TMI Blog2010 (12) TMI 1117X X X X Extracts X X X X X X X X Extracts X X X X ..... al jurisdiction, the assessment made by any of the officers author ized by the Deputy Commissioner is illegal. Such an argument would ignore the various provisions of the VAT Act and the VATRules. Thus no hesitation in rejecting the plea that the definition of "assessing authority" in section 2(4) of the VAT Act plays a crucial role in so far as exercise of the powers by the authority prescribed for the purpose of sections 20 and 21 or for that matter any authority prescribed under the VAT Act. The Commissioner, as defined in section 2(8), derives all or any powers by reason of the delegation under the notification vide G.O. Ms. No. 1163, dated August 14, 2006, published in A.P. Gazette, Part I, Extraordinary 463A, dated August 14, 2006. Under this, the Government empowered the Commissioner to empower any officer working under his control to exercise any powers within such area or areas or the whole of State of Andhra Pradesh. - - - - - Dated:- 30-12-2010 - RAO V.V.S. AND RAMESH RANGANATHAN JJ. V. Bhaskar Reddy Vemireddy, M.V.J.K. Kumar, Shaik Jeelani Basha, G. Narendra Chetty and P. Girish Kumar for the petitioner. A.V. Krishna Kaundinya, Special Counsel for Commer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. They filed monthly VATreturns for 2005-06 and 2006-07. There was, however, audit by the DCTO, Hydernagar, on May 11, 2007. By a notice dated June 7, 2008, the first respondent informed of another audit. Such audit by the first respondent took place on August 21, 2008. Proposing best of judgment assessment in terms of rule 59 of the VAT Rules, a notice dated September 15, 2008 was issued to the petitioner. They filed objections on October 30, 2008 along with the books of accounts. The earlier assessment was withdrawn. A proposal was made to tax the estimated turnover at 12.5 per cent which was the cost of light diesel oil not covered by tax invoices. There were objections again, inter alia, that, as the second respondent was the territorial assessing authority under section 20(1) of the VAT Act, the first respondent had no jurisdiction to take up assess ment. By assessment order, dated January 5, 2009, the first respondent demanded a sum of ₹ 15,74,663. The petitioner unsuccessfully filed an appeal before the Appellate Deputy Commissioner. They then filed an appeal before the Sales Tax Appellate Tribunal (STAT). Even while the same was pending, the dealer filed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one after issuing notice of audit in form VAT304 by the authorized officer of the Department, namely, Assistant Commissioner or CTO or DCTO, as the case may be. Pursuant to such audit, the petitioners were served with the notice of assessment of VAT in form VAT 305A. In some cases, objections were raised. Considering this, the officer authorized to audit passed the assessment order also in form VAT305. In cases where objections were not filed in response to VAT form 305A, the audit officer made a best judgment assessment purportedly under section 21(3) of the VAT Act. Assailing the assessment orders, mainly on the ground that there is violation of principles of natural justice, the writ petitions are filed. In addition, rule 59(4), as stated supra, is also assailed as being ultra vires section 2(4) and (8) of the VAT Act. M/s. M.V.J.K. Kumar, Shaik Jilani Basha, V. Bhaskar Reddy, G. Narendra Chetty and P. Girish Kumar argued for the petitioners. The summary of their arguments is as follows. The impugned assessment by an authority, not designated as the assessing authority under section 2(4) of the VAT Act, is bad in law and such authority cannot, therefore, levy tax. Alternative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the VATdealer. The impugned orders do not suffer from any illegality. The power to audit includes the power to assess and, therefore, the impugned orders are in accordance with section 21(3) of the VAT Act. Sections 20(1), 21(1) and 21(3) empowered the authority prescribed to receive VATreturn and pass order by taking up best judgment assessment. The assessment orders made in accordance with rule 59(1) are valid. Lastly, he submits that section 3A empowers the Government to empower the Commissioner to confer functions of different officers. When the donor of the power has exercised power under the Rules, the delegate of the power cannot be permitted to exercise power in a different manner. The paramount owner is not divested of the power even after delegation to the delegate. The senior counsel relies on K.V. Muthu AIR 1997 SC 628, and the VATAudit Manual of the Department. Validity of rule 59(1) So as to be intra vires the Rules made by delegate should be confined to the policy guidelines of the statute (J.K. Industries Ltd. v. Union of India [2008] 297 ITR 176 (SC); [2007] 13 SCC 673). The question whether the Rules are ultra vires is required to be answered with ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enact ment, itself may not be pivotal nor can it be ignored. The entire Act has to be churned before coming to the conclusion that it did not empower the agency to make such policy which found echo in the Rules. The ratio decidendi in Maharashtra State Board of Secondary and Higher Secondary Education v. Paritosh Bhupeshkumar Sheth [1984] 4 SCC 27; AIR 1984 SC 1543, is that the validity of the rule has to be deter mined with reference only to the specific provisions contained in the relevant statute conferring the power to make the rule, regulation, etc., and also the object and purpose of the Act as can be gathered from the various provisions of the enactment. It would be wholly wrong for the court to sub stitute its own opinion for that of the Legislature or its delegate as to what principle or policy would best serve the objects and purposes of the Act, to sit in judgment over the wisdom and effectiveness or otherwise of the policy laid down by the regulation-making body, and declare a regulation to be ultra vires merely on the ground that, in the view of the court, the impugned provisions will not help to serve the object and purpose of the Act. As long as the body, ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioners, CTOs or DCTOs may perform the functions respectively conferred on them by or under the said Act. Before doing so, the Government also issued notification vide G.O. Ms. No. 1091, dated June 10, 1957. Under this, the Government empowered various officers to exercise various functions like assessment, audit, etc., as may be entrusted to them within the local limits. This G. O., was subsequently amended from time to time by issuing various notifications. Indisputably, the broad pattern of such exercise of taxing powers is that the Commercial Tax Officer, who is the head of a circle, is subordinate to the head of the Division, namely, Deputy Commissioner. The assessment is made by the CTO or, having regard to pecuniary limits, either by the DCTO or the CTO as the case may be. If the taxable turnover exceeds certain limit, the Assistant Commissioner is required to assess the sales tax. Be it also noted that section 4 of the APGST Act empowered the State Government to appoint a Commissioner, and as many Additional/Joint Commissioners of Commercial Taxes, Deputy Commissioners/Additional Deputy Commissioners, Assistant Commissioners, CTOs, DCTOs as are required to perform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . . . (8) Commissioner means any person appointed by the Government to be the Commissioner of Commercial Taxes under section 3A;. . . (9) Commercial Tax Officer means any person appointed to be Commercial Tax Officer under section 3A; . . . (11) Deputy Commercial Tax Officer means any person appointed to be a Deputy Commercial Tax Officer under section 3A; (12) Deputy Commissioner means any person appointed to be a Deputy Commissioner of Commercial Taxes under section 3A; . . . (18) Government means the State Government of Andhra Pradesh; . . . (20) Joint Commissioner means any person appointed to be a Joint Commissioner of Commercial Taxes under section 3A; . . . (24) Prescribed means prescribed by the Rules made under the Act; Various officers are those appointed under section 3A of the VAT Act. Section 3A reads as under: 3A. Appointment of officers. The State Government, may, appoint a Commissioner of Commercial Taxes and as many Additional Commissioners of Commercial Taxes, Joint Commissioners of Commercial Taxes, Appellate Deputy Commissioners of Commercial Taxes, Deputy Commissioners of Commercial Taxes, Assistant Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such area or areas or the whole of State of Andhra Pradesh. We are, therefore, required to consider various provisions excerpted hereinabove along with sections 20 and 21 of the VAT Act which deal with filing of returns respectively. Scope of section 3A read with section 78 of the VAT Act Clauses (1), (2), (5), (8), (9), (11), (12), (18) and (20) define Additional Commissioner , Appellate Deputy Commissioner , Assistant Commis sioner , Commissioner , CTO , DCTO , Deputy Commissioner , Government and Joint Commissioner in that order. Except the term Government , in all other respects these officers are those who are appointed under section 3A of the VAT Act, which is in two parts. The first part empowers the Government to appoint all the officers with various designations. The second part confers power on the Government to (a) assign to the officers functions that are to be paramount, or (b) empower any authority or officer to assign powers and functions to the named office ers. It is also not disputed that, in exercise of their power under section 3A, the Government issued a notification vide G.O. Ms. No. 1163, Revenue (CT-II), dated August 14, 2006 empowering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has eight sub-sections. Sub-sections (1), (3), (4), (5) and (6) employ the phrase the authority prescribed . When a VATdealer or turnover tax (TOT) dealer fails to file a return or files the return under section 20(1), with which the receiving officer is not satisfied, the prescribed authority shall assess to the best of his judgment within four years from the date of the return or within four years of the date of filing of return whichever is later. Rule 25(1) and (5) deals with these two situations, namely, where the VATreturn is not filed and where the return appears to the authority prescribed to be incorrect or incomplete. Indisputably, it is only the CTO, or the Assistant Commissioner, as the case may be having territorial jurisdiction who undertakes the assessment. Rule 3(a) of the VATRules defines authority prescribed as the authorities specified in rule 59, which prescribed various authorities like Deputy Commissioners, Assistant Commissioners, CTOs, DCTOs and ACTOs to exercise powers entrusted to them. These powers have been enumerated in Serial Nos. 1 to 19 in a tabular column under rule 59(1) of the VATRules. To the extent relevant, it is extracted below: 59. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Omitted Omitted 7. Entry, inspection, search, seizure, confiscation a) Assistant Commissioner or Commercial Tax Officer of the LTU concerned in respect of cases on the register of the LTU; b) Commercial Tax officer of the circle concerned; c) Any officer not below the rank of Deputy Commercial Tax Officer of the division with prior permission or approval of the Deputy Commissioner concerned; (d) Deputy Commercial Tax Officer working in GA (V E) Department; (e) Any officer not below the rank of Deputy Commercial Tax Officer as authorized by the Joint Commissioner or Additional Commissioner empowered for this purpose by the Commissioner Section 43(1), (2), rules 52, 53 8 to 19 Omitted Omitted (2) The Commissioner shall be the authority empowered as specified in section 3A, to assign any functions of the authorities prescribed to any officers subordinate to him whenever he may deem it necessary. Reading sections 3A and 78(1), 2(a) and (m) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A plain reading of sections 20(1) and 21(1), (3) and (4) makes it clear that an officer as prescribed by the Rules can alone receive and assess the returns and not such officer authorized by the Commissioner under section 2(4). Assuming that there is no authority prescribed to receive/assess the VATreturns, the power of the Commissioner, if any under section 2(4), may not be effective. The meaning of various words, phrases and terms used in a statute is understood essentially from the dictionary clause of the statute which defines these terms. If the words are not defined in the statute, one has to look to the General Clauses Act. If it is not possible to do so, then one has to look to the judicial pronouncements and, thereafter, to the dictionaries G.P. (see Samatha Rural Development Society v. State of Andhra Pradesh). More often than not difficulty arises in understanding the purport of the word or phrase used in the dictionary clause, due to palpable inconsistent intention of the Legislature in enacting a provision. To deal with such situations, the legislative draftsman is cautious to enter a caveat that the meaning of the words in the dictionary clause would be what it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... succeeded and a view was taken that foster son would also be a member of the family. Before the Supreme Court, it was argued that the family has to be given the meaning which is commonly understood by an ordinary man and that family would include natural sons and not foster son . The appeal was dismissed by the Supreme Court upholding the eviction observing that in every case, a foster son is not treated as a member of the family and that it would depend on the facts and circumstances of each case. As a fact it was found that the landlady s foster son was brought up by her husband and even there was a bequeath of property in favour of his children leaving life estate to the landlady. Dealing with the question of interpreting the definition clause, the apex court held (paras 10 and 11): Apparently, it appears that the definition is conclusive as the word means has been used to specify the members, namely, spouse, son, daughter, grand-child or dependent parent, who would constitute the family. Section 2 of the Act in which various terms have been defined open with the words in this Act, unless the context otherwise requires which indicates that the definitions, as for exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 3A by G.O. Ms. No. 1163, dated August 14, 2006, to assign functions. Even while doing so, the Commissioner cannot exercise power de hors the Rules which prescribes various officers, their powers and functions in such area or areas or the whole of State of Andhra Pradesh. This construction would fit into the context of Chapter V of the VAT Act which deals with procedure and administration of tax. To emphasise further, section 2(4) would be repugnant to sections 20 and 21 and the Rules if it is construed as suggested. The definition does not agree with various provisions in the VAT Act especially section 3A. Such interpretation should be avoided and if necessary section 2(4) has to be ignored as per the ratio in K.V. Muthu AIR 1997 SC 628. The authorities prescribed by Rules can alone perform duties and functions under the Act and the Rules. When the Rules authorize or empower such officers, no authorization is again required under section 2(4). This, however, is subject to the condition that having regard to the language used in rule 59(1) itself as well as the scheme of the Act, if the functions are performed by officers in the respective territorial jurisdiction, there ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ramjidas [1940] 8 ITR 442 (PC); AIR 1940 PC 124, the decisions are galore. So as not to burden this judgment and order with all its authorities, we need to refer only to Associated Cement Co. Ltd. v. Commercial Tax Officer [1981] 48 STC 466 (SC)1, . . . it is the duty of the court while interpreting the machinery provisions of a taxing statute to give effect to its manifest purpose having a full view of it. Wherever the intention to impose liability is clear courts ought to have no hesitation in giving what we may call a common sense interpretation to the machinery sections so that the charge does not fail . While observing thus, it was held that, . . . a distinction has to be made by court while interpreting the provisions of a taxing statute between charging provisions which impose the charge to tax and machinery provisions which provide the machinery for the quantification of the tax and the levying and collection of the tax so imposed. While charging provisions are construed strictly, machinery sections are not generally subject to a rigorous construction. The courts are expected to construe the machinery sections in such a manner that a charge to tax is not defeated. . . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , entrusted with its enforcement, can delegate the powers. In law when power is delegated under authority of the statute, the order of the delegate is treated as an order of the principal or donor or paramount owner (delegator) of the power. Such an order, ordinarily, cannot be even revised or reviewed by the delegator unless such power is conferred by the statute itself (OCL India Ltd. v. State of Orissa [2003] 130 STC 35 (SC); [2003] 2 SCC 101). Further, even after delegating its power, the delegator is not divested or denuded of its power to exercise concurrently along with delegate nor is he barred from cancelling the delegation. Further more when the delegator exercises power, the delegate cannot exercise power in contravention of the order passed by the delegator (Godavari S. Parulekar v. State of Maharashtra AIR 1966 SC 1404 and Ishwar Singh v. State of Rajasthan [2005] 2 SCC 334 (para 8)). Therefore, even if section 2(4) defines assessing authority as an officer authorized by the Commissioner, the latter being a delegate of the power under section 3A, the Government is not precluded from exercising their statutory powers of making Rules under the VAT Act. Exercising such ..... 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