TaxTMI 
TaxTMI 
1993 (9) TMI 327
X X X X Extracts X X X X
X X X X Extracts X X X X
....eclaring a gross turnover of Rs. 3,22,417.77. The petitioner contended that a sum of Rs. 1,92,110.78 representing excise duty paid by the purchasers directly into the State treasury, will not form part of the sales turnover of the petitioner and therefore did not declare the same as part of its turnover. The assessing authority rejected the claim of the petitioner. The assessee went in appeal to the appellate authority against the order of the assessing authority. The appeal was dismissed. Against the said dismissal order, the petitioner preferred a further appeal before the Tribunal in S.T.A. No. 1340/1983. Before the Tribunal, in support of its contention that the excise duty paid directly by the purchasers will not form part of its sales turnover, the petitioner relied on the decision of the Supreme Court in the case of McDowell & Company Ltd. v. Commercial Tax Officer [1977] 39 STC 151. The Tribunal following the said judgment, allowed the appeal directing the assessing authority to revise the demand by excluding the excise duty paid by the purchasers, directly to the State treasury from the taxable turnover of the petitioner. It was also held that the petitioner was not liable....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n support of his case: (a) As the impugned order of rectification was passed beyond five years specified under section 22(6-A) of the Act, the order is without jurisdiction; and (b) alternatively, even if the order is held to have been made within the permissible time-limit, on merits, the order was unsustainable, inasmuch as there was no mistake apparent from the record. In support of his contention, he submitted that though the earlier decision of the Supreme Court in [1977] 39 STC 151 (McDowell & Company Ltd. v. Commercial Tax Officer) as well as the later Constitution Bench decision in [1985] 59 STC 277 (McDowell & Company Ltd. v. Commercial Tax Officer) were cited before the Tribunal, the Tribunal, presumably on the ground that the latter decision of the Constitution Bench did not apply to the facts of the case, did not consider it and allowed the appeal by following the earlier decision of the Supreme Court in [1977] 39 STC 151 (McDowell & Company Ltd. v. Commercial Tax Officer); hence even if the decision of the Tribunal dated October 4, 1985 was erroneous, it did not reflect an apparent error of law which could be a ground for rectification proceedings and, therefore, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....view of these rival contentions, the following points arise for our consideration: (i) Whether the order dated November 30, 1990, passed by the Tribunal in rectification proceedings is beyond the period of limitation and is therefore without jurisdiction? (ii) Whether the earlier order of the Tribunal suffers from a patent error of law which can be termed as a "mistake apparent from the record"? (iii) Whether on merits, the Tribunal was justified in allowing the rectification application? Point No. (1): 8.. Section 22(6-A) of the Act dealing with rectification by Tribunal reads thus: "6(A): With a view to rectifying any mistake apparent from the record, the Appellate Tribunal may, at any time, within five years from the date of any order passed by it under sub-section (4) or sub-section (6), amend such order: Provided that no order under this sub-section shall be made without giving both-parties affected by the order a reasonable opportunity of being heard." It is true that an application for rectification of any mistake on the ground that it is apparent from the record, should be moved within five years from the date of order. It is also true that as indica....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y or revising authority functioning under the Act. In that case, a notice for rectification of an order was issued within five years. The question for consideration was whether it could be decided by the authority after the expiry of the prescribed period of five years. Venkataramiah, J., answered the question in the affirmative following the decision of the Supreme Court rendered in the case of Sales Tax Officer v. Sudarsanam Iyengar & Sons [1970] 25 STC 252. The learned Judge observed that if a notice has been issued in exercise of the power under section 25A of the Act asking the assessee to show cause as to why the order of assessment should not be rectified, within the period of five years from the date on which the order in question is passed, it has to be held that the order of rectification passed after expiry of the period of five years pursuant to the notice so issued would not be a defective one. 11.. A decision of the Division Bench of this Court in K.G. Subramanya v. Commissioner of Agricultural Income-tax reported in [1969] 73 ITR 499 (Mys); [1969] 1 Mys LJ 274 dealing with section 35(2) of the Karnataka Agricultural Income-tax Act was cited before the learned Judg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....told that the aforesaid judgment of the learned Judge was confirmed by a Division Bench of this Court*. We respectfully concur with the view expressed by Venkataramiah, J., in the aforesaid decision, especially when it is supported by the decision of the Supreme Court in [1970] 25 STC 252 (Sales Tax Officer v. Sudarsanam Iyengar & Sons) referred to by the learned Judge. 12.. In this connection, we may also refer to the decision of the Allahabad High Court in Vithaldas v. Income-tax Officer [1969] 71 ITR 204 wherein a Division Bench of the Allahabad High Court had to consider whether proceedings for rectification initiated under section 35 of the Indian Income-tax Act, 1922, within four years, could validly result in rectification of the order, after four years period prescribed under the Act. It was held that it was the duty of the Incometax Officer under section 35 of the Act to make a rectification and as he had failed to do so, the High Court had power to issue a writ directing the Incometax Officer to make a rectification even though the period of four years fixed in section 35 had expired. The Allahabad High Court relied on the decision of the Madras High Court in Kadirvel ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h incorporates the principles of natural justice to revise or not to revise the order of his subordinate. Without calling for the records and examining them, the power of revision cannot at all be exercised. When once the Commissioner calls for the records for purposes of section 22-A of the Act, the one and the only way that can be understood and interpreted is that he has initiated the proceedings for revision under section 22-A(1) of the Act. Section 22-A(2) of the Act does not stipulate that the power initiated by calling for the records should also be peremptorily completed within 4 years from the date of the order sought to be revised. All that the section requires is that the power of revision shall be exercisable within four years from the date of the order. If the power of revision can only be exercised by calling for records and not in a vacuum, then the very first step of calling for records must be of necessity construed as falling within the meaning of the term 'shall be exercisable'. In many a case as in this very case for a variety of good reasons, which cannot be catalogued and stated exhaustively, it will be impossible for the Commissioner to complete the proceedin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the said decision suffered from an apparent error as the facts of the case were governed by the decision of the Supreme Court in Commissioner of Income-tax v. Dalmia Investment Co. Ltd. [1964] 52 ITR 567. Both these decisions of the Supreme Court were before the Income-tax Officer who made the assessment in the first instance. The Division Bench took the view that the grounds put forward by the successor-Income-tax Officer for rectifying the order of the predecessor-Income-tax Officer was not covered under section 154 of the Income-tax Act, 1961 and therefore, the rectification proceedings were without authority of law. For coming to that conclusion, Mal Lodha, J., speaking for the Division Bench, referred to the relevant facts and held as follows: "The Income-tax Officer in the order, annexure 1, has computed the capital gains taking the value of the shares at the time of their purchase and accepted the mode of calculation of the capital gains as worked out by the assessee. It was not in dispute that this was done in accordance with the principles laid down by their Lordships of the Supreme Court in Emerald & Co.'s case [1959] 36 ITR 257. It may be recalled that, according to....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., J., considering section 55 of the Tamil Nadu General Sales Tax Act which permitted rectification of the order on the ground of error apparent on the face of the record, held that "rectification" means "taking out mistakes from " and that the provisions of section 55 of the Tamil Nadu General Sales Tax Act, 1959, is only to rectify any error apparent on the face of the record, such as clerical error, typing mistakes, etc. It is difficult to agree with this line of reasoning as "error apparent" is not confined to a typing nor a clerical error, as is wrongly assumed by the learned Judge. Perhaps the learned Judge might have gone on the analogy of sections 152 and 153 of the Code of Civil Procedure which are meant for correction of unintentional mistakes committed by the courts, clerical or arithmetical mistakes in judgments, decree or orders arising from accidental slips or omissions. It is no doubt true that rectification of an error apparent on the face of the record may not be the same as power of review under order 47, rule 1 of the Code of Civil Procedure, as power of review is available not only in a case where there is a mistake or error apparent on the face of the record, bu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of reasoning on points on which there may conceivably be two opinions. Failure of the Tribunal to consider an argument advanced by either party for arriving at a conclusion is not an error apparent on the record, although it may be an error of judgment. The Tribunal cannot, in the exercise of its power of rectification, look into some other circumstances which would support or not support its conclusion." No exception can be taken to the view expressed in the aforesaid decision of the Bombay High Court. It is no doubt true that no party can seek rectification by long drawn process of reasonings nor can the Tribunal be asked to rectify its order on the basis of an alternative argument. It is also true that rectification is not a proceeding analogous to review or appeal. However, on the facts and circumstances of the present case, rectification which has been made by the Tribunal is of a patent error committed by the earlier Bench in following an overruled decision and it did not involve a long drawn process of reasoning or some new argument. 18.. Learned counsel for the assessee invited our attention to the decision of the Division Bench of the Orissa High Court in Commission....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the mistake committed by the Tribunal amounts to contempt of court, it necessarily would be a mistake apparent on the face of the record which can be corrected by a later Bench of the Tribunal to get rid of the charge of contempt. 20.. Our attention was drawn by the learned counsel for the Revenue to the decision of the Division Bench of this Court in the case of Selection Committee for Admission to the Medical and Dental College v. M.P. Nagaraj reported in AIR 1972 Mys 44 which has taken the view while interpreting the term "mistake or error apparent on the face of the record" under order 47, rule 1 of the Code of Civil Procedure, which is almost in pari material with the present provision for rectification found in section 22(6-A) of the Act, that a decision of a court by overlooking a decision of the Supreme Court which is binding on all courts in India, constitutes an error apparent on the face of the record justifying review of the decision rendered contrary to the decision of the Supreme Court. The following pertinent observations are made by the Division Bench speaking through Chandrashekhar, J. (as he then was): "23. In this state of divergence of views as to whether ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is taxable turnover and it was wrongly added by the assessing authority and the appeal was wrongly dismissed by the appellate authority. In support of this contention, the assessee relied on the decision of the Supreme Court in McDowell & Company Ltd. v. Commercial Tax Officer [1977] 39 STC 151. Relying on the said decision, the Tribunal allowed the appeal. When we turn to that decision, we find that, that decision was rendered on October 25, 1976. In that case, McDowell & Company Ltd. which was the appellant had manufactured Indian liquor in its distilleries established in Andhra Pradesh. It had sold such liquor to several purchasers who had paid the excise duty under the Andhra Pradesh Excise Act, directly to the treasury. McDowell's contention before the Supreme Court was that though it manufactured liquor and though the excise duty was payable by it as manufacturer of liquor, because under the Andhra Pradesh Excise Act and the relevant Rules applicable at that time, even a purchaser can pay excise duty before taking delivery of the liquor from the distillery under a distillery pass and as the purchasers had directly paid the excise duty it was not added to the sale price of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e turnover of McDowells the excise duty and the countervailing duty which were not charged from them but were charged from and paid directly to the excise authorities by the buyers of the liquor as stated above. 22.. It appears that thereafter the Andhra Pradesh Legislature amended the relevant Distillery Rules and made the manufacturer of liquor solely responsible for payment of excise duty and on that basis raised fresh demand under the Sales Tax Act. That was challenged by the very same McDowell & Co. Ltd. in the Andhra Pradesh High Court by filing a writ petition. That challenge failed and that is how, the McDowell once again came before the Supreme Court. The very same contentions were canvassed by McDowells in the second proceeding before the Supreme Court. When leave was granted, the Division Bench of the Supreme Court doubted the correctness of the decision earlier rendered in [1977] 39 STC 151 (McDowell & Company Ltd. v. Commercial Tax Officer) and the matter was referred to a larger Bench. That is how the matter was placed before a Constitution Bench of the Supreme Court. The Constitution Bench speaking through Ranganath Misra, J. (as His Lordship then was), with whom ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....paid the same under the Distillery Rules, the provisions were merely enabling and did not give rise to any legal responsibility or obligation for meeting the burden. We do not propose, however, to examine this aspect any further for the change in rule 76 of the Distillery Rules has clearly affirmed the position that liability for payment of excise duty is of the manufacturer. Provisions of rules 80, 81, 82, 83 and 84 do not militate against the conclusion that the payment of excise duty is a liability exclusively of the manufacturer. In these rules, detailed provisions have been made regarding obtaining of distillery pass, correct calculation and full payment of excise duty, the manner of depositing such duty and ultimately issue of the spirit under the pass from the distillery. These rules, therefore, do not detract from the position that payment of excise duty is the primary and exclusive obligation of the manufacturer and if payment be made under a contract or arrangement by any other person it would amount to meeting of the obligation of the manufacturer and nothing more." He then considered the definition of "turnover" found in the Andhra Pradesh General Sales Tax Act and o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that the position is not different when under a prior agreement, the legal liability of the manufacturer-dealer for payment of excise duty is satisfied by the purchaser by direct payment to the excise authorities or to the State exchequer." Again at page 292 of the Report, it has been observed thus: "Admittedly, the bills issued by the appellant did not include the excise duty. As already found, payment of excise duty is legal liability of the manufacturer; its payment is a condition precedent to the removal of the liquor from the distillery and payment by the purchaser is on account of the manufacturer. According to normal commercial practice, excise duty should have been reflected in the bill either as merged in price or being shown separately. As a fact, in the hands of the buyer the cost of liquor is what is charged by the appellant under its bill together with excise duty which the buyer has directly paid on seller's account. The consideration for the sale is thus the total amount and not what is reflected in the bill. We are, therefore, clearly of the opinion that excise duty though paid by the purchaser to meet the liability of the appellant, is a part of the considera....