Balachandran vs Sales Tax Officer

T.L. Viswanatha Iyer, J.—An interesting question of law untraversed by any decision of this Court arises for decision in this case. The question is whether an assessee could seek intervention in his favour by the Deputy Commissioner u/s 35 of the Kerala General Sales Tax Act, 1963 (the "Act" for short).

The facts leading to this original petition are short. The petitioner is running a small printing press in which he gets printed letter heads, bill books, account books, invitation cards and the like on orders placed by customers. Assessments were completed on him under the Act for the years 1980-81, 1981-82 and 1982-83 accepting his returns. However, he was charged tax at the rate of 8 per cent treating the items supplied as "paper products".

This Court has in a series of cases, starting with P.K. Dewer v. State of Kerala [1974] 33 STC 73 (App.) held that such materials as those printed by the petitioner were not paper products, but general goods.

The Board of Revenue had also confirmed this in a clarification (exhibit P4) issued by them to M/s. Printocraft of Cochin. Based on these decisions as also the clarification made by the Board of Revenue, the petitioner filed applications before the assessing authority, the first respondent, u/s 43 of the Act requesting him to rectify the mistake in the assessments for the three years aforesaid by reducing the rate of tax applied from the single point rate of 8 per cent to the multi-point rate. The assessing authority, however, bypassed the request with reply that the assessments could not be rectified as "disputed questions" were involved. The petitioner, therefore, moved the Deputy Commissioner of Agricultural Income Tax and Sales Tax, Pal ghat, the 2nd respondent, invoking his suo motu power of revision u/s 35 of the Act "to cure illegality in the assessments" by setting aside the same and directing fresh assessments applying the correct rate of tax. Those applications are exhibits P5, P6 and P7. They, however, met with swift dismissal at the hands of the 2nd respondent by his order, exibit P8, on the ground that the impugned orders of assessment were appealable and that suo motu powers could not be exercised at the instance of the assessee. It is this order that is under challenge in this original petition.

The question that arises for consideration, therefore, is whether an assessee could invoke Section 35 in relation to an order of assessment passed u/s 17 of the Act. It has to be remembered that an order of assessment is appealable to the Appellate Assistant Commissioner as defined in Section 2(i) of the Act. The Deputy Commissioner exercises his powers of revision under Sections 35 and 36, Section 35 conferring the power to be exercised suo motu of his own motion and Section 36 conferring the power to be exercised on application. Section 36 can be invoked only in the case of those proceedings or orders for which an appeal has not been provided for in Section 34 or Section 39 (Section34 deals with appeals to the Appellate Assistant Commissioner and Section 39 with appeals to the Appellate Tribunal). In other words, no revision u/s 36 lies if the order or proceeding in question is appealable. There is no such prohibition in regard to Section 35 and it is described as a power given to the Deputy Commissioner, of his own motion, to call for and examine the record of any order passed or proceedings recorded by an officer or authority subordinate to him (other than the Appellate Assistant Commissioner). I shall extract the relevant parts of the two sections below :

Powers of revision of the Deputy Commissioner suo motu.-(1) The Deputy Commissioner may, of his own motion, call for and examine any order passed or proceedings recorded under this Act by any officer or authority subordinate to him other than an Appellate Assistant Commissioner and may make such enquiry or cause such enquiry to be made and, subject to the provisions of this Act, may pass such order thereon as he thinks fit.

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(3) No order under this section adversely affecting a person shall be passed unless that person has had a reasonable opportunity of being heard.

Powers of revision of Deputy Commissioner on application.-(1) Any person objecting to an order passed or proceeding recorded under this Act for which an appeal has not been provided for in Section 34 or Section 39 may, within a period of thirty days from the date on which a copy of the order or proceeding was served on him in the manner prescribed, file an application for revision of such order or proceeding to the Deputy Commissioner.

The contention of Shri K. C. Balagangadharan, counsel for the petitioner, is that an assessee could also invoke Section 35 and that, even in relation to orders or proceedings which are appealable, and hence not revisable u/s 36. According to him, the assessee is entitled to bring to the notice of the Deputy Commissioner any illegality or impropriety in the order or proceeding of any officer or subordinate authority (other than the Appellate Assistant Commissioner) and when this is brought to his notice, the Deputy Commissioner is bound to exercise his power of revision and set right the illegality or impropriety, though suo motu. He sought to substantiate his contention with reference to three decisions, Board of Revenue v. Raj Brothers Agencies [1973] 31 STC 434, Bombay Ammonia Pvt. Ltd. v. State of Tamil Nadu [1976] 37 STC 517, both of the Supreme Court, and Arunachalam Pillai and Sons v. State of Tamil Nadu [1980] 45 STC 109, of a Full Bench of the Madras High Court. I may point out even at this stage that all these cases arose under the corresponding provisions in the Tamil Nadu General Sales Tax Act (1 of 1959) (Tamil Nadu Act, for brevity) relating to revision by the Deputy Commissioner or by the Board of Revenue (as they stood prior to the amendment by Act 22 of 1982).

Shri T. Karunakaran Nambiar, Special Government Pleader (Taxes), appearing for the Revenue points out, on the other hand, that if an assessee could approach the Deputy Commissioner in this fashion, overlooking the inhibitions imposed by Section 36, and the latter is bound to exercise his power u/s 35, Section 36, with the conditions prescribed therein for exercise of the revisional power, becomes meaningless, unnecessary and otiose. Section 35 by itself could have served the purpose. He refers to the decision of the Calcutta High Court in State of West Bengal v. Paper Products Ltd. [1986] 61 STC 42 in support of his contention.

The question involved is a difficult one and there is much to be said on both sides, particularly, the contention of Shri T. Karunakaran Nambiar that Section 36 was absolutely unnecessary, if Section 35 could be invoked by an assessee in such circumstances de hors the limitations and conditions imposed by Section 35.

A look at the language of Section 35 will show that the provision is not intended merely for the benefit of the Revenue, to revise orders which are prejudicial to the Revenue. The Deputy Commissioner is entitled to revise and pass orders which may even be favourable to the assessee. I refer to the following features of the section.

(a) The power is to call for and examine the record of any order, make enquiry and pass such orders thereon as the Deputy Commissioner thinks fit. The power is not confined to revise orders prejudicial to the Revenue; or to pass orders only for the benefit of the Revenue.

(b) The provisions of Sub-section (3) stipulating that no order adversely affecting a person shall be passed unless that person has had a reasonable opportunity of being heard, implies that even orders favourable to an assessee could be passed by the Deputy Commissioner in exercise of his powers under the section.

This view of a general power of suo motu revision had been taken as early as in 1964 by the Madras High Court in East Asiatic Company (India) Ltd. v. State of Madras [1956] 7 STC 299 where Ramaswami, J., observed at page 315 :

The jurisdiction of suo motu revision is not cribbed and cabined or confined by conditions and qualifications. The purpose of such an amplitude being given suo motu revisions appears to be as much to safeguard the interests of the exchequer as in the interests of the assessee.

I may only add that the Supreme Court, in the case of Bombay Ammonia Pvt. Ltd. [1976] 37 STC 517, expressed the opinion, (with reference to the corresponding provision-Section 32 of the Tamil Nadu Act) that the suo motu power of revision was of wide amplitude and could be exercised in favour of the Revenue as well as the taxpayer in order to correct any error or illegality committed by the assessing authority in his order of assessment. There can therefore be no doubt that Section 35 is intended to reach at any error, illegality or impropriety in orders or proceedings, of a subordinate authority, and that the power could be exercised for or against the assessee.

The further question is whether this power could be invoked by an assessee to get an adverse order revised by the Deputy Commissioner. Before I deal with this question, I shall briefly point out the correspondence between the relevant provisions of the Kerala Act and those in the Tamil Nadu Act. This is necessary because the leading decisions referred to and relied on are all rendered with reference to the Tamil Nadu Act.

Sections 35 and 36 of the Kerala Act deal with the powers of revision of the Deputy Commissioner, suo motu, and on application. Sections 37 and 38 confer similar powers on the Board of Revenue. Sections 32 and 33, 34 and 35 of the Tamil Nadu Act correspond to Sections 36 and 36, 37 and 38 of the Kerala Act. These sections are all similarly worded, and the only noteworthy difference is that while Sections 32 and 34 of the Tamil Nadu Act confer the power of revision with reference to orders passed under the assessment provisions of the Act (i.e., assessment orders) Sections 35 and 37 of the Kerala Act are of wider amplitude, with the Deputy Commissioner being empowered to revise any order or proceeding of any subordinate officer or authority (other than an Appellate Assistant Commissioner). With this background, I shall proceed to deal with the question in issue.

THVL. Bombay Ammonia Pvt. Ltd. Vs. The State of Tamil Nadu, was a case which arose u/s 32 of the Tamil Nadu Act. The facts were as follows : The Deputy Commissioner acting u/s 32 of the Tamil Nadu Act issued notice to the assessee to show cause why a penalty on undisclosed turnover should not be levied against them. The assessee raised a twofold objection, first, that the Deputy Commissioner had no jurisdiction to levy the penalty; second, the one with which we are concerned, that amounts relating to works contracts, which were not liable to sales tax, had been included in the assessment, and therefore, the assessment should be revised by excluding the said amounts from assessment. It has to be observed here that the assessee had not brought to the notice of the assessing authority at the stage of assessment that the amounts relate to works contracts. They had also not preferred any appeal against the order of assessment.

The Deputy Commissioner overruled the objections, levied the penalty as proposed, and refused to revise the order of assessment. The assessee took up the matter in appeal to the Appellate Tribunal who allowed the appeal, set aside the penalty, and also directed modification of the assessment by excluding the turnover relating to works contracts. The Tribunal held that since the suo motu power of revision could be exercised both for the benefit of the State and the taxpayer, the Deputy Commissioner should have gone into the question of exemption and set right the assessment.

The Revenue took up the matter in revision to the High Court. The High Court allowed the revision in part and set aside the order of the Tribunal in so far as it directed modification of the assessment by deleting the turnover relating to works contracts. The decision of the High Court is reported in State of Madras v. Bombay Ammonia Ltd. [1974] 34 STC 364 (Mad.).

The court noted that the Deputy Commissioner had not rejected the assessee''s claim on the ground that he had no jurisdiction to deal with it. He had on the other hand, refused to give the relief because the assessee had not chosen to question the assessment at any stage before and that "the assessment made was on their own invitation".

The assessee went up in appeal to the Supreme Court. The Supreme Court dealt with the scope of the suo motu power and observed :

The language of this section makes it clear that the suo motu power conferred on the Deputy Commissioner in regard to the order or proceeding specified therein is quite wide and he can, subject to the conditions laid down in Sub-sections (2) and (3), exercise the same even at the instance of an assessee who has not filed an appeal against the order for the purpose of rectifying any illegality or impropriety therein.

However, and having regard to the peculiar facts of that case, and the conduct of the assessee therein, the court held that the Deputy Commissioner had rightly refused to exercise his revisional jurisdiction in favour of the assessee.

The Supreme Court had earlier occasion to consider whether the suo motu power of revision of the (Madras) Board of Revenue u/s 34 of the Tamil Nadu Act (corresponding to Section 37 of the Kerala Act) could be invoked by an assessee. That was in The Board of Revenue, Madras Vs. Raj Brothers Agencies, Two appeals arising out of the assessments for the years 1960-61 and 1961-62 were dismissed by the Appellate Tribunal as filed out of time. The assessee thereupon moved the Board of Revenue u/s 34 to revise the orders of assessment. The Board held that it had no jurisdiction to entertain those petitions. The High Court held otherwise upholding the right to the assessee to bring the matter to the notice of the Board in order that it may invoke its suo motu powers [vide Raj Brothers Agencies v. Board of Revenue [1972] 30 STC 410 (Mad.). On appeal, the Supreme Court observed :

It was contended on behalf of the State that the assessee had no right to invoke the jurisdiction of the Board to exercise its revisional power. This contention too has to be rejected. The power is conferred on the Board to remedy any injustice. It is open to an assessee or the Revenue to bring to the notice of the Board any error made by the subordinate authorities. It is up to the Board to consider whether the case is a fit one for exercising its revisional jurisdiction.

The question again came up before the Full Bench of the Madras High Court in Arunachalam Pillai and Sons v. State of Tamil Nadu [1980] 45 STC 109. This decision is of interest, in that the specific question posed by Sri Karunakaran Nambiar before me about the interaction of Sections 35 and 36 of the Kerala Act, was raised in that case in relation to Sections 32 and 33 of the Tamil Nadu Act, but not accepted. This decision dealt with the question as to whether the suo motu power of revision could be invoked by an assessee to set aside an order of assessment. In this case, the appeals filed by the assessee against the assessments for the years 1969-70 and 1970-71 were dismissed by the Appellate Assistant Commissioner for the reason that they were not filed in time. The appeals filed therefrom before the Appellate Tribunal were also dismissed as time-barred. The assessee thereupon filed petitions before the Deputy Commissioner u/s 32. These revision petitions were rejected by the Deputy Commissioner on the ground that there were no extraordinary circumstances to invoke the revisional power u/s 32. The assessee''s appeals to the Tribunal failed and the matters came up to the High Court in revision. The first question posed for decision was whether the suo motu power could be invoked by the assessee. The department''s contention, as it was before me, was that in view of the specific provision contained in Section 33, the suo motu power of revision u/s 32 could not be invoked at the instance of the assessee. The court dealt with the matter referring to the decision of the Supreme Court in Board of Revenue v. Raj Brothers Agencies [1973] 31 STC 434, and of itself in Mahalakshmi Textile Mills Ltd. v. Deputy Commercial Tax Officer [1972] 30 STC 412 (Mad.) and observed :

There is nothing in law preventing an assessee from drawing the attention of the Deputy Commissioner to any defect present in the order of the authorities specified u/s 32 of the Act. When the suo motu power of revision by the Board u/s 34(1) can be invoked by an assessee, there is no reason why the suo motu power of revision by the Deputy Commissioner cannot be invoked by an assessee, when the circumstances for the exercise of that power are shown to exist. The attempt to draw a distinction between the suo motu power of revision by the Board and by the Deputy Commissioner can hardly be justified when the language used in Section 34(1) is in pari materia with the language used in Section 32(1). Hence, the contention that the suo motu power of revision u/s 32 cannot be invoked by an assessee is accordingly negatived.

In fact, in Mahalakshmi Textile Mills'' case, Ramaprasada Rao, J., had made the following observations which I think are apposite :

I am unable to agree with the contention that suo motu powers are exercisable only if the authority vested with the power is subjectively satisfied about the exercise of such power or if he minds to do so. Circumstances may arise when such authorities vested with judicial functions might inadvertently or by a mistake avoid the exercise of power to call for the records of the subordinate officer whose order projects an illegality or an irregularity. There is nothing wrong in such circumstances for an aggrieved assessee requesting the quasi-judicial Tribunal to exercise the power vested in him which he failed to do so voluntarily and by himself.

The same view was taken by the High Court of Andhra Pradesh in In re State of Andhra Pradesh [1983] 64 STC 132, as under :

Section 20 of the Andhra Pradesh General Sales Tax Act, 1957, does not expressly make a provision for filing of an application, much less, an application by way of revision, by any aggrieved party. None the less, if an application is filed, though it may not be treated as an application for revision of the order of an authority subordinate to the Commissioner, the Commissioner having, on such application, come to know of the facts of a particular case being dealt with or disposed of by the subordinate authority, may suo motu act and exercise the power u/s 20 of the Act. By the mere fact that an application is filed by an aggrieved party, the power to act suo motu in respect of any proceeding taken by the subordinate authority to the Commissioner is not divested from the Commissioner, Exercise of suo motu powers does not imply that the Commissioner cannot look into any application forwarded to him and refuse to call for the records.

I may incidentally mention the following decisions where the right of the assessee to invoke the suo motu power of revision has been affirmed :

G.R. Byappa and Sons v. State of Mysore [1969] 24 STC 34 (Mys) , Burmah Shell Oil Storage and Distributing Company of India Limited Vs. Commissioner for Commercial Taxes, Board of Revenue (C.T.) and Another, ; Coimbatore Murugan Mills Ltd. Vs. Board of Revenue (Commercial Taxes) and Another, and The Paper Products Limited Vs. Assistant Commissioner, Commercial Taxes and Others,

The decision of the Division Bench of the Calcutta High Court in State of West Bengal v. Paper Products Ltd. [1986] 61 STC 42 relied on by the Revenue now requires to be considered. It is an appeal from the decision in The Paper Products Limited Vs. Assistant Commissioner, Commercial Taxes and Others, referred to in the preceding paragraph though not stated so in the report. The appellate Bench has held that if the initiation of revisional proceeding is made at the instance of a party, it cannot be held that such initiation has been made suo motu by the revisional authority. According to me, this statement of the law ignores the fact that there is nothing preventing an assessee from bringing to the notice of the Deputy Commissioner any error or other infirmity in any order or proceeding of the subordinate authority. It is not as if the Deputy Commissioner can act only on information gathered by him. The information or knowledge may be received from any quarter and acted upon. This is what the Supreme Court said in Raj Brothers Agencies [1973] 31 STC 434:

It is open to an assessee or the Revenue to bring to the notice of the Board any error made by the subordinate authorities,

and reiterated in THVL. Bombay Ammonia Pvt. Ltd. Vs. The State of Tamil Nadu, that the suo motu power could be exercised even at the instance of the assessee. The formidable array of judicial pronouncements (including those of the Supreme Court) referred to herein earlier does not appear to have been brought to the notice of the Calcutta High Court, as I do not find any reference to them in the judgment. I express my respectful dissent from the decision in State of West Bengal and Others Vs. Paper Products Ltd.,

It is therefore clear that an assessee is entitled to invoke the suo motu power of revision of the Deputy Commissioner u/s 36. It is open to the assessee to bring to the notice of the Deputy Commissioner any error, illegality or impropriety in any order or proceeding of a subordinate officer or authority. The Deputy Commissioner functioning u/s 35 is bound to exercise the power keeping in mind the purpose for which it is conferred, namely, to ensure that injustice is avoided. The fact that the order or proceeding sought to be revised is appealable or that the assessee has not invoked the power of revision u/s 36 is not relevant in this context.

The Deputy Commissioner was, therefore, in error in holding that he had no power to interfere with the orders of assessment in question on the ground that they were appealable. The order, exhibit P8 is, therefore, one by which the 2nd respondent has declined to exercise the jurisdiction vested in him by law. It is, therefore, liable to be quashed.

Shri T. Karunakaran Nambiar, Special Government Pleader (Taxes), raised an objection that the petitioner had an alternative remedy by way of revision to the Board of Revenue. The question involved in this case is quite a complicated one on which conflicting views have been expressed as noted above. There is no decision of this Court on this point, at any rate, none was brought to my notice. An authoritative pronouncement is called for. I, therefore, overrule this objection.

The original petition is, therefore, allowed. The order, exhibit P8, is quashed. I hold that the second respondent has got jurisdiction to deal with the matter. He is directed to deal with the petitions, exhibits P6, P6 and P7, on merits, in accordance with law. There will be no order as to costs.