Gem Petro Chemicals vs State of Andhra Pradesh

S. Ananda Reddy, J.—These five revisions are directed against the common order of the Sales Tax Appellate Tribunal in T.A. Nos. 765 to 770 of 1997 dated June 8, 2000 for the assessment years 1989-90 to 1993-94. As common issue is involved in all these revisions, they are disposed of by this common judgment, at the admission stage itself.

The assessee is a registered dealer on the file of the Commercial Tax Officer, Auto Nagar, Vijayawada. Originally final assessments were framed for the assessment years 1989-90 to 1992-93 accepting the claim of the assessee for exemption of the turnover from sales tax. However, basing on the subsequent information received by the assessing authority, provisional assessment was framed for the assessment year 1993-94 as well as the revised assessments for the assessment years 1989-90 to 1992-93, disallowing the claim of exemption in respect of the engine oil, as there was information to the assessing officer that three dealers from whom the assesses claimed to have made purchases of used engine oil, were found to be fictitious. Thereafter, against the said revised assessment orders dated June 30, 1994 as well as the provisional assessment order for 1993-94, the assessee preferred the appeals before the Appellate Deputy Commissioner (CT), Vijayawada. The Appellate Deputy Commissioner, after hearing the counsel for the petitioner set aside the revised assessment orders for 1989-90 to 1992-93 and the provisional assessment for 1993-94 and remitted the matter back to the assessing officer for fresh consideration. Thereafter, the Commercial Tax Officer framed assessments on January 3, 1995 for all the years in question granting exemption of the disputed turnover. These assessment orders were subjected to revision by the Deputy Commissioner (CT), No. II, Vijayawada, by his orders dated August 18, 1987. As per the said orders, the assessee-dealer is not entitled for the exemption, as the dealer did not produce evidence to satisfy the authorities that he had purchased the used engine oil as and by way of second sale. Hence, the exemption granted by the assessing officer was erroneous and prejudicial to the interest of the Revenue. Therefore, the Deputy Commissioner revised the assessments withdrawing the exemption granted by the Commercial Tax Officer on the disputed turnover and accordingly the assessing officer was directed to give effect to the said order. These orders were assailed before the Sales Tax Appellate Tribunal by way of appeals. The Sales Tax Appellate Tribunal heard the contentions of the assessee and having found that there is no merit in the contention of the assessee that the Deputy Commissioner has no jurisdiction to revise the assessment order of the Commercial Tax Officer, which according to the assessee was made as per the directions of the Appellate Deputy Commissioner. Though the Appellate Tribunal recorded that the assessee -appellant has not questioned the correctness of the findings of the revisional authority, still the Tribunal has gone into and gave a finding that the assessee-dealer failed to produce the necessary evidence to show that the purchases made by the assessee cannot be treated as a first sale by producing necessary evidence and therefore the assessee is not entitled for the exemption as claimed. Aggrieved by the said orders of the Tribunal, the assessee is before this Court.

The learned counsel for the petitioner contended that the Deputy Commissioner (CT) has revised the assessments of the Commercial Tax Officer, framed as per the directions of the Appellate Deputy Commissioner without jurisdiction. As the assessments were framed while giving effect to the order of the Appellate Deputy Commissioner, the Deputy Commissioner (CT) on the administrative side cannot revise such assessments by exercising the revisional powers u/s 20(2) of the Andhra Pradesh General Sales Tax Act, 1957. It is contended that as the orders of the Appellate Deputy Commissioner, dated December 13, 1994 have become final, without revising those orders, it is not open to the authorities in the department to revise the consequential orders passed by the Commercial Tax Officer, who is the assessing authority. Strong reliance is placed by the learned counsel for the petitioner in the case of Hyderabad Insulated Wires (P) Ltd. Vs. Commissioner of Commercial Taxes, Hyderabad, . It is contended that the Tribunal failed to consider the contention of the petitioner in the proper perspective and therefore, the order of the Deputy Commissioner (CT) as well as the orders of the Appellate Tribunal are liable to be set aside.

We have heard the learned counsel for the petitioner and considered the material on record.

The only grievance of the petitioner is that the revisional power exercised by the Deputy Commissioner under Sub-section (2) of Section 20 of the Act in revising the orders of the assessments dated January 3, 1995 is without jurisdiction. According to the learned counsel, the said assessment orders were framed, giving effect to the orders of the Appellate Deputy Commissioner dated December 13, 1994, hence the impugned orders are liable to be set aside.

The assessee was dealing with the purchase of used engine oils within the State of Andhra Pradesh and used to process/reclaim the same and sells the reclaimed engine oil to various consumers. It is also the case of the petitioner/dealer that engine oil is liable to tax only at the first sale in the State, under item 39 of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957 and not on the subsequent transactions. When the assessee claimed on that basis exemption of its turnover for the assessment years 1989-90 to 1992-93, the assessing officer framed the assessments accepting the exemption claimed. However, the assessing officer after he received additional information with reference to three dealers from whom the assessee-dealer claimed to have been purchased the used engine oil that their registration certificates were either fictitious or not in force, framed the provisional assessment for 1993-94 and also revised the assessments for the earlier years withdrawing the exemption. Thereafter, the assessee preferred appeals to the Appellate Deputy Commissioner (CT), Vijayawada. The Appellate Deputy Commissioner considered various contentions advanced by the petitioner and having found that the assessee was not given sufficient opportunity to prove its case before withdrawing the exemption earlier granted for the years 1989-90 to 1992-93 or while framing the provisional assessment for 1993-94, remitted the matter to the assessing officer and the relevant portion of the order of the Appellate Deputy Commissioner is as under :

"As seen from the above facts, arguments, revisional proceedings and the case law, the predominant fact is whether the disputed commodity of engine oils was suffered tax at the earlier stage as first sales. As seen from the several judgments, it is evident that if the assessee was able to show that there had been taxable sale and its sale was only a second sale, it was entitled to claim exemption of its sale as second sale. It is not for the assessee, who is the subsequent seller, to show that the first sale has been taxed. The onus on the subsequent seller is only to point out that there has been a first sale, and the onus is not on him to show that the first sale is in fact suffered tax. Any how, in the present cases, the main contention of the appellants was that they were not first sellers, their purchases were suffered tax at the earlier stages as first sale and their sales are only second sales. There appears no dispute that the disputed purchases are from within the State. The appellants'' arguments that they were not given sufficient opportunity to cross verify the sellers is also to be taken into consideration.

It is seen from the appeal filed that the appellants had filed certain exhibits relating to the sale bills issued by the earlier dealers and the oil companies like Indian Oil Corporation and Indo-Burma Petroleum Company. The rejection of this material by the assessing authority seems to be arbitrary without allowing the appellants to prove their claim of exemption and without verifying the tax payments at the point of first sale by the oil companies. It is in the interests of natural justice that the assessing authority shall accord sufficient and further opportunity to the appellants if so desired, to file additional material in the attempts to prove that they are other than the first sellers. The assessing authority shall also verify and consider the bills produced by the appellants for granting exemption when it could be proved that the purchases made by the appellants were taxed at the point of first sale. The assessing authority shall pass fresh orders keeping in mind the above guidelines and case law.

Accordingly to the revisionary and provisional assessments made by the assessing authority are set aside and the matter is remitted back to the assessing authority for fresh disposal giving an opportunity to the appellants to prove themselves that they are other than first sellers."

Thereafter, the assessments were taken on by the Commercial Tax Officer before whom the assessee produced certain original bills issued by the oil companies relating to the assessment years, wherein sales of engine oils were made by them to other registered dealers from whom the assessee''s predecessor sellers have purchased engine oils. Based on that evidence, the Commercial Tax Officer framed the fresh assessments on merits accepting the claim of the assessee for exemption of the disputed turnover from liability to tax. These assessments were framed on January 3, 1995. The Deputy Commissioner (CT), Vijayawada issued show cause notices dated February 17, 1997 proposing to revise the assessments framed by the Commercial Tax Officer on January 3, 1995. Before the Deputy Commissioner, the assessee-dealer filed its reply objecting to the proposed action of revision on the ground that the Commercial Tax Officer framed the assessment while giving effect to the orders of the Appellate Deputy Commissioner and therefore they are not independent assessments against which revisional powers could be exercised by the Deputy Commissioner, while exercising the revisional powers under Subsection (2) of Section 20 of the Act. The Deputy Commissioner rejected the said contention for the reasons that :

"The dealers have not negatived the fact that the seller''s dealers are fictitious and non-existing. When they themselves admitting this fact, their claim that they have purchased engine oil from such fictitious dealers cannot be accepted as true and correct. The action of the assessing authority in granting exemption on the strength of the bills issued fay the oil companies in favour of the fictitious and non-existing dealers is therefore incorrect. In the instant case no issue was decided by the Appellate Deputy Commissioner as contended by the dealers. The remand orders of the Appellate Deputy Commissioner cannot be concluded as a decided order. The objections raised by the dealers are set aside as not valid. The proposed revision in withdrawing exemption on the turnover of Rs. 7,80,699.00 and subjecting the same to tax at 11.55 per cent (tax at Rs. 90,170) is therefore confirmed exercising the revisional powers vested in me u/s 20(2) of the Andhra Pradesh General Sales Tax Act, 1957."

The said orders of the Deputy Commissioner are assailed before the Sales Tax Appellate Tribunal. Before the Sales Tax Appellate Tribunal also the assessee reiterated the same contention. It was also contended that as the Appellate Deputy Commissioner''s order has become final, without setting aside the said order of the Appellate Deputy Commissioner, it is not open to the authorities under the Act, to revise the orders of assessment. The Appellate Tribunal rejected the said contention for the reason :

"The said orders of the assessing authority pursuant to the remand order of the first appellate authority is an independent order of the assessing authority based on the evidence available before him and as, that evidence interpreted by him. Had the assessing authority given a finding against the dealer/assessee that is to say that the dealer has failed to establish that the disputed oils have already suffered tax necessarily the appellant dealer would have filed an appeal as provided u/s 19 of the Andhra Pradesh General Sales Tax Act, 1957 to the first appellate authority again. The revisions contemplated u/s 20 of the Andhra Pradesh General Sales Tax Act, 1957 always provide where an order is prejudicial to the revenue the superior authority can always take a revision. When the orders of the assessing authority were found prejudicial to the interests of the revenue, the only remedy left to the departmental officials is to take a revision u/s 20 of the Andhra Pradesh General Sales Tax Act, 1957, by superior authority, which has been done by the Deputy Commissioner (CT), Vijayawada and passed the impugned orders under appeal. There is no necessity for Additional Commissioner/Joint Commissioner as the case may be to take up the revision because the assessing authority passed orders after remand. The said orders passed by the assessing authority after remand are not implementing the orders of the appellate authority on any question of law. If the revisional authority has questioned the orders of the assessing authority thereby indirectly questioning the correctness of the orders of remand of the first appellate authority such order cannot be sustained unless the orders of the first appellate authority are also revised and can be done only by a superior authority to the Deputy Commissioner.

But, in this case on my hand as is earlier explained, the revisional authority has only revised the orders on a question of fact and interpretation of evidence made by the assessing authority but in no way he questioned the correctness of the orders of the first appellate authority directly or indirectly. Consequently, we are of the view that the revisional orders are legally sustainable and the contention of the appellant that the revisional authority has no jurisdiction to revise the orders of the assessing authority passed pursuant to the remand order is not correct."

Thereafter, the Appellate Tribunal also went into the merits of the matter though it was not questioned before it and recorded a categorical finding, which reads :

"...........We cannot say that the revisional orders are totally incorrect. The appellant has to blame himself for not able to get the benefit out of the disputed turnovers in each assessment year representing the sale of engine oils that suffered tax because he has not produced the necessary information to give him that benefit. All the bills produced by the appellant did not show the appellant name. Peculiarly he produced bills showing sales by the engine oil companies or by registered dealers or some other dealers. Much of the contention of the appellant that the reclamated oil cannot be considered as a new oil and the sales of which cannot be treated as first sales is not necessary to be considered in this case because it is not the case of the department that sale of reclamated oil is to be treated as first sales. Therefore, for all these reasons, we are of the opinion that the appellant has not produced the evidence to establish that the oils purchased and sold by him have suffered tax. Consequently, we find there is no justification in interfering with the revisional orders for the reasons mentioned above. Hence, the point is held accordingly."

Assailing the above finding, the learned counsel reiterated the contention that when the order of the Appellate Deputy Commissioner has become final, it is not open to revise the order of the Commercial Tax Officer. We are unable to appreciate the said contention of the learned counsel for more than one reason. The Appellate Deputy Commissioner did not decide the issue on merit one way or other, but the findings recorded by him clearly show that in order to give opportunity to the petitioner/dealer, the matter was remitted to the assessing officer, so that it can produce necessary evidence for showing that the purchases made by the assessee in question relates to the second and subsequent sales and not the first sale, and therefore, not liable to tax. Thereafter before the assessing officer the petitioner-assessee produced certain evidence and basing on the appreciation of the said evidence, the Commercial Tax Officer framed the assessments. With reference to the correctness of those assessments framed on consideration of the material on record, the Deputy Commissioner has got the power of revision conferred on him under Sub-section (2) of Section 20. Therefore, the rejection of the assessee''s contention that the Deputy Commissioner (CT) has no jurisdiction to exercise the revisional powers is proper and just.

The learned counsel, however, relied upon judgment of this Court in the case of Hyderabad Insulated Wires (P) Ltd. [1991] 80 STC 99 ; (1990) 11 APSTJ 267. In that case a writ petition was filed questioning the notice dated August 11, 1990 issued by the Commissioner of Commercial Taxes u/s 20(1) of the Andhra Pradesh General Sales Tax Act, 1957, proposing to revise the order of the Deputy Commissioner of Commercial Taxes dated October 7, 1986, with a view to levy surcharge u/s 6-B and additional tax u/s 5-A in respect of the turnover falling within the purview of Section 5-B of the Act. The facts of the case are that the first assessment under the Andhra Pradesh General Sales Tax Act for the year 1982-83 was made on March 31, 1984, by the Commercial Tax Officer. He subjected the turnover of Rs. 22,47,212 to tax at different rates. As regards the turnover of Rs. 21,14,414 falling u/s 5-B, he applied the concessional rate of 4 per cent. No surcharge and additional tax was levied thereon as the assessing authority obviously felt that the total tax liability of the assessee u/s 5-B should be computed at the rate of 4 per cent only. This assessment was reopened by the successor assessing authority u/s 14(4) and a revised assessment order was passed levying and demanding an amount of Rs. 8,458 towards surcharge. Against this reassessment order dated September 11, 1985, the petitioner preferred an appeal. The appellate authority by order dated January 16, 1987, allowed the appeal following a decision of the Sales Tax Appellate Tribunal holding that no surcharge apart from 4 per cent could be levied in respect of the turnover falling within the ambit of Section 5-B. As the matter stood thus, the Deputy Commissioner proposed to exercise revisional powers u/s 20(2) of the Act, whereby he wanted to set aside the original assessment order dated March 31, 1984, passed by the Commercial Tax Officer so as to add surcharge to the tax otherwise payable. A show cause notice was issued by the Deputy Commissioner dated May 14, 1986. The petitioner filed objections stating that the original assessment order was no longer in existence in view of the reassessment order passed subsequently and, therefore, the revision was unwarranted. The assessee also contested the liability to pay the surcharge. The Deputy Commissioner, Secunderabad, by his order dated October 7, 1986, did not accept the first contention of the petitioner and he observed that there was no revised assessment order levying surcharge, which is factually an incorrect observation. However, with regard to the merits, the Deputy Commissioner accepted the contention of the petitioner and held that no surcharge is leviable in view of the decision of the Tribunal. The Deputy Commissioner, therefore, dropped the proposed revision.

The Commissioner of Commercial Taxes issued a revision notice dated January 15, 1989 u/s 20(1) of the Act proposing to set aside the order of the Deputy Commissioner dated October 7, 1986 and to modify the original assessment order dated March 31, 1984 subjecting the turnover of Rs. 21,14,414 to surcharge at 10 per cent of the tax due. The Commissioner stated in the said notice that the order of the Sales Tax Appellate Tribunal relied upon by the Deputy Commissioner has not been accepted by the department and a tax revision case has been filed in this Court by the State. No further action was taken thereon till August 11, 1990 on which date the Commissioner issued a "revised show cause notice" whereunder the Commissioner proposed to revise the order of the Deputy Commissioner dated October 7, 1986 and to levy additional tax and surcharge u/s 5-A and Section 6-B, respectively, in respect of the turnover of Rs. 21,14,414. The Commissioner referred and relied upon a decision of this Court in India Fruits Private Limited v. Commercial Tax Officer II, Rajahmundry [1988] 68 STC 114. The said notice was assailed before this Court. This Court accepted the contention of the assessee therein by observing :

"We see force in this contention. In the face of the reassessment order passed by the Commercial Tax Officer subjecting a part of the turnover to surcharge in addition to the tax already levied, it was unnecessary and in fact beyond the jurisdiction of the Deputy Commissioner to go back to the original assessment and adjudicate upon the legality or propriety of that assessment. The omission, if any, in the original assessment order to levy surcharge was filled up by the reassessment order which came into existence by the time the Deputy Commissioner took up the revision. The said reassessment order having been set aside on appeal by the appellate authority by his order dated January 16, 1987, the said order of the appellate authority holds the field as on today. Unless and until that order is disturbed by the revisional authority or otherwise, no surcharge can be demanded from the petitioner. The Commissioner has proceeded on an erroneous assumption that the revision of the order of the Deputy Commissioner would automatically pave the way for demand of surcharge u/s 6-B. But in our view, this result does not follow in law. Firstly, the Deputy Commissioner could not have proceeded with the revision of original assessment order for the purpose of imposing surcharge when the surcharge was already levied by then by a reassessment order. Evidently, the Deputy Commissioner did not touch upon the revised assessment order at that time as he was under the mistaken impression that no reassessment was at all made in relation to surcharge. Secondly, the force and effect of the appellate order dated January 16, 1987 cannot be ignored by the Commissioner. In our view, so long as the order of the appellate authority stands, no demand for surcharge could be raised or directed to be raised. The desired effect of raising a demand for surcharge can only be brought about by revising the order of the appellate authority. But as the revision notice now stands, there is no such proposal. We, therefore, deem it fit to issue a writ prohibiting the Commissioner from proceeding with the levy of surcharge pursuant to the impugned notice. However, we leave it open to the Commissioner, if he so chooses to initiate fresh proceedings for the purpose of revising the order of the appellate authority dated January 16, 1987."

A perusal of the above judgment clearly shows that in that case the authorities, both the Deputy Commissioner and the Commissioner, have proposed to revise the assessment order which was not in existence, in view of the revised assessment framed by the assessing officer himself, long before the proposed revision by the Deputy Commissioner or by the Commissioner of Commercial Taxes. In fact this Court held that revision of the order of the Deputy Commissioner dropping the proposed revision u/s 20(2) would not pave the way for demand of surcharge u/s 6-B. Therefore. the judgment rendered by this Court in the above case is totally under different set of facts and it has no application to the facts of the present case. In the present case what was revised was only the assessment framed by the Commercial Tax Officer after the remand made by the Appellate Deputy Commissioner. The assessments framed are independent assessments, framed after appreciating the evidence that was produced before the assessing officer and not giving effect to any of the directions of the Appellate Deputy Commissioner. The direction if at all given by the Appellate Deputy Commissioner was only to give opportunity to the assessee/dealer for producing evidence to prove its case. Therefore, there were no fetters on the powers of the assessing officer to be exercised while framing the assessment after remand by the Appellate Deputy Commissioner. There is absolutely no merit in the contention of the learned counsel for the petitioner that the Deputy Commissioner has no jurisdiction to revise the assessment order framed by the Commercial Tax Officer, dated January 3, 1995.

Under the above circumstances, all the tax revision cases are dismissed. No costs.