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Rajmal Multanmal And Company And Another v. Commercial Tax Officer, Cuddapah, And Others

Andhra Pradesh High Court

Dec 20, 1974

Judgment

Subsequent
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Factual and Procedural Background

The opinion arises from two matters heard together; the court confines its factual recitation to W.P. No. 4908 of 1972. The petitioner was a firm trading in groundnuts and groundnut oil. For the assessment year 1965–66 the Commercial Tax Officer assessed the petitioner on inter-State sales turnover of Rs. 9,59,400.34, of which Rs. 1,85,310 related to groundnut oil sales that had been taxed under the Act. The petitioner claimed exemption for that turnover under the Central Sales Tax Act; the claim was initially negatived by the Commercial Tax Officer but allowed on appeal by the Assistant Commissioner following the Supreme Court decision in State of Mysore v. Yaddalam Lakshminarasimhiah Setty and Sons, with a refund directed.

Parliament then introduced section 6(1A) into the Central Sales Tax Act (by Amendment Act 28 of 1969) with retrospective effect, which nullified the Yaddalam decision for present purposes. Pursuant to that change, the Deputy Commissioner of Commercial Taxes, Warangal, invoked revisional powers under section 20 of the Andhra Pradesh General Sales Tax Act to revise the Assistant Commissioner's order and restored the original Commercial Tax Officer's assessment. The assessment order had been made on 7 December 1966; the revisional order of the Deputy Commissioner was served on the petitioner on 18 April 1972.

The petitioner appealed to the Sales Tax Appellate Tribunal, contending the Deputy Commissioner's exercise of revisional jurisdiction was time-barred under section 20(3) of the Act because service occurred after the four-year period. The Tribunal rejected this contention and dismissed the appeal. The petitioner then filed the present writ petition challenging the Deputy Commissioner’s power to exercise revisional jurisdiction under section 20(3).

Legal Issues Presented

Whether the Deputy Commissioner exercised his revisional jurisdiction under section 20(2) of the Andhra Pradesh General Sales Tax Act beyond the period permitted by section 20(3) and, if so, whether the assessments made pursuant to that revision are void.
Whether the incident in question is one of "escaped assessment" requiring reassessment under section 14(4)/14(4-A)(b) (with the four-year limitation) or instead a proper exercise of revisional jurisdiction under section 20(2)/(3).
Whether the communication (service) of the Deputy Commissioner’s revisional order to the dealer must itself occur within the four-year period specified in section 20(3), or whether it suffices that the revisional jurisdiction was exercised (notice issued and order passed) within that period.

Arguments of the Parties

Petitioner's (Appellant) Arguments — Mr. Dasaratharama Reddi

The Deputy Commissioner exercised revisional jurisdiction beyond the period fixed by section 20(3) of the Act because the revisional order was served on the petitioner after four years from the assessment order; therefore the revision is time-barred.
The matter is one of "escaped assessment" (i.e., turnover escaped assessment) and so reassessment procedures and limitation under section 14(4) / section 14(4-A)(b) apply; reassessment should have been made within four years from the expiry of the relevant year.
Even if the Deputy Commissioner passed his order within the statutory period, it must also have been communicated/served upon the assessee within that four-year period (relying on precedents such as Bachhittar Singh v. State of Punjab and State of Punjab v. Amar Singh).

Respondent/Government's Arguments — Mr. D.V. Sastry, Government Pleader

The case is not one of reassessment under section 14(4) but a case where the Deputy Commissioner exercised suo motu revisional jurisdiction under section 20(2) of the Act following the retrospective insertion of section 6(1A) in the Central Sales Tax Act.
Section 20(2) (and the limitation in section 20(3)) governs the matter; the Deputy Commissioner validly issued a show-cause notice on 2 November 1971 and passed the revisional order on 1 December 1971, thereby exercising jurisdiction within the permissible period.
The Supreme Court decisions relied on by the petitioner about communication requirements (Bachhittar Singh and Amar Singh) are not applicable to the construction of section 20(3) of the Act.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
State of Mysore v. Yaddalam Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C. 231 S.C.	Previously interpreted section 6 of the Central Sales Tax Act in a manner that allowed the petitioner’s claim for exemption; relied upon by the Assistant Commissioner to allow refund.	The court noted that this Supreme Court decision initially supported the petitioner's exemption but was later nullified for present purposes by the retrospective insertion of section 6(1A) into the Central Sales Tax Act.
State of Kerala v. Joseph & Co.	Held that the effect of the Ordinance (later replaced by Amendment Act 28 of 1969) was to supersede the judgment in Yaddalam's case.	The court relied on this to conclude that section 6(1A) (via the Amendment Act/Ordinance) had retrospective effect and thereby changed the legal position so that exemption under the previous interpretation could no longer be sustained.
Deputy Commissioner v. Dhanalakshmi Vilas Cashew Co	Explained what constitutes "escaped assessment."	The court invoked this authority to support the conclusion that the present case did not involve escaped assessment, because the exemption earlier granted resulted from the law as interpreted at the time (not from inadvertence, omission or concealment).
State of Madras v. Louis Dreyfus and Company Ltd. [1955] 6 S.T.C. 318 (Full Bench)	Explained the natural meaning of "turnover which has escaped" — i.e., turnover not noticed due to inadvertence, omission, concealment or want of care.	The court quoted this explanation to reinforce that "escaped turnover" implies oversight or concealment, which was absent here because the exemption was based on an earlier legal interpretation.
Bachhittar Singh v. State of Punjab	Concerned with what amounts to communication of an order of the State Government; addressed formal requirements under clause (1) of article 166 of the Constitution for an order to be one of the State Government.	The court observed this decision dealt with departmental enquiry and communication formalities and held it was not relevant to the construction of section 20(3) of the Sales Tax Act regarding limitation for exercise of revisional jurisdiction.
State of Punjab v. Amar Singh	Considered from which date an order of dismissal takes effect — the date of the order or the date of communication/service to the officer.	The court noted this case concerned the effective date of dismissal and communication, and held it did not support the petitioner's contention that the revisional order itself must be communicated within the four-year window under section 20(3).

Court's Reasoning and Analysis

The court framed the dispute around whether the Deputy Commissioner's action was a time-barred reassessment of escaped turnover or a valid exercise of revisional jurisdiction under section 20(2) of the State Act, prompted by the retrospective insertion of section 6(1A) in the Central Sales Tax Act.

Step-by-step analysis as reflected in the opinion:

The court accepted that section 6(1A) of the Central Sales Tax Act (Amendment Act 28 of 1969) has retrospective application and that, as a result, the earlier Supreme Court decision (Yaddalam) was effectively superseded for the purposes of assessing tax liability on inter-State sales in the circumstances described.
The court considered whether the incidence fell within the statutory concept of "escaped assessment" (which would trigger reassessment procedures under section 14(4) and the four-year limit in section 14(4-A)(b)), or whether the Deputy Commissioner validly exercised suo motu revisional powers under section 20(2).
The court relied on authorities explaining "escaped assessment/turnover" (including the Full Bench decision in State of Madras v. Louis Dreyfus and the Supreme Court in Deputy Commissioner v. Dhanalakshmi Vilas Cashew Co.) to define escaped turnover as turnover not noticed due to inadvertence, omission, concealment or want of care.
Applying that definition to the facts, the court concluded that no escapement in that sense had occurred: the Assistant Commissioner's grant of exemption was based on the prevailing legal interpretation (Yaddalam) at the time and not due to any inadvertence, omission, or concealment by the assessing officer or the assessee.
Given the legislative change (section 6(1A)) which altered the substantive law retrospectively, the legality of the exemption had to be revisited; this invoked the revisional power of the Deputy Commissioner under section 20(2).
The court then turned to limitation under section 20(3), which provides that the powers in subsections (1) and (2) are exercisable within a period not exceeding four years from the date on which the order was served on the dealer (the court identifies the date on which the order in revision was served as the relevant reference point for this provision).
The court rejected the petitioner’s narrower contention that not only must the Deputy Commissioner exercise jurisdiction within four years, but the revisional order passed by him must also be communicated/served on the assessee within that same four-year period. The court found the language of subsection (3) unambiguous: it speaks of the exercise of revisional jurisdiction (i.e., the authority acting within the statutory period), not of the requirement that the revisional order's communication to the dealer must also occur within that timeframe.
The court further examined the precedents relied upon by the petitioner (Bachhittar Singh and Amar Singh) and explained that those cases concerned communication and effectivity in distinct contexts (departmental enquiry and effective date of dismissal). The court held they were not instructive on constructing subsection (3) of section 20 in relation to limitation for exercising revisional jurisdiction.
Concluding from these analyses, the court found the Deputy Commissioner validly exercised his revisional jurisdiction under section 20(2) within the permissible period (show-cause notice issued on 2 November 1971; order passed on 1 December 1971), and that later service/communication of the revisional order after expiry of four years did not invalidate the exercise of jurisdiction.

Holding and Implications

Holding:

THE WRIT APPEAL AND THE WRIT PETITION ARE DISMISSED.

The court expressly dismissed both the writ appeal and writ petition with costs (final line: "Appeal and petition dismissed.").

Immediate implications (direct effect on the parties):

The Deputy Commissioner's revisional order restoring the assessment of the Commercial Tax Officer stands; the revisional jurisdiction exercised under section 20(2) is valid in the circumstances described.
The petitioner's contention that the revisional order was time-barred under section 20(3) because it was served after four years was rejected: the court held that exercising jurisdiction (issuing notice and passing the order) within the statutory period satisfies subsection (3), and subsequent communication after the period does not vitiate the exercise of jurisdiction.

The opinion does not discuss broader doctrinal or systemic implications beyond the direct resolution of the parties' dispute; it does not purport to lay down any novel principle beyond its interpretations of the cited statutory provisions and precedents.

Show all summary ...

S. Obul Reddi, C.J:— The main question raised in these two cases by Mr. Dasaratharama Reddi, the learned counsel for the petitioner, is that the Deputy Commissioner exercised his revisional jurisdiction beyond the period specified in section 20(3) of the Andhra Pradesh General Sales Tax Act, hereinafter referred to as the “Act”, and, as such, the assessments made by him pursuant to the revision are liable to be set aside.

2. For the purpose of determining the question it will suffice if we refer to the facts narrated in W.P No. 4908 of 1972. The petitioner was a firm carrying on business in groundnuts and groundnut oil. Groundnut oil was taxable in 1965-66 at the point of first sale in the State. For that assessment year, the Commercial Tax Officer assessed the petitioner on inter-State sales turnover of Rs. 9,59,400.34. Out of that turnover, sales of groundnut oil that has suffered tax under the Act come to Rs. 1,85,310. The petitioner claimed exemption in respect of that turnover under the provisions of the Central Sales Tax Act. Its claim was negatived by the Commercial Tax Officer and, on appeal, the Assistant Commissioner of Commercial Taxes, following the decision of the Supreme Court in State of Mysore v. Yaddalam Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C 231 S.C. allowed its claim and directed refund of a sum of Rs. 3,706.20 to the petitioner. After the above judgment of the Supreme Court, section 6(1A) was introduced by the Parliament in the Central Sales Tax Act with retrospective effect and that nullified the decision of the Supreme Court in State of Mysore v. Yaddalam Lakshminarasimhiah Setty and Sons. Under this amendment inter-State sale of any goods is exigible to tax under the Central Sales Tax Act irrespective of the fact whether it is liable to tax under the local Act at purchase point or at a particular single point or not. Pursuant to the new provision, the Deputy Commissioner of Commercial Taxes, Warangal, exercised his revisional jurisdiction under section 20 of the Act to revise the order of the Assistant Commissioner. The plea raised by the petitioner was that the Deputy Commissioner had no jurisdiction to exercise his revisional powers four years after the date of the assessment order. The assessment order was made on 7th December, 1966. The Deputy Commissioner revised the order of the Assistant Commissioner and restored that of the Commercial Tax Officer. This order of the Deputy Commissioner was served upon the petitioner on 18th April, 1972. The petitioner carried that order in appeal to the Sales Tax Appellate Tribunal contending that the order made by the Deputy Commissioner in exercise of his revisional jurisdiction was barred by limitation since it was served upon the petitioner on 18th April, 1972. In other words, the service of the order on the petitioner was beyond the peribd of four years fixed in section 20(3) of the Act for exercising the revisional jurisdiction. The Tribunal repelled that contention and dismissed the appeal. It is on the ground that the petitioner did not question the revisional jurisdiction of the Deputy Commissioner before the Tribunal that the writ petition has been filed questioning the power of the Deputy Commissioner to exercise revisional jurisdiction under section 20(3) of the Act.

3. It is not in dispute that section 6(1 A) of the Central Sales Tax Act, which has been inserted by the Amendment Act 28 of 1969, has retrospective application as if it was in the principal Act from the date of the commencement of the Act. The Supreme Court has ruled in State of Kerala v. Joseph & Co., that the effect of the Ordinance, which was replaced by the Amendment Act 28 of 1969, was to supersede the judgment of the Supreme Court in Yaddalam's case [1965] 16 S.T.C 231 S.C.. It, therefore, follows that even if no tax was leviable under the general sales tax law of the State in respect of intra-State transactions of sale, tax shall be levied under the Central Sales Tax Act on sale of goods effected by a dealer in the course of inter-State trade according to the sales tax law of the State. The assessment order in this case was made on 7th December, 1966, and in a case where the whole or any part of the turnover of business of a dealer has escaped assessment to tax, the revisional jurisdiction has to be exercised by the revisional authority within four years from the date of the expiry of the year to which the assessment relates. According to Mr. Dasaratharama Reddi, it is a case of escaped assessment but not a case of any wrongful assessment made under any mistaken impression of law and therefore the Deputy Commissioner should have made reassessment within four years as provided in section 14(4) of the Act. Mr. D.V Sastry, the learned Government Pleader contends that it is not a case of reassessment but is a case where the Deputy Commissioner exercised his revisional jurisdiction suo motu under section 20(2) of the Act. We have, therefore, to see whether section 20(2) applies or section 14(4) applies to this case.

4. Section 14(4) of the Act reads:

“In any of the following events, namely, where the whole or any part of the turnover of business of a dealer has escaped assessment to tax, or has been under-assessed or assessed at a rate lower than the correct rate, or where the licence fee or registration fee has escaped levy or has been levied at a rate lower than the correct rate, the assessing authority may, after issuing a notice to the dealer, and after making such enquiry as he may consider necessary, by order, setting out the grounds therefor:—

(a) determine to the best of his judgment the turnover that has escaped assessment and assess the turnover so determined.”

5. The limitation for reassessment is prescribed in section 14(4-A)(b), which says:

“An assessment or levy under sub-section (4) shall be made within a period of four years from the expiry of the year aforesaid, if such event has occurred due to any other causes.”

6. Section 14(4-C) empowers the Deputy Commissioner concerned to exercise the powers of the assessing authority under section 14(4) of the Act. We are unable to agree with Mr. Dasaratharama Reddi that it is a case of reassessment, for no part of the turnover of the business of the dealer had escaped assessment to tax. If, on the turnover of Rs. 1,85,310 exemption was granted by the Assistant Commissioner, it was in view of the judgment of the Supreme Court in Yaddalam's case interpreting section 6 of the Central Sales Tax Act, as it then stood prior to the Ordinance, which was replaced by Act 28 of 1969. What constitutes “escaped assessment” has been explained by the Supreme Court in Deputy Commissioner v. Dhanalakshmi Vilas Cashew Co. If the disputed; turnover is exempted from sales tax it was not for the reason that there was any inadvertence on the part of the officer who made the assessment but for the reason that the assessee was entitled to exemption under the law as it then stood and stated by the Supreme Court. With the insertion of section 6(1 A) the previous law was superseded and no exemption was to be allowed on the disputed sales. A Full Bench of the Madras High Court in State of Madras v. Louis Dreyfus and Company Ltd. [1955] 6 S.T.C 318. explained what constitutes “escaped turnover”. To quote the learned Judges:

“‘Turnover’ escapes when it is not noticed by the officer either because it is not before him by reason of an inadvertence, omission Or deliberate concealment on the part of the assessee, or because of want of care on the part of the officer the turnover though in the books has not been taken notice of This would be the natural and normal meaning of the expression ‘turnover which has escaped’.”

7. Therefore, it is not a case where it could be said that there has been any escapement of assessment on account of any inadvertence. On the part of the officer or omission or deliberate concealment on the part of the assessee. Section 20 of the Act empowers the Board of Revenue and other officers prescribed to exercise revisional jurisdiction. This provision, to the extent material, reads:

“20. (1) The Board of Revenue may suo motu call for and examine the record of any order passed or proceeding recorded by any authority, officer or person subordinate to it, under the provisions of this Act, including sub-section (2) of this section, for the purpose of satisfying itself as to the legality or propriety of such order or as to the regularity of such proceeding and may pass such order in reference thereto as it thinks fit.

(2) Powers of the nature referred to in sub-section (1) may also be exercised by the Deputy Commissioner and the Commercial Tax Officer, in the case of orders passed or proceedings recorded by authorities, officers or persons subordinate to them…………”

8. It is by virtue of the powers conferred upon the Deputy Commissioner under sub-section (2) that he issued a notice to the petitioner on 2nd November, 1971, to show cause why the order of the Assistant Commissioner granting exemption in respect of the turnover in question should not be set aside. By virtue of section 6(1A) of the Central Sales Tax Act, which has been made retrospectively applicable, the legality of the exemption granted had to be considered by the Deputy Commissioner. Therefore, it cannot be said that the Deputy Commissioner was not justified in exercising jurisdiction under section 20(2) of the Act.

9. The next question which relates only to W.P No. 4908 of 1972 is whether that power has been exercised within the period prescribed in subsection (3) of section 20. Sub-section (3) reads:

“In relation to an order of assessment passed under this Act, the powers conferred by sub-sections (1) and (2) shall be exercisable only within such period not exceeding four years from the date on which the order was served on the dealer, as may be prescribed.”

10. The period of four years prescribed should be reckoned for the purpose of limitation from the date on which the order in revision was served upon the dealer. That order was served upon the petitioner on 21st December, 1967. Admittedly, the Deputy Commissioner issued a show cause notice to the petitioner on 2nd November, 1971, and passed the order on 1st December, 1971. What Mr. Dasaratharama Reddi contends is that it is not enough if the Deputy Commissioner issues a notice within the period of four years or passes an order within four years but that order must also be served upon the assessee within four years from the date of the communication of the assessment order. We see no force in this contention. The language in sub-section (3) is quite clear and unambiguous. This provision speaks of the exercise of jurisdiction by the Deputy Commissioner. It does not speak of serving the order passed by him within four years from the date of the assessment order communicated to the dealer. That distinction is quite clear.

11. Mr. Dasaratharama Reddi, however, invited our attention to two decisions of the Supreme Court, viz., Bachhittar Singh v. State of Punjab and State of Punjab v. Amar Singh, to show that it is not enough if the Deputy Commissioner passes an order within a period of four years and that he must also communicate the same within the period of four years. We are afraid that these two decisions have absolutely no bearing upon the construction of sub-section (3) of section 20. The case of Bachhittar Singh v. State of Punjab relates to a departmental enquiry. The learned Judges were considering what amounts to communication of an order to a person concerned. It was, therefore, observed by the learned Judges:

“Before something amounts to an order of the State Government two things are necessary. The order has to be expressed in the name of the Governor as required by clause (1) of article 166 of the Constitution and then it has to be communicated. The Constitution requires that the action must be taken by the authority concerned in the name of the Governor. It is not till this formality is observed that the action can be regarded as that of the State.”

12. The learned Judges in that case were only concerned with the compliance of the requirements of clause (1) of article 166 of the Constitution, and they were not concerned with any period of limitation. The other decision, State of Punjab v. Amar Singh, was also a case where a suit was filed by an officer challenging the validity of an order of dismissal passed against him. There, the question was from which date the order of dismissal was effective, whether from the date mentioned in the order or from the date of service or communication of the order to the officer concerned. It was in that connection that the learned Judges held that the order of dismissal comes into effect only from the date it was communicated to, the officer. There is nothing in the language of sub-section (3) which is susceptible of an interpretation that communication of an order passed by the Deputy Commissioner should also be within the period of four years. It only contemplates exercise of revisional jurisdiction within a period not exceeding four years. Once that jurisdiction is exercised by passing an order, the fact that it was communicated to the petitioner after the expiry of the period of four years is not at all material.

13. For the reasons recorded we find no merit either in the writ appeal or in the writ petition and they are accordingly dismissed with costs.

14. Appeal and petition dismissed.