Citation Codes

Equivalent Citations

citation codes

Case Number

T.C No. 105 of 1962 (App. No. 7 of 1962).

Attorney(S)

Mr. M.S Ramaswami for Petr.
Mr. G. Ramanujam for The Govt., Pleader foe Respt.

Judges

Jagadisan
Venkatadri, JJ.

Acts

S. 34 of the Madras General Sales Tax Act, 1959.
Madras General Sales Tax Act, 1959,
Madras General Sales Tax Act, 1939,
Act of 1939. S. 11 of that Act

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Smart Summary

Judgment Summary (Delivered by Jagadisan, J.)

Factual and Procedural Background

The appellants are dealers in non-ferrous metals (mainly brass and copper) who purchased scrap, manufactured circles and sheets, and sold the manufactured products. For the assessment year 1955–1956 the Deputy Commercial Tax Officer (Park Town) assessed their net turnover at Rs. 24,35,134-3-3. The appellants appealed to the Special Commercial Tax Officer (Madras City) under the Madras General Sales Tax Act, 1939, and the appellate authority on 3rd March 1958 re-fixed the taxable turnover at Rs. 14,39,914-12-6. The Deputy Commercial Tax Officer gave effect to that appellate order by issuing a revised assessment dated 19th March 1958.

The Board of Revenue, exercising suo motu powers of revision, issued a notice on 22nd February 1962 asserting that a turnover of Rs. 9,22,166-2-0 (deleted by the appellate authority) should be included, relying on the decision in Ashok Leyland Ltd. v. State of Madras. The appellants objected by letter dated 6th March 1962, but the Board overruled their objection and on 10th March 1962 revised the Deputy Commercial Tax Officer's assessment, refixing taxable turnover at Rs. 16,96,189-10-0.

The appellants challenged the Board's order primarily on the ground that the Board lacked jurisdiction to pass that order on 10th March 1962 because more than four years had elapsed from the date of the order of the Commercial Tax Officer (3rd March 1958).

Legal Issues Presented

Whether the Board of Revenue could validly exercise its revisionary power on 10th March 1962 to interfere with the revised assessment dated 19th March 1958, when more than four years had elapsed from the date (3rd March 1958) of the Special Commercial Tax Officer's appellate order.
Whether the Board could, for limitation purposes, compute the four-year period from the date of the Deputy Commercial Tax Officer's revised assessment (19th March 1958) rather than from the date of the appellate order (3rd March 1958), thereby avoiding the bar of limitation.

Arguments of the Parties

Appellants' Arguments

The Board had no jurisdiction to pass the order of 10th March 1962 because four years had elapsed from the date of the Special Commercial Tax Officer's order (3rd March 1958), which, once final, could not be attacked by the Board under the relevant statutory limitation.
The Deputy Commercial Tax Officer's revised assessment of 19th March 1958 merely gave effect to the appellate order and had no independent existence that could be used to extend the period of limitation.

Board / Government Pleader's Arguments

The Board's case was that the order in question for purposes of limitation was the Deputy Commercial Tax Officer's revised assessment dated 19th March 1958, and therefore the revision on 10th March 1962 was within the four-year period.
The Board relied on the decision in Madura Mills (Madurai Mills Co. Ltd. v. State of Madras) to support the position that time should be computed from the date of the Deputy Commercial Tax Officer's order rather than from the appellate order.
The Board also relied on the Supreme Court decision in Ashok Leyland Ltd. v. State of Madras as justification for including the previously deleted turnover in the assessment.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Ashok Leyland Ltd. v. State of Madras	Invoked by the Board to justify inclusion of the turnover (Rs. 9,22,166-2-0) which the appellate authority had deleted.	The Court stated it was unnecessary to decide whether inclusion pursuant to Ashok Leyland was well founded because the appeal would succeed on the jurisdictional (limitation) ground regardless of the substantive correctness of applying Ashok Leyland.
Madurai Mills Co. Ltd. v. State of Madras (Madura Mills case)	Relied upon by the Board to show that time for revision should be computed from the Deputy Commercial Tax Officer's revised assessment.	The Court found the Madura Mills decision not relevant to the present facts, distinguished it on its facts, and held it did not support the Board's position. The Court explained that in Madura Mills the Deputy Commercial Tax Officer's order was not consequential upon an appellate order, unlike the present case.

Court's Reasoning and Analysis

The Court approached the question by examining the legal character of the Deputy Commercial Tax Officer's revised assessment dated 19th March 1958 and the statutory framework governing appeals and amended assessments.

The Court identified a fallacy in the Board's reasoning that treated the Deputy Commercial Tax Officer's order as having an independent existence for limitation purposes. It emphasized that the Deputy Commercial Tax Officer's order of 19th March 1958 merely gave effect to the Special Commercial Tax Officer's appellate order of 3rd March 1958 and did not involve the exercise of independent discretion by the Deputy Commercial Tax Officer.
The Court reviewed the statutory scheme under the repealed Act of 1939 (S.11) and the Rules (R.15), noting that appeals could alter the assessing authority's order and that rules required the assessing authority to give effect to appellate orders and to refund excess tax. The 1959 Act's S.31(4) expressly directs the assessing authority to amend orders to reflect changes made on appeal and to refund overpayments or collect further tax as required.
On that statutory basis the Court concluded that the Deputy Commercial Tax Officer's amended assessment "has its root" in the appellate order. Once four years elapsed from the date of the appellate order, that appellate order became final and the finality extended to consequential orders made by subordinate officers to give effect to it.
The Court held that permitting the Board to treat the deputy's consequential order as the operative starting point for limitation would allow the Board to circumvent the statutory bar of limitation and thereby "do indirectly what it cannot do directly." Such an approach would undermine the finality conferred by the statute.
The Court distinguished Madura Mills on its facts: in that case the deputy's order was not consequential upon an appellate order and therefore the reasoning of Madura Mills could not be applied to validate the Board's action in the present case.
On these grounds the Court concluded that the Board had acted in excess of its jurisdiction when it purported to revise the appellate order by targeting the consequential deputy's order after the four-year limitation period from the appellate order had expired.

Holding and Implications

APPEAL ALLOWED; ORDER OF THE BOARD OF REVENUE SET ASIDE

Holding: The Court held that the Board of Revenue acted in excess of its jurisdiction by purporting to revise the Deputy Commercial Tax Officer's consequential assessment on 10th March 1962 when four years had elapsed from the Special Commercial Tax Officer's appellate order of 3rd March 1958. The bar of limitation runs from the appellate order and extends to consequential orders made to give effect to it; the Board could not circumvent that bar by treating the consequential order as independently starting a fresh limitation period.

Direct consequences for the parties: The Board's order dated 10th March 1962 was set aside. The appellants were awarded their costs from the State: the State Counsel's fee of Rs. 150 was to be paid.

Broader legal implication stated by the Court (as articulated in the opinion): Once the four-year limitation period from the date of the appellate authority's order expires, that appellate order becomes final and such finality "extended and pervaded" to consequential orders passed by subordinate officers to give effect to the appellate order; thus revision cannot be effected indirectly by attacking consequential orders when the appellate order itself is beyond statutory attack.

V.C.S

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P.S.N.S Ambalavana Chettiar & Co. Pte., Ltd. v. Commissioner Of Commercial Taxes, Board Of Revenue, Madras.

JUDGMENT

(Delivered by Jagadisan, J.)

An interesting question of law is raised in this appeal from the order of the Board of Revenue, Madras, passed under the Madras General Sales Tax Act, 1959, and that relates to the power of the Board to interfere with the revised order of assessment of the Deputy Commercial Tax Officer, implementing the order of the Commercial Tax Officer after the expiry of four years from the date of the order of the Commercial Tax Officer. These two Officers functioned under the Old Act of 1939.

The sequence of events which had led to the filing of the present appeal are briefly as follows. The appellants are dealers in non-ferrous metals consisting mainly of brass and copper. Their business consists of purchase of scraps, conversion of the scraps into circles and sheets in their factory and selling the manufactured products. In respect of the assessment year 1955-1956 the Deputy Commercial Tax Officer, Park Town, determined their net turnover liable to tax as Rs. 24,35,134-3 3. They preferred an appeal to the Special Commercial Tax Officer, Madras City, the appellate authority which functioned under the Madras General Sales Tax Act, 1939, and were partially successful. The appellate authority re-fixed the taxable turnover at Rs. 14,39,914-12-6. This order was made on 3rd March, 1958. Giving effect to this appellate order the Deputy Commercial Tax Officer Issued a revised assessment dated 19th March 1958. The Board of Revenue in exercise of its suo motu powers of revision issued a notice to the appellants on 22nd February 1962 asking them to show cause why a turnover of Rs. 9,22,166-2-0 deleted by the appellate authority should not be included in their turnover in view of the decision of the Supreme Court in Ashok Ley-land Ltd. v. State of Madras(1). The appellants objected by their letter dated 6th March 1962 to the proposed action of the Board, but, eventually the Board overruled the objection and passed an order on 10th March 1962, revising the order of assessment passed by the Deputy Commercial Tax Officer, Park Town, dated 19th March 1958, and refixing the taxable turnover at Rs. 16,96,189-10-0, The appellants challenged the correctness of this decision of the Board mainly on the ground that the Board had no jurisdiction to pass the order on 10th March, 1962, when four years had elapsed from 3rd March, 1958, the date of the order of the appellate authority, the Special Commercial Tax Officer, Madras City.

It is not necessary to consider in this appeal whether the inclusion of the turnover of Rs. 9,22,166-2-0 by the Board purporting to follow the decision of the Supreme Court in Ashok Leyland Ltd. v. State of Madras, is well founded or not. If the appellants can succeed in convincing this Court that the Board had no power to pass the order of 10th March, 1962, the Board's order must be struck down on this ground alone. The Board's powers of revision are contained In S. 34 of the Madras General Sales Tax Act, 1959. We need not set down the provision as nothing turns upon its phraseology in this particular case. It is conceded by learned Counsel for the appellants that the Board could in a proper case of aside the order of the Commercial Tax Officer or that of the Deputy Commercial Tax Officer. It is also clear that the Board would not be entitled to pass any order under S. 34, Sub S. (1), if more than four years elapse after the passing of the order which is in fact set aside. In the instant case the Board purported to revise the order of the Deputy Commercial Tax Officer dated 19th March 1958 and the stand taken by the Board, and which is now sought to be supported by the learned Government Pleader, is that four years had not run out on 10th March, 1962, computed from 19th March 1958. In dealing with the question of jurisdiction raised, the Board observes as follows:

“They have contended that the proposed revision is barred by limitation as the order of the Commercial Tax Officer on appeal was passed on 3rd March 1958. This is not correct. The order that is called in question is the order of the revised assessment passed by the Deputy Commercial Tax Officer, Park Town, in his A. 3/518/55-56, dated 19th March 1958. There fore, the rivision is well within time as per the decision of the Madras High Court in the case of Madurai Mills Ltd. v. State of Madras(2).

We must point out that there is an obvious fallacy in this reasoning of the Board. We must also point out that the decision in the Madura Mills case, which is cited as authority in support of the conclusion reached by the Board, is hardly relevant to the question now in issue.

The order of the Deputy Commercial Tax Officer dated 19th March 1958 has no independent existence apart from the order of the Commercial Tax Officer, dated 3rd March, 1956 The former was only giving effect to the order of the latter as he was in law bound to do. He did not, and indeed he could not, exercise any discretion of his in the matter; and it can well be said that there was no decision or determination by him in regard to the quantum of assessment of the assessee. In the year 1959, when both the Commercial Tax Officer and the Deputy Commercial Tax Officer passed their respective orders dated 3rd March 1958 and 19th March 1958, the Act that was in force was the repealed Act of 1939. S. 11 of that Act prescribed the appellate power of the Commercial Tax Officer. That states that the appellate authority may, after giving the appellant an opportunity of being heard, pass such orders on the appeal as such authority may think fit and every order passed in appeal shall, subject to the provisions of Ss. 12 to 12-C, be final. There was no provision in that Act to compel the assessing authority which passed the assessment to give effect to the appellate order. But R. 15 of the Rules framed under the Act provided that every order of the appellate authority should be communicated to the appellant and that the order passed in appeal should be given effect to by the assessing authority. The assessing authority was directed under R. 15(2) to refund within two months from the date of the communication of the order any excess tax found to have been collected. Even without a rule like R. 15 the assessing authority would have been bound to carry out the orders of a higher authority which in law was clothed with powers to modify, cancel or annul the order of the assessing authority. If that were not the true position appeals would be purposeless and empty of results. The 1959 Act contains, significantly, a specific provision, S. 31(4), which directs the assessing authority to pass amended assessment orders reflecting the changes caused by the order of the appellate authority. That section reads—

“Where as a result of the appeal any change becomes necessary in the order appealed against, the Appellate Assistant Commissioner may authorise the assessing authority to amend such order accordingly and on such amendment being made, any amount over paid by the appellant shall be refunded to him without interest or the further amount of tax, if any due from him shall be collected in accordance with the provisions of this Act, as the case may be.”

It is plain, therefore, that the order of the Deputy commercial Tax Officer does not rest on any foundation apart from that afforded by the order of the Special Commercial Tax Officer dated 3rd March 1958. In other words, the order of 19th March 1958 has its root in the order of the Commercial Tax Officer made on 3rd March 1958. If the order of 3rd March 1958 had become final under the Act, the limitation period of four years from that date having run out, the Board of Revenue would not be competent to interfere with it under the guise of revising the Deputy Commercial Tax Officer's amended assessment in respect of which the bar of limitation may not literally or technically apply. We have grave doubts whether the Board would not be circumventing the provisions of the Act by purporting to quash a consequential order of the Deputy Commercial Tax Officer based upon an order of the Special Commercial Tax Officer after it acquires immunity from any statutory attack at the instance of either the assessee or the State. In our opinion the moment four years expired from the date of the Commercial Tax Officer's order that order become steadfastly final and the finality extended and pervaded also to such consequential orders as the Deputy Commercial Tax Officer might pass as a result of the appellate order.

The Board has failed to comprehend the true scope of the Madura Mills case. That does not lend any support for the view taken by the Board on the question of limitation. In that case [Madura Mills Co. Ltd. v. State of Madras], the assessees were assessed to sales-tax on a certain turnover. They appealed to the Commercial Tax Officer for excluding certain items from the turnover. The Commercial Tax Officer partially allowed the claim, and, in pursuance of this order the Deputy Commercial Tax Officer made a revised assessment on 29th November, 1952. Thereafter the assessees preferred a revision to the Deputy Commissioner of Commercial faxes and for the first time objected to the Inclusion of a certain item in the turnover. This, however, was not the subject matter of their previous appeal before the Commercial Tax Officer. The Deputy Commissioner dismissed their objection by his order dated 21st August, 1954. The Board issued a notice to the asses-sees on 4th August, 1958, stating that is proposed to revise the assessment of the Deputy Commercial Tax Officer by including in the net turnover a sum which was wrongly excluded by that Officer. The assessces pleaded the bar of limitation urging that four years bad elapsed from the date of the order of the Deputy Commercial Tax Officer dated 28th November, 1952, and that the Board had become functus officio. This was rejected by the Board on the ground that time should be computed not from 28th November, 1952, but from 21st August, 1954. A Division Bench of this Court, to which one of us was a party, held that the subject matter of revision proceedings before the Board was only the revised assessment of the Deputy Commercial Tax Officer dated 28th November, 1952, and therefore the Board exercised its powers of revision beyond the period of limitation prescribed under the Act.

We do not see the relevancy of that citation in the present context. Here the question is whether the Board could exercise jurisdiction beyond four years from the date of the order of the appellate authority taking advantage of the fact that the order of said appellate authority was given effect to by the Subordinate Officer within the four year period. In the Madurai Mills case (1) the order of the Deputy Commercial Tax Officer dated 28th November, 1952, was not an order consequential upon the order of the Deputy Commissioner of Commercial Taxes dated 21st August, 1954. It Is unnecessary to deal further with the Madurai Mill's case, as, it seems to us, that even a Cursory examination of that case would be sufficient to show that the Board cannot invoke its aid to sustain its conclusion.

In our judgment, though, in form the Board purported to revise the order of the Deputy Commercial Tax Officer dated 19th March, 1958, in substance and in essence the Board was only concerned to say that the order of the Special Commercial Tax Officer dated 3rd March, 1958, was erroneous and unsustainable in law. The Board was not competent on 10th March, 1962, to revise the order of the Commercial Tax Officer as four years had elapsed by that time. This bar of limitation cannot be got over under the present pretext of revising the order of the Deputy Commercial Tax Officer which has no existence independently of the appellate order and which cannot operate proprio vigore. The Board cannot do indirectly what it cannot do directly. It is plainly impossible for the Board to rely upon the later consequential order of the Deputy Commercial Tax Officer for purposes of saving limitation. The Board, therefore, acted in excess of its jurisdiction.

In the result, the appeal is allowed and the order of the Revenue Board is set aside. The appellants will have their costs from the State Counsel's fee, Rs. 150.