2011 (11) TMI 121 - HC - VAT and Sales Tax

Appeal on Merger Doctrine Denied, Revision Order Time-Barred

The Additional Commissioner of Sales Tax VATI, Mumbai Versus Kirloskar Oil Engine Ltd.

The High Court upheld the Tribunal's decision that the doctrine of merger did not apply as the appeal was limited to specific issues of interest and ... Doctrine of merger - not rigid and universal - depends on the nature of the appellate or revisional order in each case and the scope of the statutory provisions - Held That:- Where assessee appealed against interest and penalty only and the rest of the order of assessment was not in challenge before the first appellate authority and would therefore to that extent not merge with the order of the first appellate authority. The limitation for revising the order of assessment dated 31 March 1999 would therefore commence from 21 April 1999 which was the date on which the order was served on the dealer. While the notice was issued by the revisional authority within the prescribed period of three years, the order of the revisional authority which was passed on 27 June 2005 was clearly beyond the period of five years prescribed by the proviso to clause (a) of sub section (1) of Section 57. Issues Involved:1. Whether the Tribunal was justified in holding that the order of assessment did not merge in the first appeal order.2. Whether the Tribunal was justified in holding that there was no merger of the assessment order with the appeal order and the revision order was barred by limitation.Detailed Analysis:Issue 1: Merger of Assessment OrderThe primary issue was whether the order of assessment dated 31 March 1999 merged with the first appellate order dated 30 June 2000. The Respondent, a registered dealer, was assessed for the Assessment Year 1995-96, resulting in a refund order adjusted against central sales tax dues. The dealer challenged the assessment only regarding the levy of interest and penalty, which the Deputy Commissioner of Sales Tax set aside on 30 June 2000.The Additional Commissioner of Sales Tax issued a notice on 27 August 2001 to revise both the assessment order and the appellate order. The Tribunal held that the assessment order did not merge with the appellate order since the appeal was limited to interest and penalty issues. The Tribunal concluded that the revision order was barred by limitation, as the period commenced from the original assessment order date, 31 March 1999.Issue 2: Limitation for Revising the OrderThe relevant legal provision was Section 57(1)(a) of the Bombay Sales Tax Act 1959, which prescribes two periods of limitation: three years for serving a notice and five years for passing a revision order from the date of communication of the order sought to be revised. The Tribunal found that the revision order dated 27 June 2005 was beyond the five-year limit from the original assessment order date, 31 March 1999.The Revenue argued that the dealer had reserved the right to amend grounds of appeal, implying that the assessment order merged with the appellate order. However, the Tribunal and subsequently the High Court held that the doctrine of merger did not apply as the appeal was limited to interest and penalty issues, not the entire assessment order.Legal Precedents and Doctrine of MergerThe judgment referenced the Supreme Court's ruling in the State of Madras v. Madurai Mills Company Limited, which established that the doctrine of merger is not universally applicable and depends on the scope of the appellate or revisional jurisdiction. The Court also cited Commissioner of Central Excise, Delhi v. Pearl Drinks Ltd., reiterating that the doctrine applies only to the aspects of the order under appeal or revision.In this case, since the dealer's appeal was confined to interest and penalty, the rest of the assessment order did not merge with the appellate order. Therefore, the limitation period for revising the assessment commenced from the original order date, making the revision order issued on 27 June 2005 time-barred.ConclusionThe High Court upheld the Tribunal's decision, stating that the doctrine of merger did not apply as the appeal was limited to specific issues. Consequently, the limitation period for revising the assessment order started from the original order date, rendering the revision order beyond the prescribed five-year limit. The Sales Tax Application was dismissed with no order as to costs.