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Judgment
The issues raised in these petitions filed under Article 226 of the Constitution lie in a very narrow compass. The undisputed facts are:
Petitioner is a registered dealer registered under the provisions of Karnataka Sales Tax Act and Central Sales Tax Act. The assessment years in question are 1986-87 to 1992-93. The Assessing Authority had quantified the tax liability under KST Act for the assessment years 1986-87 to 1990-91 and 1991-92 to 1992-93 by his orders dated 8-3-1994 and 7-5-1994 respectively. Disturbed by the quantification of tax liability, petitioner was before this Court in W.P. Nos. 30131 to 30137 of 1994. This Court while entertaining these petitions had granted an interim order of stay, staying the notice of demand issued pursuant to the orders of assessment. By an order dated 28-7-1995, after hearing the parties to the lis, this Court was pleased to dispose off the writ petitions by setting aside the impugned orders of assessment and the consequential demand notice and further was pleased to remit the matter to the Assessing Authority with a direction to reframe the assessment orders in accordance with law and after affording a reasonable opportunity of hearing to the assessee concerned.
In spite of disposal of these petitions, pleading ignorance of the orders and directions issued by this Court, the Revisional Authority had issued a show-cause notice under Section 21(4) of the Act, inter alia directing the petitioner to show cause why the orders of assessment for the years 1986-87 to 1992-93 should not be revised. Petitioner being of the view that the show-cause notice is no notice in the eye of law, did not bother to file any reply in writing to the show cause notice issued by the Revisional Authority. Since written reply was not filed to the show-cause notices dated 19-3-1996, the Revisional Authority proceeded to complete the proceedings by revising the orders of assessment for the years 1986-87 to 1992-93 by his order dated 5-6-1996. Perplexed by these orders, petitioner by his communication dated 28-9-1996 informed the Revising Authority, the orders made by this Court in W.P. Nos. 30131 to 30137 of 1994 and also requested him to annul the orders made in exercise of his powers under Section 21(2) of the Act. It appears, the Revisional Authority pursuant to such communication had not taken any steps either to cancel or recall the earlier orders made by him dated 5-6-1996.
The Assessing Authority in view of the orders made by the Revisional Authority has issued the impugned notices dated 21-3-2000 under Section 14 of the Act. Primarily aggrieved by these notices, petitioner is before this Court. Incidentally, petitioner questions the correctness or otherwise of the orders made by Revisional Authority for the assessment years 1986-87 to 1992-93 dated 5-6-1996 and the revised demand notices issued by the Assessing Authority dated 3-9-1996. Petitioner also seeks consequential reliefs.
Sri S. Narayan, learned Counsel for petitioner submits that the order made by the Revisional Authority is void, inoperative and ultra vires and not merely voidable and basing on such an invalid order, the Assessing Authority could not have issued tax demand notice dated 3-9-1996 and since the illegal demands were not paid, could not have resorted to coercive measures to recover taxes by issuing impugned notices under Section 14 of the Act. In aid of this submission, the learned Counsel contends that there must be an order made by the Assessing Authority in existence for the Revisional Authority to invoke his powers under the statute and it is not expected of the Revisional Authority to revise a non-existent assessment orders. Therefore, it is contended that the orders made by the Revisional Authority for the assessment years 1986-87 to 1992-93 are without authority of law and the impugned notices issued by the Assessing Authority are highly illegal and invalid. Therefore, requests this Court to grant reliefs sought in these petitions.
Per contra, Sri D''sa, learned Government Advocate for the respondents sought to justify the impugned orders and notices, by contending that since the petitioner had not deliberately brought to the notice of the Revising Authority the orders made by this Court in W.P. Nos. 30131 to 30137 of 1994 in setting aside the orders of assessment made by the Assessing Authority by filing objections to the show-cause notice issued under Section 21(4) of the Act for the assessment years 1986-87 to 1992-93, this Court need not take exception to the orders made by Revisional Authority. The argument looks very attractive but on a deeper consideration, it has no merit. I will advert to these aspects a little later.
On the contention canvassed by the learned Counsels, the following issues arise for consideration and decision of this Court. They are.-
(a) Whether the notices of demand for recovery of tax due from the petitioner for the assessment years 1986-87 to 1992-93 by respondent-Assessing Authority dated 3-9-1996 and 21-3-2000 are legal and valid?
(b) Whether the orders made by the Revisional Authority for the assessment years 1986-87 to 1992-93 is void, inoperative and ultra vires?
(c) What order?
Re. Issue No. (a).-In the present case, the Revisional Authority in exercise of his powers under Section 21 of the Act had revised the orders of assessment made by the Assessing Authority for the assessment years 1986-87 to 1992-93 by his orders dated 5-6-1996. The same was served on the petitioner. For the reasons best known, petitioner did not choose to question the legality or otherwise of the said order before a competent forum, except shooting out a letter dated 28-9-1996 to the Revisional Authority with a request to cancel the order in view of the orders made by this Court in W.P. Nos. 30131 to 30137 of 1994. In obedience to the orders so made by the Superior Authority, the Assessing Authority had taken steps to issue notice of demand dated 3-9-1996 for recovery of taxes due under the Act. Since petitioner did not comply with the terms of demand notice, the Assessing Authority being left with no other alternative has issued the impugned notice of demand dated 21-3-2000 in exercise of his powers under Section 14 of the Act. In my opinion, as long as the orders made by the Revisional Authority is intact i.e., not annulled, modified or cancelled by the superior forum, the Assessing Authority is bound to comply with the orders, direction issued by the Revising Authority in its revisional orders. This is what that has been done by the Assessing Authority by issuing notice of demand for recovery of tax due from the petitioner by his impugned demand notices dated 3-9-1996 and 21-3-2000. Therefore, it is difficult to find fault with the action of the Assessing Authority in issuing the impugned demand notices. However, Sri S. Narayan, learned Counsel for petitioner contends that since the orders made by the Revisional Authority was void, inoperative and illegal, the Assessing Authority could not have issued the impugned notice dated 3-9-1996 and further, could not have resorted to coercive recovery proceedings to recover taxes due from the petitioner by issuing notices under Section 14 of the Act. The legal issue raised by the learned Counsel for petitioner is no more debatable in view of the law declared by the Apex Court in the case of State of Punjab and Others v Gurdev Singh and Another, AIR 1991 SC 2219. In the said decision, the Court was pleased to observe:
"For the purposes of the present cases, it may be assumed that the order of dismissal was void, inoperative and ultra vires and not voidable. But nonetheless the impugned dismissal order has at least de facto operation unless and until it is declared to be void or nullity by a competent body or Court. If an act is ultra vires or void, it is enough for the Court to declare it so and it collapses immediately and automatically. It need not be set aside. The aggrieved party can simply seek a declaration that it is void and not binding on him. A declaration merely declares the existing state of affairs and does not quash so as to produce a new state of affairs. Therefore, the party aggrieved by the invalidity of the order has to approach the Court for relief of declaration that the order against him is inoperative and not binding upon him".
Bearing in mind, the law declared by Apex Court, the facts situation pleaded in the present case is analysed, the only conclusion that could be arrived at is that the Assessing Authority has not committed any error in issuing demand notices dated 3-9-1996 and since petitioner failed to comply with the terms of the notice, in invoking the provisions of Section 14 of the Act to recover tax due from the petitioner since the undisputed position was that the order made by the Revising Authority was intact and in fact undisturbed by a competent body or the Court. In view of all this, in these proceedings whether these notices should be set aside or not, I will answer it in the later portion of this order.
Re. Issue No. (b): To appreciate the submission made by learned Counsels for the parties to the lis, a look at the provisions of Section 21 of the KST Act is necessary. Therefore, they are extracted and they read as under:
"21. Revisional powers of Deputy Commissioners and Joint Commissioners.-1. The Deputy Commissioner may of his own motion call for and examine the record of any order passed orproceeding recorded under the provisions of this Act by an Commercial Tax Officer subordinate to him for the purpose of satisfying himself as to the legality or propriety of such order as to the regularity of such proceeding insofar as it is prejudicial to the interests of the revenue and may pass such order with respect thereto as he thinks fit.
The Joint Commissioner may of his own motion call for and examine the record of any order passed or proceeding recorded under the provisions of the Act by a Assistant Commissioner of Commercial Taxes subordinate to him for the purpose of satisfying himself as to the legality or propriety of such order or as to the regularity of such proceeding insofar as it is prejudicial to the interests of the revenue and pass such order with respect thereto as he thinks fit.
In relation to an order of assessment passed under this Act, the power under sub-sections (1) and (2) shall be exercisable only within a period of four years from the date on which the order was passed.
No order shall be passed under sub-section (1) or sub-section (2) enhancing any assessment, unless an opportunity has been given to the assessee to show cause against the proposed enhancement.
The power under this section shall not be exercisable in respect of matters subject to appeal under Section 20.
Every order passed in revision under this section shall subject to the provisions of Sections 22 to 24 and 25-A, be final".
The salient features of Section 21 of the Act could be briefly stated thus:
The Deputy Commissioner and Joint Commissioner may call for and examine the record of any proceedings under the Act. He may consider that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue. The consideration must be of Deputy or Joint Commissioner and none else. These are administrative functions of Deputy or Joint Commissioner. It is only hereafter that the proceedings acquire a quasi-judicial character. He should then give the assessee an opportunity of being heard. He has also the power to make or cause such inquiry to be made as deems necessary. He can pass such orders thereon as the circumstances of the case justify. The authorities under this section can invoke this section, only if the following factors co-exists:
(i) There should be a proceeding under the Act;
(ii) The Assessing Officer or the officers subordinate to Revisional Authority should have passed an order in such proceeding;
(iii) The Deputy or the Joint Commissioner should consider that the orders made by their subordinate officers, in the case of Deputy Commissioner, the Commercial Tax Officer subordinate to him and in the case of Joint Commissioner, his subordinate officer namely Assistant Commissioner of Commercial Taxes is erroneous and prejudicial to the interest of the revenue.
The basis for the exercise of power of revision is the existence of an order. In other words there must be an order in existence, which the Deputy Commissioner or Joint Commissioner seeks to revise. The other parts of the section is not relevant for the purpose of this case. Keeping in view the only construction that is possible of Section 21 of the Act, let me now once again briefly notice the factual matrix. The undisputed facts are that this Court in exercise of its powers under Articles 226 and 227 of the Constitution in the writ petitions filed by the petitioner earlier had set aside the orders of assessment framed by the Assessing Officer for the assessment years 1986-87 to 1992-93 by its orders dated 8-3-1994 and 7-5-1994 respectively by its order dated 28-7-1995. The order was passed by this Court after hearing the learned Counsels for sales tax department. It is presumed that the learned Government Advocate would inform the department the fate of their cases pending before this Court. It is also not contention of the department that their learned Advocate had not informed the stage of the proceedings in W.P. Nos. 30131 to 30137 of 1994. Therefore, it should be necessarily presumed that the department was fully aware that the orders made by the Assessing Officer for the assessment years 1986-87 to 1992-93 has been set aside by this Court and further, the matter has been remitted to the Assessing Officer for a fresh disposal in accordance with law, after affording a reasonable opportunity of hearing to the petitioner.
In spite of these developments, the Revising Authority had thought fit to revise the orders of assessment framed by the Assessing Officer for the years 1986-87 to 1992-93 on the ground that the said orders are prejudicial to the interest of the revenue by issuing a show-cause notice under Section 21(4) of the Act dated 19-3-1996. Though the notice was served on the dealer, he did not file any written objections inter alia bringing to the notice of the Revising Authority about the orders made by this Court in W.P. Nos. 30131 to 30137 of 1994. Nobody can be blamed for the faux pas. The assessee as well as the department share equal irresponsibility. Though I have said so, still I feel that the department while exercising its administrative as well as quasi-judicial functions should be more vigilant and act in a more responsible manner. They are not expected to equate themselves to a registered dealer and in my opinion, they should not only act and behave in a better way that would be an eye opener to the employee-officers of the other Government departments. This necessarily means that the authorities are expected not only go through the records of the proceedings but the other relevant information which is available on records. They are expected to apply their minds to the records of the proceedings before mechanically performing their quasi-judicial function. The Assessing Authority as well as Superior Authorities are expected to keep track of their litigation pending before this Court and this helps them to update their records and the law declared by this Court on the problems faced by the department.
Now coming back to the fact situation in the present case, on the date when the Revising Authority issued show-cause notice under Section 21(4) of the Act dated 19-3-1996, the orders of assessment made by the Assessing Authority for the years 1986-87 to 1992-93 had already been set aside by this Court by its order dated 28-7-1995. Therefore, firstly the Revising Authority could not have issued the show-cause notice to revise a non-existent assessment order.
Petitioner being of the view that the show-cause notice is fully illegal and invalid, had not replied the same. This may be considered as the assessee''s default. As I said earlier, it was first expected of the Assessing Authority to have informed the Revising Authority the orders made by this Court in W.P. Nos. 30131 to 30137 of 1994 and the fate of the assessment orders made by him for the assessment years 1986-87 to 1992-93. At the same time it was also expected of the Revising Authority to have scanned through the assessment records which would have definitely indicated the orders made by this Court since it is expected of the Assessing Authority to keep the orders made by this Court for the relevant assessment years in the concerned files. Because of this crucial lapse, the Revising Authority has proceeded to revise the orders of assessment for the years 1986-87 to 1992-93, which has already been set aside by this Court by its order in W.P. Nos. 30131 to 30137 of 1994, dated 28-7-1995. In my opinion, in view of the clear language of Section 21 of the Act, the order made by the Revising Authority is nullity in the eye of law, is void ab initio, inoperative and wholly without authority of law. Therefore, the same requires to be declared as void and not binding on the petitioner/assessee. Based on such void orders, the notices issued by the Assessing Authority cannot be enforced and executed. Therefore, those notices requires to be annulled by this Court.
In the result, petitioner succeeds in these petitions. Accordingly, petitions are allowed. Rule made absolute. The impugned orders made by the Revising Authority, revising the orders of assessment for the years 1986-87 to 1992-93 is declared as void and not binding on the petitioner. Consequently the impugned notices of demand to recover tax due from the petitioner issued by the Assessing Authority are quashed. In the facts and circumstances of the case, parties are directed to bear their own costs. Ordered accordingly.