Venkateswara Metal Industries vs The State of Tamil Nadu

Bhaskaran, J.—This is a tax case appeal by the erstwhile partners of M/s. Venkateswara Metal Industries, against the order of the Board of

Revenue, revising the order of the Appellate Assistant Commissioner and also the order of assessment of the Joint Commercial Tax Officer,

Tondiarpet, withdrawing the exemption granted with respect to certain turnover for the assessment year 1969-70.

For the assessment year 1969-70, the appellants, manufacturers and dealers in M.S. rounds, were assessed on a total and taxable turnover of

Rs. 35,91,555.70 and Rs. 5,26,237.20 respectively by the Joint Commercial Tax Officer, Tondiarpet, by his order dated 19th May, 1975 and he

has exempted to the tune of Rs. 30,65,318.59 relating to sale of M.S. rounds rerolled out of local purchases of scrap. The taxable turnover of Rs.

5,26,237.20 related to sales of M.S. rounds amounting to Rs. 5,23,375.20 and Rs. 2,862 related to sales of machinery. The assessee filed an

appeal before the Appellate Assistant Commissioner disputing the assessment made on the above two items. The Appellate Assistant

Commissioner by his order dated 29th August, 1975 confirmed the assessment made at Rs. 2,862 towards the sales of machinery and out of the

disputed turnover of Rs. 5,23,375.20 he gave relief to a turnover of Rs. 4,51,000. The Board of Revenue by exercising its power u/s 34 of the

Tamil Nadu General Sales Tax Act, 1959, after notice to the erstwhile partners of the appellant since the partnership had since stood dissolved

and after hearing the submissions made by the partners of the assessee, revised the orders of the assessing officer and the Appellate Assistant

Commissioner and determined the taxable turnover at Rs. 35,01,984. The Board of Revenue have come to the conclusion that the sales of M.S.

rounds, manufactured out of local purchases of iron scrap, are also liable to tax though the iron scrap suffered tax earlier in view of the decision of

the Supreme Court reported in Pyare Lal Malhotra''s case [1976] 37 STC 319. The present appeal is against the order dated 30th June, 1978 of

the Board of Revenue by the erstwhile partners of the firm, the appellants.

In the appeal it is contended that the decision reported in State of Tamil Nadu Vs. Pyare Lal Malhotra and Others, is not applicable to the case

on hand and the case of the appellants falls u/s 14(iv)(c) of the Central Sales Tax Act, 1956 read with corresponding item 4(c) of the Second

Schedule to the Tamil Nadu General Sales Tax Act, 1959. But the said contention was given up in the course of the argument. However, the

learned counsel submitted that the assessment was made, granting exemption with respect to certain portions of turnover, as per the then prevailing

decision of the Madras High Court and the revision has been made by the Board of Revenue just on the basis of the subsequent decision of the

Supreme Court. The learned counsel submitted that (1) the Board of Revenue has exceeded its jurisdiction in revising the assessment beyond the

period of limitation prescribed u/s 16 of the Act; (2) that the Board of Revenue, under the guise of revision, cannot pass an original order of

assessment; (3) that the Board of Revenue, in exercise of power of revision, cannot determine the taxable turnover in excess of the figure arrived at

by the assessing officer; and (4) that the Board of Revenue cannot set aside simultaneously u/s 34 of the Act the order of the Joint'' Commercial

Tax Officer as well as the order of the Appellate Assistant Commissioner. For the first two submissions, the learned counsel relied on A. Velayutha

Raja, Raja Engineering Co., Madurai Vs. Board of Revenue (CT), Madras, . For the third submission he relied on S. Rajagopala Naicker Vs. The

Government of Pondicherry, and for the last submission he relied on Babu Manmohan Das Shah and Others Vs. Bishun Das, .

The learned Government Pleader submitted that the period of limitation u/s 16 of the Tamil Nadu General Sales Tax Act will not apply to a

revision u/s 34 of the Act and both are independent sections governed by restrictions mentioned therein as held in D. Padmavathi Vs. The State of

Tamil Nadu, and Kutty Flush Doors and Furniture Co. (P.) Ltd. Vs. The State of Tamil Nadu, . Further the learned Government Pleader

submitted that the facts relating to A. Velayutha Raja, Raja Engineering Co., Madurai Vs. Board of Revenue (CT), Madras, are distinguishable as

held in the later decision reported in East India Corporation Ltd. Vs. The State of Madras, . Further it is submitted that it is not a case of original

assessment by the Board of Revenue but a case of bringing to tax certain turnover to which exemption was granted wrongly. Under the power of

revision the Board can reassess the previous turnover, for which the learned Government Pleader relied on Ram Kanai Jamini Ranjan Pal Pvt. Ltd.

Vs. Member, Board of Revenue, W. Bengal, . As regards the third submission, the learned Government Pleader submitted that it is not a case of

actual revision of the Appellate Assistant Commissioner alone but the order of the assessing officer also and therefore, S. Rajagopala Naicker Vs.

The Government of Pondicherry, is not applicable to this case, which arose under the Pondicherry General Sales Tax Act. Further there is no

substance in the last ground and that the proposal was to revise the order of the assessing officer as well as the appellate authority, and therefore, it

cannot be contended that only one of the orders alone can be revised.

The learned counsel for the appellants mainly relied on A. Velayutha Raja, Raja Engineering Co., Madurai Vs. Board of Revenue (CT),

Madras, which in turn relied on a decision of the Supreme Court in State of Kerala v. Cheria Abdulla and Company [1965] 16 STC 875. Section

16 of the Act gives power to the assessing officer to bring to tax the turnover which escaped original assessment and that power can be exercised

by the assessing officer within a period of five years from the expiry of the year to which the tax relates. u/s 34 of the Act as it then stood, the

Board of Revenue can revise the order of any taxing authority subordinate to it like the assessing officer, Appellate Assistant Commissioner and

Deputy Commissioner within a period of four years from the date of the order sought to be revised (now raised to five years). In A. Velayutha

Raja, Raja Engineering Co., Madurai Vs. Board of Revenue (CT), Madras, the assessee was reassessed on the basis of discovery of materials

subsequent to the original assessment and his taxable turnover was redetermind with an addition of Rs. 11,052. On appeal the Appellate Assistant

Commissioner, deleted the additional assessment of Rs. 11,052. Subsequently, on a revision, the Board, rejecting the claim of the assessee that the

proceedings by the Board were barred by the limitation of five years, passed an original order of assessment refixing the taxable turnover. In that

case, this Court held that :

in passing an original order of assessment the Board exceeded its powers u/s 34 and that the order was also passed beyond time. Therefore, the

order was unenforceable in law.

In that case, subsequent to the appellant getting some partial relief in appeal, the Board revised the original assessment by itself estimating the

escaped turnover. The court held that the power of revision by the Board is subject to the provisions of the Act and section 16 provides a

limitation that the assessment should be revised within a period of five years subsequent to the order for which tax is levied, and therefore the

revision of that assessment u/s 34 of the Act is also subject to the restriction placed u/s 16 of the Act. Thus it was held that the Board of Revenue

cannot revise any order by revision after expiry of five years subsequent to the order by which tax was revised u/s 16 of the Act and it cannot take

the role of the assessing authority, by embarking upon a probing enquiry. The Board could consider only whether the order passed by the authority

is illegal or improper or whether the proceedings are irregular, as laid down in State of Kerala Vs. K.M. Charia Abdullah and Co., which

considered the Kerala General Sales Tax Act and Rules. Factually in this case, the original assessment was not revised u/s 16 of the Act before the

assessment was subject to revision by the Board of Revenue. Moreover, there is no estimate made by the Board of Revenue in the instant case

unlike the cases cited above. This is a case of withdrawing the exemption by the Board of Revenue with respect to a turnover which was wrongly

given by the assessing officer. Here the turnover has been already determined by the assessing officer. The question that was to be decided was

whether the exemption granted by the assessing officer with respect to certain turnover was legally correct. Therefore, the decision cited above will

not apply to this case. In the decision reported in East India Corporation Ltd. v. State of Madras [1973] 31 STC 330 a Bench of this Court

consisting of Ramanujam, J., and V. Ramaswami, J. [as pointed out already, Ramanujam, J., was a party to the earlier decision in [1970] 26 STC

176 (Velayutha Raja v. Board of Revenue)], has held that the power of the original authority u/s 16 and the power of the Deputy Commissioner

u/s 32 (which is analogous to section 34) of the Tamil Nadu General Sales Tax Act are independent powers and controlled by the respective

sections. Therefore the limitation provided u/s 16 of the Act cannot be applied in exercise of power by the Deputy Commissioner u/s 32 of the

Act. It is further held that the power of revision by the Deputy Commissioner is a separate and independent power and can be exercised to revise

an order of assessment within a period prescribed under that section and it can also be revised by the assessing authority by correcting the mistake

or bringing into tax the escaped turnover. The Bench also considered the decision reported in A. Velayutha Raja, Raja Engineering Co., Madurai

Vs. Board of Revenue (CT), Madras, to which one of them was a party and pointed out that in that decision, the original assessment itself was

revised u/s 16 of the Act and that was again sought to be revised u/s 34 and, therefore, the limitation applicable to section 16 was also made

applicable to revision of that assessment u/s 34. Thus the Bench distinguished the decision reported in A. Velayutha Raja, Raja Engineering Co.,

Madurai Vs. Board of Revenue (CT), Madras, .

The revisional order passed by the Board of Revenue is within a period prescribed by that section. Therefore, the power of limitation prescribed

u/s 16 of the Act will not apply to the revision in the instant case. Further in the decision reported in D. Padmavathi Vs. The State of Tamil Nadu,

while considering the scope of section 16 and 32 (the revision by the Deputy Commissioner is analogous to section 34) it is held as follows :

..... the two sections are mutually exclusive and give different powers to different authorities. Therefore, if action could be taken under one section,

it does not follow that action could not be taken under the other. Where it is possible to act under two provisions, the department may resort to the

one instead of the other and it cannot be compelled to proceed under only one of the two provisions. Section 32 provides for the examination of

the order passed by a subordinate authority under certain provisions set out therein. So long as the jurisdiction is exercised with respect to an order

contemplated by the section, there would be no error in the exercise of jurisdiction.

In the decision reported in Kutty Flush Doors and Furniture Co. (P.) Ltd. Vs. The State of Tamil Nadu, it is held that u/s 32 of the Tamil Nadu

General Sales Tax Act the Deputy Commissioner is not confined to the examination of the order proposed to be revised and he can take

information from outside the order for the purpose of effectively exercising his powers of revision and he can further peruse the record extraneous

to the assessment. With respect to similar provision under the Bengal Financial (Sales Tax) Act, 1941 the Supreme Court held in Ram Kanai

Jamini Ranjan Pal Pvt. Ltd. Vs. Member, Board of Revenue, W. Bengal, that the power of revision can easily be equated with the power

exercisable by the appellate authority in an appeal, and therefore, in exercise of revisional power, the Commissioner can reassess the turnover by

roping escaped items of turnover and thereby enhance the gross turnover.

On a consideration of the above decisions, we are of the view that sections 16 and 34 of the Tamil Nadu General Sales Tax Act are

independent and the limitation prescribed u/s 16 will not be applicable to a revision u/s 34 of the Act and in any event, in this case, since the

original assessment was not revised u/s 16 the limitation prescribed u/s 16 will not be applicable to a revision u/s 34. Further we are of the view

that section 34 gives wide power to reassess the turnover as in the case of the original assessing authority. But the facts of the case will clearly

establish that it is not a case of reassessment but a case of bringing to tax by withdrawing certain exemptions granted by the assessing authority in

respect of certain turnover. Therefore the first two submissions made by the learned counsel for the appellants have to fail and accordingly they are

rejected.

The third submission is based on assumption that what was sought to be revised in only an order of the Appellate Assistant Commissioner. But

here we find from the records that notice was given to the assessee by the Board of Revenue proposing to revise both the orders of the assessing

authority as well as that of the Appellate Assistant Commissioner. Therefore, the assessee cannot contend that the Board cannot take away the

benefit granted by the assessing officer under the guise of revising the order the Appellate Assistant Commissioner. In S. Rajagopala Naicker Vs.

The Government of Pondicherry, against an order of assessment passed by the Joint Commercial Tax Officer, Pondicherry, the assessee preferred

an appeal to the Appellate Assistant Commissioner, Pondicherry, who reduced the taxable turnover. The Government in exercise of power of

revision, revised the order of the Appellate Assistant Commissioner and the assessing officer and thereby enhanced the turnover determined by the

assessing officer. On appeal a Bench of this Court consisting of Ismail, J. (as he then was), and Sethuraman, J., while setting aside the order of the

Appellate Assistant Commissioner, held that the Government cannot redetermine the turnover to be in excess of the turnover determined by the

assessing authority, because the appellate order was passed at the instance of the assessee and, therefore, the assessee cannot be placed in a

worse position than what he would have been if he had not preferred the appeal, by modifying the order of the Appellate Assistant Commissioner

to the prejudice of the assessee. Therefore, the said decision cannot have any assistance to the present case which arises under the Tamil Nadu

General Sales Tax Act. Section 37 of the Pondicherry General Sales Tax Act cannot be equated to section 34 of the Tamil Nadu General Sales

Tax Act. Hence, we are of the view that the third submission made by the learned counsel for the appellants has to be rejected and is accordingly

rejected.

As regards the last contention, referring to section 34 of the Act the learned counsel for the appellants submitted that the word ""or"" used therein

implies that the Board of Revenue could revise either the order passed by the assessing officer or the order passed by the Appellate Assistant

Commissioner and the Board of Revenue cannot interfere both the orders at the same time since admittedly it is not a case where there is a merger

of the original order with the order passed by the Appellate Assistant Commissioner. Section 34 of the Act (before amendment) runs as follows :

Special powers of Board of Revenue. - (1) The Board of Revenue may, of its own motion, call for and examine an order passed or

proceeding recorded by the appropriate authority u/s 4A, section 12, section 14, section 15 or sub-section (1) or (2) of section 16 or an order

passed by the Appellate Assistant Commissioner under sub-section (3) of section 31 or by the Deputy Commissioner under sub-section (1) of

section 32 and may make such inquiry or cause such inquiry to be made and subject to the provisions of this Act may pass such order thereon as it

thinks fit.

In tax matters, there may be merger or may not be merger of the original order with the appellate order depending upon the facts of each case. In

this case, admittedly, there is no merger as such. The decision relied on by the learned counsel for the appellants in Babu Manmohan Das Shah and

Others Vs. Bishun Das, related to a case arising under the U.P. (Temporary) Control of Rent and Eviction Act. In the case, the grounds of eviction

provided in the Act, viz., material alteration of the building or alteration which was likely substantially to demolish the value of the accommodation

came up for consideration. In that, the contention raised was that the word ""or"" must be treated as ""and"" and therefore both conditions must be

satisfied for an order of eviction and it was not sufficient that one or the other conditions alone should be satisfied. Rejecting the above contention,

the Supreme Court held :

......... that a provision of a statute must be construed in accordance with the language used therein unless there are compelling reasons such as,

where a literal construction would reduce the provision to absurdity or prevent the manifest intention of the legislature from being carried out.

The above decision will not be applicable to this case since to interpret section 34 of the Tamil Nadu General Sales Tax Act, wherein the power of

revision is given to revise the orders of various authorities, as contended by the petitioner, will reduce the provision to absurdity and therefore, it

cannot be construed that the word ""or"" introduced in between prohibits revision of both orders of the assessing officer and the Appellate Assistant

Commissioner. In fact, in the decision reported in The Yercaud Coffee Curing Works Ltd. Vs. The State of Madras, with respect to a turnover of

six lakhs rupees, the assessing authority accepted the claim of the assessee for exemption for a turnover of five lakhs of rupees and rejected the

assessee''s claim for the balance of Rs. 70,000 and odd. The assessee appealed against the rejection of the assessing authority to the appellate

authority, viz., the Appellate Assistant Commissioner, with respect to Rs. 70,000 and odd for which exemption was denied by the assessing

officer. The Appellate Assistant Commissioner allowed the appeal. Thereafter, the Board of Revenue, in exercise of power of revision u/s 34 of

the Act, set aside the exemption granted to the assessee on the entire turnover of six lakhs and this order was within a period of four years from the

date of the order of the Appellate Assistant Commissioner, but beyond the period of four years from the date of the assessment order. Since u/s

34 of the Act, the Board of Revenue can interfere with an order of assessment made by any authority within a period of four years from the date of

the order, it was held that the Board cannot revise the order of the assessing authority which was beyond the period of four years as prescribed u/s

34 of the Act, in view of the fact that the theory of merger of the order of assessment with the appellate order is not applicable to this case.

Therefore, this Court held that revision of the assessment order beyond the period prescribed u/s 34 of the Act cannot be sustained, but it did not

say that the Board can interfere only with one order and therefore the order is not sustainable. It implies that this Court took the view in the said

decision that the Board can interfere with either the order of the Appellate Assistant Commissioner or the assessing officer or of both provided

each of the order sought to be revised is within a period of limitation provided in that section. Though the said decision is not directly on the point

raised that the Board can interfere with only one order, i.e., either of the assessing authority or of the appellate authority, it indirectly implies that the

Board can interfere with both the orders. Admittedly, both the order of the Appellate Assistant Commissioner and the assessing officer are within

the period of four years from the date of the order passed by the Board of Revenue. We are, therefore, of opinion that the Board can interfere

with both the orders and that order cannot be challenged on the ground that the Board can interfere only with any one of the orders, viz., the

assessing officer or the Appellate Assistant Commissioner. Therefore, we reject the last contention also.

Lastly, the learned counsel for the appellants submitted that the revision was made by the Board of Revenue because of the subsequent

decision of the Supreme Court and the assessee having not collected tax, since no tax could be leviable as per the decision of our High Court then

prevailing the assessee should not be burdened with it. If the appellants have not collected the tax from the vendees it is for the appellants to move

the Government for waiver of tax, if they are so advised although the Board has correctly revised the tax. This Court cannot interfere on the

question of equity.

In the result, the tax case appeal is dismissed. No costs.

Appeal dismissed.