1964 (10) TMI 64 - SC - VAT and Sales Tax

Supreme Court clarifies limits of revisional authority under Madras Sales Tax Act

The Supreme Court held that the Deputy Commissioner's jurisdiction under section 12(2)(i) of the Madras General Sales Tax Act does not allow for a fresh ... Whether the Deputy Commissioner of Commercial Taxes has jurisdiction under section 12(2)(i) of the Madras General Sales Tax Act, 1939, read with the relevant rule, rule 14-A, to make the order he did? Whether the revisional jurisdiction conferred under section 12 of the Act enables the authority concerned to make a fresh enquiry after issuing notice to the dealer concerned and determine the question of assessment on merits? Held that:- Appeal allowed and case remanded. In accordance with the opinion of the majority, the order of the High Court declaring rule 14-A to be ultra vires is set aside and the proceedings are remanded to the High Court to be dealt with according to law.The High Court will have to make enquiry whether in the circumstances of the case the Deputy Commissioner, Coimbatore Division, was competent to proceed in the manner he has done and to pass the order which was impugned before the Sales Tax Appellate Tribunal. The order passed by the High Court declaring rule 14-A to be ultra vires is set aside, and the proceedings are remand- ed to the High Court to be dealt with according to law. Issues Involved:1. Jurisdiction of the Deputy Commissioner under section 12(2)(i) of the Madras General Sales Tax Act, 1939.2. Validity of Rule 14-A of the Rules framed under the Act.3. Distinction between appellate and revisional jurisdiction.4. Scope and limitations of revisional authority's powers.Issue-Wise Detailed Analysis:1. Jurisdiction of the Deputy Commissioner under section 12(2)(i) of the Madras General Sales Tax Act, 1939:The primary issue was whether the Deputy Commissioner of Commercial Taxes had the jurisdiction under section 12(2)(i) of the Act to make a fresh enquiry and revise the assessment order. The respondents, dealers in pepper and other condiments, had initially been granted an exemption for certain transactions as commission sales. The Deputy Commissioner, upon review, concluded that the respondents engaged in outright purchase and sale, thus revising the assessment to include the previously exempted turnover. The court held that section 12(2) allows the Deputy Commissioner to examine the legality or propriety of an order or the regularity of proceedings, but does not permit a fresh enquiry or reassessment based on new evidence. This interpretation maintains the distinction between appeal and revision, where revision is limited to the existing record and does not encompass a full re-evaluation of the case on new evidence.2. Validity of Rule 14-A of the Rules framed under the Act:Rule 14-A, which allows the revising authority to issue a notice and determine the correct amount of tax after making necessary enquiries, was challenged as being ultra vires the Act. The court found that while the rule confers broader powers than section 12(2), it must be read in conjunction with the Act. If the rule conflicts with section 12, it must yield to the Act. The court concluded that Rule 14-A could not extend the revisional authority's power beyond what section 12(2) permits, which is limited to examining the record of the order passed by the subordinate authority. Therefore, the rule was deemed invalid to the extent it allowed fresh enquiries and reassessments.3. Distinction between appellate and revisional jurisdiction:The judgment emphasized the essential distinction between appeal and revision. An appeal involves a continuation of the proceedings with the appellate authority having the power to review evidence and make a fresh decision. In contrast, revision is limited to examining the legality or propriety of the order or the regularity of proceedings based on the existing record. The revisional authority does not have the power to conduct a fresh enquiry unless explicitly provided by the statute. This distinction ensures that the scope of revision remains narrower than that of an appeal.4. Scope and limitations of revisional authority's powers:The court analyzed the scope of the revisional authority under section 12(2), which is confined to the record of the order passed by the subordinate officer. The revisional authority can pass orders to rectify defects in legality, propriety, or regularity but cannot conduct a fresh enquiry or reassessment. The phrase 'may pass such order as he thinks fit' is restricted to the scope of jurisdiction defined by the section. Therefore, any rule or action that extends beyond these limits is ultra vires. The judgment clarified that the revisional authority's power is procedural and aids in rectifying defects within the existing record without expanding into reassessment or fresh enquiry.Separate Judgments:- Subba Rao, J.: Delivered a separate judgment concurring with the majority but emphasizing the need to adhere strictly to the statutory limitations of revisional jurisdiction and the invalidity of Rule 14-A when it conflicts with section 12(2).- Majority Opinion (Shah and Sikri, JJ.): Concluded that Rule 14-A was ultra vires to the extent it allowed fresh enquiries and reassessments beyond the scope of section 12(2). The case was remanded to the High Court for further proceedings consistent with this interpretation.Conclusion:The Supreme Court set aside the High Court's declaration of Rule 14-A as ultra vires and remanded the case for further proceedings. The appeal was allowed, emphasizing the need to adhere to the statutory limits of revisional jurisdiction and the invalidity of rules that extend beyond these limits. No order as to costs was made.