TaxTMI 
TaxTMI 
2010 (12) TMI 1117
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....etition Nos. 15146, Writ Petition Nos. 16062, Writ Petition Nos. 16573, Writ Petition Nos. 18552, Writ Petition Nos. 18598, Writ Petition Nos. 20284 of 2009 decided on December 30 2010 ORDER In this group of writ petitions, filed by registered VAT dealers from various places in the State of Andhra Pradesh, the challenge is to the validity of rule 59(1) of the Andhra Pradesh Value Added Tax Rules, 2005 ("the VAT Rules") in so far as it confers the power of assessment of value added tax, when it appears that the VAT return filed by the dealer is incorrect or incomplete on (i) the Commercial Tax Officer (CTO) or the Deputy Commercial Tax Officer (DCTO) in case of dealers in the territorial jurisdiction of the circle; and (ii) on any officer not below the rank of the DCTO of the division as authorized by the Deputy Commissioner of the Division. The challenge is based on the petitioners' perception that the impugned rule does not satisfy the statutory essentials and is ultra vires the Andhra Pradesh Value Added Tax Act, 2005 ("the VAT Act"). In W.P.Nos. 13015 and 13019 of 2009, sub-sections (3) and (4) of section 17 are impeached as being ultra vires section 17(2) of the VAT Act. In a....
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....of the petitioner that the assessment was already made and, therefore, the first respondent acted without jurisdiction. It is also contended that, under section 3A, all the CTOs have been assigned with territorial areas for the purpose of assessment. The Commissioner, therefore, has to specifi cally authorize any other official to take up assessment. Rule 59(4) does not override section 2(4) and 2(8), and is therefore ultra vires. The writ petition indeed impugns rule 59(4). Curiously, the Government of Andhra Pradesh which derives rule-making power under section 78 of the VAT Act is not arrayed as a party respondent. Leaving this aside for a while, we may summarise the position of the respondents from the counterffidavit filed by the first respondent. The writ petition is not maintainable as the second appeal before STATis pending, and for non-joinder of proper and necessary parties. Section 2(4) is a dictionary clause. It is neither a substantive provision nor does it confers power on the Commis sioner. As authorities created under the statute, they cannot answer the allegations with regard to vires of rule 59(4). The counter does not seriously dispute other allegations regardin....
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....o is within the pecuniary jurisdictional limits of another CTO/Assistant Commissioner, the very spirit of the purpose of assessment under the VAT Act is defeated. Reliance is also placed on the following judicial decisions. Mangulal Chunilal v. Manilal Maganlal AIR 1968 SC 822, Sri Balaji Rice Company v. Commercial Tax Officer [1984] 55 STC 292 (AP), K.V. Muthu v. Angamuthu Ammal AIR 1997 SC 628, Kunj Behari Lal Butail v. State of H.P. [2000] 3 SCC 40, Syndicate Bank v. Prabha D. Naik [2001] 4 SCC 713, Nagrik Upbhokta M. Manch v. Union of India [2002] 5 SCC 466, Kerala Samsthana Chethu Thozhilali Union v. State of Kerala [2006] 4 SCC 327, Dash Agency v. Sales Tax Officer [2007] 9 VST 482 (Orissa), Global Energy Limited v. Central Electricity Regulatory Commission [2009] 15 SCC 570, Nahalchand Laloochand Private Limited v. Panchali Cooperative Housing Society Limited [2010] 9 SCC 536 and R.C. India v. State of Karnataka [2010] 29 VST 494 (Karn). Mr. A.V. Krishna Kaundinya, Special Counsel for CT argued the Government's case as follows. All the definitions in section 2 are not conclusive. The words in dictionary clause can have meaning if the context so requires. Therefore, section ....
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.... the Rules conform to the statute (conformation test); and (b) whether the Rules are manifestly arbitrary and irrational (rationality test). If there is compliance with these two, any further judicial review is barred. In Indian Express Newspapers (Bombay) Private Limited v. Union of India [1985] 1 SCC 641; AIR 1986 SC 515, it was held that subordinate legislation does not carry the same degree of immunity which is enjoyed by a statute and that it can be questioned on any of the grounds on which plenary legislation may be questioned. In addition it may also be questioned on the ground that it does not conform to the statute under which it is made as well as on the ground that it is manifestly arbitrary and unreasonable. It is also settled that the expression, "for carrying out the purpose of the Act" is not construed as to bring something in the statute which has been excluded by the Act itself (see Kunj Behari Lal Butail [2000] 3 SCC 40, Kerala Samsthana Chethu Thozhilali Union [2006] 4 SCC 327 and Global Energy Limited [2009] 15 SCC 570). To be able to succeed on the ground that subordinate legislation lacks statutory essentials, it must be demonstrated that the Rules are not in....
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....ion as to whether the impugned rules fall within the scope of the donated power. Herein the impugned rule is assailed only on the ground that it is ultra vires. For the reasons discussed supra, and some more to follow infra, we cannot countenance the submission. At the outset, we may briefly mention about sales tax administration before shift to VAT. This is necessary because, while repealing Andhra Pradesh General Sales Tax Act, 1957 ("the APGST Act") by section 80(1) of the VAT Act, the Legislature has expressed its intention to continue to enforce all notifications, Rules and regulations, etc., as if those instruments had been made under the VAT Act. There is no gainsaying that unless and until the Rules, regulations, notifications, etc., made under the APGST Act are replaced by similar instruments under the VAT Act, they continue to govern. This is not disputed by the parties. Section 4 of the APGST Act conferred power on the State Government to appoint the Commissioner of Commercial Taxes (the Commissioner) and various other officers in the hierarchy up to the level of DCTOs and assign functions and empower such officers to perform various functions. The Commissioner so appo....
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....sistant Commissioner, Appellate Deputy Commissioner, Deputy Commissioner, CTO and DCTO are also defined to mean any person appointed as such under section 4. Section 4, as noticed supra, empowers the Government to appoint these officers who shall perform such functions as conferred on them by the Government or any authority or officer empowered by them. There is no dispute that by reason of the notification issued by the Government under section 4 read with section 2(b) of the APGST Act, the Deputy Commissioners heading the division and CTOs in-charge of circles exercised the powers, functions and jurisdiction as conferred by the notification in such areas in the respective divisions/circles. The situation remains the same even under the VAT Act. For ready reference, we will quote relevant provisions from it. "2. Definitions.-In this Act, unless the context otherwise requires: (1) 'Additional Commissioner' means any person appointed to be an Additional Commissioner of Commercial Taxes under section 3A; (2) 'Appellate Deputy Commissioner' means any person appointed under section 3A to be an Appellate Deputy Commissioner or any other officer not below the rank of Deputy Comm....
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....otification vide G. O. Ms. No. 1163, dated August 14, 2006 empowering the Commissioner to empower any officer working under his control to exercise any powers under the VAT Act within such area or areas or the whole of the State of Andhra Pradesh. This is however subject to the condition that where an officer in exercise of powers dele gated to him by the Commissioner undertakes the assessment of any dealer, the assessing authority of the area having jurisdiction to assess such dealer shall not exercise such jurisdiction for the relevant period. The VATRules made under section 78 read with section 2(21) of the Act constitute a piece of delegated legislation. The challenge that rule 59(1), Sl. No. 4(ii)(b) and (d) is ultra vires can only be successful when it is shown on a sustainable basis that the Legislature did not empower the Government to prescribe and empower (i) the Deputy Commissioner concerned to authorize CTO/DCTO to take up assessment under rule 25(1) and/or rule 25(5), in case of dealers in the territorial jurisdiction of the circle; and (ii) to empower Deputy Commissioner of the Division to authorize any officer not below the rank of DCTO of the Division to take up as....
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.... done in accordance with the Rules prescribed, it can be done only as prescribed by the Rules made by the Government. The Commissioner except performing the powers and functions as may be entrusted to him under section 3A or as prescribed by the Rules has no power of making Rules to prescribe authorities to undertake assessment. Therefore, the Commissioner's power to do something under the Act is subordinate to the power of the Government either under section 3A or under section 78(1) and (2) or the Rules made by them. Section 20 deals with submission of VAT returns and self-assessments. It has four sub-sections. Sub-sections (1) and (3)(b) refer to "the authority prescribed". Every dealer registered under section 17 has to submit the VAT returns to the authority prescribed, which shall be accepted as selfssessment. The same, however, can be scrutinized to verify the correctness of the calculation, application of the correct rate of tax, the input-tax credit claimed, and payment of tax. If any mistake is detected, as a result of such scrutiny, "the authority prescribed" shall issue a notice of demand for any short-payment of tax or for recovery of any excessive input-tax credit cl....
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....les 4 to 7, 10 to 12 and 15 3. Receipt of VATreturn Receipt of TOT return AC (LTU) or CTO or officer authorized by him. DCTO authorized for the purpose. Section 20(1), Rule 23 4. Assessments VAT- (i) Unilateral assessment under rule 25(1) (ii) Assessment Under rule 25(5) (iii) Reassessment (i) Assistant Commissioner of the division concerned in case of Large Tax-payer Unit and Commercial Tax Officer in the case of circle. (ii) (a) AC in case of LTU dealer. (b) CTO or Deputy Commercial Tax Officer in case of dealers in the territorial jurisdiction of the circle as authorized by Deputy Commissioner concerned. (c) any officer not below the rank of Deputy Commercial Tax Officer as authorized by the Joint Commissioner or Additional Commissioner empowered for this purpose by the Commissioner. (d) Any officer not below the rank of DCTO of the division as authorized by the DC of the division. Omitted in these cases. Section 21(1) Rule 25(1) Section 20(3)(a) & (b) Section 21(3), 21(4), 21(5), 24(2) rule 25(5) 5. Omitted Omitted 6. Omitted Omitted 7. Entry, inspection, search, seizure, confiscation a) Assistant C....
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....s wholly misconceived and cannot be countenanced. As already held by us, the power to appoint officers, the power to prescribe by the Rules providing for duties and functions, the power to assign the functions or the power to empower any authority to assign functions to other officers and to make Rules is vested in the Government. The appointment of Commissioner is also within the exclusive power of the Government. Unless and until by Rules, the authority to register the VAT dealer, to receive the VATreturns and to assess the VATreturn is prescribed, the empowerment of the Commissioner under section 3A for the purpose of section 2(4) would be an empty formality. The Commissioner so appointed under section 3A can only authorize such authority prescribed by the Rules to make an assessment. Similar is the case when the power is assigned to Additional/Joint/Deputy Commissioners. A plain reading of sections 20(1) and 21(1), (3) and (4) makes it clear that an officer as prescribed by the Rules can alone receive and assess the returns and not such officer authorized by the Commissioner under section 2(4). Assuming that there is no authority prescribed to receive/assess the VATreturns, th....
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....es it unworkable and otiose, it can be said that the definition is not applicable to that provision because of contrary context. In K.V. Muthu AIR 1997 SC 628 the question was whether (a) foster son would be "a member of family" in relation to a landlord within the meaning of section 2(6A) of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960. The Act defined a member of family means his spouse, son, daughter, grandchild or dependant parent. A petition was filed by landlady for eviction of Muthu from a non-residential building for personal occupation, for commencement of business by her foster son. It was opposed on the ground that a foster son is not a member of the family and, therefore, the plea of personal occupation is unsustainable. The rent controller ordered eviction which was reversed by the appellate authority. Before the High Court, the landlady succeeded and a view was taken that "foster son" would also be a member of the family. Before the Supreme Court, it was argued that "the family has to be given the meaning which is commonly understood by an ordinary man and that family would include natural sons and not foster son". The appeal was dismissed by the Supre....
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....would be repugnant to the context envisaged in section 21(3) and (4). If the Legislature intended that the assessing authority, for the purpose of sections 21(3) and (4), is the one authorized by the Commissioner it ought to find a place there. It is not so. Indeed the paramount power to assign powers and functions to all of the officers under the VAT Act vests in the Government. The Commissioner only derives powers from delegation made under the second part of section 3A. Therefore, section 2(4) has to be construed without ignoring section 3A and/or section 21. So construed, it is clear that the Legislature intended to confer power on the Government to prescribe various authorities for the purpose of registration, receipt of returns, assessment, etc. When once the officers are prescribed it is for the Commissioner, by reason of the notification issued under section 3A by G.O. Ms. No. 1163, dated August 14, 2006, to assign functions. Even while doing so, the Commissioner cannot exercise power de hors the Rules which prescribes various officers, their powers and functions in such area or areas or the whole of State of Andhra Pradesh. This construction would fit into the context of C....
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....truction of section 2(4), in reading the substantive machinery provisions of the VAT Act would amount to ignoring the clear legislative intention in conferring the power of assessment only on the authorities prescribed, as may be authorised or empowered by the named supervisory officers. Sections 3A, 20 and 21 are machinery provisions of the VAT Act. The strict rule of construction is applied to taxing statute without implying anything (State of West Bengal v. Kesoram Industries Ltd. [2004] 2 RC 298; [2004] 10 SCC 201). There is however distinction between charging provisions and machinery provisions. While construing the machinery sections of taxing statute, one has to interpret so as to make a statute effective and workable. Commencing from Whitney v. Commissioners of Inland Revenue [1926] AC 37 (HL) and Commissioner of Income-tax v. Messrs. Mahaliram Ramjidas [1940] 8 ITR 442 (PC); AIR 1940 PC 124, the decisions are galore. So as not to burden this judgment and order with all its authorities, we need to refer only to Associated Cement Co. Ltd. v. Commercial Tax Officer [1981] 48 STC 466 (SC)1, ". . . it is the duty of the court while interpreting the machinery provisions of a t....
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....r the Rules in the first instance and latter the power was delegated to the Commissioner to empower authorities prescribed in his control under section 3A. The Commissioner was entrusted with the power only to adjust and allocate the work among various officers, and also to have control over tax administration in various divisions and/or circles. As the head of the Department, it is but natural that the Commissioner must have power to regularly conduct checks with regard to VATadministration as well as assessments undertaken. Without there being a proper appointment of the Commissioner, under section 3A read with section 2(8), there would not have been any exercise of power under section 2(4) (Ajit Singh v. State of Punjab AIR 1967 SC 856 (para 4)). The issue can also be viewed from a slightly different angle. If a statute so permits, the authority, entrusted with its enforcement, can delegate the powers. In law when power is delegated under authority of the statute, the order of the delegate is treated as an order of the principal or donor or paramount owner (delegator) of the power. Such an order, ordinarily, cannot be even revised or reviewed by the delegator unless such power ....