Messrs Hindusthan Motors Ltd. vs Commissioner Commercial Taxes

Sinha, J.—The facts in this case are shortly as follows: The Petitioner is a company incorporated under the Indian Companies Act and carries on the business of manufacture, export and import of motor cars. It is assessed for taxation under the provisions of the Bengal Finance (Sales Tax) Act, 1941. This application relates to the assessment for sales tax in respect of periods 22-6-1946 to 30-8-1946, 30-9-1946 to 31-3-1947 and 31-3-47 to 31-3-1948. For these periods, the Petitioner was assessed for the payment of sales tax. Against the original orders of assessment, the Petitioner preferred appeals to the Additional Commissioner, Commercial Tax, West Bengal. The appeals were numbered 32, 34 and 36 of 1954-55. In the returns filed the Petitioner, claims were, made for exemption from payment of sales tax u/s 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941 (hereinafter referred to as the "Act"). Under that provision of law, sales of goods which are shown to the satisfaction of the Commissioner to be despatched by or on behalf of the dealer to an address outside West Bengal are entitled to exemption. In Appeal No. 32 of 1954-55. an order was made by the Additional Commissioner, on March 8, 1956 by which all claims in respect of transport otherwise than by road were allowed, but 75 per cent of the claim on transport by road was disallowed. The disallowance on this head involved a sum. of Rs. 91.898. In Appeal No. 34 of 1954-55 an order was made by the Additional Commissioner on March 9. 1956. In this case also, the claim on transport otherwise than by road was allowed, but 75 per cent, was disallowed on transport by road. This involved a sum of Rs. 1,65,718. In Appeal No. 36 of 1954-55 an order was made by the Additional Commissioner on March 12, 1956. In this case full deduction was allowed on cars valued at Rs. 2,26,5.60, but 75 per cent was disallowed on trans port by road on cars valued at Rs. 21,30,707. So far as transport otherwise than by road was concerned, a sum of Rs. 1,39,539 was allowed and Rs. 7,29,272 was disallowed. In the body of the order, a copy whereof is to be found in the additional brief at page 16, it has been stated that 75 per cent, of the claim was disallowed on 236 cars valued at Rs. 21,39,707 alleged to have been despatched by "rail". This is inconsistent with the particulars given at the bottom of the order. Mr. Mukherji appearing on behalf of the Respondents says that this is a mistake. I directed the original to be produced and in the original also, the word "rail" is used and not "road". Against the assessment for the four quarters ending 31-3-1948 an appeal was preferred on June 26, 1.956 before the Board of Revenue numbered as Petition No. 106 of 1956. Appeals were also filed in. respect of the other two orders, being Petitions, Nos. 107 and 108 of 1956. It was urged before the Member Board of Revenue, who heard the matter, that the provisions of Sales Tax Rules 21(c) framed under the said Act, came into force only a short time before the period of assessment and the Petitioner had not been maintaining records of despatch to addresses outside West Bengal as required by that particular Rule. It was however stated that, the accounts of the company were. audited regularly and if detailed evidence was required after such lapse of time it would be difficult for the assesses to produce the same. They had, however, sufficient materials in "their possession which went to show that the goods in question were despatched by them, or on their behalf, by different agents as would appear from the terms of agreement with the agents.

The Member, Board of Revenue, in bis Resolution No, 20875-ST. dated 28-11-58 stated as follows:

At first I felt inclined to send the cases back to the Commissioner of Commercial Taxes for farther examination of the evidence on record but that would be a lengthy process and the learned Counsel for the Petitioners suggested that instead of 25 per cent, of the claims for deduction on account of sale u/s 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941, in respect of the first and second periods 50 per cent, might be deducted. I think this is a very reasonable proposition considering the antecedents of the Petitioners and the nature of their business as well as the periods to which the assessment relates. A similar deduction may be made in respect of claims under the same section for the third period also.

As for the Petitioners'' claim for deduction of the proportionate cost of advertisement charges, I am afraid this cannot be allowed, because the taxing authorities are concerned with the sale prices charged by the dealer and not the costing on which such prices are fixed. So this part of the claim of the Petitioners is disallowed.

The petitions are partially allowed. The assessments should be revised after allowing 50 per cent, of the claims for deduction u/s 5(2)(a)(v) of the Act.

As I have said, Section 5(2)(a)(v) of the Act relates to sales of goods which are shown to the satisfaction of the Commissioner to have been despatched by, or on behalf of the dealer to an address outside West Bengal. It will be remembered that the Petitioner claimed transport of goods to a place outside West Bengal by road, as distinct from rail, and other forms of transport. The claims with regard to transport by road were dishallowed to the extent of 75 per cent, and 25 per cent, was allowed. With regard to transport by other means, the claim was allowed in the first two cases, but in the last case it was partly allowed and partly disallowed. That being the background, this order on the face of it would appear to relate to transport by any means whatsoever, because u/s 5(2)(a)(v) of the Act the means whereby goods are transported to a place outside West Bengal is not specified. The matter then went back to the Assistant Commissioner, who purported to make the computation in accordance with the direction of the Board. This computation, dated March 2, 1959 is annexure "B" to the petition. The deduction that was allowed by the Assistant Commissioner was a further 25 per cent, on "road transport "sales" that is to say, 25 per cent on Rs. 21,39,707. In the original orders of the Assistant Commissioner, 25 per cent had been allowed on this heading, and upon remand the order of the Board of Revenue appear to have been construed as allowing a further 25 per cent deduction in respect of road transport only, and not in respect of transport by other means. The despatches by rail and steamer amounted to Rs. 10,62,442, so that if the construction put forward by the Petitioner be correct, then 50 per cent, of the claim upon this heading was disallowed without justification.

Therefore, the point that arises is briefly as to whether the order of the Board of Revenue allows 50 per cent deduction for all forms of transport u/s 5(2)(a)(v) of the Act or only on transport by road. As I have stated, there is nothing on the face of the order of the Board of Revenue, dated November 28. 1958, which confines the exemption only to transport by road. Thereafter, a certificate was filed under Sections 4 and 6 of the Public Demands Recovery Act, in the Office of the Certificate Officer, 24-Parganas, for a sum of Rs. 95,901-3 for arrears of sales tax for the four quarters ending the last day of March, 1958 and notice was served upon the Petitioner u/s 7 of the said Act. The Petitioner preferred objection u/s 9, stating that the Assistant Commissioner had wrongly construed the order of the Board of Revenue, and deposited a sum of Rs. 72,000 which, according to the Petitioner, was the correct sum under the order of the Board of Revenue. On June 9, 1959 the Petitioner made an application to the Board of Revenue directly, a copy whereof is annexure "D" to the petiton. In the petition, it was pointed out that the Member, Board of Revenue, had by his order, dated November 28. 1958, allowed 50 per cent, of the claims for deduction u/s 5(2)(a)(v) of the Act which, therefore, included all means of transport and not by road alone. It was further stated that Rs. 3,333 should have been also allowed as advertisement charges. It was prayed that in order to avoid multiplicity of proceedings, the Board of Revenue should direct the Assistant Commissioner, Commercial Taxes, to allow 50 per cent, of all claims u/s 5(2)(a)(v) and not only in respect of despatches by road, as has been done by order, dated 2-3-59 This matter came up before the Board, which was of the opinion, that an application for clarification did not lie. In the opinion of the Board, misinterpretation or wrong implementation of the Board''s order, may constitute the subject matter of an appeal, and it would have to come in the. ordinary way as described by the Act and Rules, according to which the Commissioner can revise an order passed by the Assistant Commissioner and the Board can revise an order passed by the Commissioner so that no revision petition lay before the Board directly, against the order of the Assistant Commissioner, and the Board could not entertain it at that stage. On July 1959 the decision of the Board was communicated to the Petitioner. On July 25. 1959 the Petitioner sent a letter to the Commissioner of Commercial Taxes, a copy whereof is annexure "A" to the affidavit of Dholichand Lahoti affirmed on July 1, 1960. The above facts were brought to the notice of the Commissioner, Commercial Taxes and it was submitted that in pursuance of the order of the Board of Revenue, the Assistant Commissioner should have allowed 50 per cent, on despatches by rail and steamer and Rs. 3,333 from out of the advertisement charges claimed in respect of vehicles sent by road. On August 31, 1959 a letter was sent to the Petitioner from the Commissioner as follows:

"Ref.: Your petition dated 25th July, 1959.

You are informed that the matter cannot be remedied on such application at this stage.

You may seek for remedy by filing a regular petition u/s 20 of the B. F. (S. T.) Act, 1941 after due compliance with the provisions of rules.

In the meantime, the Petitioner had sent another letter, dated August 12, 1959. which was virtually a religion of tile previous letter, save and except that it was prayed that the Commissioner should revise the order of the Assistant Commissioner, Commercial Taxes, in exercise of power u/s 20(3) of the Bengal Finance (Sales Tax) Act, 1941, allowing 50 per cent, of all claims u/s 5(2)(a)(v), and not only on the despatches by road, as has been done by the Assistant Commissioner. Commercial Taxes. On this letter, a court fee stamp of Re. 1. was affixed. The power of revision is granted u/s 20 of the said Act. Under Sub-section (3) of Section 20. the Commissioner, upon an application made by a party or of his own motion, may revise any assessment made or order passed, by the Assistant Commissioner, under the Act and the Board of "Revenue may in like manner revise any assessment made or order passed by the Commissioner. Rules 74 of the Bengal Sales Tax Rules deal with the procedure to be followed in respect of appeal, revision and review. Rules 75 and 76 lay down how a memorandum of appeal should be drawn up and served. Rule 85 prescribes the fees for making an application. According to sub-Rule (i), the fee to be paid on an application for revision of an order of assessment is 5 per cent, of the amount of tax in dispute. Under Sub-rule (iii), the fee payable upon, an application for revision of any order other than an order of assessment, when presented to the Commissioner is Rs. 25 and under Sub-rule (iv) the fee payable upon any other miscellaneous application or petition for relief is Re. 1. All fees are, of course, payable in court-fee stamps. Under Rule 77, in the case of an appeal, if the Appellant fails to comply inter alia with Clause (iv) of Rule 76 then the appeal may be summarily rejected. Clause (iv) of Rule 76 inter alia lays down that the memorandum of appeal shall be accompanied by the fee prescribed by Rule 85. Under Rule 78, if the appeal is not summarily rejected, the Appellate Officer must fix a date for bearing of the. appeal. Under Rule 80 the provisions of Rules 76 and 77 apply mutatis mutandis for every application for revision. It is, however, not necessary in such a case that the application should be in form XXI.

In this case, what is said is that the application was an application for revision and, therefore, it came under Clause (iii) of Rule 85 and the fee payable was Rs. 25, whereas only a fee of Re. 1 had been paid. As I have stated above, under Rule 77, if the court fee has not been properly paid, the application can be summarily rejected, otherwise it would have to be heard upon notice to the parties. In this case, on September 19, 1959, the following order was communicated to the Petitioner:

It appears that the Assistant Commissioner, Central Section, has interpreted the order of the Board of Revenue correctly. No other interpretation seems to bo possible if the Resolution of the Board is read in its entirety. Hence the undersigned regrets his inability to interfere in the matter. Tills disposes of your petition, dated 18-9-59, as well.

Thereafter the Petitioner made an application, and this rule was issued on September 24, 1959, calling upon the Respondents to show cause why appropriate writs should not be issued directing the Respondents not to give effect to the said order of the Assistant Commissioner, or of the Commissioner, and or directing that the order of the Board of Revenue, dated November 28, 1959, be followed, and for other reliefs.

On behalf of the Respondents, Mr. Mukherjee has argued that the Petitioner followed the wrong procedure throughout, and therefore, if it has lost its right to obtain relief, it has only to thank itself. He says that the matter was sent back by the Board of Revenue to the Assistant Commissioner, who thereupon made a computation, in accordance with the direction given. If the Petitioner was not satisfied, it should have preferred an appeal or a revision against it to the Commissioner, and thereafter if it was still dissatisfied it could have gone up to the Board of Revenue. Instead of doing so, it made an application straightway before the Board of Revenue, and the Board of Revenue correctly pointed out that it could not interfere in the matter and the matter must come to them in the regular course. Thereupon, the Petitioner instead of making an application for revision in the proper manner by complying with the rules, just sent a letter without stamp or without a certified copy of the order and expected that the Commissioner should grant relief. This the Commissioner refused to do. Thereafter an application was made as if it was a miscellaneous application bearing a stamp of Re. 1. Therefore, it must be considered that there was no application for revision at all. The result is that the Petitioner has failed to exhaust its alternative legal remedies and this Court should not interfere.

In my opinion, the matter is not so simple as has been presented on behalf of the Respondents. In this case, the Board of Revenue gave certain directions in its order, dated November 28, 1958, and as I said, on the face of the order, the contention put forward, on behalf of the Petitioner seems to he amply supported. The order is that, instead of 25 per cent, of the claims for deduction on account of sales: u/s 5(2)(a)(v), 50 per cent, should be deducted. As I have stated above Section 5(2)(a)(v) does not refer to any particular means of transport and includes transport by road as well as by rail or steamer. The assessment of the Petitioner involved the question of transport not only by road, but also by rail and steamer. If, therefore, the direction is general, there does not seem to be any reason why the Assistant Commissioner should not comply with it. On the other hand, there is this fact which cannot be denied that 25 per cent, which was allowed, was allowed in two of the assessments on the heading of transport by road. If it is to be argued that the Board of Revenue, by stating that instead of 25 per cent. 50 per cent, should be allowed, had only in mind transport by road, that is something which is entirely absent from the order, and I do not see how this problem is to be solved except by the Board of Revenue itself.

I think it would be useful to refer to a case which is a close parallel, and which came up before the Supreme Court- Commissioner of Income Tax, Madras Vs. Mtt. Ar. S. Ar. Arunachalam Chettiar, . The facts in that case were as follows: The Respondent was a Nattukoti Chettiar and had business in India as well as abroad, including a plantation. The income tax Officer, in making assessments for the year 1941-42, disallowed certain deductions, including the claim for re-plantation expenses as also some bad debts at Singapore. Against this order, the Assessee preferred am appeal to the Appellate Assistant Commissioner who allowed some of the objections but disallowed both these items. Upon ft further appeal to the Appellate Tribunal, the appeal, was allowed in part and both these items were directed to be deducted. The matter then came back to the income tax Officer who then recuperated the assessment. The Assessee was not satisfied that the directions of the Appellate Tribunal were properly followed, and filed an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner was of the opinion that this recomputation was not am assessment u/s 23 and declined to admit the appeal, but expressed his view that the Assessee''s remedy might lie in a miscellaneous application to the Tribunal complaining that the income tax Officer had either misconstrued or had not given effect to, the order of the Appellate Tribunal. The Assessee then brought a miscellaneous application to the Appellate Tribunal. The Appellate Tribunal allowed the application and directed the income tax Officer to revise the compilation. The Commissioner of income tax, Madras, made an application before the Appellate Tribunal u/s 66(1) of the Income Tax Act and prayed that certain questions should be referred to the High Court. The contention was that the Appellate Tribunal had no jurisdiction in law to entertain or pass an order on such a miscellaneous application. The Appellate Tribunal took the view that although there was no specific provision made in the Act by which it could give effect to its order or explain any ambiguity by a later order in any miscellaneous application filed by any party, such power, nevertheless, was inherent in the Tribunal. The Appellate Tribunal thought that a point of law did arise and referred the question to the High Court. The Madras High Court rejected the reference as incompetent on the ground that as there was no appeal pending, the provisions of Section 66(1) of the Income Tax Act did not apply. Thereafter the matter went to the Supreme Court. The Supreme Court upheld the decision of the High Court to the effect that as there was no appeal pending, there could be no reference. There are however expressions of opinion which are relevant to be considered. Speaking about the application to the Appellate Tribunal made as a miscellaneous application, Das, J., said as follows:

It will be recalled that when on 19-11-1945 the Appellate Assistant Commissioner declined to admit the appeal, the Assessee did not prefer any appeal but only made a miscellaneous application before the Appellate Tribunal. There is no provision in the Act permitting such an application. Indeed, in the statement of the case the Appellate Tribunal states that in entertaining that application and correcting the error of the income tax Officer, it acted in exercise of what it regarded as its inherent powers.

Although, the ultimate decision of the Supreme Court was based on the point, that since there was no appeal, there could not be any reference u/s 66(1), still, it will be noted that the Supreme Court did not say that the Appellate Tribunal was wrong in claiming inherent powers in the facts and circumstances of the case. The learned Judge further stated as follows:

The power of the Appellate Tribunal u/s 33(4) is indeed wide, for, on an appeal properly before it, it can make such order as it thinks fit. There fore, the order made by the Appellate Tribunal in this case on 20-8-1943 must be read and Construed as a direction to the income tax Officer to carry but the directions by allowing the two deductions in question.

When the matter again came before the income tax Officer, his function was only to carry out the order of the Appellate Tribunal. He could not otherwise reopen the assessment already made by him u/s 23. Therefore, in carrying Out the directions of the Tribunal and in doing what he did on 26-9-1945, the income tax Officer cannot be regarded as having acted under, Section 23 or Section 27 of the Act and that being the position no appeal lay from that order of the income tax. Officer under 3(1) of the Act.

In the light of these observations, it is clear that the order of the Assistant Commissioner in carrying out the direction of the Board of Revenue was not in the nature of re-assessment Mr. Mukherjee however points out that under the Sales Tax Act all orders are subject to revision and, therefore, a revision lay to the Commissioner. I do not see how the Commissioner is in a position to decide this particular point that has arisen. From the facts stated above, it would appear that the matter having gone up before the Board of Revenue, certain suggestions were made on behalf of the Assessee, and an order was made the relevant part whereof is quoted above. In my opinion, none but the Board of Revenue is in a position to say what is exactly meant. I am inclined to the view that it had inherent powers to direct the Assistant Commissioner to carry out its direction in a proper manner. However, in this case the Board of Revenue decided that the matter should come in the usual manner through the Commissioner. The question is as to whether the Commisisoner has dealt with the application in accordance with law. There is no doubt that an application for revision must be made in a particular form and there should be affixed proper court fee stamps. I have already discussed about the particular rules which apply. In this case, the first letter that was written to the Commissioner did not comply with the rules. With regard to the second letter it appears that an one rupee stamp was affixed, and at no time was this application rejected on the ground that the provisions of Rule 76 or 77 or 85 had not been complied with. Under Rule 77 which applies mutatis mutandis to an application for revision, if the applicant fails to comply with the requirements of Clause (iv) of Rule 76 which inter alia directs that an application should be accompanied by a prescribed fee under Rule 85, then the appeal shall be summarily rejected and if he fails to comply with certain other clauses then an opportunity should be given to the applicant to make necessary amendments. Rule 78 lays down that if the Appellate Officer does not reject the appeal summarily, he shall fix a date for hearing. Although Rule 78 has not been made specifically applicable to applications for revision, still, even under Rule 77 the power to reject the application summarily has not been exercised in this case. What is argued is that this letter with a stamp of Re. 1 was neither an appeal nor a revision and, therefore, the application of these rules did not at all arise. In my opinion, that is a wrong view to take. In the second letter, dated August 12. 1959, it was clearly stated that the Commissioner should revise the order of the Assistant Commissioner, in exercise of his power u/s 20(3) of the Bengal Finance (Sales Tax) Act, 1941, under which any order made by the Assistant Commissioner could be revised by the Commissioner. Now if this application was summarily rejected due to deficits in the payment of court fee, that would be one then. The Commissioner however did not construe it as such. While, with regard to the first letter it had been clearly stated that no action could be taken upon it, with regard to the second letter, with an one rupee stamp, a substantive order was made on September 19, 1959. By this order it was definitely held that the Assistant Commissioner had properly interpreted the order of the Board of Revenue and hence the Commissioner could not interfere. Therefore, obviously, the Commissioner treated this, either as an application for revision or as a miscellaneous application. In my opinion, if he was minded to do so, he should have given an opportunity to the party to be heard. The case made on behalf of the Petitioner based on the order of the Board of Revenue is not one to be summarily rejected. As I have stated above, on the face of the order of the Board of Revenue, all items envisaged by Section 5(2)(a)(v) were included. It was certainly a violation of the rules of natural justice to make such an order without hearing the party. If there is deficiency in the court fees, I don''t see any impediment in asking the Petitioner to rectify the defect. If of course, the Petitioner was heard by the Commissioner then it would have to be held that the proper thing was to go up before the Board of Revenue; from the order, and I do not think that anything could be done in this application. The facts being such as they are, I think I am entitled to set aside the order of the Commissioner ON the ground that the order was made without hearing the Petitioner and therefore, it is bad. The rule is therefore made absolute in part, and the order of the Commissioner, dated September 19, 1959, should be set aside and/or quashed by a writ in the nature of certiorari and the application will now be heard by him in accordance with law.

I think this also accords with the justice of the case. It involves a very large sum of money and the authorities should apply their minds, more to substance than to technicalities. Ultimately, it seems that the matter should go to the Board of Revenue which alone can interpret its order, and whose duty undoubtedly is to see that its orders are carried out. However, that is a matter upon which it is unnecessary to say anything further in this application at this stage. There will be no order as to costs.