1977 (7) TMI 107 - HC - VAT and Sales Tax

Kerala HC upholds Deputy Commissioner's order on tax exemptions, clarifies revisional power vs. assessment jurisdiction

The Kerala High Court held that the Deputy Commissioner's order under section 35, directing the assessing authority to limit exemptions on goods purchased ... - Issues:1. Whether an order of remand made by the Deputy Commissioner under section 35 of the Kerala General Sales Tax Act amounts to a direction to assess escaped income.2. Whether the impugned order of the Deputy Commissioner was illegal in initiating proceedings for a fresh assessment of escaped income.3. Whether the impugned order of the Deputy Commissioner was beyond the powers vested in him under subsection (1) of section 35.4. Whether the impugned order constituted an infringement of the jurisdiction of the assessing authority under section 19 of the Act.5. Whether the proceedings initiated under the order were time-barred.Analysis:The judgment of the Kerala High Court involved tax revision cases arising from a common order of the Kerala Sales Tax Appellate Tribunal regarding the years 1966-67, 1967-68, and 1968-69. The main issue was whether an order of remand by the Deputy Commissioner under section 35 amounted to a direction to assess escaped income. The Deputy Commissioner had set aside the assessment orders for those years and directed the assessing authority to limit the exemption to goods purchased within the State. The assessee contended that the order of remand was illegal and time-barred, infringing on the assessing authority's jurisdiction under section 19 of the Act. The Tribunal upheld the Deputy Commissioner's order, leading to the tax revision cases before the High Court.The Deputy Commissioner's order was made under his revisional power under section 35 of the Act. The petitioner argued that the order exceeded the Deputy Commissioner's powers under section 35(1) by initiating proceedings for a fresh assessment of escaped income. The petitioner relied on a previous court decision emphasizing that the revisional power should correct irregularities, not interfere with the assessing authority's power to assess escaped turnover under section 19. However, the High Court found that the power to assess escaped turnover under section 19 was distinct from the Deputy Commissioner's revisional power under section 35, which focused on correcting illegality or irregularity in orders.Section 19 of the Act specifically deals with the assessment of escaped turnover, while section 35 confers revisional power upon the Deputy Commissioner. The High Court clarified that these two sections relate to different jurisdictions and matters. In this case, the Deputy Commissioner's order to limit the exemption to goods purchased within the State was a valid exercise of his revisional power under section 35. The order aimed to correct an irregularity detected in the records and did not infringe upon the assessing authority's power under section 19 to assess escaped turnover.The High Court further ruled that the Deputy Commissioner's order was made within the time stipulated under section 35 and was not barred by limitation. Any subsequent steps directed by the assessing authority following the Deputy Commissioner's order would not be governed by the time limit in section 35 or constitute a proceeding under section 19. Therefore, the High Court concluded that the order was valid, dismissing the tax revision cases and stating that there would be no order as to costs.