TMI Blog1967 (11) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... , O.C. Mathur of J.B. Dadachanji and Co. with him), for the appellant. R.M. Hajarnavis, Senior Advocate (S.P. Nayar for R.H. Dhebar with him), for the respondent. -------------------------------------------------- Appeal from the judgment and order dated the 27th January, 1966, of the Bombay High Court in Miscellaneous Application No. 112 of 1963. Civil Appeal No. 637 of 1967. The judgment of the Bombay High Court (TAMBE, AG. C.J., and V.S. DESAT, J.) delivered on 27th January, 1966, is as follows: DESAI, J.-In this petition under Article 226 of the Constitution of India, the petitioner challenges the notice dated 7th January, 1963, issued by the respondent, who is the Deputy Commissioner of Sales Tax, Bombay City Division, under section 31 of the Bombay Sales Tax Act of 1953, on the ground that the said notice is illegal and without or in excess of jurisdiction and suffers from an error apparent on the face of the record. It has prayed for an appropriate writ or order quashing the said notice and restraining the respondent from taking any action against the petitioner in pursuance thereof. The petitioner carries on business of manufacturing vege ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r appeared before the respondent and raised several objections against the revision proceedings proposed to be instituted under section 31 of the Act of 1953 and requested the respondent to drop the proceedings. Since the respondent would not agree with the said request of the petitioner, it has filed the present writ petition challenging the said proceedings. The grounds on which the petitioner has challenged the notice and the proceedings intended to be instituted in pursuance thereof are as follows: It is contended in the first place that a notice under section 31 of the Act of 1953 was not competent, since on the date on which the said notice was issued, viz., the 7th January, 1963, the Act of 1953 was already repealed. Action, if at all it was possible, was only under the Act of 1959 and since the period of limitation for exercising the powers of suo motu revision under the Act of 1959 was a period of two years from the date of the order sought to be revised, the action taken by the respondent was time-barred. In the second place, it was contended that the order which was sought to be revised was in respect of a liability under the Act of 1946 and could only be revised under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear from the provision that in spite of the repeal of the Act of 1953 by the Act of 1959, the former Act continued to be available for the purpose of assessment or for any other purpose connected with or incidental to the assessment relating to any period before the appointed day under the Act of 1959, which was the 1st of January, 1960. If the Act of 1953 before its repeal therefore was available for the purpose of issuing the notice in the present case, the repeal of the Act of 1953 did not render it unavailable. Mr. Palkhivala, learned counsel who appears for the petitioner, has tried to argue that under the provisions of clause (a) of sub- section (1) of section 77 of the Act of 1959, the availability of the Act of 1953 is only in respect of the substantive rights or the corresponding liabilities and obligations under the Act and not in respect of the procedural provisions. He argues that inclusion of the words "and all rules, regulations, orders, notifications, forms and notices issued under those laws and in force immediately before the appointed day" indicates that procedural provisions of the Act of 1953 are not available after the repeal. We are, in the first place, not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or arrears thereof shall be imposed and recovered so far as may be in accordance with the provisions of the Act of 1953 and consequently a proceeding for the recovery of escaped tax could be instituted under the provisions of the Act of 1953 in respect of the tax liability escaped under the Act of 1946. The facts of the other Division Bench decision which followed this case were similar. There an assessment order under the Act of 1946 was sought to be revised by the Assistant Collector under section 31 of the Act of 1953 after a lapse of three years from the date of the order sought to be revised, and it was contended that the notice was not competent to be issued under the Act of 1953. It was held, following the earlier case already referred to, that under sub-section (2) of section 48 the power could be exercised under the Act of 1953 and since there was no limitation to the exercise of the said power under the Act of 1953 the notices issued were competent and also not barred by time. In our opinion, these two decisions dispose of the contentions of the petitioner that the notice could not be issued under section 31 of the Act of 1953 and also the further contention that the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the respondent under section 31 of the Act of 1953 must also be regarded as a notice in the pending assessment proceedings. Under this part of the saving clause of section 48 in respect of all legal proceedings which are pending, the Act of 1946 and not the Act of 1953 that has to operate. Consequently, for the purpose of suo motu revision in respect of an assessment, which is still pending, powers could be exercised only under the Act of 1946 and not under the Act of 1953. We are not inclined to agree with this submission of the learned counsel. In the first place, there was no legal proceeding pending in respect of the part of the assessment order, in respect of which the notice in the present case is issued on the 7th January, 1963. As we have already pointed out, the assessment order was first passed on the 2nd June, 1954, by the Sales Tax Officer, by which he had brought to tax the turnover representing the despatches as well as the sales, which were claimed to be in the course of inter-State trade. In the appeals against the said orders, which were taken by the petitioner, the despatches were excluded and the tax on the inter- State sales was retained. The revision, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Palkhivala was also permitted to argue this point in the said case, since it was involved in his case also. It is not therefore necessary to deal with it in any great detail again. As has been pointed out by the Supreme Court, which was dealing with the powers of revision of the Deputy Commissioner under section 12(2) of the Madras General Sales Tax Act, it was not right baldly to propound that in passing an order in exercise of his revisional jurisdiction, the Deputy Commissioner must in all cases be restricted to the record maintained by the officer subordinate to him and can never make an inquiry outside the record. The power of revision under the Madras General Sales Tax Act, which was being considered by the Supreme Court in that case, provided that the Deputy Commissioner may call for and examine the record of any order passed or proceeding recorded under the provisions of the Act by any officer subordinate to him for the purpose of satisfying himself as to the legality or impropriety of such order or as to the regularity of such proceedings and may pass such order with respect thereto as he thinks fit. The question before the Supreme Court was whether in pursuance of this po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay Sales Tax Act of 1946 as amended by the Bombay Act 48 of 1949, inasmuch as it has not applied his mind as to whether there is or there is not included in the value of the said despatched goods the value of purchases of raw materials and processing materials, which the assessee has purchased on the strength of his registration certificate, without paying tax thereon and used in the manufacture of the goods. As has been pointed out by the Supreme Court in the case to which we have already referred, if the revising authority on the examination of the order and the record is satisfied that the order is either illegal or improper, it would have jurisdiction to pass an order directing a further inquiry with a view to correct the order. The ground pointed out by the respondent in the present case is, in our opinion, a ground which would show prima facie at any rate that the order passed by the appellate authority, permitting the exemption in respect of the entire amount of despatches, is erroneous, since it is reasonably possible that in the manufacture of the goods despatched the petitioner had utilised some of the raw material and processing material, which it had purchased in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is issued after a long lapse of time, quash the said notice. When the petitioner appears before the authority and produces such material as it can, the authority may consider the same having regard to the fact that the petitioner is likely to be handicapped by the lapse of time in producing further and better material before him. At any rate that will be a matter relating to the merits, which will be put by the petitioner before the assessing authority and has nothing to do with the jurisdiction of the assessing authority to issue the notice, with which alone we are concerned in the present case. As to the last contention of Mr. Palkhivala that there was no material before the revisional authority on the basis of which it could have issued the notice and that it has been issued merely on conjectures and surmises, we do not think, having regard to what is stated in the notice, that such is the position. The ground on the basis of which the notice has been issued is that the assessing authority, which allowed exemption in respect of the entire despatches, has overlooked a particular statutory provision which had to be borne in mind. Inasmuch as no investigation has been even mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Assistant Collector of Sales Tax, who, in his appellate order dated 29th October, 1956, accepted the claim of the appellant in respect of the despatches to its various depots or branches in other States in India, but disallowed the claim in respect of the alleged inter-State sales. As a result of partially allowing the claim of the appellant, the Assistant Collector reduced the tax imposed by a sum of Rs. 19,240-15-6 for the period between Ist April, 1948, to 31st March, 1950, and Rs. 97,208 for the second period between Ist April, 1950, to 31st March, 1951, and directed refund of these amounts to the appellant. The revisions filed by the appellant against the rejection of its claim in respect of inter-State sales were still pending, when, on 7th January, 1963, a notice was issued by the Deputy Commissioner of Sales Tax, Bombay City Division, in Form XXIV under section 31 of the Bombay Sales Tax Act, 1953, intimating the appellant that he proposed to revise suo motu the appellate orders passed by the Assistant Collector of Sales Tax in so far as he had allowed deduction in respect of the entire goods despatched to its branches in other States outside Maharashtra, because, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eyond the record that is available to the assessing authority and the basis should be found on the record already in existence." We are unable to accept this principle laid down by that High Court as correct. Whenever a power is conferred on an authority to revise an order, the authority is entitled to examine the correctness, legality and propriety of the order and to pass such suitable orders as the authority may think fit in the circum- stances of the particular case before it. When exercising such powers, there is no reason why the authority should not be entitled to hold an enquiry or direct an enquiry to be held and, for that purpose, admit additional material. The proceedings for revision, if started suo motu must not, of course, be based on a mere conjecture and there should be some ground for invoking the revisional powers. Once those powers are invoked, the actual interference must be based on sufficient grounds, and, if it is considered necessary that some additional enquiry should be made to arrive at a proper and just decision, there can be no bar to the revising authority holding a further enquiry or directing such an enquiry to be held by some other appropriate autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercised in the manner provided. It would not be open to the revising authority to assume that power." (pages 886-887). In the present case, the notice issued by the Deputy Commissioner of Sales Tax, on the face of it, discloses the reasons which led him to take proceedings for exercising his revisional power suo motu, and it cannot be said on those facts that he was acting merely on conjecture. The Deputy Commissioner has not yet proceeded further under the notice to make the assessment. We have no doubt that, when the Deputy Commissioner does make an enquiry, if any, for the purpose of exercising his revisional powers, he will keep within the limitations indicated by this Court in the case cited above. The notice cannot be quashed or the proceedings restrained merely on the ground that the Deputy Commissioner may have to hold some enquiries in order to properly exercise his revisional jurisdiction. Mr. Desai on behalf of the appellant emphasised the circumstance that in section 12(2) of the Madras General Sales Tax Act, which was considered by this Court, the Deputy Commissioner's power was expressed by stating that he may pass such order as he thinks fit, while no such words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the laws referred to therein,- (a) those laws (including any earlier law continued in force under any provisions thereof), and all rules, regulations, orders, notifications, forms and notices issued under those laws and in force immediately before the appointed day shall, subject to the provisions of section 42, continue to have effect for the purposes of the levy, assessment, reassessment, collection, refund or set-off of any tax, or the granting of a draw-back in respect thereof, or the imposition of any penalty, which levy, assessment, reassessment, collection, refund, set-off, draw-back or penalty relates to any period before the appointed day, or for any other purpose whatsoever connected with or incidental to any of the purposes aforesaid; * * * * (3) Without prejudice to the provisions contained in the foregoing sub-sections and subject thereto, section 7 of the Bombay General Clauses Act, 1904, shall apply in relation to the repeal of any of the laws referred to in section 76 as if the law so repealed had been an enactment within the meaning of section 7 of that Act." (We have only quoted the portions of section 77 with which we are concerned). The effect of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 of the Act of 1946. This is so, because, when the Act of 1946 was repealed by the Act of 1953, similar provisions were made in the Act of 1953 to continue in force the provisions of the Act of 1946 in respect of rights and liabilities which may have accrued or have been incurred under the Act of 1946. Section 48(2) and section 49(1) clearly contained provisions indicating that, in respect of a liability to tax under the Act of 1946, the rights and liabilities of the assessee had to be determined in accordance with the provisions of the Act of 1946 and all legal proceedings or remedies in respect thereof had also to be taken under the same Act. Consequently, the Deputy Commissioner, in seeking to exercise revisional powers against the order of the Assistant Collector passed under the Act of 1946, had to proceed under section 22 of the Act of 1946. That, however, is not at all material, because the provisions of section 22 of the Act of 1946 are quite similar to those of section 31 of the Act of 1953. The mere incorrect mention of section 31 of the Act of 1953 in the notice is immaterial. The Deputy Commissioner has the jurisdiction and power to revise the order under section 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the end of the chargeable accounting period concerned, it would be totally unreasonable to hold that the first assessment of tax can be made after the expiry of that period. The case before us relates to exercise of revisional powers and does not deal with the question of the first assessment to be made when the return is initially filed by an assessee. In fact, when a revisional power is to be exercised, we think that the only limitations, to which that power is subject, are those indicated by this Court in K.M. Cheria Abdulla Co.'s case [1965] 16 S.T.C. 875. These limitations are that the revising authority should not trench upon the powers which are expressly reserved by the Acts or by the Rules to other authorities and should not ignore the limitations inherent in the exercise of those powers. In the present case, the Deputy Commissioner, when seeking to exercise his revisional powers, is clearly not encroaching upon the powers reserved to other authorities. Under the Act of 1946, the first assessment is made by the Sales Tax Officer under section 11. If information comes into his possession that any turnover in respect of sales or supplies of any goods chargeable to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st, in our judgment, apply for the same reasons to the exercise of revisional jurisdiction, and that jurisdiction must be exercised within a reasonable period, and the yard-stick of reasonableness will be the period prescribed for reassessment." It appears that, in view of the fact that proceedings for reassessment would have been taken under section 11A in that case and, instead, revisional powers were sought to be exercised, that Court held that the exercise of such revisional powers must be governed by the same limitation which applied to the exercise of power of reassessment. In fact, the correct principle that should have been applied in that case is the principle mentioned by us earlier laid down in K.M. Cheria Abdulla Co.[1965] 16 S.T.C. 875. The revision should have been held to be incompetent on the ground that the power was sought to be exercised for assessment of escaped turnover which had not been assessed at all at the initial stage of assessment under section 11 and proceedings under section 11A could have been competently initiated for bringing that turnover to tax. Instead, the Court equated the proceeding in revision with the proceeding for reassessment and app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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