Western India Trading Co. vs State of Karnataka

M. Rama J.-In this sales tax revision petition the following two questions of law arise for consideration:

(1) Whether an appeal which had been preferred by an assessee under section 20 of the Karnataka Sales Tax Act. 1957 against an order of assessment and which had been disposed of following the judgment of this court in the case of Yadalam Lakshminarasimhiah Shetty & Sons v. State of Mysore1 without deciding the other grounds urged by the assesses on merits should have been restored consequent on the amendment of the Central Sales Tax Act by the Central Sales Tax (Amendment) Act, 1969 with retrospective effect by which the effect of the decision in Yadalam Lakshminarasimhiah Setty''s case, 1962 Mys. L.J. 577 was taken away.

(2) Whether there is any period of limitation for preferring an appeal against an order of assessment which is validated by the provisions of the Central Sales Tax (Amendment) Act 1969.

The facts of the case are as follows:

(i) The petitioner is a dealer in manganese ore. During the assessment year 1958-59, there was a sales turnover of Rs. 4,33,500. The petitioner did not file any return under the Central Sales Tax Act (hereinafter referred to as the Central Act). The petitioner claimed that these sales were entirely in the course of export and sales outside the State of Karnataka and consequently not liable to tax under the provisions of the Central Act. This contention was rejected by the Commercial Tax Officer. He levied tax of Rs. 24,565 by an order of assessment dated 21-3-1969 (Annexure-''A'').

(ii) Against the said order, the assessee preferred an appeal before the Deputy Commissioner of Commercial Taxes under Section 20 of the Karnataka Sales Tax Act, 1957 (hereinafter referred as the State Act). In the appeal, the assessee had urged that no tax was leviable on manganese ore under the State Act within the State and that in view of S. 8(1) of the Cen-

13 STC 583=.tral Act, no tax was also leviable under the Central Act. An alternative contention was also raised in the appeal to the effect that all the sales effected by the petitioner were in the course of export, and therefore, in view of the provisions of Art. 286 of the Constitution read with the relevant provisions of the State Act and Central Act, no tax was leviable on the said turnover. The appeal however was disposed of by the appellate authority on 1-12-1965 (Annexure-(B)) on the first ground, viz., that as no tax was leviable on the sales by the petitioner under the provisions of the State Act, no tax was also leviable under the provisions of the Central Act. In doing so, the Appellate Authority followed a judgment of this Court in the case of Yadalam Lakshminarasimhaiah Setty & Sons v. State of Mysore1. Pursuant to this order the tax paid was refunded to the petitioner.

(iii) The decision of this Court in Yadalam Lakshminarasimhaiah Setty''s case was confirmed by the Supreme court in appeal. After the judgment of the Supreme Court was delivered, the Central Act was amended by the Central Sales Tax (Amendment) Act, 1969 (hereinafter referred to as ''the Amending Act''), with retrospective effect, i.e., from the inception of the Central Act. By sub-section (1-A) of Section 6 introduced into the Central Act, all inter-State sales were made liable to tax irrespective of the fact whether tax was leviable under the State Act or not. Section 9 of the Amending Act gave overriding effect to its provisions notwithstanding any judgment or order of any Court. Consequently the decision of this Court and the Supreme Court in Yadalam Lakshminarasimhaiah''s case stood superseded and the orders of assessment stood validated as if they were made under section 6(1-A) of the Act. Sub-sec. (2) of S. 9 however provided that the validation of assessments under Sub-sec. (1) thereof did not preclude the assesses concerned from challenging the correctness of the assessment order as was permissible under the principal Act, i.e., State Act.

(iv) Thereafter, the Deputy Commissioner proceeded to rectify his appellate order dated 1-12-1965. He made an order on 30-11-1970 (Annexure-C). By the said order, he dismissed the appeal which had been allowed earlier and restored the original order of assessment. This order was made by the Deputy Commissioner without notice to the petitioner. Aggrieved by the said order, the petitioner preferred an appeal before the Appellate Tribunal. The Appellate Tribunal set aside, the order of the Deputy Commissioner on the ground that the order was bad for want of notice to the petitioner. The order of the Tribunal is dated 19-5-1972 (Annexure-''D''). By this order the case was remitted to the Deputy Commissioner to initiate proceedings afresh according to the provisions of the State Act.

(v) After the receipt of the order of the Appellate Tribunal, the Deputy Commissioner issued notice dated 20-1-1975 under Section 25-A of the State Act proposing to rectify his earlier order. The assessee contended that the notice issued under S. 25-A of the State Act was barred by time, By this time, the Full Bench decision of this Court in M/s. Gill and Company (P)Limited v. Commercial Tax Officer, II Circle, Gadag, 1973 KLJ 3 had been rendered. In the said case, the provisions of the Amending Act were interpreted. The answers furnished to the questions which were referred for the opinion of the Full Bench were as follows.

"(1) Section 9 of the Central Sales Tax (Amendment) Act, 1969, operates to render ineffective the order of this Court in W.P. Nos. 550 to 554 of 1967 and to render effective and valid the original assessment orders as if they have been made under or pursuant to sub-section (1-A) of Section 6 of the Central Sales Tax Act. 1956.

(2) The said Section 9 likewise renders ineffective any order made by an appellate or revisional authority under the Sales Tax Act following the decision in Yadalam''s case and renders valid and effective the original assessment orders set aside by such authority for the said reason as if the same had been made under or pursuant to sub-section (1-A) of Section 6 of the Central Sales Tax Act.

(3) As the demands made pursuant to original assessment order so rendered are also rendered valid and effective recovery of tax pursuant to such demand does not stand in need of any machinery other than or in addition to the machinery provisions already contained in the Mysore Sales Tax Act, 1957, read with the Central Sales Tax Act."

In view of the above judgment, the Deputy Commissioner made an order on 19-2-1975 (Annexure-E) holding that no rectification was necessary.

(vi) Aggrieved by the said order, the petitioner preferred an appeal to the Appellate Tribunal. The Tribunal by its order dated 16-7-1975 (Annexure-''7'') following the judgment of this Court in Gill and Company''s case held that the original order of assessment stood restored. This order was communicated to the petitioner on 3-7-1975.

(vii) In the meanwhile, the assessing authority itself, obviously in view of the judgment in Gill''s case proceeded to issue notice in form 6 dated 3-6-1975 calling upon the petitioner to pay back the amount of Rs. 23,565 as that amount had already been refunded to the petitioner after the assessment order was set aside by the first appellate order. This was received by the assessee on 7-6-1975. According to the assessee, it preferred no appeal against the said order immediately thereafter as its appeal against the order of the Deputy Commissioner dated 19-2-1975 was still pending before the Appellate Tribunal. But after the said appeal was decided on 16th July 1975 and communicated to the petitioner on 31-7-1975, the petitioner preferred an appeal before the first appellate authority on 28-8-1975 against the notice dated 3-6-1975 issued by the assessing authority. The appellate authority rejected the appeal on the ground that the appeal was barred by time holding that it ought to have been preferred within 30 days from the date of receipt of notice dated 3-6-75 which had been received by the petitioner on 7-6-1975 and consequently, there was a delay of 51 days. The order of the appellate authority is dated 30th March 76 (Annexure-G).

(viii) Aggrieved by the said order, the petitioner preferred an appeal before the Appellate Tribunal. The Appellate Tribunal was also of the opinion that the appeal preferred by the petitioner before the first appellate authority was time barred. Accordingly the appeal was dismissed on 26-4-77 (Annexure-''H''). The petitioner has preferred this revision against the said order.

Sri K. Srinivasan, learned counsel for the petitioner contended that the view taken by the first appellate authority and the appellate tribunal to theeffect that the appeal of the petitioner against the notice dated 3-6-1975 was time barred is not correct as there was no time limit fixed for preferring an appeal against an order of assessment validated under the provisions of the amending Act. In support of his contention, learned counsel relied on subsection (2) of Section 9 of the amending Act which reads as. follows:

9.Validation of assessments:-(1)

xx xx xx (2) For removal of doubts, it is hereby declared that nothing in subsection (1) shall be construed as preventing any person- (a) from questioning in accordance with the provisions of the principal Act, as amended by this Act, any assessment, reassessment, levy or collection of tax referred to in subsection (1) or

(b) from claiming refund of any tax paid by him in excess of the amount due from him by way of tax under the principal Act as amended by the Act."

He submitted that the above provisions specifically preserve the right of the assessee to question the validity of the order of assessment in accordance with the provisions of the principal Act as amended by the amending Act and no period of limitation having been fixed in this behalf in this special provision made consequent on retrospective validation of assessment orders, the period of limitation fixed for filing appeals in the normal course under the State Act was inapplicable. In support of ''his'' interpretation of sub-sec. (2)of Section 9 of the Amending Act, he also relied upon judgment in S.S. Navalgi v. C.T.O., Jamkhandi, W.P. No. 504-506/74 dd. 13.2.74. He also relied on the order of the Supreme Court while disposing of the appeals against the Full Bench judgment of this Court in Gill and Company''s case. The order reads as follows:

"The appeals are disposed of. The Sales Tax authorities will examine the assessment in accordance with the provisions of Section 9 of the Central Sales Tax Amendment Act, 1969 (28 of 1969). The parties will pay and bear their own costs."

On the above basis, learned counsel for the petitioner submitted that the view taken by the appellate authority that the appeal preferred by the petitioner against the notice dated 3-6-1975 was time barred was erroneous and the appeal should have been disposed of on merits. Alternatively it was also contended for the petitioner that when the original order of assessment had been set aside by the first appellate authority relying upon the judgment of this Court in the case of Yadalam Lakshminarasimhaiah Setty, without deciding the other grounds on merits and when the effect of the judgment was super seeded by retrospective amendment made to the Central Sales Tax Act by the amending Act, the order of the first appellate authority was rendered ineffective and consequently the appeal should have been reopened and should have been disposed of on merits after consideration of the other grounds on merits.

Having regard to the facts and circumstances of the case which have been set out in detail above, in our view, the appropriate course for the first appellate authority after the Central Sales Tax was amended with retrospective effect by the amending Act, was to set aside its earlier order dated 19-2-1975, reopen the appeal and dispose of the same on merits as the alternative contention urged for the petitioner viz., that the sales effected by the petitioner during the assessment year 1958-59 were in the course of export and consequently not liable to tax either under the State Act or under the Central Act, had not been considered and decided on merits. This must have been the inevitable course which should have been adopted in view of Section 9(2) of the Amending Act also, which preserved the right of assessees to question the correctness of assessment orders validated by Section 9(1) of the Amending Act under the provisions of the principal Act i.e., the State Act. The Appellate Authority failed to comprehend this aspect. Consequently immediately after the Amending Act came into force, the first Appellate Authority proceeded to pass an order on 30-11-1970 (Annexure-C) rectifying its earlier order by which the appeal had been allowed and confirmed the assessment order and dismissed the appeal without notice to the petitioner and without realising that there were other grounds which had been urged in the appeal. Even after the matter was remitted to it by the order of the Appellate Tribunal dated 19-5-1972 (Annexure-D), the Deputy Commissioner did not proceed to dis-

pose of the appeal in that manner, but issued a notice under Section 25-A or the State Act. The assessee also, instead of insisting on the reopening of the appeal and decision on merits on other grounds available to it, merely objected to rectification on the ground it was barred by time. In this situation when the matter came up in appeal before the Appellate Tribunal, the proper course for the Appellate Tribunal was to hold that as the original assessment order had been validated by the provisions of the Amending Act and as the appeal preferred by the petitioner against that assessment order had been disposed of only following the judgment of this Court in Yadalam Narasimhaiah''s case without deciding the other grounds on merits, the first appellate authority should proceed with the appeal and dispose of the same after considering the other contentions which were available to the petitioner even after the Amending Act came into force. Instead, the Tribunal passed an order dated 16-7-1975 stating that the original order stood restored and did not issue any direction with reference, to theappeal which had already been preferred by the petitioner against the, assessment order. Having failed to realise that the reopening of the first appeal was the proper course, the petitioner preferred another appeal against the notice dated 3-6-1975 issued by the assessing authority after the petitioner received the order of the Tribunal dated 16-7-1975 on 31-7-1975. In this appeal both the first appellate authority and the second appellate authority held that the appeal preferred by the petitioner was barred by limitation on the ground that the limitation began to run from 7.6.75 on which date fresh notice dated 3.6.75 issued by the assessing authority was received by the petitioner . It is in this context the petitioner contends that liberty is specifically reserved for the assessee to question the correctness of the order of assessment validated by the provisions of the Amending Act under sub-sec. (2) of Section 9 of the Amending Act and that in the absence of any period of limitation fixed under the provision, the appeal could not have been dismissed on the ground that it was barred by limitation.

In our view, the appellate tribunal should have held that the first appeal preferred against the order of assessment having been followed by the first appellate authority without deciding the other grounds but following only the ratio of the judgment of this Court in Yadalam Lakshminarasimhaiah Setty''s case, after the assessment order was validated by the Amending Act notwithstanding the judgment in that case, the first appellate authority should have reopened, taken up the appeal on file and should have disposed of the same on merits after considering the other grounds which had been urged in the appeal memo by the petitioner.

We also find considerable force in the contention urged for the petitioner that there is no period of limitation prescribed under sub-sec. (2) of Section 9 of the Amending Act. In fact, such a view has been taken by Venkataramiah, J. (as he then was) in W.P. Nos. 504 to 506 of 1974 referred to earlier. But we find it unnecessary to decide the said question in this revision petition, as in our view the first appeal preferred by the petitioner against the assessment order not having been disposed of earlier after considering the other grounds urged for the petitioner, the same was required to be reopened and disposed of by the first appellate authority after the assessment order which had been set aside by the first appellate authority was validated by the Amending Act, and more so having due regard to the right to challenge the correctness of such assessment preserved for the assessee under Section 9(2) of the Amending Act.

For the reasons aforesaid, we make the following order:

(i) Revision Petition is allowed. The order of the Deputy Commissioner dated 30-3-1976 (Annexure-G) and the order of the Appellate Tribunal dated 26-4-1977 (Annexure-H) are set aside.

(ii) The Deputy Commissioner of Commercial Taxes is directed to take back the appeal bearing No. BG/CST/6/64-65 against the order of the assessing authority dated 21-3-1964 to file and to dispose of the same on merits after considering the contentions not covered by the Amending Act urged by the petitioner in the grounds of appeal.

(iii) No costs.