Model Bottling Company Private Limited vs Commissioner of Commercial Taxes

C. Venkataramulu, J.—This special appeal is filed u/s 23(1) of the Andhra Pradesh General Sales Tax Act, 1957 read with Rule 41 of the Andhra Pradesh General Sales Tax Rules, 1957, aggrieved by the Order of the Commissioner of Commercial Taxes, Andhra Pradesh, Hyderabad, in CCT''s Ref. No. LV(2)/l845/94, dated January 8, 1996, wherein the Order of the Additional Commissioner of Commercial Taxes was sought to be revised, while exercising the powers vested in him, u/s 20(1) of the APGST Act.

The brief facts of the case are that :

The appellant, M/s. Model Bottling Company Private Limited, Guntur, engaged in the business of sale of aerated water and concentrates (soft drinks) on wholesale basis. It is a registered dealer on the rolls of the Commercial Tax Officer at Bapatla. The assessing authority made assessment for the year 1989-90 and levied tax on a turnover of Rs. 18,46,370, which relates to publicity and advertisement expenditure. Aggrieved by the same, the appellant herein, preferred an appeal before the Appellate Commissioner, Guntur. The Appellate Commissioner allowed the appeal on the ground that the assessing authority was wrong in assessing the advertisement expenditure to levy tax, treating it as part of the sale price. Further, the order of the appellate authority was sought to be reviewed by the Additional Commissioner (CT) by issuing a show cause notice dated March 12, 1993 u/s 20(1) of the APGST Act (for brevity "the Act"). However, after perusing the reply filed by the appellant the Revisional Authority (Additional Commissioner, CT-cum-Joint Commissioner, Legal) agreed with the view taken by the appellate authority holding that the publicity and advertisement expenditure collected from the customer (dealer) do not form part of the turnover and dropped the proceedings by its order dated April 21, 1993.

While so, again a show cause notice dated October 3, 1994 was issued in respect of the same matter by the Commissioner, Commercial Taxes purporting to be while exercising the powers u/s 20(1) of the Act to revise the orders passed by the Additional Commissioner of Commercial Taxes on the ground that it was noticed by him that the expression "turnover" as defined u/s 2(s) of the APGST Act, 1957, among other things, includes total amount set out in the bills of sale as consideration for sale, or purchase of goods by a dealer either directly or through another constitutes turnover, and as such, the consideration retained by the appellant from purchaser would be sale price whatever be the nomenclature given and in the present case the appellant has charged advertisement charges through debit note at a unit rate per crate, which mean that the calculations were made with reference to sales but not under any other criteria and these calculations have nexus with the sales. After receiving the written objection and hearing the counsel for the appellant the Commissioner of Commercial Taxes passed final order of January 18, 1996 setting aside the orders passed by the Additional Commissioner dated April 21, 1993 and restoring the order of the original order passed by the Commercial Tax Officer, Bapatla. Aggrieved by the said order of revision u/s 20(1) of the Act, the present special appeal is preferred.

The appellant, inter alia, raised two important aspects for the consideration of this Court :

"(i) Whether the Commissioner of Commercial Taxes was right in revising the order of the Additional Commissioner purported to be u/s 20(1) of the APGST Act, on the ground that the order of the Additional Commissioner (Commercial Taxes) could be revised by him u/s 20(1) of the Act, as the Additional Commissioner of Commercial Taxes was subordinate to the Commissioner of Commercial Taxes under Rule 44-A of the APGST Rules, 1957 ?".

(ii) Whether the Commissioner of Commercial Taxes was right in holding that the publicity and advertisement expenditure recouped by the purchaser forms part of the sale consideration, though the same is in the nature of reimbursement of the post sales expenditure ?"

The learned counsel for the appellant at the threshold, attacked the jurisdiction of the Commissioner of Commercial Taxes in revising the order of revision already passed by the Additional Commissioner of Commercial Taxes u/s 20(1) of the Act on April 21, 1993, purporting to exercise his powers under the same Section of law, i.e., Section 20(1) of the APGST Act read with Rule 44-A of the APGST Rules, 1957 (for brevity "the Rules") treating the Additional Commissioner as his subordinate as on April 21, 1993.

The learned counsel for the appellant submits that the Additional Commissioner of Commercial Taxes was not subordinate to the Commissioner of Commercial Taxes, and as such, the order of Revision passed by the Additional Commissioner of Commercial Taxes while exercising his powers u/s 20(1) of the Act, cannot be revised again by the Commissioner of Commercial Taxes while invoking his powers vested u/s 20(1) of the Act.

On the other hand, the learned Special Government Pleader for Taxes submits that the Commissioner of Commercial Taxes has got powers u/s 20(1) of the Act to revise even the order passed by the Additional Commissioner of Commercial Taxes u/s 20(1) of the Act, as both the authorities have been vested with powers u/s 20(1) of the Act and the Additional Commissioner of Commercial Taxes being subordinate to the Commissioner under Rule 44-A, the Commissioner of Commercial Taxes was right in exercising his powers u/s 20(1) of the Act. It is, therefore, necessary to examine the provisions of Section 20of the APGST Act, 1957 and Rule 44-A of the APGST Rules, 1957 made thereunder.

Section 20 of the A.P.G.S.T. Act reads as under :

Section 20 of the Act : Revision by Commissioner of Commercial Taxes and other prescribed authorities.-(1) The [Commissioner of Commercial Taxes] may suo motu call for and examine the record of any order passed or proceeding recorded by any authority, officer or person subordinate to it, under the provisions of this Act, including Sub-section (2) of this Section and if such order or proceeding recorded is prejudicial to the interests of revenue, may make such enquiry, or cause such enquiry to be made and subject to the provisions of this Act, may initiate proceedings to revise, modify or set aside such order of proceeding and may pass such order in reference thereto as it thinks fit.

(2) Powers of the nature referred to in Sub-section (1) may also be exercised by [the Additional Commissioner, Joint Commissioner] [Deputy Commissioner, Assistant Commissioner] and the Commercial Tax Officer in the case of orders passed or proceedings recorded by authorities, officers or persons subordinate to them."

Rule 44A of the A.P.G.S.T. Rules, reads as under :

"44A : For the purpose of the exercise of the powers of the nature referred to in Sub-section (1) of Section 20, the authorities specified in column (1) of the Table below shall be deemed to be subordinate to the authority specified in the corresponding entry in column (2) thereof.

Table

From the above table under Rule 44-A, it is seen that the Additional Commissioner who exercised his powers u/s 20(1) of the Act has been made subordinate to the Commissioner of Commercial Taxes. This was introduced through G.O.Ms. No. 788, Revenue Department, dated September 21, 1996.

Whereas u/s 20(1) of the Act, the Commissioner is vested with suo motu powers to call for and examine the records, any order passed by any authority subordinate to him including the authorities under sub-clause (2) of Section 20. Therefore, the Commissioner is vested with the powers to revise the orders passed even by the Additional Commissioner who is also empowered to exercise the powers u/s 20(1) of the Act, being subordinate to the Commissioner of Commercial Taxes as per Rule 44-A of the APGST Rules, 1957.

1A Section 2(aaa) defines : ''Additional Commissioner'' means any person appointed to be an Additional Commissioner of Commercial Taxes u/s 4 of the Act.

This definition was inserted by, Act No. 27 of 1996, with retrospective effect from November 19, 1991.

Section 4 of the Act, which reads as under :

Section 4 of the Act : Appointment of [Commissioner of Commercial Taxes, [Additional Commissioner of Commercial Taxes] Joint Commissioners of Commercial Taxes], Appellate Deputy Commissioners of Commercial Taxes, Deputy Commissioners of Commercial Taxes [Assistant Commissioners of Commercial Taxes] Commercial Tax Officers and [Deputy Commercial Tax 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 Commissioner of Commercial Taxes], [Assistant Commissioners of Commercial Taxes], Commercial Tax Officers and [Deputy Commercial Tax Officers] as they think fit, for the purpose of performing the functions respectively conferred on them by or under this Act. Such officers shall perform the said functions [within such area or areas or the whole of the State of Andhra Pradesh] as the State Government or any authority or officer empowered by them in this behalf may assign to them.

The post of Additional Commissioner was available on the statute book since the inception of the Act, and the Joint Commissioner was introduced from July 1, 1985. The definition of Additional Commissioner was sought to be introduced in 1996, w.e.f. November 19, 1991, as per Section 4 of the Act. But the Additional Commissioner, was not a subordinate till November 21, 1996 to the Commissioner of Commercial Taxes.

The special Government pleader for Taxes argued that the Additional Commissioner being a subordinate to the Commissioner as per Rule 44-A of the APGST Rules, 1957, the Commissioner can revise the orders passed by the Additional commissioner u/s 20(1) of the APGST Act as per the powers vested in him u/s 20(1) of the Act.

Generally speaking, an Additional Commissioner is nothing but in addition to the Commissioner he is supposed to exercise all the powers vested in the Commissioner as conferred on him under the Act, and as such, the State Government may confer on him. What are the functions and powers conferred on the Additional Commissioner under the Act, as contemplated u/s 4 of the Act, are not forthcoming. Be that as it may, in view of the powers conferred on the Commissioner u/s 20(1) itself to revise the orders passed by the authorities u/s 20(2) of the Act and the doctrine of subordination was also applied to the Additional Commissioner under Rule 44-A of the Rules made thereunder, it may not be necessary to go into that aspect nor was it under attack before this Court.

The learned Special Government pleader for Taxes submitted at the bar, that there was no post of Additional Commissioner available under the Act till September 21, 1996, may be inspired by Rule 44 of the Rules, and he submits that once the post of Additional commissioner of Commercial Taxes was not available on the statute book, the order passed by him on April 21, 1993 purported to be u/s 20(1) of the Act must be deemed to have been passed by a Joint Commissioner and not Additional Commissioner, and as such, the Commissioner had powers to revise the orders passed by his subordinate, i.e., the Joint Commissioner of Commercial Taxes, and thus, the power of Revision u/s 20(1) of the Act by the Commissioner cannot be questioned. But this argument cannot be accepted, for the reason that as per the amended Section 4 of the Act, Section 20(1) and Section 20(2) of the Act, the post of Additional Commissioner was there on the statute book w.e.f. November 19, 1991. Thus, from November 19, 1991 to September 21, 1996 the Additional Commissioner cannot be called a "subordinate" to the Commissioner and the Commissioner of Commercial Taxes has no power u/s 20(1) of the Act to revise the orders of the Additional Commissioner passed on April 21, 1993.

Rule 44-A of the A.P.G.S.T. Rules, 1957 subjects the authority of the Additional Commissioner of Commercial Taxes, w.e.f. January 29, 1996 subordinate to the Commissioner of Commercial Taxes and not his status as an officer subordinate to the Commissioner of Commercial Taxes for the purpose of Section 20(1) of the APGST Act, 1957.

The doctrine of subordination was introduced only w.e.f. September 21, 1996 and prior to that the Additional commissioner cannot be called "subordinate" even though the words "Additional Commissioner", was inserted to Sub-section (2) of Section 20 of the Act in 1997 with retrospective effect, i.e., November 19, 1991 as the Rule 44-A was amended only w.e.f., September 21, 1996 making the Additional Commissioner subordinate to the Commissioner of Commercial Taxes. Thus, during the interregnum period, though the definition of Additional Commissioner was inserted in 1997, with retrospective effect from November 19, 1991 he was not made subordinate to the Commissioner with retrospective effect till September 21, 1996 as to his authority u/s 20(1) of the Act.

When the order passed by the Additional Commissioner on April 21, 1993, while exercising powers vested u/s 20(1) of the Act, he cannot be called to be a subordinate to the Commissioner of Commercial Taxes u/s 20(1) of the same Act, as the doctrine of subordination insofar as making the Additional Commissioner subordinate to the Commissioner was not there. Thus, the order passed by the Commissioner purported to be while exercising his powers vested u/s 20(1) of the Act in CCT''s Ref. No. LV (2)/1845/94, dated January 8, 1996 is without jurisdiction, arbitrary and illegal and the same is liable to be set aside. In view of the conclusions reached by us, there is no necessity to go into the other aspects of this case.

Accordingly, the order passed by the Commissioner in his Proceedings CCT''s Ref. No. LV(2)/1845/94, dated January 8, 1996 is set aside and the Special Appeal is allowed. No costs.