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Judgment
Veeraswami, J.—The petitioner, who was a dealer in hides and skins at Madras, made no return under the provisions of the Madras
General Sales Tax Act, 1939, for the year 1954-55. He had not taken out a licence for the year and he was apparently not prompted to file a
return on his understanding of the law that it was only in the case of a licensed dealer in these goods any tax liability arose. In fact this Court also
was of the opinion that dealings in hides and skins not covered by a licence were not chargeable to tax. This view was not accepted by the
Supreme Court which held that such transactions would be liable to multi-point tax u/s 6-A of the Madras General Sales Tax Act, 1939. The
Deputy Commercial Tax Officer, Madras, by his notice dated 26th June, 1956, called upon the petitioner to produce his accounts on a specified
date. On that date the Deputy Commercial Tax Officer scrutinized the accounts but nothing transpired immediately thereafter. From the assessment
file sent up to this Court, it however appears that the Deputy Commercial Tax Officer on the basis of his check of the accounts assessed the
turnover and made a draft assessment order, but kept it at that, pending receipt of instructions regarding the assessment of dealers who had failed
to take out licence. The Deputy Commissioner of Commercial Taxes issued a notice dated 24th April, 1961, followed by a revised notice dated
20th July, 1961, to the petitioner, asking him to show cause why the turnover specified therein relating to transactions in hides and skins not
covered by licence should not be brought to tax, as proposed. This petition for prohibition is to forbid the respondent, the Deputy Commissioner
of Commercial Taxes, from proceeding further pursuant to these notices.
It may be mentioned that in the meantime, as again appears from the assessment files before this Court, the Assessment Commercial Tax Officer
made an order dated 17th October, 1959, fixing the turnover at Rs. 36,56,291-9-4 but stating that the petitioner being a non-licensee, none of the
items of the turnover was taxable. The notice of the Deputy Commissioner purported to be one u/s 32 of the Madras General Sales Tax Act,
1959, which came into force with effect from 1st April, 1959, and to revise the said order of the Assessment Commercial Tax Officer. The order
of assessment dated 17th October, 1959, it is common ground, has not till to date been communicated to the petitioner.
The Rule of prohibition is asked for on more grounds than one. The first of them relates to the effect of repeal of the Madras General Sales Tax
Act, 1939, by Section 61 (1) of the Madras General Sales Tax Act, 1959. In relation to the suo motu proceedings of revision set in motion by the
Deputy Commissioner of Commercial Taxes, it is contended that since no proceeding was pending to assess the petitioner for 1954-55 when the
new Act came into force, there is no longer any power to bring the petitioner to charge. The scope and effect of Section 61 was considered by this
Court in Ratanchand Chordia v. State of Madras (W.P. No. 345 of 1960), and the connected petitions and it is wholly unnecessary to reiterate
what I stated in those petitions. In this particular case it may be observed that even before the new Act came into force the assessing authority had
taken steps to call upon the petitioner to produce the accounts, which he checked and with reference to which he determined the turnover. He,
however, did not pass an order of assessment actually, though a draft order was prepared, as apparently in the state of understanding of the law
then, he wanted to be assured of the instructions of higher authorities as to what should be done in the case of dealers in hides and skins who had
failed to take out licences. On the date, therefore, when the new Act came into force, proceedings against the petitioner were pending, whether
those proceedings were to be regarded as relating to escaped turnover or not. The assessment file clearly indicates that a step having been taken to
assess the petitioner, the proceedings in respect thereof were pending on 1st April, 1959. That being the case, the contention that, as no
proceeding was pending on the date of repeal of the earlier Act, there was no longer jurisdiction to proceed against the petitioner, should be
rejected.
The next contention for the petitioner is that since the petitioner had not filed any return for 1954-55, Rule 17 of the Madras General Sales Tax
Rules, 1939, and the corresponding Section 16 in the new Act and Rule 12 made thereunder would apply. In support of the contention that where
an assessee filed no return at all, it would be a case of escaped turnover attracting the procedure relevant thereto, my attention has been invited to
State of Madras v. Balu Chettiar [1956] 7 S.T.C. 519, and State of Madras v. Ibrahim Kunhi [1956] 7 S.T.C. 617. But it. appears to be
unnecessary to go into the question whether the petitioner''s case was one of escaped turnover or a case of original assessment u/s 9 of the old Act
corresponding to Section 12 of the new Act. Whether it is the one or the other, the point raised is common to both, namely, that the procedure
prescribed under Rule 12 of the Madras General Sales Tax Rules, 1959, has not been followed. Rule 12 requires that if no return is submitted by a
dealer, the assessing authority before taking action under Rule 11, should issue a notice to the dealer and make such enquiry as he considered
necessary. It is not the case for the department that this procedure had been complied with. The contention for the petitioner is, therefore, that
when the procedure prescribed by this Rule was not followed, the assessment order dated 17th October, 1959, was not a valid one and should be
treated as non est. On that basis the further contention is that there was nothing for the Deputy Commissioner to revise. It is true that if the turnover
that was assessed, though to nil tax, by that order is regarded as escaped turnover, it was certainly incumbent upon the department before making
the order to give an opportunity to the petitioner to show cause against the proposal to assess the escaped turnover. On the other hand, if the
turnover was not regarded as escaped turnover but was proposed to be assessed in the ordinary way as original assessment, even so Rule 12
required a notice to go to the petitioner, and the department to make such enquiry as it considered necessary. Due to failure to follow this
procedure, there is force in the contention for the petitioner that the assessment order itself was not valid. But I need rest my judgment in this case
not merely on this point.
The other contention urged for the petitioner, namely, that in the circumstances of the case, the Deputy Commissioner has no jurisdiction at all to
act u/s 32 should in any case, in my opinion, be accepted. It has always been mentioned that the order of the Assessment Commercial Tax Officer
dated 17th October, 1959, has never been communicated to the petitioner down to date. What is the effect of this upon the Deputy
Commissioner''s suo motu power to revise u/s 32 ? The scheme of that Section suggests that the power is directed against the order of the
authorities below the Deputy Commissioner in respect of which the appeal time had expired. Sub-section (2) of Section 32 clearly says that the
Deputy Commissioner shall not pass an order under Sub-section (1) if ""the time for appeal against the order has not expired. "" Certainly in this
case it cannot be said that the time for appeal against the order has expired because the time for appeal would only commence from the date of the
communication of the order, and there being no communication of the order at all to the petitioner, it stands to reason that Section 32(2)(c) has not
been complied with. No doubt, the order dated 17th October, 1959, resulted in nil tax. Nevertheless it was an order of assessment. It cannot be
said that it is only where an order resulted in a charge to tax it was an assessment order and not otherwise. An assessment is but a process of
ascertaining the net turnover chargeable to tax or not after applying the provisions of the Act. That process was beyond doubt applied before the
order dated 17th October, 1959, was made. It may be that where the order resulted in no tax, the assessee might not prefer an appeal. But it
should not be lost sight of that when the order fixes the turnover at a certain figure, it was open to the assessee if he felt aggrieved by such fixation
to take the matter in appeal, though there might be no tax liability under the original order. I think, therefore, that in appreciating the scope of
Section 32(2)(c) the accident of the assessment order actually resulting in no tax liability can have no significance. Quite apart from this, I am also
unable to see how a power of revision can be exercised in relation to an order which has never been communicated to the person to whom it is
intended. It is a necessary requisite to the exercise of the power of revision that the person who would be affected by that should be called upon to
show cause against the proposal. It is patent that this requisite cannot be complied with unless the order had been communicated to the person
affected. From this standpoint also it seems to me that the impugned notices proposing to revise the order, which was not communicated at all to
the petitioner, is illegal and without jurisdiction. It may be recognized that for an assessment order to be valid, it need not necessarily be
communicated to the assessee. But that does not mean that when the power of revision is sought to be exercised, it could validly be done when the
person affected had not been told of the order to be revised.
The learned Additional Government Pleader strongly relied on Periasami Nadar v. State of Madras [1962] 13 S.T.C. 328, and contended that
even in such cases the power of revision could be exercised. But that was not the point which was decided in that case. On facts of course the
order of assessment there was made on 28th December, 1954, which was never communicated to the assessee and the notice proposing to revise
u/s 12 of the old Act was apparently communicated to him on 26th February, 1958. The order in revision was made on 18th September, 1958.
The original order, as here, resulted in no tax, though the relative turnover was fixed. Against the order of the Commercial Tax Officer in revision
the assessee filed an appeal before the Tribunal but unsuccessfully, the Tribunal being of the view that the exercise of the power of revision in the
case was not barred by. limitation .This Court agreed with that view and dismissed the tax revision petition filed by the assessee. The question in
that case was merely approached from the standpoint of limitation, not of jurisdiction. It was observed that if limitation for filing an appeal by an
assessee would commence only from the date of the communication of the order, there was no reason to apply a different principle to the case of
the exercise of suo motu power of revision. The Court, therefore, held that when the original order of assessment was never communicated to the
assessee, no question of limitation could arise. It may be seen, therefore, that the question that has been raised in the instant case was not before
the Court and was not decided in that case.
In my opinion, the suo motu power of revision u/s 32 of the Madras General Sales Tax Act, 1959, to revise an earlier order of assessment
cannot be exercised before and until that order was communicated to the assessee, irrespective of whether such order resulted in tax or nil tax. I
come to that conclusion both from the scheme of Section 32 and also for the reason that no one can be asked to show cause against something of
which he had never had notice or knowledge.
The petition is allowed with costs and the Rule nisi is made absolute. Counsel''s fee Rs. 100.
W.P. Nos. 933 and 935 of 1961. The principle of the decision in W.P. No. 855 of 1961 will equally apply to the facts of these two petitions.
The petitions are allowed and the Rules nisi are made absolute. There will, however, be no order as to costs.