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Union Of India And Others v. S.B Gurbaksh Singh

Delhi High Court

May 10, 1973

Judgment

Subsequent
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Case Summary — Opinion of D.K. Kapur, J.

Factual and Procedural Background

The respondent, M/s. S.B. Gurbaksh Singh, a building contractor and registered dealer under the Bengal Finance (Sales Tax) Act, 1941 as extended to Delhi, was assessed for the assessment year 1955–56 by an assessment order dated 23 November 1959 passed by the Sales Tax Officer. The respondent appealed in part, contending that the assessment was time-barred for the first two quarters of the year. The Assistant Commissioner accepted that contention and remanded the matter to the Sales Tax Officer for a fresh assessment only in respect of the third and fourth quarters.

The Commissioner of Sales Tax, exercising revisional powers suo motu and after notice to the respondent, set aside the Assistant Commissioner’s order on 29 July 1960. Acting on that revisional order, the Sales Tax Officer framed a fresh assessment on 24 September 1960 and created a demand of Rs. 3,202.47. The respondent challenged the revisional order and the consequential assessment by two writ petitions in the Circuit Bench of the Punjab High Court at Delhi (Civil Writ Petition No. 388‑D of 1960 and Civil Writ Petition No. 460‑D of 1960).

A learned single Judge (Hardy, J.) allowed both writ petitions on 2 April 1969, quashing the revisional order on the ground that the Commissioner could not exercise revisional powers beyond four years from the end of the assessment year (i.e., after 31 March 1960), and quashing the consequential assessment. The Union of India appealed under clause 10 of the Letters Patent read with section 10 of the Delhi High Court Act, 1966.

Legal Issues Presented

Whether there is a time‑limit for passing a revisional order under section 20(3) of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi.
Whether the time‑limit for assessments contained in section 11(2a) of the Act (as amended in 1959) applies to appellate and revisional authorities (so as to bar revisional orders made after four years from the end of the assessment year), or whether that time‑limit applies only to the original assessing authority.

Arguments of the Parties

Appellant's Arguments (Union of India / State counsel)

Mr. Lal Narain Sinha, Solicitor‑General, submitted that the Supreme Court’s decision in State of Orissa v. Debaki Debi should be read restrictively — limited to the special circumstances and statutory language of the Orissa Sales Tax Act (1947).
It was urged that the language of section 11(2a) of the Bengal Finance (Sales Tax) Act is materially different from the provision in the Orissa Act relied on in Debaki Debi, and that a specific limitation in section 11(2a) prescribed for assessments cannot automatically be transferred to dispositional powers under a separate provision such as section 20 (which deals with appellate and revisional powers).

Respondent's Arguments

The respondent's counsel contended that appellate and revisional authorities exercise the power to assess under section 11(1), and thus the time‑limit in section 11(2a) should govern appellate and revisional orders as well — relying on the decision in Debaki Debi to that effect.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Sir Sobha Singh & Company v. Commissioner of Sales Tax, Delhi [1966] 18 S.T.C. 416 (S.K. Kapur, J.)	Held that the time‑limit prescribed by section 11(2a) governed even orders passed in revision under section 20(3) of the Act (the judgment read section 11(2a) without the later proviso).	The opinion notes this decision was relied upon by the learned single Judge below; the present court explains Sir Sobha Singh's reasoning arose where the revisional power had been exercised before the proviso to s.11(2a) was introduced, and treats that decision as one reading the provision without the proviso.
State of Orissa v. Debaki Debi [1964] 15 S.T.C. 153 S.C.	Interpreted a proviso in the Orissa Sales Tax Act as laying down a general time‑limit (36 months) for assessments which applied to assessing, appellate and revisional authorities alike; held revisional authority bound to pass order within that period.	The court constrained the reach of Debaki Debi to the specific statutory language of the Orissa Act, holding that its rule applies where the statute contains a general time‑limit of the type found in the Orissa provision; it declined to apply Debaki Debi as a universal rule to the Bengal Finance (Sales Tax) Act.
Swastik Oil Mills Ltd. v. H.B. Munshi, Deputy Commissioner of Sales Tax, Bombay (Supreme Court)	Concluded that under the Bombay Sales Tax Act there was no provision limiting the period in which revisional powers had to be exercised; distinguished Debaki Debi on statutory grounds.	The court regarded this decision as support for distinguishing Debaki Debi where the particular sales tax statute lacks a general time‑limit applicable to revision; used to show that the presence or absence of a general time‑limit in the statute is decisive.
State of Kerala v. K.M. Cheria Abdulla and Company [1965] 16 S.T.C. 875 S.C.	Held revisional powers must be exercised consistently with the powers granted to other authorities and that a revisional authority could not encroach upon the authority granted to others under the Act.	The court cited this decision for the proposition that revisional powers are to be read in the context of the Act's distribution of powers and limitations; it supported the view that rules depend on the specific statutory scheme rather than a single general principle.

Court's Reasoning and Analysis

The court concentrated on the statutory text and comparative statutory schemes rather than applying a single blanket rule from prior cases. The central statutory provision under consideration was section 11(2a) of the Bengal Finance (Sales Tax) Act as amended in 1959, which prescribes:

“No assessment under sub‑section (1) shall be made after the expiry of four years and no assessment under sub‑section (2) shall be made after the expiry of six years from the end of the year in respect of which or part of which the assessment is made: Provided that where such assessment is made in consequence of or to give effect to any order of an appellate or revisional authority or of a court, the period of four years or six years, as the case may be, shall be reckoned from the date of such order.”

The court observed that the proviso did not exist in 1959 (i.e., at the time of the events relevant to some earlier decisions) and that earlier authorities (including Sir Sobha Singh and Debaki Debi) had been decided in contexts where the statutory language differed. The court reasoned as follows:

The Supreme Court decisions cited (especially Debaki Debi) were products of the express language of the particular sales tax Acts before them; in the Orissa Act the statute explicitly contained a general time‑limit which the Supreme Court read as applying to assessing, appellate and revisional authorities.
By contrast, the Bengal Finance (Sales Tax) Act lacked a comparable general provision; instead, the proviso to section 11(2a) expressly provides that where an assessment is made to give effect to an appellate or revisional order, the limitation period is reckoned from the date of that order — thereby creating a fresh period after remand.
If the four‑year limit in section 11(2a) were to be read as applying to appellate and revisional authorities, appeals and revisions would be rendered ineffective in practice. The court illustrated this consequence: a Sales Tax Officer could delay the original assessment until the end of the four‑year period and thereby nullify the right of appeal because no effective modifying order could be made after that time — an outcome to be avoided if possible and inconsistent with legislative design.
Section 20(2) of the Act grants the appellate authority power to confirm, reduce, enhance, annul the assessment, or set it aside and direct a fresh assessment — a set of powers that necessarily contemplates a consequential fresh assessment. The proviso to section 11(2a) contemplates and accommodates this by starting a fresh limitation period from the date of the appellate/revisional order.
The court therefore restricted the rule of Debaki Debi to statutes containing a general time‑limit of the Orissa type and held that the Bengal Finance (Sales Tax) Act’s scheme shows a clear legislative intention that the time‑limit in s.11(2a) operates primarily as a limit on the assessing authority and that remands or orders of appellate/revisional authorities trigger a fresh period for assessment under the proviso.
Applying that reasoning to the facts, the court found that the Commissioner’s revisional action merely directed a fresh assessment (i.e., it was a remand), and section 11(2a) does not prohibit the passing of an order of remand after four years; the proviso creates a fresh four‑year (or six‑year) period reckoned from the date of the remand order. The fresh assessment by the Sales Tax Officer was made within that newly‑reckoned period.

On that basis the court concluded both the revisional order (treated as a remand) and the consequential fresh assessment were within the time allowed by law.

Holding and Implications

Holding:

Appeal allowed; the judgment of the learned single Judge is reversed; the two writ petitions are dismissed; parties to bear their own costs.

Immediate consequences for the parties:

The revisional order of the Commissioner of Sales Tax and the consequential assessment and demand challenged in Civil Writ Petition Nos. 388‑D and 460‑D of 1960 were held to have been passed within the time allowed by law and thus were sustained.
The writ petitions that had been allowed by the single Judge were set aside and dismissed; the Union of India’s appeal succeeded.

Broader legal implications (as stated by the court):

The decision emphasises that whether a time‑limit for revisional or appellate orders exists depends on the specific statutory wording of the sales tax statute in question. The court limited the reach of State of Orissa v. Debaki Debi to cases where the statute contains a general time‑limit applicable to all authorities.
Under the Bengal Finance (Sales Tax) Act, 1941 (as extended to Delhi), section 11(2a) operates primarily as a limitation on the original assessing authority, and its proviso supplies a fresh limitation period for assessments made "in consequence of or to give effect to any order of an appellate or revisional authority or of a court" — thereby preserving the effectiveness of appeals and revisions and avoiding the anomalous result that appeals would be frustrated by tactical delay in original assessments.
The court’s reasoning preserves the statutory scheme that contemplates appeals, revision, further references and consequential fresh assessments, some of which by necessity may fall outside the original four‑year window unless a fresh period is prescribed by the statute (as the proviso to s.11(2a) does).

Appeal allowed.

Show all summary ...

D.K Kapur, J.:— M/s. S.B Gurbaksh Singh, the respondent in this appeal, is a building contractor who is also a registered dealer under the pro-visions of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi. The respondent was assessed for the assessment year 1955–56, per assessment order dated 23rd November, 1959, passed by the Sales Tax Officer. The respondent appealed to challenge a part of the assessment on the ground that the assessment order was barred by time in respect of the first two quarters of the year. The Assistant Commissioner accepted this contention in appeal and remanded the case to the Sales Tax Officer to make a fresh assessment only with respect to the third and fourth quarters of the year in question. In exercise of his revisional powers, the Commissioner of Sales Tax suo motu set aside the Assistant Commissioner's order on 29th July, 1960, after notice to the respondent. Acting on this order, the Sales Tax Officer framed a fresh assessment against the respondent on 24th September, 1960, and on that basis made a demand for Rs. 3,202.47 as sales tax. This led the respondent to challenge the proceedings by way of two writ petitions in the Circuit Bench of the Punjab High Court at Delhi.

2. By way of Civil Writ Petition No. 388-D of 1960 the revisional order of the Commissioner of Sales Tax was challenged and by way of Civil Writ Petition No. 460-D of 1960, the consequential assessment made by the Sales Tax Officer and the demand created thereby was challenged. These two writ petitions were eventually accepted by a learned single Judge (Hardy, J., as he then was) on 2nd April, 1969. The order of the Commissioner of Sales Tax exercising revisional powers was quashed on the ground that he could not exercise those powers beyond four years of the end of the assessment year in question, i.e, the last date for passing the revisional order was held to be 31st March, 1960. Consequently, the other writ petition was also accepted and the consequential assessment made by the Sales Tax Officer was quashed. The Union of India being aggrieved has now come before us in appeal under clause 10 of the Letters Patent read with section 10 of the Delhi High Court Act, 1966. The only question which requires our decision in this appeal is, whether there is in fact a time-limit for passing a revisional order under section 20(3) of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi. The only provision of the Act which imposes any time-limit on assessments is sub-section (2a) of section 11 of the Act? That sub-section, amended in 1959, reads as follows:

“No assessment tinder sub-section (1) shall be made after the expiry of four years and no assessment under sub-section (2) shall be made after the expiry of six years from the end of the year in respect of which or part of which the assessment is made:

Provided that where such assessment is made in consequence of or to give effect to any order of an appellate or revisional authority or of a court, the period of four years or six years, as the case may be, shall be reckoned from the date of such order.”

3. The proviso to this sub-section did not exist in 1959. In Sir Sobha Singh & Company v. Commissioner of Sales Tax, Delhi [1966] 18 S.T.C 416., S.K Kapur, J., while sitting as a Judge of the Punjab High Court, held that the time-limit prescribed by this sub-section governed even orders passed in revision under section 20(3) of the Act. However, he did say that he, was reading the section without the proviso because, in that case, the revisional power had been exercised before the proviso had been introduced. He relied particularly on State of Orissa v. Debaki Debi [1964] 15 S.T.C 153 S.C., decided by the Supreme Court. Both these judgments were relied upon by the learned single Judge in support of the judgment under appeal. It was held that the proviso, which had been introduced in 1959, only allowed a further period for the assessing authority to pass an order, but did not affect the period during which the revisional power itself had to be exercised. In other words, it was held that the revisional order had to be passed within the period of four years from the end of the assessment year, as held by S.K Kapur, J., but on remand, the assessing authority could utilise the time allowed in the proviso to make its consequential order of assessment. Thus, if the revisional order had been passed in the present case on or before 31st March, 1960, the Sales Tax Officer could have taken advantage of the proviso to make the order of assessment. Thus, the only question we have now to deal with is, whether there is in fact a time-limit for passing a revisional order under section 20(3) of the Act.

4. Mr. Lal Narain Sinha, Solicitor-General, has urged that the decision pi the Supreme Court in State of Orissa v. Debaki Debi, must be restricted in its operation to the special circumstances of that case. The provisions, which were in question there, were those of the Orissa Sales Tax Act, 1947. The main provision of that Act, which was the subject-matter of the decision, was the second proviso to section 12(6) of the Act. That sub-section can conveniently be reproduced here:

“(6) Any assessment made under this section shall be without prejudice to any prosecution instituted for an offence under this Act:

Provided that when the Collector has imposed a penalty in addition/to the amount assessed under this section, no further proceedings either revenue or criminal shall be taken against the dealer:

Provided further that no order assessing the amount of tax due from a dealer in respect of any period shall be passed later than thirty-six months from the expiry of such period.”

5. It is noticeable that the second proviso does specify that there is a time-limit for making an assessment, and that that time-limit is 36 months from the expiry of the period. It was held by the court (Sarkar, J., dissenting) that this proviso was of general application and should be read as a separate restriction on the right to make an assessment, which applied to every State of the proceedings. Thus, not only was the assessing authority bound to make the assessment within 36 months, but the appellate and revisional authorities were also obliged to pass orders within that period. On this reasoning, the court held that the revisional authority was also bound to pass its order within the period of 36 months.

6. Subsequently, in the same judgment, the court dealt with the State's contention that this restriction of 36 months only applied to the assessing authority and not to the appellate or revisional authority and concluded that even if this were so, the power of the appellate and revisional courts to assess, was also to be found on the same provision, namely, section 12 of the Act and, hence the period specified governed those authorities also. It is convenient to reproduce the language of the court:

“The result would thus be that the appellate authority could pass an order setting aside the assessment at any time, but the assessing authority cannot give effect to the order to make a fresh assessment if by that date three-year period is past………In other words, if the construction suggested by the appellant were accepted, we would have the anomalous situation that if the appellate authority set aside the assessment and remanded it for fresh orders, no fresh assessment can be done, but that if instead of so doing, he himself effected the same reassessment, there would be no bar of limitation.”

7. This position the court could not accept and thus, the court virtually decided the case on the ground that the original assessing authority could not pass an assessment order after 36 months in the case of a remand, and so it followed that the revisional authority, which had the power of making that remand, could also not pass its revisional order altering the assessment after the period of 36 months was over.

8. It is stressed by the learned counsel for the appellant that the language of section 11(2a) is very different from the language of section 12(6). It is particularly mentioned that no order under section 11(1) can be passed after the prescribed period of 4 years. Thus, the limit of period being specified and for specific purposes, cannot be transported and attached to some other provisions of the Act like section 20, which deals with the appellate and revisional powers. It is pointed out that it is not essential that there should be a period of limitation. It is for the statute to fix a limitation or leave it open to the officer concerned to exercise the revisional power whenever it likes. On the other hand, counsel for the respondent stresses that the power to assess which is exercised by the appellate and revisional aut horities is also exercised under section 11(1) of the Act, and not under section 20. For this purpose reliance is placed on the aforementioned decision in Debaki Debi's case.

9. We have also been referred to Swastik Oil Mills Ltd. v. H.B Munshi, Deputy Commissioner of Sales Tax, Bombay, which was a judgment delivered by the Supreme Court in respect of the revisional powers under the Bombay Sales Tax Act. On a construction of the Bombay Act, it was found that there was no provision in that Act limiting the period in which revisional powers had to be exercised. The aforementioned decision in Debaki Debi's case was distinguished on the ground that in the Orissa Sales Tax Act, there was a proviso in general terms laying down a time-limit for assessments which applied even to revisional orders. The court referred to the earlier decision of the Supreme Court in Slate of Kerala v. K.M Cheria Abdulla and Company [1965] 16 S.T.C 875 S.C, which was a decision in respect of the revisional powers under the Madras General Sales Tax Act, 1939. In that case, the court had held that the revisional powers had to be exercised consistently with the powers granted by the Act to other authorities, and the revisional authority could not encroach upon the authority granted to others.

10. In our view, the three decisions of the Supreme Court referred to were really concerned with the express language of the Sales Tax Acts in question. In each one of these Acts, the revisional power was of the same type as is exercisable in the present case under the provisions of section 20(3) of the Bengal Finance (Sales Tax) Act, 1941, as in force in Delhi. The power of revision is the same, but the provisions regarding limitation, particularly regarding revisional power, are different in the four Acts. In the Orissa case, the provisions of section 12 contained a time-limit for passing an order of assessment. It was held in Debaki Debi's case, aforementioned, that that limitation of time extended also to the appellate as well as revisional authorities. There was no such time-limit in the other two Acts. In the Sales Tax Act now in question, no general provision of the type to j be found in the Orissa Act exists. The proviso to section 11(2a) clearly shows, that after remand, there is a fresh period of limitation for passing an assess ment order. The starting point of that period is the date of the order of remand. It is inherent in this provision that a fresh assessment made consequent to an appellate or revisional order has almost necessarily to be passed on some date after the four-year period allowed for the initial order has expired. To illustrate the case, the original assessment can be made within a period of four years from the end of the year in question, i.e the original assessment in the present case could be made up to 31st March 1960. An appeal or revision against such an order would have to be instituted under section 20 of the Act. That provision visualises an appeal under section 20(1) to the appellate authority and further revision under sub-section (3). Clearly, such an appeal may be heard after the period of four years prescribed in section 11(2a) has expired. For instance, if the final assessment is made towards the end of the four years' period mentioned in section 11(2a), the appeal is likely to be heard after that period has expired. If the restriction of four years applies also to the appellate authority, it would not be able to exercise jurisdiction at all sub section (2) of section 20 sets out the power of the appellate authority It may confirm, reduce, enhance or annul the assessment or set aside/the assessment and direct a fresh assessment. Any order passed by the appellate authority will necessarily result in a fresh assessment order. There is nothing in the section to restrict the time to be taken by the appellate authority in disposing of the appeal. If the respondent's contention is correct, then no appeal can be heard after four years; as no effective order modifying the assessment can be passed after four years. If that is so/the assessing authority, i.e, the Sales Tax Officer acting under section 11 can nullify the right of appeal by merely delaying the assessment to the end of the four-year period allowed to him. This is a consequence which has to be avoided if possible. The only way to do so is to treat the time-limit mentioned in section 11(2a) as only applying to the assessing authority. This also appears to be the clear intention of the statute from the language appearing in the sub-section and its proviso.

11. Against the appellate order, there is a further revision to the Commissioner of Sales Tax and a still further reference to the Chief Commissioner (now Financial Commissioner), i.e, the Act visualises two further revisions. After the final revisional order, the Act visualises a reference to the High Court, under section 21 of the Act, similar in nature to a reference to the High Court under the Income-tax Act. Section 21(7) of the Act states that the amount of tax payable in accordance with the order of the Chief Commissioner will not be stayed pending the disposal of a reference, but if the tax is reduced as a result of the reference, the excess tax shall be refunded. Similarly, section 12 of the Act visualises a refund of the excess tax, if the quantum of tax is reduced in appeal or revision. Therefore, the result of a reference may also be a fresh assessment. All this cannot take place within four years of the end of the year in question.

12. In Debaki Debt's case, there is an observation that the appellate and revisional authorities also exercise the same power of assessment that is exercisable by the original authority and no other power is to be found in the Act. This remark must be restricted in application to the special circumstances of the Orissa Act; otherwise, the appellate and revisional powers under section 20 will become illusory and dependent on the date on which the original assessment is made which is a result which could not have been contemplated by the Legislature. There is another passage in Debaki Debi's case, which seems to help the appellant, which reads:

“The first contention urged on behalf of the State of Orissa is that the High Court is wrong in holding that an order of assessment of the revising authority is necessarily one made under section 12(7). The power of revision granted by section 23(3) is clearly a distinct and separate power from the power to assess after calling for a return in case of under-assessment or escaped assessment. The mere fact that in a particular case the revising au thority has by a fresh order of assessment made the dealer liable for tax in respect of which he can be said to have been under-assessed or to have escaped assessment does not make the two powers one and the same. We therefore find it difficult to agree with the High Court that section 12(7) includes also the reassessment made by the revising authority under section 23(3).”

13. Even if the rule laid down in Debaki Debi's case is applied to the present facts, there does not seem to be a time-limit of four years for passing the order actually passed in this case. Let me assume that the four-year limitation to make an assessment applied even to the revisional authority. In the present case, the Commissioner of Sales Tax has not passed an order of assessment. He has merely directed a fresh assessment. The provisions of sub-section (2a) of section 11 do not say that an order of remand cannot be passed after four years. As far as a fresh assessment by the original authority is concerned, the proviso to section 11(2a) brings in a fresh period of four years starting from the date of the order of remand. That period had admittedly not expired when the Sales Tax Officer passed the fresh order of assessment which is the subject-matter of Civil Writ Petition No. 460-D of 1960. That being so, both the revisional order dated 24th September, 1960, as well as the fresh assessment order were passed within the time allowed by law. Consequently, this appeal has to succeed and the judgment of the learned single Judge granting these two writ petitions reversed. The said writ petitions are consequently dismissed. The parties are left to bear their own costs.

14. Appeal allowed.