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M/S. A. Thippanna Rayappa v. The Government Of Andhra (By The Commercial Tax Officer, Anantapur) .

Andhra Pradesh High Court

Feb 20, 1957

Judgment

Subsequent
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Factual and Procedural Background

The revision petition challenges an order of the Sales Tax Appellate Tribunal dismissing three miscellaneous petitions (Nos. 195, 225 and 269 of 1955) connected to Tribunal Appeal No. 412 of 1954. The Tribunal held that the subject-matter of the appeal was confined to the disputed amount of turnover shown in the appeal memorandum.

On the facts stated in the opinion, the assessee had originally disputed before the Commercial Tax Officer (CTO) liability to pay Sales Tax only on two sums: Rs. 20,558-4-9 and Rs. 47,240-1-6. Before the Appellate Tribunal the disputed sum in the turnover was further limited to Rs. 47,240-1-6. The three miscellaneous petitions were filed to enable the assessee to raise objections against liability on a larger turnover (Rs. 2,77,099-1-7). Petition No. 225/55 alleged that the assessee had instructed his representative to object to the entire turnover being liable but that the representative was prevented by the CTO from pleading that objection. The CTO denied that allegation in his report, which the Tribunal accepted. Consequently, the Tribunal rejected the petitions and held that it lacked jurisdiction to entertain objections to turnover amounts not originally disputed before the CTO.

Legal Issues Presented

Whether an assessee, in an appeal to the Appellate Tribunal against an order of the Commercial Tax Officer, may be permitted to object to liability in respect of an amount of turnover that was not disputed before the Commercial Tax Officer.
Whether Section 12-A(4) of the Madras General Sales Tax Act confers on the Appellate Tribunal powers of rehearing comparable to those under Section 107, C.P.C., or Section 33(4) of the Income-tax Act — i.e., powers to rehear the whole case and make such orders as it thinks fit.
Whether the principle in Kalam Somasundaram Chettiar & Sons v. The State of Madras (that an Appellate Tribunal has no authority to add a new item to turnover that was not before the assessing authority) justifies refusal of jurisdiction where the assessee seeks to raise objections at the appellate stage to turnover elements not previously disputed.

Arguments of the Parties

Appellant's Arguments

The assessee sought to raise objections at the appellate stage in respect of a larger turnover (Rs. 2,77,099-1-7) than had been disputed before the CTO and/or in the appeal memo.
In petition No. 225/55 the assessee alleged that his representative had been instructed to object to the entire turnover being made liable, but was prevented by the CTO from pleading that objection (i.e., the assessee sought to explain why the entire turnover had not earlier been before the authority).
The assessee invoked authorities (including Bengal Immunity Co., Ltd. v. The State of Bihar) to support the contention that constitutional or legal questions affecting the whole assessment could be raised and that appellate power to grant just orders should enable effect to be given to such objections.

Respondent's / Tribunal's Position

The CTO in his report denied the allegation that he prevented the assessee's representative from raising objections to the entire turnover; the Tribunal accepted that report and found the record did not corroborate the assessee's allegation, thereby rejecting petition No. 225/55.
The Tribunal held that the assessee could not enlarge the pecuniary limits of his dispute beyond what had been questioned in the first appeal, and relied on Kalam Somasundaram Chettiar & Sons v. The State of Madras to support the position that an Appellate Tribunal has no authority to add a new item to turnover that was not before the assessing authority.
On that basis the Tribunal dismissed the petitions for want of jurisdiction to entertain disputes relating to turnover elements not raised before the CTO.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Kalam Somasundaram Chettiar & Sons v. The State of Madras, 6 S.T.C. 304	Proposition that Appellate Tribunals have no authority to add a new item to the turnover and include what was not before the assessing authority (i.e., cannot assess matters omitted from assessment).	The Tribunal relied on the first proposition of this case to deny jurisdiction. The Court accepted that this proposition is correct as far as it goes, but held it does not justify the Tribunal's broader conclusion that it cannot entertain objections to omitted items when those objections affect parts of the turnover that are before the Tribunal or when the objection goes to the root of the assessment (e.g., constitutionality of the tax).
Attorney General v. Birmingham Tame and Rea District Drainage Board, 1912 A.C. 788	Under the Judicature Acts, an appeal is by way of rehearing and the appellate court has power to give any judgment and make any order which ought to have been made; it may rehear the case.	The Court cited this authority to support the proposition that appellate powers may be wide (rehearing), and thus helpful in construing Section 12-A(4) as enabling a rehearing in the sales tax context.
Quitter v. Mapleson, (1882) 9 Q.B.D. 672	Supports the proposition that an appeal may be a rehearing and that the appellate court is entitled to rehear the case.	Used to reinforce the English-law foundation for the view that appellate jurisdiction can be exercised as a rehearing, relevant by analogy to the powers of the Appellate Tribunal under the taxing statute.
Lachmeshwar Prasad Shukul v. Keshwar Lal	Held that under Indian procedural law the hearing of an appeal is in the nature of a rehearing, permitting consideration of facts and events arising after the decree appealed against.	Cited to show that Indian appellate practice permits consideration of later events and legislative changes, supporting a wide view of appellate powers in this context.
Kamakshya Narain v. I.T. Commr., B. & C.	Held that powers conferred on the Tribunal under Section 33(4) of the Income-tax Act are of an extensive character and are more extensive than powers of an Appellate Court under Section 107, C.P.C.; the Tribunal could take into account legislative changes since the decision in appeal.	Relied on as an example of a taxing tribunal being vested with extensive rehearing powers; used to argue that Section 12-A(4) could be similarly wide in scope.
Bengal Immunity Co., Ltd. v. The State of Bihar	Mentioned as a case relied on by the appellant that interpreted Art. 286 differently (constitutional interpretation affecting tax liability).	The Court noted the appellant relied on this authority to show that a different legal interpretation could have consequences for the entire assessment and thus might justify appellate intervention affecting parts of the turnover not specifically in the appeal memo.

Court's Reasoning and Analysis

The Court proceeded in a stepwise fashion:

Factual determination: The Court accepted the Tribunal's acceptance of the CTO's report regarding petition No. 225/55 — i.e., the record before the CTO did not corroborate the assessee's allegation that his representative had been prevented from raising objections to the entire turnover. Accordingly, the Tribunal's factual finding on that petition was sustained.
Clarifying the legal question: The principal legal question was framed as whether an assessee can in an appeal to the Appellate Tribunal raise objections to turnover amounts not disputed before the CTO.
Examination of appellate powers: The Court reviewed authorities to distinguish two types of appellate power — a limited corrective jurisdiction and a rehearing jurisdiction. It cited English authorities (Attorney General v. Birmingham Tame and Rea District Drainage Board and Quitter v. Mapleson) and Indian decisions (Lachmeshwar Prasad Shukul and Kamakshya Narain) to demonstrate that an appellate body under some statutes has broad rehearing powers, including consideration of facts or legislative developments arising after the original decision.
Statutory text analysis: The Court closely examined Section 12-A(4) of the Madras General Sales Tax Act, which provides that "The Appellate Tribunal shall, after giving both parties to the appeal a reasonable opportunity of being heard, pass such order thereon as it thinks fit." The Court observed that Form XIII (and related procedural rules) require certain particulars in the appeal but concluded these procedural requirements should not be read as limiting the wide remedial words of Section 12-A(4).
Reconciling precedent: The Court considered the Kalam Somasundaram proposition (that an Appellate Tribunal cannot add a new item to turnover not before the assessing authority). The Court accepted that proposition but held it does not conflict with construing Section 12-A(4) as enabling rehearing. The crucial distinction drawn was between adding a wholly new item to turnover (which the appellate authority cannot do) and deciding questions that affect both the portion of the turnover before the Tribunal and omitted parts — particularly where the objection goes to the root of the assessment (for example, a constitutional challenge to the tax), or where relief can be given by amendment of pleadings.
Discretion and procedure: The Court emphasized that while the Tribunal has discretion to disallow amendments and refuse to exercise its wide powers, dismissing the petitions on the ground of absence of jurisdiction was erroneous. The Court explained that Section 12-A(4) deliberately uses wide language enabling the Tribunal to consider law and facts as at the time of hearing and to direct amendments to pleadings where technical difficulties arise.
Conclusion from analysis: On this basis the Court found that the Tribunal erred in rejecting the petitions for want of jurisdiction and that the right course was to permit the Tribunal to consider the merits of the remaining petitions (with the Tribunal retaining discretion to refuse relief on merits or to disallow amendments).

Holding and Implications

Holding:

Revision allowed. The Court answered the formulated question in the affirmative and held that the Appellate Tribunal, under Section 12-A(4) of the Madras General Sales Tax Act, has the power to rehear and pass such orders as it thinks fit; consequently the Tribunal erred in dismissing the petitions for want of jurisdiction and must decide the merits of the remaining two petitions.

Implications:

The direct effect is that the Sales Tax Appellate Tribunal must reconsider the remaining petitions on their merits rather than dismissing them for lack of jurisdiction.
The Court clarified that while the precedent in Kalam Somasundaram Chettiar & Sons remains correct insofar as an appellate authority cannot add a wholly new item to turnover that was not part of the assessment, that proposition does not preclude the Tribunal from exercising broad rehearing powers where objections affect parts of the turnover before the Tribunal or go to the root of the assessment (for example, constitutional challenges), and where pleadings can be amended.
The decision interprets Section 12-A(4) as conferring wide rehearing powers on the Appellate Tribunal (permitting consideration of law and facts at the time of hearing, and allowing amendments where appropriate), but it also recognizes the Tribunal's residual discretion to refuse amendments or relief on the merits.
No order as to costs was made by the Court.

T.A.B

End of summary — Revision allowed (paragraph 11: "Revision allowed.")

Show all summary ...

Mohammed Ahmed Ansari, J.:— The revision petition is against an order by the Sales Tax Appellate Tribunal, wherein three miscellaneous petitions, Nos. 195, 225 and 269 of 1955-in Tribunal Appeal No. 412 of 1954 have been dismissed, and the subject matter of the aforesaid appeal has been held to be confined to the disputed amount of turnover in the appeal memo.

2. The correctness of the legal view, on which the order has been passed can hardly be determined without stating some facts of the case. It appears that the assessee had disputed before the Commercial Tax Officer the liability to pay Sales Tax only on two sums of Rs. 20,558-4-9 and Rs. 47,240-1-6, and before the Appellate Tribunal the disputed sum in the turnover was further limited to Rs. 47,240-1-6. The petitions were filed to enable raising objections against the liability to Sales Tax on a higher turnover of Rs. 2,77,0099-1-7. It was stated in petition No. 225/55 that the assessee had instructed his representative before the Commercial Tax Officer to object to the entire turnover being made liable to pay the tax; but that his representative was prevented by the Officer from pleading the objection. In the report of the Officer the allegation of the petitioner has been denied and the Tribunal has rightly accepted the report; for the appeal memo before the Officer does not show raising the plea of the entire turnover being free from liability. In these circumstances, the finding of the Tribunal that the records do not corroborate the allegations of the petitioner should stand, and also the rejection of this petition.

3. The Appellate Tribunal has further held that the assessee cannot be permitted to enlarge the pecuniary limits of his dispute beyond what had been questioned in the first appeal, and has relied on the case of Kalam Somasundaram Chettiar & Sons v. The State of Madras . 6 S.T.C 304. in support of this view. The case among other things, decideds that the Sales Tax Appellate Authority has no power to add a new item to the turnover and include therein what was not before the assessing authority. But the Tribunal in the particular case has held that as a corollary, the reverse position also must be accepted, namely that the Appellate Tribunal cannot entertain disputes about the new item in the turnover which was not before the first Appellate Authority. There could have been no objection to the rejections having been made in exercise of discretionary powers vested in the Appellate Authority. The Tribunal, however has dismissed the petitions on the ground of absence of jurisdiction and consequently the following question of law has been raised in this revision against the order;

“Can an assessee in his appeal to the Appellate Tribunal against the order by the Commercial Tax Officer be permitted to object to his liability in respect of an amount of turnover that was not disputed before the Commercial Tax Officer?”

4. It is well to remember that the powers of appellate authority may be of two kinds: it may be given jurisdiction of merely correcting errors in the decisions of the subordinate courts, or it may enjoy the powers by way of rehearing the entire case. In the latter case, the appellate court can make such order as the Judge of first instance could have made. In this connection, the following observation of Lord Gorrel in Attorney General v. Birmingham Tame and Rea District Drainage Boare . 1912 A.C 788., at page 801 may be referred to.

“Under the Judicature Acts and Rules the hearing of an appeal from the judgment of a judge is by way of rehearing, and the court has power to give any judgment and to make any order which ought to have been made, and to make such further or other order as the Court may think fit.

It seems clear, therefore, that the court of Appeal is entitled and ought to rehear the case as at the time of rehearing, and if any authority were required for this proposition it is to be found in the case of Quitter v. Mapleson3. [6 (1882) 9 Q.B.D 672].”

5. Also Varadachariar, J. in Lachmeshwar Prasad Shukul v. Keshwar Lal, has examined the power of an appellate court in this country and has held that under the procedural law of India the hearing of an, appeal is in the nature of rehearing, and, therefore, in moulding the relief to be granted on appeal, the appellate court is entitled to take into account facts and events which have come into existence after the decree appealed against. The learned Judge further held in the case that the appellate court was competent to take, into account legislative changes since the decision in appeal was given and its powers were not confined only to see whether the lower court's decision was correct according to the law as it stood at the time when its decision was given. It cannot be said that what has been said is true only of the civil courts for there is authority that the power of an Appellate Tribunal in a taxing statute may be also of an extensive character so as to constitute the authority a Court with power to rehear the case. In Kamakshya Narain v. I.T Commr. B. & C. it was held that the powers conferred on the Tribunal under Section 33(4) of the Income-tax Act are of an extensive character, that authority was competent to take into account legislative changes since the decision in appeal was given, and these powers were not confined only to see whether the lower court's decision was correct according to the law as it stood. The learned Judges observe at page 181:

“It is clear that the powers conferred on the Tribunal under Sec. 33(4) are of an extensive character. These powers are more extensive than the powers of an Appellate Court conferred by Sec. 107, Civil Procedure Code.”

6. It follows from the aforesaid authorities that the power of rehearing means that the whole case is litigated again in the Court of Appeal and the appellate authority has wide powers of granting reliefs. A particular instance of the wide power is to be found in Order 41 Rule 33 of the Civil Procedure Code, wherein it has been provided that the power of passing any decree under the rule may be exercised notwithsanding that the appeal is as to a part only of the decree. It further follows from the aforesaid authorities that where there be legislative changes affecting the subject-matter of litigations consideration of a party having partly appealed would not be of material importance. The position should not be different where a recent pronouncement has interpreted a constitution provision contrary to the prevailing view. It appears from the Tribunal's order that the assessee had filed the petition, relying among others on the case of the Bengal Immunity Co., Ltd. v. The State of Bihar, and the aforesaid authority has interpreted Art. 286 differently. Therefore, the crucial point in the case is whether the provisions of Section 12-A of the Madras General Sales Tax Act, confer on the Tribunal, powers as wide as those of Sec. 107 C.P.C, or Sec. 33(4) of the Income-tax Act.

7. The relevant part of the Section juntas follows:

“12-A.(1) Appeal to the Appellate Tribbnal. Any assessee objecting to an order relating to assessment passed—

(i) by the Commercial Tax Officer whether on appeal under Section 11 or suo moto under Section 12, sub-section (i), or (ii) by the Deputy Commissioner suo moto under Section 12, sub-section (2),

may, if the assesee has not preferred an application for revision of the order under Section 12, sub-section (2), or under sub-section (3) of that section, as the case may be appeal to the Appellate Tribunal within sixty days from the date on which the order was communicated to the assessee.

(2) ****

(3) The appeal shall be in the prescribed form, shall be verified in the prescribed manner, and shall be accompanied by such fee not exceeding one hundred rupees as may be prescribed.

(4) The Appellate Tribunal shall, after giving both parties to the appeal a reasonable opportunity of being heard, pass such order thereon as it thinks fit.

(5) Notwithstanding that an appeal has been preferred under sub-section (1) tax shall be paid in accordance with the assessment made in the case:

Provided that the Appellate Tribunal may, in its discretion, permit the appellant to pay the tax in such number of instalments, or give such other direction in regard to the payment of the tax, as it thinks fit.

Provided further that if as a result of the appeal any change becomes necessary in such assessment, the Appellate Tribunal may authorise the assessing authority to amend the assessment, and on such amendment being made, the amount overpaid by the assessee shall be refunded to him without interest, or the further amount of tax due from him shall be collected in accordance with the provisions of this Act, as the case may be.”

8. It may be mentioned that both Section 12-A(3) of the Act and Rule 13-B(a) of the General Sales Tax Rules require the appeal before the Tribunal to be in a particular form. Form XIII of the aforesaid Rules prescribes an entry for “Disputed turnover” if turnover is disputed, and for “Turnover involved” if rate of tax is disputed. These provisions, however, should not, be treated as circumscribing the wide powers conferred, by Section 12-A(4); for, once the sub-section is construed as enabling the Tribunal to rehear the case, the power to direct amendment of pleading follows, and relief could be given after the memorandum has been appropriately amended. The other objection to construing Section 12-A(4) as conferring wide powers on the appellate authority is the decision in the case of Kalam Somasundaram Chettiar and Sons v. The State of Madras (supra). Therein, the learned Judges have laid down three propositions and the first of them has been made the basis of the Tribunal's order under this revision. That proposition reads as follows:

“(1) The Appellate Tribunals have no authority to add a new item to the turnover and include therein what was not before the assessing authority for that would be a matter not assessed but omitted from the assessment”

9. We think the proposition in no way conflicts with the view of the power of the appellate authority under Section 12-A(4) of the Act being one of rehearing. For in accepting the appeals under the Act to be continuation of assessing turnover to Sales Tax, it does not follow that the appellate authority, can deal with what does not form part of the turnover. The position is different when something is part of the turnover and has been made liable, but is not included in the appeal memo. Here the appellate authority may be called upon to decide questions which may be common to the parts of the turnover before the authority and what has been omitted. An example of the objection going to the very root of assessment is the challenge to the constitutionality of the tax and when the Tribunal upholds the objection its judgment is bound to affect the entire liability, because the assessment thereby becomes vitiated. There is also no statutory bar against such results, because Section 12-A(4) of the Act expressly provides for such orders as the Tribunal thinks fit. The exercise of the powers should not be circumscribed by consideration of whether the entire turnover has at all stages been disputed. The aforesaid sub-section deliberately uses wide words to enable the appellate authority to take into consideration the law and facts as at the time of hearing the appeal, and should technical difficulties arise, they can be adjusted by directing necessary amendments. The jurisdiction to make just orders, being there, whether it should be exercised in the particular circumstances is a matter of discretion. Therefore, the proposition relied on by the Tribunal is no authority for the view that it has taken.

10. Evidently, the appellant in the case before the Tribunal was invoking the power of passing just orders and the Tribunal has erred in rejecting the petitions on the ground of absence of jurisdiction. Of course, the Appellate Tribunal has the discretion to disallow the amendments, but the merits of the two petitions have not yet been gone into. We therefore, answer the question formulated earlier in this judgment in the affirmative, allow the revision and the appellate Tribunal should decide the merits of the remaining two petitions. In the circumstances of the case, we make no order as to costs.