order passed or proceedings recorded under this Act by any officer or authority subordinate to him other than an Appellate Assistant Commissioner which in his opinion is prejudicial to revenue and may make such enquiry or cause such enquiry to be made and, subject to the provisions of this Act, may pass such order thereon as he thinks fit. (2) The Deputy Commissioner shall not pass any order under sub-section (1) if, - (a) the time for appeal against the order has not expired; (b) the order has been made the subject of an appeal to the Appellate Assistant Commissioner or the Appellate Tribunal or of a revision in the High Court; or (c) more than four years have expired after the passing of the order referred to therein. (2A) Notwithstanding anything contained in sub-section (2), the Deputy Commissioner may pass an order under sub-section (1) on any point which has not been decided in an appeal or revision referred to in clause (b) of sub-section (2), before the expiry of a period of one year from the date of the order in such appeal or revision or before the expiry of the period of four years referred to in clause (c) of the sub-section, whichever is later. (3) No order under this section adversely affecting a person shall be passed unless that person has had a reasonable opportunity of being heard." A perusal of the aforesaid provision would clearly demonstrate, that, the revisional authority can exercise its suo motu powers to revise an order, if the said order is prejudicial to the interest of the Revenue, after issuing a notice and after making such enquiry as may be deemed necessary. In the instant case, as we have already noticed, an original order of assessment came to be passed by the assessing authority on March 3, 1994. In the said order, the assessing authority had granted certain exemptions to the assessee, primarily on the ground that the transaction of the assessee would come within the purview of section 5(3) of the CST Act. Subsequently, the assessing authority had issued a notice under section 19(1) of the KGST Act read with section 9(2) of the CST Act to reassess the escaped turnover. In the said reassessment order passed, the assessing authority has levied tax under the provisions of the CST Act, which was exempted by him earlier while passing the original assessment order dated March 3, 1994. These facts are not in dispute. The orders of reassessment passed by the assessing authority was the subject-matter of first appeal before the first appellate authority. The first appellate authority has allowed the appeal filed by the assessee, primarily on the ground of limitation. During the pendency of the appeal, the revisional authority has initiated suo motu revisional powers by issuing a notice dated September 30, 1997. In the said notice, the revisional authority has categorically stated that he intends to revise the orders of assessment dated March 3, 1994, passed by the assessing authority for the assessment year 1991-92 under the provisions of the CST Act. On the day when the revisional authority had issued the aforesaid notice, the original order of assessment dated March 3, 1994 was not in existence, in the sense, that, the said order was the subject-matter of reassessment proceedings by the assessing authority. On the day when the revisional authority had issued the aforesaid notice, the original order of assessment dated March 3, 1994 was not in existence, in the sense, that, the said order was the subject-matter of reassessment proceedings by the assessing authority. An order, which was not in existence, cannot be revised by the revisional authority by invoking his suo motu revisional jurisdiction and on that sole ground, in our opinion, the orders passed by the revisional authority pursuant to his notice dated September 30, 1997, and the subsequent orders passed by the Tribunal require to be set aside. Accordingly, while answering the questions of law framed by the assessee in favour of the assessee and against the Revenue, we allow the revision petition and set aside the orders passed by the revisional authority dated February 26, 1998 issued pursuant to the notice dated September 30, 1997 as well as the orders passed by the Tribunal in T.A. No. 656 of 1999 dated January 23, 2004. I.A. No. 3181 of 2004 is dismissed. Ordered accordingly.