JUDGMENT
K. Shivashankar Bhat, J.
1. These revision petitions pertain to the assessment years 1978-79 and 1979-80 (for the year ending 30th June). The assessee purchased paddy and sold hand pounded rice. The question pertains to the liability of the petitioner regarding the turnover pertaining to hand pounded rice.
2. During the relevant period, the petitioner had the requisite recognition certificate issued under rule 25-B of the Karnataka Sales Tax Rules, 1957. By virtue of this certificate of recognition, the petitioner claimed that the turnover in question was not liable to be taxed during the period of the certificate. The assessing authority did not accept this contention of the petitioner. The alternative contention of the petitioner that under explanation I of the Fourth Schedule, the petitioner is entitled to set-off in respect of the tax paid on the purchase turnover of paddy was also negatived. The petitioner filed an appeal to the first appellate authority. The appellate authority did not accept the first contention and held that the petitioner had used electricity for converting paddy into rice and therefore the benefit of rule 25-B was not available. On the second question, the appellate authority remanded the matter for fresh consideration by the assessing authority with a direction that the benefit of set-off shall be extended under the Fourth Schedule to the Karnataka Sales Tax Act, 1957 (hereinafter referred to as “the Act”). The assessing authority made an order of assessment after giving the benefit of set-off as aforesaid. The assessee again filed an appeal before the appellate authority. The appellate authority held that the first question was concluded by its earlier order and therefore, the assessee was precluded from raising the same question once again. The petitioner then approached the Karnataka Appellate Tribunal under section 22 of the Act. The Appellate Tribunal also held that the assessee was precluded from raising the question which had been earlier raised before the first appellate authority who had considered the same while remanding the matter on the first occasion. Hence the present revision petitions.
3. An appeal to the first appellate authority lies under section 20 of the Act. As per section 20(5) of the Act, the appellate authority is competent to confirm, reduce or annul the assessment and it may also set aside the assessment and direct the assessing authority to make a fresh assessment. It is unnecessary to refer to other aspects of the said sub-section of section 20.
4. Section 22 provides for appeal to the Appellate Tribunal. It provides for an appeal to the Appellate Tribunal by any person “objecting to an order” passed by the Assistant Commissioner or the Deputy Commissioner under section 20, etc.
5. The contention of the Revenue is that, when the first appellate authority gave a finding earlier, it gave rise to a cause of action to the assessee to object to the said order, but the assessee did not avail of the opportunity of filing an appeal under section 22 and if so, the earlier order of the appellate authority became final to that extent.
6. Sri Indrakumar, learned counsel for the petitioner, on the other hand, contended that there is no such provision similar to section 105 of the Code of Civil Procedure enacted in the Karnataka Sales Tax Act. A superior court or superior Appellate Tribunal is not bound by an order of remand made earlier. The assessee is entitled to challenge the finding given earlier by the appellate authority while remanding the matter when the assessee comes up before the second appellate authority subsequently.
7. The principle governing the fact situation could be gathered from a few decisions of the Supreme Court. In Satyadhyan Ghosal v. Smt. Deorajin Debi it was pointed out by the Supreme Court that the principle of res judicata is based on the need of giving a finality to a judicial decision. The said doctrine applies as between past litigation and a future litigation. In the case of remand, the litigation will be the same and therefore, the superior court could examine the finding or order made earlier by the subordinate court which remanded the matter. At page 945 it was observed thus :
“There can be little doubt about the salutary effect of the rule as laid down in the above cases on the administration of justice. The very fact that in future litigation it will not be open to either of the parties to challenge the correctness of the decision on a matter finally decided in a past litigation makes it important that in the earlier litigation the decision must be final in the strict sense of the term. When a court has decided the matter it is certainly final as regards that court. Should it always be treated as final in later stages of the proceeding in a higher court which had not considered it at all merely on the ground that no appeal lay or no appeal was preferred ? As was pointed out by the Privy Council in Moheshur Singh’s case, 7 Moo Ind App 283, the effect of the rule that at every stage of the litigation a decision not appealed from must be held to be finally decided even in respect of the superior courts, will put on every litigant against whom an interlocutory order is decided, the burden of running to the higher courts for redress of the grievances, even though it may very well be that though the interlocutory order is against him, the final order will be in his favour and so it may not be necessary for him to go to the appeal court at all. Apart from the inevitable delay in the progress of the litigation that such a rule would cause, the interests of the other party to the litigation would also generally suffer by such repeated recourse to the higher courts in respect of every interlocutory order alleged to have been wrongly made. It is in recognition of the importance of preventing this mischief that the Legislature included in the Code of Civil Procedure from the very beginning a provision that in an appeal from a decree it will be open to a party to challee the correctness of any interlocutory order which had not been appealed from but which has affected the decision of the case.”
7. In the said case, it was held that the order of remand was an interlocutory order which did not terminate the proceedings and so the correctness of the said order can be challenged in an appeal from the final order. Same is the effect of the decision reported in Kshitish Chandra Bose v. Commissioner of Ranchi .
8. In Jasraj Indersingh v. Hemraj Multanchand the Supreme Court held that the finding in an order of remand is binding on the court which remanded the matter. However, when the matter subsequently comes up before the Supreme Court the correctness of the earlier remand order could be examined. At page 1018, it was observed by the Supreme Court thus :
“Viewed simplistically, the remand order by the High Court is a finding in an intermediate stage of the same litigation. When it came to the trial court, and escalated to the High Court, it remained the same litigation. The appeal before the Supreme Court is from the suit as a whole and, therefore, the entire subject-matter is available for adjudication before us. If, on any other principle of finality statutorily conferred or on account of res judicata attracted by a decision in an allied litigation the matter is concluded, we too are bound in the Supreme Court. Otherwise, the whole lis for the first time comes to this Court and the High Court’s finding at an intermediate stage does not prevent examination of the position of law by this Court. Intermediate stages of the litigation and orders passed at those stages have a provisional finality. After discussing various aspects of the matter, Chandrachud, J., speaking for the Court in Lonankutty observed : ‘The circumstance that the remanding judgment of the High Court was not appealed against, assuming that an appeal lay therefrom, cannot preclude the appellant from challenging the correctness of the view taken by the High Court in that judgment’. The contention barred before the High Court is still available to be canvassed before this Court when it seeks to pronounce finally on the entirety of the suit.”
9. The principle was applied by the Madras High Court in the proceeding under a similar legislation in Senniyappa Mudaliar v. Government of Madras ILR (1965) 2 Mad. 397. It was a case arising under the Madras Plantations Agricultural Income-tax Act. It was held therein that a finding given while remanding the matter could be later challenged in a subsequent appeal. The Bench observed that “the test of appealability will not be decisive of the matter. What will be relevant is the substance of the order. The order in effect set aside the entire assessment on the assessee, and the Income-tax Officer had to make a fresh assessment in the light of the findings of the Appellate Assistant Commissioner under two grounds, but the third ground was left open for the Income-tax Officer to decide. It is obvious that a finding on only a portion of the data on which an assessment order is based, cannot be conclusive in the matter of making the final assessment, which has to be based on the entire data relating to income, expenditure and permissible deductions. A finding which affects only a portion of the data on which the order of assessment is based, has to be viewed as interlocutory in character. An assessment order cannot be split up into different portions is one of general application.”
10. A Full Bench of the Kerala High Court dealt with the question quite elaborately in Syed Alavi v. State of Kerala [1981] 48 STC 150. It was a case where the first appellate authority had remanded the matter after confirming the order of the assessing authority regarding the assessee’s liability for assessment. It was held that the assessee was entitled to question the said finding at a subsequent stage before the higher appellate authority after the assessing authority made an order afresh.
11. Technical rules governing the doctrine of res judicata normally would not be attracted to statutory proceedings, when the statutory proceedings pertain to tax liability. Technically, the assessee would be aggrieved only when there is an enforceable assessment order by the authority. If such an order is made, all other orders made earlier could be treated as orders made at intermediary stages. If so, certainly the higher authority before whom the matter comes up at a subsequent stage could examine the correctness of the order made by the earlier appellate authority who was subordinate to the second appellate authority. In these circumstances, we are of the view that the Appellate Tribunal was not justified in rejecting the appeals of the petitioner before us.
12. Accordingly, the petitions are allowed. The order of the Appellate Tribunal is set aside. The matter is remanded to the Appellate Tribunal to consider the question raised by the assessee.
13. Sri C. V. Kumar, learned High Court Government Pleader, is permitted to file memo of appearance for the respondents within six weeks.
14. Petitions allowed.