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Judgment
Ramanujam, J.—The only question in this tax case is, whether the turnover exempted by the assessing authority and which was not disputed
before the first appellate authority could form the subject-matter of an enhancement petition for the first time before the Sales Tax Appellate
Tribunal.
The Tribunal, following the decisions in Central Camera Co. (P.) Ltd. v. Government of Madras [1971] 27 STC 112, Easun Engineering
Company Ltd. v. Joint Commercial Tax Officer [1970] 26 STC 486, State of Madras v. Spencer and Company Ltd. [1974] 34 STC 249 and
Nagaraja Overseas Traders v. State of Mysore [1974] 33 STC 315, held that the enhancement petition could not be admitted, as the subject-
matter of the enhancement petition was not before the first appellate authority; nor was it canvassed by the Revenue before it. Therefore the
question involves the determination of the scope and ambit of the power of the Tribunal u/s 36(3)(a)(i) of the Tamil Nadu General Sales Tax Act,
1959, hereinafter referred to as the Act.
Section 36(3) of the Act so far as it is relevant is extracted below :
(3) In disposing of an appeal, the Appellate Tribunal may, after giving the appellant a reasonable opportunity of being heard, -
(a) in the case of an order of assessment -
(i) confirm, reduce, enhance or annul the assessment or penalty or both;
(ii) set aside the assessment and direct the assessing authority to make a afresh assessment after such further inquiry as may be directed; or
(iii) pass such other orders as it may think fit; or
(b) in the case of any other order, confirm, cancel or vary such order :
Provided that at the hearing of any appeal against an order of the Appellate Assistant Commissioner or the Deputy Commissioner, the assessing
authority shall have the right to be heard either in person or by a representative :
Provided further that, if the appeal in involves a question of law on which the Appellate Tribunal has previously given its decision in another appeal
and either a revision petition in the High Court against such decision or an appeal in the Supreme Court against the order of the High Court thereon
is pending, the Appellate Tribunal may defer the hearing of the appeal before it, till such revision petition in the High Court or the appeal in the
Supreme Court is disposed of.
The above sub-section expressly enables the Tribunal in an appeal relating to an order of assessment to confirm, reduce, enhance or annual the
assessment or penalty or both. Thus the Tribunal has been conferred by sub-section (3) of section 36 of the Act the power to directly deal with the
assessment and confirm, reduce, enhance or annul the assessment. It also enables the Tribunal to set aside the assessment and direct the assessing
authority to make a fresh assessment after such further enquiry as may be directed. The said sub-section does not in terms limit the power of the
Appellate Tribunal to deal with the order of the appellate authority alone. Thus the above provision contemplates a case where the Tribunal can
enhance the assessment, if the Revenue files an application for enhancement and if enhancement is called on the facts and circumstances of the
particular case.
The scope of section 36(3)(a) of the Act came up for consideration before a Division Bench of this Court in Deputy Commissioner of
Commercial Taxes v. Panayappan Leather Industries [1981] 47 STC 88. In that case this Court has held that u/s 36(3)(a)(i) of the Act in an
appeal preferred by the assessee, the Appellate Tribunal has got the power to decide the appeal prejudicial to the assessee in the sense, not only
by way of dismissing the appeal but also by way of enhancing the assessment or penalty. It is also held that section 36(3)(a)(ii) under which power
is given to the Tribunal to set aside the assessment itself and direct the assessing authority to make a fresh assessment after such further enquiry as
may be directed also indicates that the power of the Tribunal is not confined to the order of the Appellate Assistant Commissioner in appeal or the
order of the Deputy Commissioner in revision, and that therefore in an appeal preferred by the assessee u/s 36 the entire matter is set at large and
the Tribunal can go into the correctness or otherwise of the order of the assessing authority himself and not the order of the Appellate Assistant
Commissioner along against which the appeal has been filed. In this decision the learned Judges have considered the decisions referred to by the
Tribunal in Easun Engineering Company Ltd. v. Joint Commercial Tax Officer [1970] 26 486, Central Camera Co. (P.) Ltd. v. Government of
Madras [1971] 27 STC 112 and State of Madras v. Spencer and Company ltd. [1974] 34 STC 249 and held that the above decisions will have
no bearing on the interpretation of section 36(3)(a)(i) of the Act. The aforesaid decision of this Court in Deputy Commissioner of Commercial
Taxes v. Panayappan Leather Industries [1981] 47 STC 88 has been followed consistently by various Division Benches of this Court in T.C. No.
1284 of 1977 (State of Tamil Nadu v. Kutty Flush Doors & Furniture Co. (P.) Ltd. [1984] 57 STC 217 judgment dated 15th April, 1982, T.C.
No. 1304 of 1977 (State of Tamil Nadu v. Pyarelal Malhotra [1984] 57 STC 215 and T.C. No. 1564 of 1977 (State of Tamil Nadu v. Rallis
India Limited [1984] 57 STC 218 in all of which the power of the Tribunal to enhance the assessment was upheld, even though the subject-matter
of the enhancement petition filed by the Revenue was not before the first appellate authority. These decisions squarely apply to the facts of this
case.
The learned counsel for the assessee, however, submits that an earlier decision of this Court in Dunlop India Ltd. v. Joint Commercial Tax
Officer [1978] 41 STC 41 and also a Full Bench decision of the Andhra Pradesh High Court in State of Andhra Pradesh v. Sri Venkata Rama
Lingeshwara Rice Mill [1977] 39 STC 57 (FB) take a different view and therefore the decision in Deputy Commissioner of Commercial Taxes v.
Panayappan Leather Industries [1981] 47 STC 88 and the other decisions rendered by this Court subsequently following the same may require
reconsideration. However, it is seen that the decision of the Full Bench of the Andhra Pradesh High Court in State of Andhra Pradesh v. Sri
Venkata Rama Lingeshwara Rice Mill [1977] 39 STC 57 (FB) was considered by this Court in Deputy Commissioner of Commercial taxes v.
Panayappan Leather Industries [1981] 47 STC 88 and this Court held that the aforesaid decision of the Andhra Pradesh High Court ran directly
contrary to the decision of this Court in T. V. Sundaram Iyengar & Sons (P.) Ltd. v. State of Madras [1970] 25 STC 160.
The decision of this Court in Dunlop India Ltd. v. Joint Commercial Tax Officer [1978] 41 STC 41, which is relied on by the learned counsel
for the assessee is not relevant for the present discussion relating to the scope of section 36 of the Act. In that case the scope of sections 32 and
34(1) of the Act came up for consideration. The order which was appealed against to the High Court u/s 34(1) of the Act in that case was an
order of the Board of Revenue merely intimating to the party that it did not intend to exercise its suo motu powers of revision at the instance of the
assessee. Such an intimation was held not to be an order u/s 34(1) of the Act and therefore no appeal would lie to the High Court against such
intimation u/s 37 of the Act. We do not see how that decision is of any relevance for the determination of the power of the Tribunal u/s 36(3)(a)(i)
of the Act.
As a result of the above discussion, we have to hold that the Tribunal is in error in holding that the application filed by the Revenue for
enhancement is not maintainable. We accordingly hold that the enhancement petition filed by the State is maintainable.
Since we have held that the enhancement petition by the State is maintainable, the matter is remitted to the Tribunal for disposal of the said
enhancement petition on merits.
The tax case is ordered accordingly. The Revenue will have its costs from the assessees. Counsel''s fee Rs. 250 (Rupees two hundred and fifty
only).