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Judgment
Ismail, C.J.—All these four tax revision cases raise a common question of law and they are disposed of by a common judgment. From one
point of view, this will be sequel to our judgment dated 29th November, 1979, rendered in Bava Prima Tannery v. State of Tamil Nadu [1981] 47
S.T.C. 7 (T. C. Nos. 456, 457, 475, 487, 489, 695 and 962 of 1979) dealing with the liability to sales tax of the purchase turnover of raw hides
and skins and the sales turnover of dressed hides and skins under items 7(a) and 7(b) of the Second Schedule to the Tamil Nadu General Sales
Tax Act, 1959 (hereinafter referred to as the Act). We are concerned in these tax revision cases with the claim for enhancement of assessment
made by the State at the hearing of the appeals preferred by the assessee-respondents before the Tribunal, in each of these four cases. When the
appeals preferred by the assessee-respondents were taken up for hearing, the revenue had filed petitions for enhancement of the assessment on the
basis that in accordance with the judgment of the Supreme Court in V. Guruviah Naidu and Sons v. State of Tamil Nadu [1976] 38 S.T.C. 565
the assessing officer should have proceeded under item 7(a) of the Second Schedule to the Act and assessed the purchase turnover of raw hides
and skins, made in the State, instead of assessing the sales turnover of dressed hides and skins sold in the State. The subject-matter of Tax Case
No. 449 of 1979 is the order of the Sales Tax Appellate Tribunal, Main Bench, Madras-1, dated 29th August, 1978, rendered m Tribunal Appeal
No. 981 of 1977 read with Tribunal Miscellaneous Petition No. 302 of 1978. The appeal itself was preferred by the assessee-respondent. The
contention that was put forward by the assessee-respondent in the appeal was against the tax at 3 per cent on closing stock of raw skins.
However, the revenue filed Tribunal Miscellaneous Petition No. 302 of 1978 contending that the assessing authority had failed to assess the
assessee on the entire local purchases of raw hides and skins which went into the production of tanned hides and skins and the purchase turnover
was liable to tax at 3 per cent under item 7(a) of the Second Schedule to the Act and such turnover amounted to Rs. 27,93,138, that the last
purchases of raw hides and skins in this State are assessable only under item 7(a) of the Second Schedule and this is supported by the decision of
the Supreme Court in Guruviah Naidu and Sons v. State of Tamil Nadu [1976] 38 S.T.C. 565, referred to above. The Tribunal relying upon two
decisions of this Court in State of Madras v. Spencer and Company Limited [1974] 34 S.T.C. 249 and State of Tamil Nadu v. K. R. and P.
Shanmugavel Nadar [1977] 39 S.T.C. 391 held that it has no jurisdiction to entertain the enhancement petition at that stage, since such a
contention was not put forward and was not made the subject-matter of the appeal before the Appellate Assistant Commissioner. The subject-
matter of Tax Case No. 486 of 1979 is the order of the Sales Tax Appellate Tribunal, Main Bench, Madras-1, dated 9th January, 1979, made in
Tribunal Appeal No. 903 of 1977 read with Tribunal Miscellaneous Petition No. 96 of 1978. That also was concerned with the liability to tax of
the purchase turnover of the raw hides and skins in the State under item 7(a) of the Second Schedule to the Act. In that appeal also, the revenue
filed an enhancement petition stating that the turnover of last purchase of raw hides and skins as per accounts of the assessee is Rs. 17,29,529, but
the assessing officer assessed only Rs. 16,21,819 representing the proportionate last purchase of raw hides and skins attributable to export sales
and inter-State sales and that in view of the decision of the Supreme Court in Guruviah Naidu and Sons v. State of Tamil Nadu [1976] 38 S.T.C.
565 the entire last purchase of raw skins have to be subjected to tax at 3 per cent and, therefore, the turnover of last purchase may be enhanced to
Rs. 17,29,529. Dealing with this enhancement petition, the Tribunal observed :
As for the enhancement petition, we do find that the request of the State Representative is for bringing into the net of taxation a turnover which was
not so far assessed by the lower authorities. In T. A. No. 981 of 1977 dated 29th August, 1978, we have held that the last purchase of raw hides
and skins is liable to tax in the light of the decision in the Guruviah Naidu''s case [1976] 38 S.T.C. 565. However if the assessing officer had not
taken advantage of the decision of the Supreme Court and fixed the turnover of last purchases at an amount proportionate to the export sales of
tanned skins or inter-State sales of tanned skins, we cannot newly bring the unassessed portion of the purchase turnover to tax by invoking the
provisions of Section 36(3). As laid down in the decisions in State of Madras v. Spencer and Company Ltd. [1974] 34 S.T.C. 249 and State of
Tamil Nadu v. K.R. and P. Shanmtigavel Nadar [1977] 39 S.T.C. 391, the dispute before the Tribunal can only be in respect of matters agitated
in the first appeal before the Appellate Assistant Commissioner. The claim cannot be newly brought forth before the Tribunal against an order of
the assessing officer.
The subject-matter of Tax Cases Nos. 1082 and 1083 of 1979 is the common order of the Sales Tax Appellate Tribunal, Main Bench,
Madras, dated 24th February, 1979, made in Tribunal Appeal No. 322 of 1978 read with Tribunal Miscellaneous Petition No. 443 of 1978 and
Tribunal Appeal No. 554 of 1978 read with Tribunal Miscellaneous Petition No. 444 of 1978. That order also dealt with the question of assessing
the purchase turnover of raw hides and skins made in the State under item 7(a). In those two appeals also, in which the assessee-respondent was
common, two enhancement petitions were filed by the State putting forward the same contention. Dealing with the enhancement petitions, the
Tribunal referred to its earlier ruling in Leather Industries v. State of Tamil Nadu (T.A. No. 981 of 1977 dated 29th August, 1978), wherein it had
observed :
We need not be understood as saying that there is an option to the authorities in the case of raw hides locally purchased and sold locally after
dressing to tax either the local purchases of raw hides at 3 per cent or the first sale of dressed hides at 1| per cent. The authorities are normally
expected to tax whatever comes under item 7(a) under that item only. This will be in keeping with the well-settled principle that the liability to tax
arises at the first point in the chain of taxable events. If this is the correct law, as indeed we understand it to be so, then it follows that the
procedure of the assessing officer or the learned Appellate Assistant Commissioner in having chosen to tax at 11 per cent the dressed hides at the
point of first sale and not the local purchase of raw hides at the point of last purchase is not totally opposed to law,
and stated that taking the same view it held that there was no case for enhancing the turnover of purchase of raw skins, with the result the
enhancement petitions in both the appeals were dismissed, and the dismissal of those enhancement petitions are the subject-matter of Tax Cases
Nos. 1082 and 1083 of 1979. Thus, it will be seen that in Tax Cases Nos. 449 and 486 of 1979, the Tribunal dismissed the enhancement
petitions filed by the State on the ground that it had no jurisdiction to entertain the same, since the petitions themselves were not maintainable, while
in Tax Cases Nos. 1082 and 1083 of 1979 the Tribunal had dismissed the enhancement petitions on merits.
For the purpose of considering the question that arises for consideration in these tax revision cases, it is necessary to refer to the decision of the
Supreme Court in V. Guruviah Naidu and Sons v. State of Tamil Nadu [1976] 38 S.T.C. 565, which we have considered in our judgment dated
29th November, 1979, in Bava Prima Tannery v. State of Tamil Nadu represented by the Joint Commercial Tax Officer, Dindigul Assessment
Circle, Dindigul [1981] 47 S.T.C. 7 (T. C. Nos. 456, 457, 475,487,489,695 and 962, of 1979). Following the judgment of the Supreme Court
referred to above we have held in that judgment that the duty of the assessing officer is to tax the purchase turnover under item 7(a) of the Second
Schedule to the Act and to tax the sales turnover of the first sale in the State of the dressed hides and skins under item 7(b) at the appropriate rates
mentioned in the Act subject to the qualification that when raw hides and skins already subjected to tax had been sold as dressed hides and skins,
they would not suffer tax at the point of first sale in the State. If that be the case, the law is that it is the duty of the assessing officer to first assess
the purchase turnover under item 7(a) at 3 per cent on the turnover and thereafter to assess the sales turnover under item 7(b) subject to the
qualification referred to above. We have also pointed out that before the decision of the Supreme Court in the Guruviah Naidu''s case [1976] 38
S.T.C. 565 the practice in this State was on the basis of the law laid down by this Court in L.M.S. Sadak Thamby & Co., Madras-1 v. Appellate
Assistant Commissioner of Commercial Taxes I, Madras-13 [1969] 24 S.T.C. 468, by which the sales turnover of dressed hides and skins was
taxed under item 7(b) and thereafter whatever was left out of the purchases of raw hides and skins was taxed on the purchase turnover under item
7(a).
The decision of the Supreme Court referred to above was merely to declare the law as it stood from the very beginning under items 7(a) and
7(b) thereby having the effect of overruling the decision of this Court in L.M.S. Sadak Thamby & Co., Madras-1 v. Appellate Assistant
Commissioner of Commercial Taxes I, Madras-13 [1969] 24 S.T.C. 468. Consequently, as had been very rightly pointed out by the Tribunal,
there was no option on the part of the assessing officer either to tax the purchase turnover under item 7(a) or to tax the sales turnover under item
7(b), and the assessing officer is expected to and is obliged to tax the purchase turnover under item 7(a) and the sales turnover under item 7(b),
subject to the qualifications referred to above, thereby avoiding double taxation of the same turnover, both in the raw state as well as in the dressed
state. If so, what the Tribunal stated in the order in Tribunal Appeal No. 981 of 1977 dated 29th August, 1978, and followed by it in the order
which is the subject-matter of Tax Cases Nos. 1082 and 1083 of 1979, namely, that the procedure of the assessing officer or the Appellate
Assistant Commissioner in having chosen to tax at 11 per cent the dressed hides and skins at the point of first sale and not the local purchase of
raw hides at the point of last purchase was not totally opposed to law, cannot be correct. On the other hand, it will be totally opposed to law. If
so, the question for consideration is what the Tribunal should have done in the present cases when the revenue filed the enhancement petitions
putting forward the contention that it is the purchase turnover under item 7(a) which should have been first taxed at the rate of 3 per cent. As we
have pointed out already, the Tribunal in two cases, which are the subject-matter of Tax Cases Nos. 1082 and 1083 of 1979, held on merits that
there was no case for enhancement. For the reasons we have indicated just now the Tribunal was in error. As far as the other two cases, namely,
Tax Cases Nos. 449 and 486 of 1979 are concerned, the Tribunal held that the enhancement petitions themselves were not maintainable. We shall
now proceed to consider the correctness of the conclusion of the Tribunal that the enhancement petitions were not maintainable. For the purpose
of considering this question, it is necessary to refer to and set out certain provisions of the Act. Section 12 of the Act deals with the procedure to
be followed by the assessing authority. Section 13 deals with the provisional assessment to be made by the assessing authority. Section 14 deals
with fresh assessment in certain cases. Section 16 deals with the assessment of escaped turnover. Section 31 is the section dealing with an appeal
to the Appellate Assistant Commissioner. Section 31(1) enumerates the orders which could be the subject-matter of an appeal to the Appellate
Assistant Commissioner. Sub-section (3) of Section 31 deals with the scope of the power of the Appellate Assistant Commissioner in disposing of
an appeal. That sub-section says :
In disposing of an appeal, the Appellate Assistant Commissioner may, after giving the appellant a reasonable opportunity of being heard,
(a) in the case of an order of assessment-
(i) confirm, reduce, enhance or annul the assessment or the penalty or both;
(ii) set aside the assessment and direct the assessing authority to make a fresh assessment after such further inquiry as may be directed; or
(iii) pass such other orders as he may think fit; or
(b) in the case of any other order, confirm, cancel, or vary such order :
Provided that at the hearing of any appeal against an order of the assessing authority, the assessing authority shall have the right to be heard either
in person or by a representative.
Section 32 deals with the special powers of the Deputy Commissioner. Sub-section (1) of Section 32 says :
The Deputy Commissioner may, of his own motion, call for and examine an order passed or proceeding recorded by the appropriate authority u/s
4-A, Section 12, Section 14, Section 15, or Sub-sections (1) and (2) of Section 16 and may make such inquiry or cause such inquiry to be made
and, subject to the provisions of this Act, may pass such order thereon as he thinks fit.
Sub-section (2) imposes a restriction on the power of the Deputy Commissioner to revise the orders referred to in Sub-section (1). That sub-
section states :
The Deputy Commissioner shall not pass any order under Sub-section (1), if-
(a) the time for appeal against the order has not expired;
(b) the order has been made the subject of an appeal to the Appellate Assistant Commissioner or the Appellate Tribunal, or of a revision in the
High Court; or
(c) more than five years have expired after the passing of the order.
Section 33 deals with the powers of revision of the Deputy Commissioner in certain other circumstances. Section 34, which corresponds to
Section 32, deals with the special powers of the Board of Revenue. Under Sub-section (1) of Section 34, the Board of Revenue may, of its own
motion, call for and examine an order passed or proceeding recorded by the appropriate authority u/s 4-A, Section 12, Section 14, Section 15 or
Sub-sections (1) and (2) of Section 16 or an order passed by the Appellate Assistant Commissioner under Sub-section (3) of Section 31 or by
the Deputy Commissioner under Sub-section (1) of Section 32 and may make such inquiry or cause such inquiry to be made and subject to the
provisions of the Act may pass such order thereon as it thinks fit. Sub-section (2) of Section 34 corresponds to Sub-section (2) of Section 32 and
imposes similar restrictions on the power of the Board of Revenue to pass any order under Sub-section (1) of Section 34. It is not necessary to
repeat the language of Sub-section (2) of Section 34, because the language is analogous to the language contained in Sub-section (2) of Section
32, which we have already extracted. Section 36 deals with appeal to the Appellate Tribunal. Sub-section (1) of that section states :
Any person objecting to an order passed by the Appellate Assistant Commissioner under Sub-section (3) of Section 31, or an order passed by
the Deputy Commissioner under Sub-section (1) of Section 32 may, within a period of sixty days from the date on which the order was served on
him in the manner prescribed, appeal against such order to the Appellate Tribunal:
Provided that the Appellate Tribunal may admit an appeal presented after the expiration of the said period if it is satisfied that the appellant had
sufficient cause for not presenting the appeal within the said period.
Sub-section (2) deals with the form in which the appeal should be preferred and the fee that should be paid for the appeal. Sub-section (3) of
Section 36 deals with the scope of the power of the Tribunal in disposing of an appeal. That sub-section states :
In disposing of an appeal, the Appellate Tribunal may, after giving the appellant a reasonable opportunity of being heard,
(a) in the case of an order of assessment-
(i) confirm, reduce, enhance or annul the assessment or penalty or both; (ii) set aside the assessment and direct the assessing authority to make a
fresh assessment after such further inquiry as may be directed; or (iii) pass such other orders as it may think fit; or
(b) in the case of any other order, confirm, cancel or vary such order : Provided that at the hearing of any appeal against an order of the Appellate
Assistant Commissioner or the Deputy Commissioner, the assessing authority shall have the right to be heard either in person or by a
representative.
Thus, it will be seen that the language of Sub-section (3) of Section 36 is identical with the language of Sub-section (3) of Section 31 dealing
with the scope of the appellate power of the Appellate Assistant Commissioner except for the fact that in the proviso the expression ""against an
order of the Appellate Assistant Commissioner or the Deputy Commissioner"" had been substituted for the expression ""against an order of the
assessing authority"" in the proviso to Section 31(3) of the Act.
The question that arises now for consideration is what exactly is the scope of this power of the Tribunal. Clearly, the power of the Tribunal has
been couched in the widest possible terms. Section 36(3)(a)(i) clearly contemplates not only the reduction of assessment and penalty which will be
in favour of the appellant, but also confirmation of assessment or penalty and even enhancement of the assessment or penalty. The enhancement of
the assessment or penalty will be one adverse to the appellant, who had preferred the appeal. It is the common case that u/s 36 the revenue has no
right to prefer an appeal against the order of the Appellate Assistant Commissioner or the Deputy Commissioner and it is only the assessee who is
entitled to prefer an appeal. Consequently, the scope of Section 36(3)(a)(i) will indicate that even in an appeal preferred by the assessee, the
Tribunal has got a power to decide the appeal prejudicial to the assessee in the sense, not only by way of dismissing the appeal but even by way of
enhancing the assessment or penalty. This flows from the very clear and emphatic language contained in Section 36(3)(a)(i). That is further
strengthened by the fact that Section 36(3)(a)(ii) refers to the setting aside of the assessment and directing the assessing authority to make a fresh
assessment. It has been noticed that Section 36(3)(a)(ii) does not refer to the setting aside of the order of the Appellate Assistant Commissioner or
the order of the Deputy Commissioner, but it contemplates the setting aside of the assessment itself and directing the assessing authority to make a
fresh assessment after such further enquiry as may be directed. Consequently, having regard to the wide language contained in Section 36(3),
which corresponds to Section 31(3) of the Act, it is clear that when an assessee prefers an appeal either to the Appellate Assistant Commissioner
or to the Tribunal, the entire assessment is set at large, and the Appellate Assistant Commissioner or the Tribunal is given power to redo the entire
assessment according to law. If either of the appellate authorities comes to the conclusion that the assessing authority had not assessed the turnover
according to law either by way of omitting a turnover liable to tax or assessing a turnover at a rate lower than the rate which is applicable to the
same, the appellate authorities have the power to go into the entire matter and revise the assessment or direct the assessing authority itself to make
a fresh assessment. It is against this background, we have to consider what exactly is the power of the Tribunal when the revenue files an
enhancement petition. It is admitted that neither in the Act nor in the Rules there is any provision for the revenue formally filing an enhancement
petition. However, as we have seen, the power to enhance the assessment is vested in the Tribunal itself. Consequently, the procedure of filing an
enhancement petition is merely by way of putting the assessee on notice that in the appeal preferred by the assessee the revenue is going to request
the Tribunal to enhance the assessment, so that the assessee may not be taken unaware if the Tribunal proceeds to concede the request of the
revenue and enhances the assessment. Therefore, the consideration that will be generally applicable to the entertainment of a petition by the other
side in the appeal preferred by the assessee will have no place in the context of the statutory provisions contained in Section 31(3) and Section
36(3) of the Act. If so, what exactly was the reason for the Tribunal holding in the two cases that the enhancement petitions were not maintainable
? As we have pointed out already, the Tribunal purported to follow the two decisions of this Court in coming to the conclusion that the
enhancement petitions were not maintainable. One is the decision in State of Madras v. Spencer and Company Limited [1974] 34 S.T.C. 249 and
the other is the decision in State of Tamil Nadu v. K.R. and P. Shanmugavel Nadar [1977] 39 S.T.C. 391. As we shall show, neither of the two
decisions has any relevancy to the point which the Tribunal had to consider when it dealt with the enhancement petitions filed by the revenue in the
present cases. These two decisions dealt with the case of an appeal preferred by the assessee and what this Court had to consider was whether
the assessee, who prefers an appeal before the Tribunal, could agitate before the Tribunal a matter which he had not raised before the Appellate
Assistant Commissioner. This Court held against such a claim on the part of the assessee. For coming to the conclusion, this Court took into
account the language of Section 36(1) of the Act dealing with the person who can prefer an appeal and the orders against which an appeal can be
preferred before the Tribunal. Section 36(1) opens by saying ""any person objecting to an order passed by the Appellate Assistant Commissioner
under Sub-section (3) of Section 31, or an order passed by the Deputy Commissioner under Sub-section (1) of Section 32"". From this, this Court
drew the inference that the person who prefers an appeal to the Tribunal must be objecting to the order of the Appellate Assistant Commissioner
or the Deputy Commissioner, as the case may be, and he can so object only if he had raised a point either before the Appellate Assistant
Commissioner or the Deputy Commissioner and that point had been decided against him. The Bench in the first case, namely, State of Madras v.
Spencer and Company Limited [1974] 34 S.T.C. 249, referred to the contention advanced on behalf of the State and recorded its conclusion as
follows :
But he (the learned Assistant Government Pleader) submitted that the Tribunal acted without jurisdiction in giving relief to this turnover which was
not disputed before the Appellate Assistant Commissioner. As already stated, the assessees themselves opted to be assessed at 50 per cent of the
consolidated receipts for apartment and board and submitted a return on that basis to the assessing authority. Before the assessing authority the
assessees disputed only that portion of the turnover which, according to them, related to the telephone and air-conditioning charges. This claim was
rejected by the assessing authority. The appeal filed by the assessees to the Appellate Assistant Commissioner also related only to this claim of
exemption for air-conditioning and telephone charges and the other turnover of 50 per cent of the board and apartment charges was not the
subject-matter of appeal before that authority.
The learned Government Pleader therefore submitted that the Tribunal should not have entertained or allowed the turnover which was not in
dispute before the Appellate Assistant Commissioner, We are of the view that the learned counsel for the State is well-founded in his contention.
After having said so, the learned Judges proceeded to refer to the decision in Richardson & Cruddas Ltd. v. State of Madras T.C. Nos. 161
and 173 of 1968 (Madras High Court), and extracted a passage from that judgment to the following effect:
Section 36 (Tamil Nadu General Sales Tax Act, 1959) opens with the words ''any person objecting to an order passed by the Appellate Assistant
Commissioner''. If a particular turnover was not brought before the Appellate Assistant Commissioner by way of an appeal by the assessee, he
cannot be said to have been aggrieved by the Appellate Assistant Commissioner not considering that item in his order. Therefore, the test for
finding out the powers of the Tribunal is to correlate the subject-matter of the appeal before the Tribunal to that of the Appellate Assistant
Commissioner.
They also relied on the decisions in Easun Engineering Co. Ltd. v. Joint Commercial Tax Officer [1970] 26 S.T.C. 486, Central Camera Co.
(P.) Ltd. v. Government of Madras [1971] 27 S.T.C. 112 and Panchura Estates Ltd. v. Government of Madras T.C. Nos. 86 and 87 of 1967
(Madras High Court). In State of Tamil Nadu v. K.R. and P. Shanmugavel Nadar [1977] 39 S.T.C. 391, this Court again held that the Sales Tax
Appellate Tribunal had no jurisdiction to permit an assessee to raise an additional ground and dispute a turnover which was not disputed by the
assessee before the Appellate Assistant Commissioner; if a turnover has not been disputed before the Appellate Assistant Commissioner and if it is
disputed for the first time before the Tribunal, it amounts to preferring an appeal to the Tribunal directly from the assessment order in so far as that
turnover is concerned and that is not permitted by law and the Tribunal also has no inherent power to permit the raising of an additional ground
which was not the subject-matter of appeal before the Appellate Assistant Commissioner. In this case also the learned Judges relied on the
language of Section 36(1) of the Act and the earlier decision of this Court in State of Madras v. Spencer and Co. Ltd. [1974] 34 S.T.C. 249. In
our opinion, the above two decisions will have no bearing on the present controversy because those two decisions expressly dealt with the scope
of the power of the Appellate Tribunal with reference to an appeal preferred by an assessee and that conclusion was reached having regard to the
specific language contained in Section 36(1) of the Act as to who can prefer an appeal and against what orders. Such a consideration will have no
place in considering the scope of the power of the Tribunal while disposing of an appeal with reference to the language contained in Section 36(3)
of the Act and, therefore, we are clearly of the opinion that the Tribunal was in error in relying upon these two decisions and holding that according
to the principle laid down in those decisions, the enhancement petitions filed by the State were not maintainable in these cases.
The learned counsel for the assessee brought to our notice a decision of a Bench of this Court, to which one of us was a party, namely, Deputy
Commissioner (C. T.), Coimbatore Division, Coimbatore-2 v. Sivasakthi Spinning Mills, Palani Road, Udumalpet (Tax Case No. 277 of 1974
decided on 31st March, 1977). In that judgment, the following passage is relevant :
The second point in dispute in this case relates to the sum of Rs. 4,299. This sum represents the sale of old machinery. When the matter was
before the Deputy Commercial Tax Officer who assessed the assessee, the assessee raised an objection that the said sum was not taxable as the
sale was not in the course of business. The Deputy Commercial Tax Officer, while arriving at the turnover taxable in the hands of the assessee,
deducted the sum of Rs. 4,299 as he allowed the exemption claimed by the assessee thereon. At the stage of the appeal by the assessee before the
Appellate Assistant Commissioner, there was no prayer at the instance of the Deputy Commercial Tax Officer to enhance the assessment. Nor did
the Appellate Assistant Commissioner on his own seek to enhance the assessment with reference to the said sum. However, when the matter came
before the Tribunal, there was an enhancement petition filed by the State and the Tribunal held on the merits that the said sum of Rs. 4,299 is not
taxable. The learned Additional Government Pleader submitted that the said sum of Rs. 4,299 would be taxable in the light of the decision of the
Supreme Court in State of Tamil Nadu v. Burmah Shell Oil Storage and Distributing Company Limited [1973] 31 S.T.C. 426 and also the
definition in Section 2(d) of the Act. The learned counsel for the respondent, however, objected to the matter being considered at this stage,
because he submitted that the enhancement petition before the Sales Tax Appellate Tribunal itself was not competent. The amount having been
given as a deduction by the assessing authority itself and in the absence of any petition for enhancement before the Appellate Assistant
Commissioner, the submission was that the petition for enhancement before the Tribunal was not at all competent. We accept this submission. As
the matter had not been raised at the stage of appeal before the Appellate Assistant Commissioner, the Sales Tax Appellate Tribunal could not
have considered any objection which arose out of the original order of the assessing authority and not out of the order of the appellate authority.
Certainly, the above observation in the judgment of the Bench is in favour of the assessee''s contention. However, if it had become necessary
we would have referred it to a Full Bench. But it had not become necessary in view of two circumstances. The first circumstance is that there is no
discussion in the above extract as to the legal position, and the Bench has simply stated that they accepted the submission made on behalf of the
respondent. Secondly, there is already a Bench judgment of this Court dealing with the scope of the power of the Tribunal and taking the view that
the Tribunal is competent to entertain such a plea to enhance before it and that decision has not been referred to and considered by the Bench in
the case relied on, namely, Deputy Commissioner (C.T.) v. Sivasakthi Spinning Mills (T. C. No. 277 of 1974). In view of these two circumstances
alone, without referring the matter to a Full Bench, we ourselves dispose of the whole matter with reference, to the language of the section as well
as the earlier decision of this Court.
The earlier decision of this Court expounding the scope of the power of the appellate authority is the one reported in T.V. Sundaram lyengar &
Sons (P.) Ltd. v. State of Madras [1970] 25 S.T.C. 160. In that case, the turnover relating to the supply of bus-bodies constructed and fitted on
to chassis provided by customers was excluded in the assessment of the assessee. However, in an appeal preferred by the assessee in respect of
certain other matters, the Appellate Assistant Commissioner included the turnover in the assessable turnover. The question for consideration was
whether the Appellate Assistant Commissioner had the power to include a turnover excluded by the assessing officer in an appeal preferred by the
assessee. This Court upheld the order of the Appellate Assistant Commissioner and his power to do so. Since the matter is fully discussed by the
Bench in that case, we are extracting in extenso the relevant passage in this behalf:
The second ground of the assessee turns on the scope and effect of the word ''enhance'' in Clause (a)(i) of Sub-section (3) of Section 31 of the
Madras General Sales Tax Act, 1959. That section confers appellate powers on the Appellate Assistant Commissioner, Commercial Taxes, and
defines their scope. Any person objecting to an order passed u/s 12 by the assessing authority is, by Sub-section (1) of Section 31, given a right
within a specified period to appeal against that order, to the Appellate Assistant Commissioner. Sub-section (3) of Section 31 says that in
disposing of an appeal, the Appellate Assistant Commissioner may, after giving the appellant a reasonable opportunity of being heard,
(a) in the case of an order of assessment-
(i) confirm, reduce, enhance or annul the assessment or the penalty or both.
A further appeal to the Tribunal from the order of the Appellate Assistant Commissioner which is objected to by a person is provided for by
Section 36. Sub-section (3)(a)(i) of that section uses the phraseology similar to Section 31(3)(a)(i). Sections 32 to 35 give to the Deputy
Commissioner and the Board of Revenue powers of revision which may be exercised, by them suo motu and on application, and certain special
powers. The special powers under Sections 32 and 34 cannot be exercised by the Deputy Commissioner or the Board of Revenue, if the time for
appeal against an order u/s 12 has not expired or such order has been made the subject of appeal to the Appellate Assistant Commissioner, the
Appellate Tribunal or of revision in the High Court u/s 38. An appeal to the High Court is provided by Section 37 from an order of the Board of
Revenue u/s 34 which is objected to. In the light of these provisions, it is contended for the assessee in this Court that as its appeals to the
Appellate Assistant Commissioner were confined to that part of the order of the assessing authority in relation to certain amounts collected by way
of tax u/s 8-B(2) of the Madras General Sales Tax Act, 1939, and in one of the appeals, a further question as to the character of the transaction,
which had been brought to tax, was alone raised, the Appellate Assistant Commissioner in dealing with those appeals has no power to travel
beyond their scope, reopen the assessment order relating to bus-body-building contracts which was not objected to by the assessee in the appeals
and thus enhance the assessment by taking the view that they are not works contracts but sales of goods. It is not disputed that unlike under the
Madras General Sales Tax Act, 1939, the appellate powers of the Appellate Assistant Commissioner as well as the Tribunal under the Madras
General Sales Tax Act, 1959, include the power to enhance the assessment in disposing of an appeal. But it is urged that the power of enhancing in
appeals can only be exercised within the limits of the assessment which is the subject-matter of the assessment that is objected to by the assessee
in his appeals. In our opinion, there is no justification for this narrow view of the scope of the power to enhance the assessment in disposing of an
appeal. If this view is to prevail, the content of the power will be reduced to almost nothing. It is difficult to conceive of cases of enhancement of
assessment confined to the limits of that part of the order which is objected to and appealed against by the assessee. The words ''enhance the
assessment'' in Section 31(3)(a)(i) should, as it appears to us, be given their full scope. Section 31(1) does not speak of an assessment but of an
order which is objected to. The word ''assessment'' means the full process of assessment and covers the entire assessment, not merely that part of
it which is objected to by the assessee in his appeal. There is indication in Sub-section (3)(a) itself to that effect, for Clause (ii) to Sub-section (3)
(a) speaks of the power of the appellate authority to set aside the assessment and direct the assessing authority to make a fresh assessment; and
that cannot possibly mean a part of the assessment that had been objected to by the assessee in the appeal. Likewise, the word ''enhance'' should
receive its full meaning and in relation to the assessment, the scope of the power to enhance should extend to the entire assessment. This view
appears to receive support from Sections 32(2)(a) and (b) and 34(2)(a) and (b). The special powers of the Deputy Commissioner and the Board
of Revenue, as is evident from those two provisions, cannot be exercised if the time for appeal against the order u/s 12 has not expired or such
order has been made the subject of an appeal to the Appellate Assistant Commissioner or the Appellate Tribunal or of a revision in the High
Court. If the intention of the legislature is to confine the power of enhancing the assessment in disposing of appeals to only that part of the order u/s
12 that is objected to by the assessee, the limitation to the special powers of the Deputy Commissioner and the Board of Revenue under Sections
32 and 34 would have been differently worded in Sub-section (2) of each of those sections. The language of Sections 32(2)(a) and (b) and 34(2)
(a) and (b) is consistent with the view that the power of enhancing the assessment u/s 31 extends to the entire range of assessment. Though the
Income Tax Act, 1922, adopts a different scheme, and decisions thereunder may not always be apposite to the construction of other fiscal
enactments like the Madras General Sales Tax Act, 1959, yet it appears that the phraseology of Sub-section (3)(a)(i) of Section 31 of the Madras
General Sales Tax Act, 1959, has been reproduced word for word from Sub-section (3)(a) of Section 31 of the Income Tax Act, 1922. Sections
32(2)(a) and (b) and 34(2)(a) and (b) of the Madras General Sales Tax Act, 1959, substantially follow the pattern of clauses (a) and (b) to the
proviso to Section 33-A of the Income Tax Act, 1922.
Thereafter, the Bench proceeded to refer to certain decisions interpreting the scope of Section 31 of the Income Tax Act, 1922, and it is not
necessary for us to refer to those cases. All that is necessary to say is that this decision, if we may say so with respect, is fully in accordance with
the interpretation we have put on the scope of the Tribunal''s power on the language of Section 36(3) of the Act, which is, as we have pointed out
already, more or less identical with the language of Section 31(3), as indicated above.
Mr. Natarajan, the learned counsel for the assessee-respondents, contended that the subject-matter of the appeal before the Tribunal is the
order of the Appellate Assistant Commissioner and, consequently, the power of the Tribunal u/s 36(3) has to be correlated to the subject-matter
of the appeal before it, and if it is so done, the Tribunal will have no power to go behind the order of the Appellate Assistant Commissioner, and
the power to enhance will be with reference to the order of the Appellate Assistant Commissioner and cannot have any reference to the order of
the assessing authority. In other words, the contention of the learned counsel is that the order of assessment made by the assessing authority cannot
be reopened by the Tribunal in an appeal preferred by an assessee against the order of the Appellate Assistant Commissioner and that the Tribunal
can reopen only the assessment made by the Appellate Assistant Commissioner. We are unable to accept this argument, having regard to the
express language contained in the statute. If the argument of the learned counsel for the assessee is to be accepted, we shall have to read words in
the statute which are not there. As a matter of fact, Section 36(3)(a)(i) merely refers to the confirmation, reduction, enhancement or annulment of
the assessment and does not say anything specifically regarding the order of the Appellate Assistant Commissioner or the order of the Deputy
Commissioner. On the other hand, Section 36(3)(a)(ii), as we have pointed out already, expressly refers to the setting aside of an assessment and
directing the assessing authority to make a fresh assessment. If the argument of the learned counsel for the assessee is to be accepted, the language
of Section 36(3)(a)(ii) will be different/namely,
set aside the order appealed against and direct the Appellate Assistant Commissioner or the Deputy Commissioner, as the case may be, to pass a
fresh order after such further inquiry as may be directed.
That is not the language of the statute and as the language in the statute has been couched in the widest possible terms, there is no scope for
interpreting that language narrowly so as to bring in only the order of the Appellate Assistant Commissioner or the order of the Deputy
Commissioner to be interfered with by the Tribunal and not the order of assessment passed by the original authority. As a matter of fact, if one
illustration is taken, we will see that this argument falls to the ground. Supposing an assessee prefers an appeal against the order of the assessing
authority to the Appellate Assistant Commissioner and that appeal is dismissed by the Appellate Assistant Commissioner and thereafter the
assessee prefers a further appeal to the Tribunal; in such a case, the Tribunal''s power of enhancement can only be with reference to the order of
the assessing authority and cannot be with reference to the order of the Appellate Assistant Commissioner, because, the Appellate Assistant
Commissioner merely dismissed the appeal preferred by the assessee, confirming the order of assessment made by the original authority. Having
regard to all these circumstances, we are clearly of the opinion that in an appeal preferred by an assessee, the entire assessment is set at large
before the Tribunal, and the Tribunal can go into the correctness or otherwise of the order of the assessing authority himself, and if it comes to the
conclusion that the assessing authority has not assessed a turnover which is liable to be assessed under the law or assessed a turnover at a rate
lower than that sanctioned by the law, it is certainly open to the Tribunal to set aside the order of the assessing authority and revise the assessment
or direct him to make a fresh assessment in the light of the opinion expressed by it. All that is necessary in such a case will be that since the revenue
has requested the Tribunal to pass an order adversely or prejudicial to the assessee, the assessee should be given a reasonable opportunity to put
forward his case with reference to the proposed enhancement.
Mr. Natarajan then relied on a decision of a Full Bench of the Andhra Pradesh High Court in support of his contention, namely, State of
Andhra Pradesh v. Sri Venkata Rama Lingeshwara Rice Mill [1977] 39 S.T.C, 57. In that case also, the relevant provisions dealing with the
power of the Tribunal were extracted and thereafter the court observed:
All these provisions clearly indicate that the subject-matter of the appeal is the disputed turnover, tax or the rate of tax and nothing else. The
learned counsel for the assessee placed strong reliance on Section 21(4) of the Act, which says that the Appellate Tribunal may confirm, reduce,
enhance or annul or set aside the assessment or pass such other orders as it may think fit. It is argued that as power is given to the Appellate
Tribunal to confirm, reduce, enhance of annul the assessment, this provision enables the Tribunal to deal with the assessment as a whole and does
not limit its powers only to the subject-matter of the appeal and that Section 21(4)(iii), which enables the Tribunal to pass such other orders as it
may think fit, further emphasises the position that the Tribunal has unlimited powers, irrespective of the subject-matter of the appeal. We are not
inclined to agree with this construction placed by the assessee on Section 21(4). Section 21(4) has to be read along with Section 21(1). All that
Section 21(4) means is that if the appeal relates to the whole of the assessment, then the Tribunal has powers to ''confirm, reduce, enhance or
annul the assessment. If it relates to a part of the assessment, then its power to confirm, reduce, enhance or annul the assessment is confined to that
part. The wide language used is only intended to cover all cases of appeal including cases of appeal against the entire assessment. We do not see
anything in the section which justifies the contention that even if any part of the assessment is not the subject-matter of of appeal, the Tribunal may
pass orders with respect to that part also.
The above decision of the Andhra Pradesh High Court runs directly contrary to the decision of this Court in T. V. Sundaram lyengar & Sons
(P.) Ltd. v. State of Madras [1970] 25 S.T.C. 160, already referred to. In the passage from the judgment of this Court in T. V. Sundaram lyengar
& Sons (P.) Ltd. v. State of Madras [1970] 25 S.T.C. 160, extracted already, there are two significant sentences, namely, ""It is difficult to
conceive of cases of enhancement of assessment confined to the limits of that part of the order which is objected to and appealed against by the
assessee"" and ""The language of Sections 32(2)(a) and (b) and 34(2)(a) and (b) is consistent with the view that the power of enhancing the
assessment u/s 31 extends to the entire range of assessment"". The observations of the High Court of Andhra Pradesh are directly opposed to the
statement of law laid down by the Bench of this Court on the scope of the power of the Appellate Assistant Commissioner u/s 31(3) and the
Appellate Tribunal u/s 36(3) of the Act. Since we have already pointed out that our own construction of the statutory language contained in
Section 36(3) is in accordance with the earlier decision of this Court in the T.V. Sundaram lyengar''s case [1970] 25 S.T.C. 160, with respect, we
are unable to follow the decision of the Andhra Pradesh High Court relied on by the learned counsel for the assessee. Under these circumstances,
these tax revision cases are allowed. The orders of the Tribunal dismissing the enhancement petitions filed by the State are set aside and the
enhancement petitions themselves are remitted to the Tribunal for fresh disposal in accordance with law. There will be no order as to costs in any
of these cases.