TMI Blog1993 (11) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... July 20, 1988. On appeal by the petitioner, the appellate authority set aside the said orders by order dated January 12, 1989 and remanded the matters for fresh assessment. On such remand, the petitioner filed revised returns and the assessing authority passed fresh orders of assessment respectively dated April 30, 1992, September 30, 1991, May 25, 1992, May 26, 1992 and May 26, 1992. In these orders, the assessing authority deducted the following amounts being the packing charges relating to cement, from the total turnover and thereby excluded the said amounts from the taxable turnover of the assessee: Year Amount 1980-81 Rs. 2,05,39,940.25 1981-82 Rs. 2,09,00,929.12 1982-83 Rs. 2,50,86,247.62 1983-84 Rs. 3,58,10,709.18 1984-85 Rs. 6,01,74,906.93 3.. The assessing authority thereafter issued notices dated December 23, 1992, under section 25-A of the Act proposing to rectify the assessments completed as aforesaid, by including packing charges in the taxable turnover of the petitioner. The assessing authority proposed to rectify the orders of assessment on the ground that there was an error apparent from the record regarding packing charges, for the following reasons: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of passing the assessment orders, and the mere fact that subsequently the Supreme Court had resolved and settled the issue did not obliterate the existence of such debate, doubt and conflict prior to such decision and in such circumstances, there was no jurisdiction in the assessing authority to rectify any order, under section 25-A. He also submitted that the alleged mistake could not be made out except upon a long and elaborate argument and further investigation of facts. He, therefore, submitted that the rectification orders were without jurisdiction and therefore liable to be set aside in writ proceedings, even though remedy by way of appeal was available under the statute. 6.. Sri H.L. Dattu, learned Government Advocate, appearing for the respondent contended that excluding packing charges from the taxable turnover was clearly a mistake apparent from the record having regard to the decision of the Supreme Court in Ramco Cement Distribution Co. Pvt. Ltd. v. State of Tamil Nadu reported in [1993] 88 STC 151 and the decision of this Court in Visvesvaraya Iron Steel Ltd. v. Deputy Commissioner of Commercial Taxes reported in [1991] 83 STC 305; and therefore, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eparately; that rule 6(4)(ft) clearly authorised the deduction of all packing charges from the total turnover, where such charges were charged by the dealer separately, without including the same in the price of goods sold; that even if packing was completed before sale, so long as the price of packing was not included in the sale price of cement, but separately charged, rule 6(4)(ff) would apply; and therefore packing charges were rightly excluded from the taxable turnover, when the orders of assessment were made. The petitioner also sought support from the provisions of the Cement Control Order, 1967, which was in force at the relevant time. Reference was made to clause 8 which specified the price of naked cement and separately provided for packing charges under the proviso. The inference sought is that packing was not a compulsory concomitant of sale of cement, but only an optional addition. He referred to the following observations of the Supreme Court in Raj Sheel v. State of Andhra Pradesh reported in [1989] 74 STC 379: "It is commonly accepted that a transaction of sale may consist of a sale of the product and a separate sale of the container housing the product with respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the taxable turnover; and the assessing authority having held that packing charges were to be excluded in arriving at the taxable turnover, that finding of fact, cannot be sought to be rectified, merely on the basis of a subsequent decision of the Supreme Court; and that there was no factual or legal basis for including the packing charges in the taxable turnover, by way of rectification. 10.. In the case of Visvesvaraya Iron Steel Ltd. [1991] 83 STC 305, a Division Bench of this Court had occasion to consider an identical question. In that case, for the relevant assessment years, the assessee claimed deduction in regard to packing charges under rule 6(4)(ff). The assessee was a manufacturer of cement. The assessing authority initially allowed such deduction. His successorin-office found the allowance of deduction impermissible and proposed to rectify the same under section 25-A. After notice, the assessment orders were rectified in the light of the decision of the Madras High Court in Natarajan and Sons v. State of Tamil Nadu [1977] 39 STC 443. The said rectification was challenged and ultimately came up in revision before this Court. This Court held: "It is common knowledge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods sold' make it clear that such charges are not to be deducted unless the pre-requisite for their deduction, viz., that these charges should not have been included in the price of the goods sold, is satisfied, and such charges have been included of the Control Order as part of the price of the goods sold." The Supreme Court approved the view that the packing of cement was to effectuate the sales and therefore, packing charges formed an integral part of the sale price in the following words: ".......Nor will, for the reasons earlier discussed in relation to freight charges, the assessee be in a position to claim a deduction in respect of these charges by virtue of rule 6(cc) of the Tamil Nadu General Sales Tax Rules. In our view, this position has been correctly set out, applying the decision in the case of Rai Bharat Das Bros. [1988] 71 STC 277 (SC) in State of Tamil Nadu v. Vanniaperumal Co. [1990] 76 STC 203 (Mad.) [FB], Dalmia Cement (Bharat) Ltd. v. State of Tamil Nadu [1991] 81 STC 327 (Mad.) and Dalmia Cement (Bharat) Ltd. v. State of Tamil Nadu [1991] 83 STC 442 (Mad.). We are, therefore, of the opinion that the packing charges and excise duty thereon cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es relating to cement, having regard to the observations in Raj Sheel's case [1989] 74 STC 379 (SC) cannot be accepted. 12.. It is true that the decision of the Supreme Court in Ramco's case [1993] 88 STC 151 was rendered subsequent to the dates of assessment orders in these cases. But even before the date of assessment orders, there was no doubt regarding the position that packing charges were to be included in the taxable turnover, having regard to the Division Bench ruling of this Court in Visvesvaraya's case [1991] 83 STC 305. Thus the first point has to be answered in the affirmative. Re: Point (ii): 13.. The assessment orders do not disclose any reason as to why packing charges were deducted from the total turnover. There is neither any reference to the nature and character of the transaction nor consideration of the circumstances relating to packing charges, nor rule 6(4)(ff) or satisfaction or requirements of rule 6(4)(ff). The assessment orders are non-speaking orders, in regard to packing charges. Except describing the amount deducted from total turnover as "packing charges" there is no reference to "packing charges" anywhere in the assessment orders. In fact, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent on the record" amenable to rectification under section 35 of the Income-tax Act. To quote the principle in the words of the Supreme Court: ".......The same argument is put in another form by contending that the finality of the order passed by the Income-tax Officer cannot be impaired by the retrospective operation of the relevant provision. In our opinion, this argument does not really help the respondent's case because the order passed by the Incometax Officer under section 18A(5) cannot be said to be final in the literal sense of the word. This order was and continued to be liable to be modified under section 35 of the Act. What the Income-tax Officer has purported to do in the present case is not to revise his order in the light of the retrospective amendment made by section 13 of the Amendment Act alone, but to exercise his power under section 35 of the Act; and so the question which falls to be considered in the present appeal centres round the construction of the expression 'mistake apparent from the record' used in section 35. That is why we think the principle of the finality of the orders or the sanctity of the existing rights cannot be effectively invoked by the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that case, the Income-tax Officer passed an order on July 27, 1955, levying an additional tax on the excess dividend declared by the assessee-company. Thereafter the Bombay High Court in Khatau's case [1956] 30 ITR 841 held that the levy of tax on excess dividend was illegal. In pursuance of it, the assessee applied to the Income-tax Officer for refund of tax paid, that is, virtually applied for rectification. The Income-tax Officer declined to accede to the said request on the ground that the assessment order had been passed prior to the judgment in Khatau's case [1956] 30 ITR 841. On appeal, the Commissioner held that the application for rectification was not maintainable, since the error was not apparent from the record, but was one which could be made out only by a long process of elucidation and debate. The assessee moved the High Court of Bombay under article 226, praying for an order compelling the Income-tax Officer to revise the order rejecting the application for rectification. The High Court granted the prayer, thereby directing rectification, on the basis of the later judgment in Khatau's case [1956] 30 ITR 841 (Bom). The Revenue took up the matter to Supreme Court. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he existing rights which are said to have been acquired by her under the initial order." 18.. In A.S. Gauraya v. S.N. Thakur AIR 1986 SC 1440, the Supreme Court had occasion to consider the binding nature of its judgment. When a judgment of the Supreme Court was brought to the notice of a Sessions Judge, he held: "So far as article 141 of the Constitution of India and the ratio of these decisions are concerned, there can be no dispute whatsoever. At the same time a pronouncement as to the position of law in a judicial decision by the Supreme Court cannot be treated as a sort of legislation by the Parliament giving retrospective effect as to enjoin reopening of all matters which have already become final and closed." The Supreme Court held: "The observations of the Sessions Judge, extracted above, discloses a confusion of thought about the effect of a decision rendered by this Court and a misreading of article 141 of the Constitution. There is nothing like any prospective operation alone of the law laid down by this Court He got rid of the effect of this Court's judgment by observing that a decision by this Court cannot be treated as 'a sort of legislation by Parliament' and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court. If such is the clear position in law, we cannot see any difficulty in one taking advantage of a provision for rectification of a mistake by the original authority in the same way as he may take advantage of a provision for preferring an appeal against his order, provided the circumstances are such that he can bring the case within the four corners of the provision for rectification." He then proceeded to examine the scope of the words "mistake apparent on the record" and held: "First of the conditions for rectification under rule 38 of the Mysore Sales Tax Rules or under section 35 of the Indian Income-tax Act is that the mistake sought to be rectified must be a mistake apparent on the record. What mistakes are mistakes apparent on the record is a matter covered by several decisions of the Supreme Court and High Courts. Although the position may not be capable of a general statement of universal application, two considerations which are considered well established are that a claim that there is a mistake which is capable of being made out only upon further evidence or investigation or further facts can never be regarded as a claim that there is any mistake a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down by Rajagopala Ayyangar, J., who spoke for the court in Tungabhadra Industries Ltd. v. Government of Andhra Pradesh AIR 1964 SC 1372. Without intending to deal with that question exhaustively his Lordship said that where without any elaborate argument one could point to the error and say here is a substantial point oil law which stares one in the face, and there could reasonably be no two opinions entertained about it, a clear case of error apparent on the face of the record would be made out. Article 141 of the Constitution provides that the law declared by the court, shall be binding on all courts within the territory of India. Hence, where there is a decision of the Supreme Court bearing on a point and where a court has taken a view on that point which is not consistent with the law laid down by the Supreme Court, it needs no elaborate argument to point to the error and there could reasonably be no two opinions entertained about such error. Applying the above test laid down by Rajagopala Ayyangar, J., in AIR 1964 SC 1372 (Tungabhadra Industries Ltd. v. Government of Andhra Pradesh), such an error would clearly be an error apparent on the face of the record. The reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quent binding decision of the Supreme Court or of the High Court has retrospective operation and overruling is always retrospective." 25.. Any decision on this aspect will be incomplete without reference to a passage from Salmond on Jurisprudence (Twelfth Edition) at page 148: "As we have seen, the theory of case law is that a judge does not make law; he merely declares it; and the overruling of a previous decision is a declaration that the supposed rule never was law. Hence any intermediate transactions made on the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regards matters that are res judicata, or accounts that have been settled in the meantime." 26.. Therefore in the final analysis, what is a "mistake apparent from the record", capable of being rectified? A mistake, either of fact or of law, glaring and obvious from the record itself, capable of identification, without a detailed investigation or enquiry or elaborate arguments, in regard to which there could reasonably be no two opinions is a "mistake apparent from the record". If it relates to a fact, it should be possible to say " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to accept the contention of Mr. Pal that the principle of retrospective legislation is applicable to the decisions of the Supreme Court declaring the law or interpreting a provision in a statute. The law is laid down or a provision in a statute is interpreted by the Supreme Court only when there is a debate or doubt on the interpretation of any provision of a statute requiring interpretation by the Supreme Court or when there is a conflict of judicial opinion on a provision of a statute between the different High Courts of India which is required to be resolved and settled by the Supreme Court. The law laid down by the Supreme Court, in our opinion, cannot be said to have retrospective operation in the sense that although a debate or doubt or a conflict of judicial opinion is resolved and settled by the Supreme Court, yet still that does not obliterate the existence of such debate or doubt or conflict that existed prior to the decision of the Supreme Court setting at rest such debate or doubt or conflict." The second is a decision of a Division Bench of the Madras High Court in State of Tamil Nadu v. Meenambal and Co. reported in [1984] 56 STC 82, wherein it was held: "The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer." 29.. The Calcutta and Madras High Courts have proceeded on the basis that an order ex facie legal and correct, when made, cannot become erroneous by reason of any subsequent declaration of law by the Supreme Court or the respective High Court. They further assume that a "mistake apparent on the record" should be demonstrated on the date of making of the order and not with reference to any subsequent binding decision of a superior court. There is an inherent fallacy in this reasoning. In Jiyajeerao's case [1981] 130 ITR 710 (Cal) and Meenambal's case [1984] 56 STC 82 (Mad.) though the principle that when a superior court whose declarations of law are binding, declares what the law is, it takes effect not from the date of judgment but from the very inception of the law in question has been referred, it was not given effect, as they made a distinction between the retrospective operation of statutes and retrospective operation of binding decisions of superior courts. When a superior court declares the law, it is not "making" law on the date of judgment but merely declaring the law. The decision being an enunciation of the true and correct position of law, becomes applicable f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.. Learned counsel for the petitioner contended that the decision in Visvesvaraya's case [1991] 83 STC 305 (Kar) was contrary to the decision of the Supreme Court in Raj Sheel's case [1989] 74 STC 379 and therefore the question regarding packing charges was still debatable on the date of the assessment order. It is not necessary to go into the question whether Visvesvaraya's case [1991] 83 STC 305 (Kar) was contrary to Raj Sheel's case [1989] 74 STC 379 (SC). Even assuming for the purpose of argument, that the decision in Visvesvaraya's case [1991] 83 STC 305 (Kar) was not available, the position is no different. When the Supreme Court categorically declared in Ramco's case [1993] 88 STC 151 that packing charges should also be included in the taxable turnover for both CST and TNST, the said declared law became applicable even in regard to Karnataka Sales Tax Act. The said decision in Ramco's case [1993] 88 STC 151 (SC) though rendered on October 20, 1992 subsequent to the orders of assessment, will have to be applied to find out whether there is any mistake apparent from the record. It should be deemed that in regard to sale of cement governed by Cement Control Order of 1967, pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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