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Judgment
G. Ramanujam, J.—In this tax revision the assessee who is a dealer in groundnut oil challenges the order of the Sales Tax Appellate Tribunal
in T.A. No. 106 of 1964. The assessee was assessed originally by the assessing authority for the year 1957-58 by an order dated 30th October,
1958 under the provisions of the Madras General Sales Tax Act, 1939, hereinafter referred to as the old Act. In the Assessment order the Deputy
Commercial Tax Officer worked out the amount which the assessee will be entitled by way of deduction under Rule 18 (A) of the Madras General
Sales Tax (Turnover and Assessment) Rules, 1939, in a way different from the one provided in Rule 5(1). That is, he found out the tax paid on the
quantity of kernel which went into the production of oil sold by the assessee and deducted the same from the tax payable on the sale value of the
oil, while the said Rule 5(1) allows only a deduction of the turnover of groundnut kernel from the gross turnover of the oil manufactured and sold. If
the rates of tax on the groundnut and the oil had been the same, this method of calculation of deduction adopted by the assessing authority would
not have made any difference. But during a part of the year, that is from 1st April, 1957 to 31st July, 1957, the rate of tax on groundnut was 2 per
cent, and the rate of tax on oil was 1.9/16 per cent. For the above period, the assessing authority calculated 2 per cent. on the value of the kernel
which has gone into the production of the oil and deducted the same from the amount calculated at 1.9/16 per cent on the sale value of the oil.
Since the deduction as calculated by the assessing authority was found to be not in accordance with Rule 5 (1) the Commercial Tax Officer,
Cuddalore, revised on 15th September, 1962, the assessment order, dated 30th October, 1958 purporting to exercise his powers u/s 16 of the
Madras General Sales Tax Act, 1959, hereinafter referred to as '' the new Act.'' In his revised order, he held that the assessee is entitled only to a
deduction of the turnover of the kernel from the turnover of the oil and that the deduction of tax paid on the kernel from the tax payable on the sale
value of the oil was irregular and not in accordance with the statutory provision contained in Rule 5 (1) (1).
Against the said order passed by the Commercial Tax Officer, there was an appeal to the Appellate Assistant Commissioner, Cuddalore, which
was unsuccessful. There was a further appeal to the Sales Tax Appellate Tribunal by the assessee, and before the Tribunal the assessee questioned
the order passed by the Commercial Tax Officer on two grounds. One ground was that the order of the Commercial Tax Officer is incorrect on
merits. The second ground was that the Commercial Tax Officer cannot invoke the power u/s 16 of the new Act in respect of an assessment made
under the old Act and that under the old Act he had no jurisdiction to reassess as has been done in this case. It was also contended alternatively
that even if the new Act were to be applied, the proper authority to exercise the power of revision in a matter of this kind will be the Deputy
Commissioner u/s 32 of the new Act and not the Commercial Tax Officer The Tribunal did not see its way to accept the said contentions of the
assessee and dismissed the appeal so far as the question of rebate under Rule 18 (A) was concerned. The assessee has come to this Court in
revision.
Before us, the learned Counsel appearing for the assessee put forward substantially the same contentions as he had put forward before the
Tribunal. One additional contention that was raised before us was as to the period of limitation within which the original order of assessment could
be revised either u/s 16 of the new Act or under Rule 17 of the old assessment Rules of 1939.
The learned Counsel for the assessee firstly submits that Section 16 of the new Act cannot be applied to the facts of this case where there is no
escapement of turnover in the original assessment. According to him, the alleged wrong calculation of the amount of deduction which the petitioner
will be entitled to under Rule 5 (1) (1) read with Rule 18 (A) of the Turnover and Assessment Rules, 1939 hereinafter called the ''old Rules'', will
not fall within the scope of Section 16 which deals with the assessment of escaped turnover. But this contention of the learned Counsel ignores the
provision of Section 16 (1) (b) which enables the assessing authority to reassess the tax due, if for any reason the whole or any part of the turnover
of the dealer has been assessed at a rate lower than the rate at which it is assessable within a period of 5 years from the assessment year. In this
case the assessing authority, by allowing a deduction of the tax paid on the groundnut from the tax paid on the oil sales, instead of deducting the
turnover of the groundnut kernel from the sales turnover of the oil and calculating the tax on the net turnover at the rate applicable to the oil, has in
effect calculated the tax at the lower rate. The decision in Sundaram and Company (P.) Ltd., Madurai Vs. Commissioner of Income Tax, Madras,
, fully supports our above view In the face of this provision in Section 16 (1) (b) we are not inclined to accept the contention of the assessee''s
learned Counsel that the provision u/s 16 cannot be invoked to modify an assessment made by the assessing authority. The learned Counsel
submits that the proper provision to be applied in such cases is Section 32 of the new Act which is the provision enabling the Deputy
Commissioner to revise an order of assessment. It may be that the Deputy Com-missioner also is empowered to revise the order in question. But
that does not mean that that is the only power and that the Deputy Commissioner is the only authority to revise the order of assessment.
The learned Counsel next contends that even if Section 16 is capable of being invoked in this case, the re-assessment order passed in this case
by the Commercial Tax Officer is beyond the period of limitations prescribed under that section. We find that Section 16(1) (b) gives a period of 5
years from the year of assessment before which the power can be exercised and that if Section 16 can be properly invoked in this case then the
period of limitation that has to be applied is 5 years.
The learned Counsel alternatively contended that Section 16 of the new Act cannot be applied to the assessment proceedings relating to 1957-
58 and that the provisions of the old Act alone will apply in this case, that if the provisions under the old Act were to apply, the only provision by
which an order passed u/s 9 by the assessing authority can be interfered with is by way of revision by the Commercial Tax Officer or the Deputy
Commissioner or the Board of Revenue and that if the Commercial Tax Officer were to exercise the power of revision u/s 12 (2), the period of
limitation prescribed is 3 years from the date of the communication of the assessment order. According to the learned Counsel the Commercial Tax
Officer cannot exercise the power u/s 12 (2) to revise the assessment order in question as the 3 years period is long over. But here again the
contention of the learned Counsel overlooks the provision contained in Rule 17 (3) (A) of Madras General Sales Tax Rules, 1939, which enables
the appellate or the revisional authority to make an order of reassessment relating to an escaped turnover within the limitation of 5 years. In this
connection the learned Counsel for the assessee contends that the period of limitation prescribed u/s 12 (4) of the 1939 Act should be applied and
not the provision contained in Rule 17 (3) (A) of the Tax Rules, 1939.
As we are construing the impugned order as an order of reassessment passed under Rule 17 (3) of the Tax Rules, 1939, and not as an order in
revision by the revisional authority u/s 12 (1) of the old Act, the period of limitation is 5 years and not 3 years as contended by the assessee.
We have discussed about the validity of the order in question on the assumption that the provisions of the new Act will apply to the assessment
year 1957-58. If the provisions of the old Act were to be applied, Section 12 (2) gave suo motu power of revision to the Commercial Tax Officer
u/s 12 (1) of the Act, and as a revisional authority he can, under Rule 17 (3) (A) of the Tax Rules, 1939, also re-assess, if it is found that the
correct rate of tax has not been applied and the period provided for exercising such a power under Rule 17 (3) is five years as per Sub-rule 3 (A)
of that Rule. If the order passed by the Commercial Tax Officer in this case is treated as one passed u/s 12(1) of the old Act, read with Rule 17
(3) (A) it cannot be said to be incompetent, illegal or contrary to the provisions of the old Act. It is pointed out by the learned Government Pleader
that even if the order is treated as one u/s 16 of the new Act, then the power to re-assess can be exercised by the Commercial Tax Officer, who is
the assessing authority under the new Act, and that on either view of the matter the impugned order has been passed by a competent authority. But
having regard to the provisions of Section 61 (1), it is doubtful whether the Commercial Tax Officer who is the assessing authority under the new
Act can invoke the power of assessment or reassessment in respect of orders passed under old Act, for Section 61 (1) (ii) directs that all pending
proceedings shall be continued under the old Act as if the new Act had not been passed. u/s 61 (2) all orders passed under the earlier Act are
treated as orders passed under the corresponding provisions of the new Act for the purpose of appeal or revision and all applications, appeals
revisions and other proceedings pending before the authorities functioning under the old Act are transferred to the corresponding authorities under
the new Act. In this case the order of re-assessment revising the original assessment was passed on 15th September, 1962, by the Commercial
Tax Officer who is said to be the assessing authority under the new Act. The notice for assessment was given only on 17th May, 1962 and it
cannot be a pending proceeding on the commencement of the new Act. In the circumstances the provision that will apply to this is Section 61 (1)
(ii) which provides that the assessment proceedings has to be completed as if the new Act has not been passed. The wording of Section 61 (1) (ii)
makes it obligatory on the authorities to apply the provisions of the old Act in respect of assessments made under the old Act. If the Commercial
Tax Officer has proceeded to pass the impugned order in his capacity as an assessing authority, then he is proceeding on the basis of the new Act
and not on the basis of the old Act. But we find that this want of original jurisdiction on the part of the Commercial Tax Officer under the old Act
will not affect the order passed in this case in view of the validating provision contained in Section 4 of the Amending Act (Madras Act X of
1963), which validates all assessments made under the provisions of 1959 Act, though actually the assessments should have been made under the
provisions of the earlier 1939 Act.
Though we have discussed the scope of Section 16 of the new Act and Rule 17 of the Madras General Sales Tax Rules, 1939, with reference
to the alternative submission made by the learned Counsel for the assessee, we are inclined to rest our conclusion on the basis that the impugned
order has been passed under the provisions of old Act and the Rules made thereunder. It is well-settled that when an authority has got jurisdiction
to pass an order under a provision of a statute, the validity of any orders passed by him in exercise of such a jurisdiction cannot be questioned
merely because a wrong provision of the statute has been mentioned. In this connection reference may be made to a decision in Pitamber Vajirshet
v. Dhondu Naylapa ILR(1888) Bom. 486. There a suit cognizable by a Court of Small Causes was entertained and tried by a Subordinate Judge
as an ordinary suit under the Code of Civil Procedure. On the dismissal of the plaintiff''s claim there was an appeal to the District Court, which
reversed the decision of the trial Court and granted a decree in favour of the plaintiff. On a revision to the High Court it was contended that the
District Court had no jurisdiction to entertain the appeal against the decree of the Subordinate Judge, as the Subordinate Judge must be deemed to
have exercised his small cause jurisdiction in entertaining and trying the suit. In answer, the plaintiff contended that the suit was tried as an ordinary
suit and therefore the District Court can entertain the appeal under the Code of Civil Procedure. On these facts a Division Bench of the Bombay
High Court held that, though the Subordinate Judge entertained the suit of a small cause nature as an ordinary suit under the Code of Civil
Procedure, since the suit was a small cause, the trial Judge should be deemed to have acted within his small cause jurisdiction, though in fact he
acted under the Code of Civil Procedure. In that view the learned Judges held that no appeal lay to the District Court and that there was an
absolute want of jurisdiction for the District Court to entertain the appeal. The learned Judges said:
We must ascribe his acts to an actual existing authority under which they would have validity rather than to one under which they would be void.
The above decision was cited with approval by the Supreme Court in L. Hazari Mal Kuthiala Vs. The Income Tax Officer, Special Circle, Ambala
Cantt., , where an order of the Commissioner of Income Tax passed u/s 5 (5) of the Indian Income Tax Act, 1922 was attacked as ultra vires and
incompetent, for the reason that the correct provision to be invoked by him was Section 5 (5) of the Patiala Income Tax Act, which was applicable
to the assessment year in question. The Court upheld the order passed by the Commissioner treating the same as one passed under the provisions
of the Patiala Income Tax Act observing:
The exercise of a power will be referable to a jurisdiction which confers validity upon it and not to a jurisdiction under which it would be nugatory.
The same view was taken in R. P. Kandaswami and Others Vs. Commissioner of Income Tax, Madras, , also by the Supreme Court.
As the impugned order in this case relates to an assessment order made under the 1939 Act and Section 61 (1) of the 1959 Act makes it
obligatory on the Revenue to apply the provisions of the earlier Act, as if the new Act had not been passed, we have to test the validity of the
impugned order only under the provisions of the old Act. Though the impugned order purports to have been passed u/s 16 of the new Act, as per
the decisions above referred to, it is open to us to treat the order as one passed under the 1939 Act and the rules made thereunder. We have
already noticed that Rule 17 (3-A) of the Madras General Sales Tax Rules, 1939, enables the Commercial Tax Officer to pass an order of the
nature in question and, if the impugned order is treated as one passed under Rule 17 (3-A), its validity is beyond question for the reasons which we
have set out already and in view of the validating provisions contained in Section 4 of the Madras Act X of 1963. As a matter of fact the
Government Pleader wanted to sustain the impugned order only as one passed under Rule 17 (3) and (3-A) of the Madras General Sales Tax
Rules, 1939, rather than as an order passed u/s 16 of the 1959 Act. If the impugned order is one passed under Rule 17 (3), the assessee''s
contention as to the point of limitation will have no force, as the period prescribed under Rule 17 (3-A) is a period of five years, and the impugned
order has been passed within five years from the date of the original order.
Then coming to the merits of the assessment, we are clear in our minds that the impugned order is in accordance with the provisions of the Act
and that the same is not contrary to the provisions relating to the rebate either under the 1939 Act or under the rules framed thereunder. As noted
already, the pro-vision dealing with a deduction is Rule 5 (1) (i) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939 and it
runs as follows:
The tax or taxes u/s 3, 5 or 5-A or the notification or notifications u/s 6 (1) shall be levied on the net turnover of the dealer. In determining the net
turnover the amounts specified in the following clauses shall, subject to the conditions specified therein, be deducted from the gross turnover of a
dealer (1) in the case of a registered manufacturer of groundnut oil (other than refined groundnut oil) and cake, the amount which he is entitled to
deduct from his gross turnover under Rule 18-A subject to the conditions specified in that rule.
Rule 18-A provides certain conditions before which a registered manufacture of groundnut oil can claim the deduction provided under Rule 5 (1)
(1). A con joint reading of Rule 5(1) (1) and Rule 18-A make it clear that the deduction to which the manufacturer of groundnut oil is entitled is the
deduction of the turnover of the groundnut kernel and not the tax paid on the groundnut kernel. The reliance placed by the learned Counsel'' on the
form A-9, as indicating that the deduction should be of the tax paid on the groundnut kernel, will be of no avail having regard to the specific
provision contained in Rule 5 (1) (1) which allows deduction of the turnover alone and not of the tax paid on the kernel. On a perusal of the form
A-9 we find that the form is intended to notify the assessing authority all the items of turnover including that of the groundnut kernel used in the
manufacture of the groundnut oil. Column 18 of that form does not in fact refer to the rate of tax at which the groundnut kernel used in the
manufacture of oil was taxed. It merely refers to the rate at which the deduction is claimed on the quantity of kernel used in the manufacture of oil.
As already expressed, there in no room for the application of the rates of tax at which the groundnut kernel was taxed or the rate of tax at which
the oil was taxed, for the purpose of deduction as provided under Rule 5 (1) (1). On a due consideration of the matter we are of the opinion that
the view taken by the revising authority in passing the impugned order is quite in accord with the statutory provisions and the same cannot be
questioned as incorrect or illegal. We may also refer to a decision of a Division Bench of this Court rendered in The State of Madras v. Ralli
Brothers Ltd., where a similar view was taken of the provisions of Rule 5 (1) (1) and Rule 18-A of the Madras General Sales Tax (Turnover and
Assessment) Rules, 1939.
In the result this tax case is dismissed with costs; counsels fee Rs. 100.