Onkarmal Jwalaprosad and Others vs Commr. of Taxes

Sarjoo Prosad, C.J.—These are applications u/s 32 of the Assam Sales Tax Act of 1947 (17 of 1947) on the basis of which the Commissioner of Taxes, Assam was directed by this Court to state a case. Some of these applications also purport to be under Article 227 of the Constitution of India, but the applications were not pressed on that ground. At the close of the arguments, a faint attempt was made by Mr. P. Choudhuri to press these applications, in the alternative, under Article 227 of the Constitution. But we were unable to entertain the plea. In our opinion, the scope and object of an application under Article 227 of the Constitution are entirely different from those of an application u/s 32 of the Assam Sales Tax Act. We were, therefore, reluctant to treat these applications as under Article 227 of the Constitution and I propose to deal with them as u/s 32 of the Assam Sales Tax Act.

The applications involve a common question regarding the law of limitation Dependent upon the interpretation of Sections 31 and 32 of the Sales Tax Act. They were, therefore, ordered to be heard together. When these applications came up before a Division Bench of the Court presided over by me, we realised that the question involved was almost covered by a Division Bench decision of this Court in-- Rahman Stores Vs. Commissioner of Taxes, The correctness of this decision was, however, seriously challenged by the learned Counsel appearing on behalf of the Petitioners, & prima facie we were inclined to think that the matter required reconsideration. We, therefore, directed that these applications should be heard by a larger Bench.

The relevant facts which give rise to these petitions, discarding minor details, are that the Petitioners moved the Commissioner to revise the order of assessment passed against them u/s 31(1) of the Assam Sales Tax Act. The applications were dismissed by the Commissioner on the ground that they had been filed beyond "ninety days of the date of the order". The Petitioners then moved the Commissioner for a reference to this Court u/s 32(2) of the Act, but the applications for reference were also rejected. In some of the cases, however, it is to be noticed that the Petitioners directly moved the Commissioner u/s 32(2) of the Act for making a references to this Court without invokeing his jurisdiction to revise the orders. But these applications also shared the same fate. They have, therefore, presented the present applications purporting to be under Sub-sections (5) and (6) of Section 32 of the Act.

The substantial contention of the Petitioners is that although the Appellate authority passed his orders on a certain date in respect of the cases, the orders were passed in the absence of the Petitioners, there, being no provision in the law or practice followed by the Taxing authorities for delivering these orders on any fixed date or at any fixed place after intimation thereof to the parties affected. The orders were communicated to the Petitioners'' through post when they hastened to apply for certified copies of them in the regular course and then presented their respective applications u/s 31 or 32 of the Act after obtaining the relevant certified copies. The Petitioners submit that if the period of limitation is counted from the date of communication of the orders to the Petitioners and the time requisite for obtaining certified copies of these orders is taken into account, then the applications presented under Sections 31 and 32 of the Act could not be held to be barred by limitation.

To appreciate the contentions, it is useful to refer to the language of the relevant provisions of the Act. Section 31 of the Act runs thus:

(1) The Commissioner may, either of his own motion or on petition filed with in ninety days of the date of the order objected to, call for and examine the records of any proceedings which have been taken under this Act by any person appointed u/s 8 to assist him and revise, subject to the provisions of this Act and after such enquiry as may be deemed necessary, such order;

Provided that no order prejudicial to a dealer shall be passed under this Sub-section without giving him a reasonable opportunity of being heard.

(2) Any order passed by the Commissioner under Sub-section (1) shall, subject to the provisions of Section 32, be final.

Section 32(2) is as follows:

(2) Within sixty days from the passing of an order of appeal or revision enhancing the assessment of, or otherwise prejudicial to, a dealer, such dealer may by application in writing ac-companied by a fee of one hundred rupees, require the Board or the Commissioner, as the case may be, to refer to the High Court any question of law arising out of such order.

It is contended that the words "ninety days of the date of the order" contained in Sub-section (1) of Section 31 or "sixty days from the passing of an order" in Sub-section (2) of Section 32, must be read as the date on which the order is made known or communicated to the party affected by that order. The words "date of the order" or "the date of passing of an order" are words of well-recognised legal import, and in circumstances where the statute does not provide for any date on which the order is to be delivered or communicated in the presence of the parties, it must obviously mean the date on which the order is made known to the party concerned or is communicated to him. The communication of the order may be according to the method or practice followed by the authorities concerned unless some particular mode of communication is provided. It is thus urged that the order cannot be deemed to be effectively made or passed until it has been communicated to the party affected by it.

In this connection strong reliance has been placed upon the decision of Madhavan Nair, J. in-- Swaminathan alias Chidambaram Pillai Vs. Lakshmanan Chettiar and Another, The question there depended upon the interpretation of Section 77 of the Indian Registration Act, which provided that a suit in a civil Court may be instituted "within thirty days after the making of the order of refusal" by the District Registrar of the registration of any document. It was argued on one side that the expression "making the order of refusal" in Section 77 meant only recording the order of refusal, and the time should be calculated from the date when it was so recorded. On the other hand it was contended that the expression meant not merely the recording of the order in writing by the Registrar but communicating it to the party concerned, in which case, the suit would be held to be in time.

In deciding the, question, Madhavan Nair, J., made this important pronouncement:

The answer to the question must depend on the special circumstances of each case. If the order of refusal is pronounced in the presence of the parties immediately after inquiry by the Registrar so that the person concerned knows that his request has been refused, then there can be no doubt that time should be calculated from the date of the order; but if the order was not so pronounced, and the person concerned does not know that his request has been refused, then it would not be just to hold that time should be calculated from the date of the order. How is an aggrieved party to take any action unless he knows that an adverse order has been passed by the Registrar?

The learned counsel, Mr. Rule Choudhury, who presented the case with thoroughness and ability, has also relied on a long catena of cases of the various High Courts in India in support of his contention. He has urged that there was no provision in the Sales Tax Act or in the rules thereunder for pronouncement of order in open Court. There was no provision even for communication of the order. In. those circumstances, the order should be deemed to have been made only from the date of knowledge of the person affected, because it is from that date that it becomes effective as an ''order''. He points out that merely recording the order in the absence of the parties without giving it any publicity or at least intimating it to those affected, does not make the recording of any avail. The existence of an order necessarily implies that some person has to abide by it and carry out its directions. The person cannot evidently do so unless it is made known to him and he has actual or constructive knowledge of it by some valid process.

His next contention is that, In any event, u/s 47 of the Act he was entitled, as a matter of right, to the exclusion of time requisite for obtaining a copy of the order in computing the period of limitation. The "time requisite" according to the learned counsel, should include not only they period between the date of the application for a copy of the order and the date on which the copy was ready for delivery, but also the period anterior to It running between the date of the order and the date when it was communicated to the Petitioners so as to enable them to apply for certified copies thereof. So long as the party was not aware of the order, he could not obviously apply for a copy thereof. A reference has also been made to the various rules framed under the Act, which require the filing of certified copies in appeals and reviews under the Act, and on this basis it is contended that it was essential to make an allowance for all the time beginning from the date of the recording of the order right up to the date on which the copies were obtained, in computing the period of limitation.

Reliance in this connection has been placed upon the decision of the Privy Council in--Pramatha Nath v. William Arthur Lee'' AIR 1922 PC 352 (C) approving the Full Bench decision of the Calcutta High Court in--''Bani Madhub v. Matungini Dassi'' 13 Cal 104 (D) and a long series of other decisions of the High Courts in India.

It has been lastly urged by the learned Counsel that o''n October 15, 1952, these Sections were amended so as to make it clear that the period of limitation was to be calculated from the date on which the order was made known to the parties. The amendment being in regard to a rule of procedure should be held to have retrospective operation, specially where it was intended to prevent an abuse of a statutory provision. It is, therefore, argued that, judged in the light of the amendment, the applications under Sections 31(1) and 32(2) of the Act were within time and the Commissioner of Taxes acted entirely without jurisdiction in refusing to entertain them.

These are undoubtedly substantial considera-, tions and would have required detailed examination. It appears to me, however, that, in view of the submission made by the learned Advocate-General in reply, on a point, which is in the nature of a preliminary objection, it would be unnecessary for us to occupy ourselves with any minute discussion of the above points urged on behalf, of the Petitioners.

The contention of the learned Advocate-General is that the applications for reference to this Court u/s 32(2), of the Act were not at all maintainable and that being so, there could be no applications presented to this Court, under Sub-section (5) or (6) of that Section. Both Sub-sections (5) and (6) postulate the existence of a valid application u/s 32(2) of the Act as a necessary precursor to the maintainability of applications under those sub-sections. Therefore if it is held that no application for reference lay under Sub-section (2) of Section 32, it must follow as a necessary corollary that the present applications under Sub-sections (5) and (6) of Section 32 also were incompetent.

Sub-section (2) of Section 32, which I have quoted earlier, shows that an application for reference to the High Court will lie if two conditions are found to exist. The first condition is that it must be in respect of "an order of appeal or revision enhancing the assessment of, or otherwise prejudicial to, a dealer", and the second condition is that the reference must be made on a" question of law "arising out of such order". We need not at present trouble ourselves with an examination of the second condition. But the question of importance is--whether the first condition is fulfilled in the present cases; namely, whe ther the orders against which the applications are directed, were orders enhancing the assessment of or "otherwise prejudicial to the dealer". That the orders were not orders, enhancing the assessment, is conceded on all hands. The orders were merely orders rejecting the applications in revision, and even*''the Appellate orders, while they modified the assessments in favour of some of the Petitioners, in regard to some of the items, they affirmed them in other respects.

Then the only question to which we need address ourselves is--whether the orders in question were "otherwise prejudicial" to the Petitioners. In the proviso to Sub-section (1) of Section 31 also it appears that no order "prejudicial to a dealer" shall be passed under the Sub-section without giving him a reasonable opportunity of being heard. The learned Advocate-General contends that an order of the nature passed in these cases merely rejecting an application for revision or modifying the order of, assessment in favour of the dealer, is not an order prejudicial to the dealer. The word "prejudicial" has to be understood in the technical sense of an order which really places the person affected in a worse position than what he originally occupied, This technical meaning of the word "prejudicial" has been assigned to it in various taxing statutes and it has been so interpreted in several important judicial pronouncements, culminating in the decision of the Judicial Committee in--''Commr of Income Tax, Punjab, North-West Frontier and Delhi Province, Lahore v. Tribune Trust, Lahore'', 74 Ind App 306 corresponding to AIR 1948 102 (Privy Council)

In the above case, their Lordships of the Judicial Committee had occasion to interpret the words "prejudicial order" occurring in the context of analogous provisions of the Income Tax Act of 1922, as amended. The provisions in question were Sub-section (1) of Section 33, and Section 66 of the Indian Income Tax Act. The relevant, part of Section 33, as quoted in the judgment itself, runs thus:

(1) The Commissioner may, of his own motion call for the record of any proceeding under this Act which has been taken by any authority subordinate to him or by himself, when exercising the powers of, an Assistant Commissioner under Sub-section (4) of Section 5.

(2) On receipt of the record, the Commissioner may make such enquiry or cause such enquiry to be made and, subject to the provisions of this Act, may pass such orders thereon as lie thinks fit;

Provided that he shall not pass any order prejudicial t''o an Assessee without hearing him or giving him a reasonable opportunity of being heard." This Section evidently bears a striking resemblance to Section 31 of the Sales Tax Act with which we are concerned in the present case.

The other relevant provision, Section 66 of the Income Tax Act, provided in effect that if in the course of any assessment under the Act or any proceeding in connection therewith, other than a proceeding under Chapter 8 of the Act (which deals with offences and penalties) a question of law arises., (1) the Commissioner might either on his own motion or on a reference from any Income Tax authority subordinate to him, draw up a statement of the case and refer it with his own opinion thereon to the High Court (2) that within sixty days of the date on which, he was served r with notice of an order u/s 31 or Section 32 or of an order u/s 33 "enhancing an assessment or otherwise prejudicial to him, the Assessee in respect of whom the order or decision was passed, might, by application, require the Commissioner to refer to the High Court any question of law arising out of such order or decision, and the Commissioner should within sixty days of the receipt of such application, draw up a statement of the case and refer it, with his own opinion thereon, to the High Court. I need not refer to the other portions of Section 66. Here again, it is obvious that there was a provision for a reference to the High Court on a question of law arising out of an order "enhancing an assessment or otherwise prejudicial to the assessee."

In dealing with this aspect of the case, the Judicial Committee were confronted with the very same question with which we are confronted, namely, "Whether, where the Commissioner, acting u/s 33 makes an order refusing to set aside an assessment, his order is "otherwise prejudicial" to the Assessee so that the latter can, under Sub-section (2) of Section 66, require him to refer any question of law arising from such order to the High Court. On behalf of the Appellant the Commissioner of Income Tax, the learned Counsel placed in the forefront of his case the contention that there was no order by the Commissioner prejudicial to the Assessee out of which any of the questions of law decided by the High Court could be said to have arisen. Although on merits their Lordships were of the view that the appeal should be allowed and that it was not strictly necessary to decide the point, yet they felt compelled to give their decision after having heard elaborate arguments and having considered the conflicting decisions of the. Courts in India. They held clearly:

that an order made by the Commissioner u/s 33 can only be said to be prejudicial to the Assessee when he is, as a result of it, in a different and worse position than that in which he was placed by the order under review.

This dictum of the Privy Council categorically supports the contention of the learned Advocate-General as to the meaning of the words "prejudicial order" and applying this test, it is impossible to hold that the orders in the present case fulfilled the requirements of Section 32(2) of the Sales Tax Act, as analysed by me earlier. I do not think it necessary to refer to some of the other cases cited on the point. That being so, the contention must be upheld that these applications under Sub-sections (5) and (6) of Section 32 are also incompetent, there being no valid ap-plication under Sub-section (2) of that Section.

The learned Counsel on behalf of the Petitioners has endeavoured his best to wriggle out of the difficulty. In the first instance, it is argued that there was a definite provision u/s 33A of the Income Tax Act, from which it appears that an order by the Commissioner declining to interfere should not be deemed to be an order prejudicial to the assessee. It is to be observed that the whole of Section 33A was introduced in the Income Tax Act by an amendment under Act 23 of 1941. Section 33, with which the Judicial Committee was concerned, as I have already quoted, contained no such provision and although this amendment may have come into being before the decision of the Judicial Committee, yet their Lordships'' interpretation of the term "prejudicial order" did not depend upon any such amendment, but independently thereof on the provisions as they stood before the amendment. The Privy'' Council decision, therefore, does not follow the amendment nor is it based upon it; but on the contrary the amendment may have followed or anticipated the principle under-lying that decision.

It is next argued that Section 33 of the Act, as quoted in the judgment of the Judicial Committee, did not concede any statutory right to the Assessee to move the Commissioner of Income Tax to revise the order of assessment; it only gave an authority to the Commissioner to call for the record of any case on its own motion and pass such orders after enquiry as he thought fit. Therefore, if after calling for the record, the Commissioner refused to interfere, the Assessee had evidently no statutory right on the authority of which he could apply for a reference to the High Court. It must be conceded that Section 33, as it then was, did not give any right to the Assessee to move the Commissioner, or impose any obligation upon the latter to do so. Accordingly their Lordships took the view that it was intended to provide merely administrative machinery by which a higher executive officer might review the acts of his subordinates and take necessary action on such review. This point did not and could not affect their decision as to the interpretation of the words "prejudicial order" which was quite independent of the consideration, whether the Petitioner had or had not any statutory right to move the Commissioner for review.

In fact, their Lordships clarified the position in no ambiguous terms as their following observation shows:

The Commissioner may act u/s 33 with or without the invitation of the Assessee : if he does so without invitation, it is clear that, if he doesnothing to worsen the position of the assessee, the latter can acquire no right : the review may be a purely departmental matter of which the Assessee knows nothing. If, on the other hand, the Commissioner acts at the invitation of the Assessee and again does nothing to worsen his position, there is no justification for giving him a new right of appeal.

The distinction, therefore, pointed out by the learned Counsel for the Petitioners is of no moment at all.

Lastly it has been argued by the learned Counsel that the pronouncement made by the Judicial Committee on this point should be treated as an obiter. Their Lordships indeed very frankly conceded the position that it was not "strictly necessary to decide the point" but at the same time they observed that "having heard argument on it and considered the conflicting decisions in the Courts of India they have come to a clear conclusion which they think it right to express." After these emphatic observations it is hardly open to us or to any Court to hold that their Lordships'' observations were merely obiter. Whatever they said was evidently well thought out & fully considered. It has been also suggested that the decisions of the Privy Council should no longer be held to be binding on us and some support has been sought from the decision of the Supreme Court in-- Pritam Singh Vs. The State, . On that basis it is further suggested that we should reopen the question and examine the previous decisions of the Courts in India which were in favour of the interpretation sought to be given to the words "prejudicial order" by the Petitioners. The argument does not appeal to me at all. I am not disposed to rake up all that past history after the very clear pronouncement of the Judicial Committee which, even if not completely binding on us, is still entitled to all the respect and attention which it deserves and which it has, on its own merits ''ex proprio vigore'', always commanded.

With great respect, I feel no hesitation in adopting the above decision of the Judicial Committee as laying down the correct standard as to the meaning and import of the expression "prejudicial order" as used in the taxing statutes.

The technical meaning attached to ''the words "prejudicial order", as discussed by me above, is thrown into bold relief if we compare the language of Section 32(2) of the Sales Tax Act with the language of Section 66 of the Income Tax Act, Section 66(1) of the Income Tax Act, as amended, runs thus:

66 (1). Within sixty days of the date upon which he is served with notice of an order under Sub-section (4) of Section 33, the Assessee or the Commissioner may, by application in the prescribed form, accompanied, where application is made by the assessee, by a fee of one hundred rupees, require the Appellate Tribunal to refer to the High Court any question of law arising out of such order and the Appellate Tribunal shall within ninety days of the receipt of such application draw up a statement of the case and refer it to the High Court:

Provided that, if, in the exercise of its powers under Sub-section (2), the Appellate Tribunal refuses to state a case which it has been required by the Assessee to state, the Assessee may, with'' in thirty days from the date on which he receives notice of the refusal to state the case, withdraw his application and if he does so, the fee paid shall be refunded.

In this section, there are no words of limitation like "enhancing the assessment" or "otherwise prejudicial to the assessee" to be found qualifying the order under reference. All that it says is that an application for reference may be made in regard to "questions of law arising out of such order" meaning thereby any order passed u/s 33(4) of the Act. We have examined the provisions of various other Sales Tax Acts obtaining in the different States and in most of them we find that these words of limitation, viz : "enhancing the assessment" or "otherwise prejudicial to the dealer" occurring in Section 32(2) of the present Act, are absent. It is quite obvious that if the intention of the Legislature was to concede a right of reference u/s 32(2) of the Act in respect of all orders, including an order of mere refusal to interfere, then the Section Could have been easily worded on the lines of Section 66, as indicated by me above.

We are regretfully conscious of the fact that the limitations put u/s 32(2) of the Act in question do very drastically cut down the right of the dealer to get references made to this Court on a question of law arising out of an order passed by the Commissioner of Sales Taxes. Such a right can only be available to the dealer according to the interpretation given by us and which is the only correct interpretation, in case the order enhances the assessment or is otherwise prejudicial to the dealer, which, in other words, would be some kind of order which places the dealer in a worse position than the order which the Commissioner, sought to revise. It is difficult for us to say whether the Legislature intentionally sought to circumscribe the right of the dealer or had inadvertently patterned Section 32(2) of the present Act on the old provisions of the Income Tax Act where similar words of limitation occurred. There can be no doubt, however, that the resultant effect is the deprivation of a very valuable right of the dealer which has been conceded under similar statutes prevailing in other sister States; but these are considerations beyond the purview of this Court and meant for the Legislature itself.

In the circumstances, we feel bound to hold that these applications are not maintainable and they must accordingly be dismissed; but we are not satisfied that the Sales Tax Department is entitled to any costs of these applications, which the parties will respectively bear themselves. The Rules are discharged.

Ram Labhaya, J.

I agree.

Deka, J.

I agree.