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M/S. Busunur Industries v. State Of Karnataka

Karnataka High Court

Feb 20, 1985

Judgment

Subsequent
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Structured Summary of the Opinion delivered by Puttaswamy, J.

Factual and Procedural Background

The assessee filed a return for the assessment year (calendar year) 1973 before the Commercial Tax Officer (CTO) under the Karnataka Sales Tax Act, 1957 showing a purchase turnover of tamarind seeds of Rs. 1,53,952.41. The CTO completed assessment on 22-4-1975 and brought that amount to tax under Section 6 of the Act. The assessee appealed to the Deputy Commissioner (DC) in Appeal No. 77/75-76. The DC, by order dated 23-6-1975, allowed the appeal and deleted the levy of purchase tax on Rs. 1,53,952.41, relying on a Division Bench ruling of this Court in The State v. B. Raghurama Shetty (35 STC 360).

The Commissioner of Commercial Taxes (Commissioner), vested with suo motu revisionary power under Section 22A of the Act, called for the records on 19-8-1975 (records received 21-8-1975) and an office note indicated the matter be pursued after the Supreme Court decided the appeal filed by the State in Raghurama Shetty. The Supreme Court allowed the State's appeal on 24-3-1981, reversing the earlier Division Bench ruling relied upon by the DC.

On 27-5-1981 the Commissioner issued a show cause notice proposing revision of the DC's order under Section 22A. After hearing and proceedings, the Commissioner by order dated 10-1-1983 reversed the DC's order and restored the CTO's assessment. The assessee filed the present appeal under Section 24 of the Act challenging the Commissioner's revisional order.

Legal Issues Presented

Whether the power of revision under Section 22A(1) read with Section 22A(2) of the Karnataka Sales Tax Act is subject to a four-year limitation measured from the date of the order sought to be revised or from the date the Commissioner calls for the records (i.e., when the exercise of revision begins).
Whether calling for records for the purposes of initiating revisionary proceedings within the four-year period suffices to preserve the Commissioner's power to complete revision even if the final revisional order is passed after the four-year period.
Whether a prior Division Bench ruling of this Court (Subba Rao's case) interpreting the analogous limitation provision should be reconsidered or is binding on the present question.
Whether mere calling for records for some other purpose (as opposed to calling for the records for revision) can be relied upon to satisfy the limitation requirement under Section 22A(2).

Arguments of the Parties

Appellant's Arguments (Sri K. Srinivasan)

Contended that the suo motu revisional proceedings were completed beyond the four-year period fixed by Section 22A(2) (i.e., measured from the date of the DC's order) and thus were barred by time, illegal and impermissible.
Argued that the earlier Division Bench ruling (Subba Rao's case) that was interpreted in favour of reckoning limitation from the date records were called is distinguishable, and if not distinguishable, calls for reconsideration by a larger Bench because it conflicts with the express language of the provision.
Further contended that unless the records were called specifically for exercising the power of revision (in the manner envisaged by Subba Rao's case), mere calling for records for other purposes in the present case would not save limitation.

Respondent's Arguments (Sri S. Rajendra Babu, Government Advocate)

Contended that the four-year period must be reckoned from the day the Commissioner called for the records (i.e., commencement of exercise of the revisional power), not from the date the revisional order was actually made; thus the limitation was satisfied.
Maintained that the ratio in Subba Rao's case governs the question and that the Gujarat High Court Division Bench ruling in The State of Gujarat v. Jamnagar Motor Stores (33 STC 353), which followed Subba Rao, supports his position.
Produced the records of the office of the Commissioner to show that the records were in fact called on 19-8-1975 for the purposes of revision under Section 22A.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
The State v. B. Raghurama Shetty (35 STC 360)	The Division Bench ruling of this Court which the DC relied upon to allow the assessee's appeal before reversing.	The DC had relied on this Division Bench ruling to delete the levy; the Supreme Court later allowed the State's appeal reversing this Court's decision, and the Commissioner followed the Supreme Court's ruling when revising the DC's order.
Subba Rao… v. Commissioner Of Commercial Tax In Mysore, Bangalore… (19 STC 257)	Held that the exercise of revisional power commences when the Commissioner calls for the records; the period of limitation (four years) is to be reckoned from the date the records are called for (initiation), not from completion of the revisional order.	The Court treated Subba Rao as direct and binding authority on the point and applied its ratio to hold that calling for records within four years satisfied Section 22A(2)'s limitation requirement.
The State of Gujarat v. Jamnagar Motor Stores (33 STC 353)	Division Bench of Gujarat High Court followed Subba Rao's ratio in construing an analogous statutory limitation to run from the date records are called for.	The Court noted this case as consistent authority and expressed agreement with the Gujarat High Court's view following Subba Rao.
Mohammed Samiulla H. v. Commissioner of Commercial Taxes (ILR 1985 KAR 481)	Full Bench decision addressing the legislative history and upholding the validity of Section 22A; held that Section 21(2) of the original Act was bodily lifted and enacted as Section 22A.	The Court relied on this Full Bench's observation to explain that Section 22A corresponds to the earlier Section 21(2), supporting application of precedent construing the earlier provision.
K.V.S. Kadirvel Nadar v. State of Madras (46 ITR 251)	Madras High Court Division Bench on an analogous provision held similarly that limitation is measured from initiation (calling for records) rather than completion.	The Court recorded respectful agreement with the Madras High Court's approach as consistent with the ruling in Subba Rao and applicable to the instant case.
K.G. Subramanya v. T.V. Reddi, Commissioner of Agricultural Income-Tax (1969 1 Mys. LJ 274)	Interpreted analogous provisions of the Karnataka Agricultural Income Tax Act; cited in comparative discussion of similar statutory schemes.	The Court held that this ruling cannot be understood as laying down a proposition different from the Madras High Court case and treated it as supportive of the same construction.
Supreme Court ruling cited as 47 STC 369	The Supreme Court decision which reversed the earlier High Court decision relied upon by the DC (i.e., it reversed the Division Bench's position relied upon by the DC).	The Commissioner followed the Supreme Court ruling (47 STC 369) when revising the DC's order; the Court noted the Commissioner relied on that Supreme Court decision in disposing of the revision on merits.

Court's Reasoning and Analysis

The Court began with a textual and purposive construction of Section 22A (and in particular Section 22A(2)) of the Karnataka Sales Tax Act. It observed that the revisional power conferred on the Commissioner is judicial or quasi-judicial and that the statutory scheme contemplates a process in which the Commissioner "may call for and examine the record" and then "after giving the assessee an opportunity of being heard" may pass such order as justified.

Key analytical steps from the opinion:

The Court emphasised that without calling for and examining records the power of revision cannot be exercised; calling for records is therefore an integral first step in the exercise of the revisional power under Section 22A(1).
Reading Section 22A(2) literally — which states that the power under subsection (1) "shall be exercisable only within a period of four years from the date of the order sought to be revised was passed" — the Court concluded that the expression "shall be exercisable" must be understood to refer to the commencement (initiation) of the exercise of the power, not the completion of the entire revisional process.
The Court noted that the facets of the revisional power (calling for records, examining them, and passing orders) are parts of a single composite power to revise; thus if the Commissioner commences that power within the statutory period (by calling for records), the limitation requirement under subsection (2) is satisfied even if the final order is passed after the four-year period.
The Court reviewed authority (Subba Rao) which applied that same construction to the predecessor provision (Section 21(3)) and held that Subba Rao is directly in point and binding. The Court therefore felt constrained to follow that precedent rather than overturn it.
The Court also considered whether the explanation to Section 22A(2) (which excludes periods during which proceedings are stayed by court order) bears upon the construction that the four-year period relates to initiation; it concluded that the explanation does not alter or shed material light on the construction already adopted.
The Court examined other High Court decisions (Gujarat and Madras) and found them to be consistent with Subba Rao and supportive of the same construction.
Turning to the facts, the Court inspected the Commissioner's office records produced by the revenue and found that the Commissioner called for the records on 19-8-1975 specifically for the purposes of revision under Section 22A. That factual finding disposed of the appellant's contention that the call for records was not for revisionary purposes.
On the merits of the revision, the Commissioner followed the subsequent Supreme Court ruling (47 STC 369) which reversed the Division Bench decision that the DC had relied upon. The appellant did not challenge the merits of the Commissioner's order based on that Supreme Court ruling, and the Court expressed no exception to the Commissioner's application of the Supreme Court decision.

Holding and Implications

Holding: The appeal is DISMISSED.

Implications and immediate consequences:

The Commissioner's revisional order dated 10-1-1983, reversing the DC and restoring the CTO's assessment, is upheld by this Court.
The Court held that, for the purposes of the four-year limitation in Section 22A(2), the exercise of revisional power is initiated when the Commissioner calls for the records; therefore calling for records within four years satisfied the limitation requirement even though the final order was passed after the four-year period.
The Court treated the earlier Division Bench ruling in Subba Rao as binding authority on the point and found no reason to doubt its correctness; the opinion notes that it referred that ruling to a larger Bench (the text states: "we do not find any good ground to doubt the correctness of the ruling in Subbarao's case and refer the same to a larger Bench").
On the merits, the Commissioner relied on a later Supreme Court ruling that reversed the Division Bench decision relied upon by the DC; the assessee did not contest the Commissioner's decision on merits and the Court did not take exception to the Commissioner's application of that Supreme Court ruling.
No new legal principle contrary to prior authoritative decisions was announced; the Court adhered to the existing line of authority that limitation for the initiation of revision is satisfied by calling for records within the statutory period.

Show all summary ...

The Judgment of the Court was delivered by

Puttaswamy, J.:— This appeal is by the assessee and is directed against the order dated 10-1-1983 of the Commissioner of Commercial Taxes, Karnataka, Bangalore (‘Commissioner’) in Case No. SMP 7/81-82 revising the order of the Deputy Commissioner of Commercial Taxes (Appeals) Bangalore Division, Bangalore (‘DC’) and restoring the order of the Commercial Tax Officer, Chitradurg (‘CTO’).

2. For the calendar year 1973 which is also the assessment year, the assessee filed his return before the CTO under the Karnataka Sales Tax Act of 1957 (Karnataka Act 25 of 1957) (‘the Act’) inter alia showing a turnover of Rs. 1,53,952-41 as purchase turnover of tamarind seeds. On an examination of that return, the CTO completed his assessment on 22-4-1975 bringing to tax the aforesaid sum of Rs. 1,53,952-41 under Section 6 of the Act. Against the said order of the CTO the petitioner filed an appeal in Appeal No. 77/75-76 before the DC, who by his order dated 23-6-1975 allowed the same and directed the deletion of levy of purchase tax on the aforesaid purchase turnover of Rs. 1,53,952-41 with which claim only we are concerned in this case. In allowing the said appeal of the assessee the DC relied on a Division Bench ruling of this Court in 35 STC 360.

3. On 19-8-1975 the Commissioner who is conferred with the suo motu power of revision under Section 22A of the Act, called for the records in the said appeal from the DC which were received by him on 21-8-1975. On receipt of those records, they were placed before the Commissioner with an office note thereon to the effect that the matter be pursued after the Supreme Court renders its decision in the appeal filed by the State against the decision of this Court in The State v. B. Raghurama Shetty (35 STC 360) and the same was approved by the Commissioner on 30-8-1975. On 24-3-1981 the Supreme Court allowed the appeal filed by the State in Raghurama Shetty's case and reversed the decision of this Court.

4. On 27-5-1981 the Commissioner issued a show cause, notice to the assessee proposing to revise the order of the DC under Section 22A of the Act for the detailed reasons, stated therein, which was opposed by him on diverse grounds. On affording an opportunity of hearing to the assessee, the Commissioner by his order dated 10-1-1983 has reversed the order of the DC and has restored the order of the CTO. Hence, this appeal by the assessee under Section 24 of the Act.

5. Sri K. Srinivasan, Learned Counsel for the petitioner, strenuously contends that the Suo motu revisional proceedings completed beyond the period of four years from the 4 date of the order of DC within which period only such power could be exercised under Section 22A(2) of the Act was barred by time, illegal and impermissible. Sri Srinivasan maintains that the earlier Division Bench ruling of this Court in Subba Rao…** v. Commissioner Of Commercial Tax In Mysore, Bangalore…, Mysore, Bangalore . 19 STC 257. that interpreted the earlier provision was distinguishable and if not distinguishable being opposed to the express language of the provision calls for reconsideration by a larger Bench of this Court.

6. Sri S. Rajendra Babu, Learned Government Advocate, appearing for the revenue refuting the contention of Sri. Srinivasan contends that the period of four years had to be reckoned from the day the Commissioner called for records and not from the day the order was actually made by him and the ratio in Subba Rao's case governs the question and that ruling followed by a Division Bench of the High Court of Gujarat in The State of Gujarat v. Jamnagar Motor Stores . 33 STC 353. does not call for reconsideration.

7. Section 21 of the Act as originally enacted, conferred power of revision on the DC and the Commissioner. Section 21(1) of the Act conferred power of revision on the DC over the officers subordinate to him. Section 21(2) of the Act conferred power of revision on the Commissioner over his subordinates. Section 21(3) of the Act regulated the period of limitation within which the power of revision had to be exercised. The Karnataka Sales Tax (Amendment) Act of 1963 (Karnataka Act 9 of 1964) that introduced a number of Amendments to the Act, with which we are not concerned in this case by Sections 16 and 18 of that Act, split up Section 21 into two independent provisions. Section 16 of the Amending Act substituted Section 21 of the Act and conferred power of revision on the Deputy Commissioners and the Assistant Commissioners of the area. Section 18 of the Amending Act inserted Section 22A conferring power of revision on the Commissioner. In Mohammed Samiulla H. v. Commissioner of Commercial Taxes . ILR 1985 KAR 481. a Full Bench of this Court noticing this legislative history and upholding the validity of Section 22A has held that Section 21(2) of the original Act has been bodily lifted and enacted as Section 22(A) of the Act.

8. We will first ascertain the scope and ambit of Section 22-A of the Act, without reference to the authorities but only keeping in view the progressive Rule of Construction of Statutes that is now firmly established.

9. Section 22A of the Act that is material reads thus:

22-A. REVISION BY THE COMMISSIONER OF ORDERS PREJUDICIAL TO REVENUE:—

1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by any officer subordinate to him is erroneous in so far as it is prejudicial to the interests of the revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.

2) The power under sub-section (1), shall be exercisable only within a period of four years from the date of the order sought to be revised was passed.

Explanation:— In computing the period of limitation for the purposes of sub-section (2), any period during which any proceeding under this section is stayed by an order or injunction of any Court shall be excluded.”

But, here also we are primarily concerned with the question of limitation that is regulated by sub-section (2) of that Section.

10. The power of revision conferred by the Section is judicial and in any event quasi-judicial power. The Section empowers the Commissioner to call for the records, examine them and then initiate proceedings in conformity with that provision which incorporates the principles of natural justice to revise or not to revise the order of his subordinate. Without calling for the records and examining them, the power of revision cannot at all be exercised. When once the Commissioner calls for the records for purposes of Section 22A of the Act, the one and the only way that can be understood and interpreted is that he has initiated the proceedings for revision under Section 22A(1) of the Act. Section 22A(2) of the Act does not stipulate that the power initiated by calling for the records should also be peremptorily completed within 4 years from the date of the order sought to be revised. All that the Section requires is that the power of revision shall be exercisable within four years from the date of the order. If the power of revision can only be exercised only by calling for records and not in a vaccum, then the very first step of calling for records must of necessity construed as falling within the meaning of the terms ‘shall be exercisable.’ In many a case as in the very case for a variety of good reasons, which cannot be catalogued and stated exhaustively, it will be impossible fop the Commissioner to complete the proceedings within four years from the date of the order though he had initiated proceedings by calling for records within that period. We are of the view that on this construction of Section 22A which carries out the purposes and object of that provision, we cannot uphold the contention of Sri Srinivasan.

11. We will now turn to the authorities on the point.

12. In Subbarao's case this Court was called upon to decide the validity of an order made by the Commissioner in, revisional proceedings initiated by him in calling for records, issuing a show cause notice within the period of four years but completing the proceedings after 4 years under Section 21(2) of the Act as in the present case. In repelling a similar contention urged before a Division Bench of this Court consisting of Hegde and Honnaiah, JJ. (as their Lordships then were) speaking through Hegde, J. expressed thus:

“Is the exercise of that power merely means passing of an order which he thinks fit? The power conferred on the Commissioner under Section 21(2) as could be gathered from its language includes three different facets, viz. (1) calling for the records mentioned therein, (2) examination of those records, and (3) passing such orders, with respect thereto as he thinks fit. The Commissioner begins to exercise his power under Section 21(2) as soon as he calls for the records in question and the exercise of that power comes 1 to an end when he passes an order in respect thereto. All that Section 21(3) says is that the power conferred under Section 21(2) is exercisable within four years from the date of the order of assessment, that is proposed to be revised. As mentioned earlier, the exercise of the power under Section 21(2) commences as soon as the records mentioned therein are called for. If that act is done within the period mentioned in Section 21(3), then no question of limitation arises. Mr. Srinivasan is not right in his contention that the powers of the Commissioner to call for the records, to examine them and to pass such orders as he thinks fit are three independent powers and all those powers should be exercised within the time fixed in Section 21(3). They are all facets of one single power, namely, the power to revise and that power is exercisable within the time mentioned in Section 21(3).

We are also unable to agree with Mr. Srinivasan that the power to call for records under Section 21(2) is not a part of the revisional power of the Commissioner.

The expression “shall be exercisable” found in Section 21(3) refers to the commencement of the exercise of the power referred to, and not the completion of the exercise of that power. Like all periods of limitation, Section 21(3) also refers to initiation of the proceedings and not its completion.”

In this case the Court has ruled that the period of limitation of four years under Section 21(3) of the Act as it stood then, which corresponds to Section 22A(2) of the Act should be reckoned from the date the records were called for and not from the date the order was made by the Commissioner. We are of the view that this ruling is a direct authority on the very question urged before us and we are bound by the same.

13. We have carefully read the language of Section 21(3) of the Act that is analogous to Section 22A(2) of the Act and the above ruling. We are of the view that the said ruling is in accord with the language of Section 22A(2) of the Act. We are of the view that the explanation added to Section 22A(2) of the Act to exclude the period occupied by injunctions and stay orders on which reliance is placed by Sri Srinivasan to urge as additional ground for reconsideration of Subbarao's case does not shed any light on the construction of Section 22A(2) of the Act at all. We do not find any good ground to doubt the correctness of the ruling in Subbarao's case and refer the same to a larger Bench.

14. In Jamnagar Motor Stores' case a Division Bench of the Gujarat High Court dealing with an analogous provision in the Bombay Sales Tax Act following the ruling of this Court in Subbarao's case has taken a similar view. In K.V.S Kadirvel Nadar v. State of Madras . 46 ITR 251. a Division Bench of the Madras High Court dealing with an analogous provision in the Madras Agricultural Income Tax Act has also taken a similar view. We are of the view that the Division Bench ruling of this Court in K.G Subramanya v. T.V Reddi, Commissioner of Agricultural Income-Tax . 1969 1 Mys. LJ 274. interpreting the provisions of the Karnataka Agricultural Income Tax Act as it then stood cannot be understood as laying down a different proposition than the one expressed by the High. Court of Madras in Kadirvel Nadar's case. We are in respectful agreement with the views expressed by their Lordships of the Gujarat and Madras High Courts in Jamnagar Motor Stores and Kadirvel Nadar's cases respectively.

15. On the foregoing discussion, we hold that there is no merit in this contention of Sri Srinivasan and we reject the same.

16. Sri Srinivasan next contends that unless the records are called for exercising the power of revision as in Subbarao's case, the mere calling for records for other purposes as in the present case, will not save limitation, even on the construction placed in that very case.

17. Sri Babu has produced the relevant records of the office of the Commissioner to justify that they were called for purposes of revision under Section 22A of the Act.

18. We have perused the records of the Office of the Commissioner produced before us which show that on 19-8-1975 the Commissioner had called for the records of the DC only for purposes of revision. When that is so, there is hardly any ground to examine the legal contention of Sri Srinivasan in this case. We, therefore, reject this challenge of the petitioner without expressing any opinion on the legal contention.

19. In revising the order made by the DC, the Commissioner followed the ruling of the Supreme Court in 47 STC 369, which reversed the decision of this Court relied on by the DC to allow the appeal of the assessee. Sri Srinivasan, in our opinion, very rightly did not challenge the decision of the Commissioner on merits. We cannot, therefore, take exception to the order of the Commissioner.

20. As the only contention urged for the assessee fails, this appeal is liable to be dismissed. We, therefore, dismiss this appeal.