State of Tamil Nadu vs Sabarigiri Industries

Chitra Venkataraman, J.—The above tax case revision is at the instance of the Revenue against the order passed by the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench), Chennai, for the assessment year 1996-97. The questions raised in the above tax case revision is as follows:

(i) Whether as against the order of rectification, an appeal would lie to the Appellate Assistant Commissioner? and

(ii) Whether for ascertaining the rate of tax under the Additional Sales Tax Act, the turnover for the year has to be taken and the appropriate rate of tax has to be adopted for levy of additional sales tax on the turnover up to July 31, 1996?

As far as the first issue on the rectification order is concerned, a perusal of the order of rectification by the assessing authority shows that the assessment under the Tamil Nadu Additional Sales Tax Act was rectified for the purpose of applying the correct rate of additional tax on the taxable turnover for the period from April 1, 1996 to July 31, 1997. The officer viewed that the taxable turnover for the period from April 1, 1996 to July 16, 1996 was wrongly assessed at 1.5 per cent as against two per cent tax leviable. Thus, referring to the letter of the Special Commissioner and Commissioner of Commercial Tax, dated January 6, 1998, the assessing officer held that when the taxable turnover for the period from April 1, 1996 to July 31, 1996 exceeded Rs. 1 crore but was below Rs. 5 crores, additional sales tax was to be levied without making any deduction of basic exemption of the first Rs. 10 lakhs turnover at two per cent. Accordingly, the order of rectification was made u/s

Hence, revision was made as against this order.

The assessee went on appeal before the State of Tamil Nadu Vs. Subbu Chemicals , held that since the order passed by the assessing officer u/s 55 of the Act is not the one made under any of those enumerated provisions for which appeal remedy was available u/s 31 of the Act no appeal would lie as against the order passed by the assessing authority.

The assessee went on further appeal before the Sales Tax Appellate Tribunal, who allowed the appeal, holding that the order passed on rectification was not a rejection order on an assessee's application, but it had gone into the merits of the assessment. Thus the Tribunal held that the order was an appealable order.

As regards the merits of the liability as to the rate of tax applicable for the period from April 1, 1996 to July 31, 1996, the Tribunal agreed with the contention of the assessee and held that the rate of tax is only 1.5 per cent for the period from April 1, 1996 up to July 31, 1996. The Tribunal pointed out that even though the assessing officer had passed a rectification order again fixing the rate at two per cent, the correct rate would nevertheless be at 1.5 per cent only. Thus the Tribunal allowed the appeal. Aggrieved by the order of the Tribunal, the Revenue is on revision before this court.

As far as the first issue on the maintainability of the appeal is concerned, in the decision reported in The State of Tamil Nadu Vs. The Crompton Engineering Company (Madras) Limited, this court held that there is a clear and a real distinction between an order allowing an application for rectification and thereby rectifying or modifying the original order of assessment and an order rejecting an application for rectification. When the rectification proceedings resulted in a positive action, which has the effect of destroying the finality of original assessment, thereby reopening the assessment order itself, then the provisions relating to appeal would lie. On the other hand, when the assessing officer refuses to interfere with the original order and that order is allowed to remain intact, the said order would not be amenable normally to appeal remedy. In so holding, this court referred to the provisions u/s 55(4) of the Tamil Nadu General Sales Tax Act, 1959, inserted by Amendment Act No. 31 of 1972, providing for appeal and revision remedy when an order of rectification is made, and not when the authority concerned refuses to pass an order of rectification.

Similar view was also taken in the decision of this court reported in State of Tamil Nadu Vs. Speedline Agencies This court, in paragraph 5 of the judgment, pointed out as follows (page 361 in 114 STC):

Any order made by an authority declining to correct any alleged errors has the effect of leaving the original order intact. It is only when rectification is ordered, and as a consequence, one of the parties is aggrieved by such modification, a remedy is required to be provided. For that purpose section 55(4) of the Act has been introduced. That new sub-section (4) of section 55 does not confer a right on an applicant who unsuccessfully seeks rectification, to file appeal or revision against the order declining to rectify. If the authority which made the original order is of the view that there are in fact no errors in the order which need to be rectified, or can be rectified u/s 55 of the Act, no further proceedings can be taken by the applicant, against the refusal of the authority to make an order in favour of the person applying for rectification.

In the light of the above stated decisions and in view of section 55(4) of the Act, the first question is answered against the Revenue. Thus, as against the order of rectification passed resulting in the modification of the original order passed, the assessee has the right of appeal before the appellate forum.

As far as the second question is concerned, learned Special Government Pleader submits that the question is no longer res integra by reason of the decision reported in State of Tamil Nadu Vs. National Time Co., wherein identical question of law has been considered. The assessment year under consideration was relating to 1996-97. Applying the above stated decisions, we do not find any defect in the order of the Tribunal also.

Consequently, the tax case revision is dismissed.

No costs.