1969 (7) TMI 94 - SC - VAT and Sales Tax

Supreme Court sets 4-year limit for revisional powers in tax cases, addresses illegality

The Supreme Court clarified that revisional powers under section 15(1) of the Travancore-Cochin General Sales Tax Act are meant to address illegality, ... Whether the revisional powers conferred on the Deputy Commissioner of Agricultural Income-tax and Sales Tax under section 15(1) of the Travancore- Cochin General Sales Tax Act, 1125, hereinafter called the Act, could be exercised in the present case after the expiry of a period of three years mentioned in rule 33 of the Rules framed under the Act? Held that:- Appeal allowed. Although it is stated in the judgment of the High Court that the present cases were of escaped turnover we are altogether unable to endorse that view. The question which the Deputy Commissioner had to consider was one of the legality, propriety and regularity of the exemption of the turnover granted under the licence in respect of the auction sales. This fell strictly within the purview of section 15(1) of the Act and there was no question of any action being taken under rule 33 on the ground that there had been escapement of turnover. The period of limitation for such proceedings is prescribed by section 15 itself to be four years from the date on which the order was communicated to the assessee. Issues:Interpretation of revisional powers under section 15(1) of the Travancore-Cochin General Sales Tax Act, 1125 in relation to the time limit for exercising such powers as per rule 33 of the Rules framed under the Act.Detailed Analysis:The case involved two appeals from the High Court of Kerala concerning the exercise of revisional powers by the Deputy Commissioner of Agricultural Income-tax and Sales Tax under section 15(1) of the Act after the expiration of the three-year period specified in rule 33. The respondent, a dealer in provisions and auction sales of cardamom, had his assessments canceled by the Deputy Commissioner due to improper exemption under the license. The assessing authority subsequently included the auction sales turnover in the taxable turnover and disallowed the exemption.The Appellate Assistant Commissioner and the Kerala Sales Tax Appellate Tribunal upheld the assessments, leading the assessee to file tax revisions before the High Court. The High Court, citing a previous judgment, held that the revisional authority could not interfere after the lapse of three years in cases of escaped turnover.However, the Supreme Court, referencing previous decisions, clarified that section 15(1) was intended to address illegality, impropriety, or irregularity in assessing authority orders, not cases of escaped turnover. The Court emphasized that the dispute in this case pertained to the legality of the exemption granted under the license, falling within the purview of section 15(1) and not rule 33 regarding escaped turnover. The limitation period for such proceedings was deemed to be four years from the date of order communication to the assessee, as established in prior judgments.Consequently, the Supreme Court allowed the appeals, overturning the High Court's decision and emphasizing the applicability of the four-year limitation period under section 15, setting aside the three-year limit prescribed by rule 33. The Court awarded costs and a hearing fee, ultimately ruling in favor of the appellants.