CASE NO.: Appeal (civil) 1374 of 2003 PETITIONER: Commissioner of Sales Tax & Ors. RESPONDENT: M/s Subhash & Company DATE OF JUDGMENT: 17/02/2003 BENCH: SHIVARAJ V. PATIL & ARIJIT PASAYAT JUDGMENT:
J U D G M E N T
(Arising Out of S.L.P. (C) No. 389/2002)
ARIJIT PASAYAT,J.
Leave granted.
The controversy involved in the present case lies with
a very narrow compass and, therefore, a brief reference to
the factual aspects would suffice.
Respondent-Subhash Kimtee (hereinafter referred to as
assessee) was the proprietor of a concern known as M/s
Subhash and Company. He was registered as a dealer under
the M.P. General Sales Tax Act, 1958 (hereinafter referred
to as ‘the Act’) w.e.f. 28.5.1973. The registration
continued to be operative till 22.10.1987. The assessment
periods to which the dispute relates are (a) 27.10.1981 to
15.11.1982, (b) 16.11.1982 to 4.11.1983 and (c) 5.11.1983 to
24.10.1984. The assessments were originally completed for
the assessment years 1981-82, 1982-83 and 1983-84 vide
orders dated 12.9.1984, 29.8.1985 and 29.8.1985
respectively. Respondent applied cancellation of the
certificate of registration on 14.12.1987 and the same was
cancelled w.e.f. 23.10.1987. The Assessing Officer initiated
proceedings for re-assessment under Section 19(1) of the Act
on the basis of information that the respondent had
purchased iron and steel from M/s Steel Terro, Indore and
had enjoined certain benefits by issuing declaration forms
in Form XII-J. The Assessing Officer was of the view that
the benefits were not permissible in law and, therefore,
there was short levy of tax and escapement of assessment.
Accordingly, notices were issued for re-assessment in
respect of the three years. The notices were issued on the
address as indicated in the certificate of registration. It
was indicated in the notices that the same may be pasted if
the respondent-assessee was not available or he refused to
accept the notice. Since it was learnt that the respondent-
assessee was not residing at the address given, service by
affixture was resorted to. Vide orders dated 13.12.1990,
13.12.1990 and 31.12.1990, re-assessments were done under
Section 19(1) of the Act. On 23.4.1992, respondent-assessee
challenged the orders of re-assessment by filing revision
petition before the revisional authority at Indore under
Section 39(1)(b) of the Act on the ground that the notices
and the orders of re-assessment as well as the original
assessment orders were not served on him, rendering the re-
assessment proceedings illegal. The revisional authority
vide 3 separate but common order dated 23.4.1993 dismissed
the revision petition recording a finding that service in
both the original assessments as well as re-assessment
proceedings had been duly effected by affixture and the
orders were valid.
It was noted that respondent’s certificate of
registration remained in force till he applied for
cancellation on 14.12.1987. As the notices were issued for
service at the address given in the registration
certificate, there was nothing illegal.
Respondent-assessee filed a writ petition under
Articles 226 and 227 of the Constitution of India, 1950 (in
short ‘the Constitution’)in the High Court of Madhya
Pradesh, at Indore Bench on the ground that the procedure
prescribed for service of notice as contemplated under Rule
63 of the M.P. General Sales Tax Rules, 1959 (in short ‘the
Rules’) has not been followed. Accordingly, the principles
of natural justice were violated. He took a stand that after
closure of business in October 1980, he was appointed as a
clerk, Grade II in Reserve Bank of India in November, 1980.
Revenue contested the writ petition by filing a counter
affidavit specifically stating that service had been duly
effected at the last known address as per the registration
certificate. There was a duty enjoined on the dealer under
Section 32 of the Act to provide necessary information
regarding change of address which has not been done by the
respondent-assessee who continued to enjoy the benefits by
issuing declaration forms by virtue of the certificate of
registration up to 23.10.1987.
Learned Single Judge with reference to Rule 63 held
that the service was effected properly inasmuch as the
Assessing Officer had failed to record the reasons for his
satisfaction that the assessing was evading service or that
the service was not possible in any other manner before
resorting to service by affixture as prescribed under Rule
63.
The writ petition was allowed with a direction that
the re-assessments were to be done de novo in accordance
with law after hearing the respondent-assessee within a
period of 6 months from the date of order and no further
notice was required as the respondent-dealer was already
appearing in the matter.
Challenge was made by the respondent-assessee before a
Division Bench on the ground that after having held that
there was no valid service of notice, the direction for de
novo assessment was untenable. It was further contended that
challenge on the question of limitation was precluded by the
direction.
The Division Bench held that the direction for de novo
assessment without reserving any right for the respondent-
assessee to raise the plea of limitation was not proper.
In support of the appeal, learned counsel for the
appellants submitted that the respondent-assessee cannot
take advantage of his own lapses. He was required under
Section 32 of the Act to indicate the change of address.
Admittedly, he did not do so. Merely because at some point
of time the departmental authorities sent letters by
redirecting service by post to deposit the arrear of tax, it
does not do away with the statutory requirement to inform
the authorities about the change of address. Further,
learned Single Judge had only found some procedural
irregularity which did not invalidate the service of notice.
Therefore, the direction for de novo assessment was in
order.
In response, learned counsel for the respondent-
assessee submitted that the learned Single Judge clearly
held that there was no proper service of notice and,
therefore, there was no service in the eye of law. That
being the position, the re-assessment proceedings which were
to be completed within a particular period could not have
been extended by permitting de novo assessment.
Whether service of notice is valid or not is
essentially a question of fact. In the instant case, learned
Single Judge found that certain procedures were not followed
while effecting service by affixture. There was no finding
recorded that such service was nonest in the eye of law. In
a given case if the assessee knows about the proceedings and
there is some irregularity in the service of notice, the
direction for continuing proceedings cannot be faulted. It
would depend upon the nature of irregularity and its effect
and the question of prejudice which are to be adjudicated in
each case on the basis of surrounding facts. If, however,
the service of notice is treated as nonest in the eye of
law, it would not be permissible to direct de novo
assessment without considering the question of limitation.
There also the question of prejudice has to be considered.
Both learned Single Judge and Division Bench have
missed to notice that Section 19(1) does not speak of
“notice” before re-assessment. It only prescribes giving
of “reasonable opportunity of being heard”. It reads as
follows :
“Where an assessment has been made under
this Act or any Act repealed by Section
52 and if for any reason any sale or
purchase of goods chargeable to tax
under this Act or any Act repealed by
Section 52 during any period has been
under-assessed or has escaped assessment
or assessed at a lower rate or any
deduction has been wrongly made
therefrom, the Commissioner may, at any
time within five calendar years from the
date of order of assessment, after giving
the dealer a reasonable opportunity of
being heard and after making such enquiry
as he considers necessary, proceed in
such manner as may be prescribed to
reassess within a period of two calendar
years from the commencement of such
proceedings, the tax payable by such
dealer and the Commissioner may, where
the omission leading to such reassessment
is attributable to the dealer, direct
that the dealer shall pay, by way of
penalty in addition to the amount of tax
so assessed a sum not exceeding that
amount:
Provided that in case of an
assessment made under any Act repealed by
Section 52, the period for reassessment
on the ground of under-assessment,
escapement or wrong deduction shall be as
provided in such Act notwithstanding the
repeal thereof :
Provided further that any
reassessment proceedings pending on the
date of commencement of the Madhya
Pradesh General Sales Tax (Amendment)
Act,1978, be completed in accordance with
the provisions in force before the date
of such commencement and within a period
of two calendar years from the date of
such commencement.”
Rule 63 deals with methods of serving notice or
summons or order under the Act or any rules made
thereunder.
The term “notice” is originated from the Latin word
“notifia” which means “a being known” or a knowing is
wide enough in legal circle to include a plaint filed in a
suit. “Notice” has been defined in various Judicial
Dictionaries and Dictionaries as follows :
The Judicial Dictionary, Words and Phrases Judicially
Interpreted, Second Edn. By F. Stroud, (p.1299) :
“Notice is a direct and definite
statement of a thing, as distinguished from
supplying materials from which the existence
of such thing may be inferred.”
Webster’s Universal College Dictionary, 1997 Edn. (p.543) :
“Information, warning or announcement
of something impending; notification; to
give notice of one’s intentions; a written
or printed statement conveying such
information or warning; as for renting or
employment, that the agreement will
terminate on a specified date. “She gave
her employer two weeks’ notice.”
Oxford Concise Dictionary :
“an intimation; intelligence, warning”
and has the meaning in expression like
“give notice”, “have notice” or “formal
intimation of something or instruction to do
something” and has the expression like
“notice to quit”, “till further notice”.
Chamber’s 20th Century Dictionary 1993 (p.1154) :
“intimation; announcement; information;
warning; a writing; placard, etc; conveying
an intimation or warning; time allowed for
preparation, etc.”
Chamber’s Dictionary vide Allied Chambers (India) Ltd;
Reprint 1994, 1995 (p. 1154) :
“intimation; announcement; a formal
announcement made by one of the parties to a
contract of his or her intention to
terminate that contract; information,
especially about a future event; warning; a
writing; placard, board, etc. conveying an
intimation or warning; time allowed for
preparation; cognizance; observation; heed;
mention; a dramatic or artistic review;
civility or respectful treatment; a notion,
etc.”
Law Lexicon Dictionary A Legal Dictionary of Legal Terms
and Phrases Judicially Defined. Fourth Edition, Vol.II,
1989(P.226):
‘A person is said to have notice’ of a
fact, when he actually knows that fact, or
when, but for wilful abstention from an
enquiry or search which he ought to have
made, or gross negligence, he would have
known it.’
The Law Lexicon Dictionary, Second Edition, 1997 (p. 1322) :
(1) Intimation; a writing; placard,
board, etc. conveying an intimation or
warning (section 154, IPC and Article
61(2)(a), Constitution of India); (2)
Knowledge or cognizance (Section 56, Indian
Evidence Act).
“Notice”, in its legal sense, may be defined as
information concerning a fact actually communicated to a
party by an authorized person, or actually derived by him
from a proper source, or else presumed by law to have been
acquired by him, which information is regarded as equivalent
to knowledge in its legal consequences.
Dictionary further states:
Co.Lit 309 Tomlin’s Law Dictionary
Notice is making something known, of what a man was or
might be ignorant of before. And it produces diverse
effects, for, by it, the party who gives the same shall have
same benefit, which otherwise he should not have had; the
party to whom the notice is given is made subject to some
action or charge, that otherwise he had not been liable to;
and his estate in danger of prejudice.
“Notice is a direct and definite statement of a thing
as distinguished from supplying materials from which the
existence of such thing may be inferred.” (Per Parke, B.
Burgh v Lege 5 M and W 420: 8 LJ, Ex.258)
The Dictionary gives some other definitions of
“Notice” as:
– The legal instrumentality by which
knowledge is conveyed, or by which one is
charged with knowledge.
– The term “notice” in its full legal
sense embraces a knowledge of circumstances
that ought to induce suspicion or belief, as
well as direct information of that fact.
– In its popular sense, “notice” is
equivalent to information intelligence, or
knowledge.
In Anandji Haridas and Co. (P) Ltd V. S.P.Kasture and
Others (AIR 1968 SC 565), it was observed as follows :
“We are unable to accept the contention
of Mr. Gokhale that a notice under Section 11
(4) (a) or IIA(1) is a condition precedent for
initiating proceedings under those provisions or
that it is the very foundation for the
proceedings to be taken under those provisions.
The notice contemplated under Rule 32 is not
similar to a notice to be issued under Section
34 (1) (b) of the Income Tax Act, 1922. All
that Sections 11(4) and 11A (1) prescribe is
that before taking proceedings against an
assessee under those provisions, he should be
given a reasonable opportunity of being heard.
In fact, those sections do not speak of any
notice. But Rule 32 prescribes the manner in
which the reasonable opportunity contemplated by
those provisions should be afforded to the
assessee. The period of 30 days prescribed in
Rule 32 is not mandatory. The rule itself says
that ‘ordinarily’ not less than 30 days notice
should be given. Therefore, the only question
to be decided is whether the defects noticed in
those notices had prejudiced the appellants. It
may be noted that when the assessees received
the notices in question, they appeared before
the assessing authority, but they did not object
to the validity of those notices. They asked
for time for submitting their explanation. The
time asked for was given. Therefore, the fact
that only nine days were given to them for
submitting explanation could not have in any
manner prejudiced them. So far as the mistake
in the notice as regards the assessment year is
concerned, the assessees kept silent about that
circumstance till 1958. It was only when they
were sure that the period of limitation
prescribed by Section 11A had expired, they
brought that fact to the notice of the assessing
authority. It is clear that the appellants were
merely trying to take advantage of the mistakes
that had crept into the notices. They cannot be
permitted to do so. We fail to see why those
notices are not valid in respect of the periods
commencing from February 1, 1953 till 31.10.55.
We are unable to agree with Mr. Gokhale’s
contention that each one of those notices should
be read separately and that we should not
consider them together. If those notices are
read together as we think they should be, then
it is clear that those notices given the
appellants the reasonable opportunity
contemplated by Sections 11(4) (a) and 11-A (1).
In Chatturam V. Commr. Of Income Tax Bihar,
(1947 (15) ITR 302) = (AIR 1947 FC 32), the
Federal Court held that any irregularity in
issuing a notice under S. 22 of the Income Tax
Act,1922 does not vitiate the proceeding; that
the income tax assessment proceedings commence
with the issue of the notice but the issue or
receipt of the notice is, however, not the
foundation of the jurisdiction of the income tax
officer to make the assessment or of the
liability of the assessee to pay the tax. The
liability to pay the tax is founded on Sections
3 and 4 of the Income Tax Act which are the
charging sections. Section 22 and others are
the machinery sections to determine the amount
of tax. The ratio of that decision applies to
the facts of the present case. In our opinion,
the notices issued in the year 1955 are valid
notices so far as they relate to the period
commencing from February 1, 1953 to October 31,
1955.”
Whenever an order is struck down as invalid being
violation of principles of natural justice, there is no
final decision of the case and, therefore, proceedings are
left open. All that is done is that the order assailed by
virtue of its inherent defect is vacated but the
proceedings are not terminated. (See Guduthur Bros. V.
Income Tax Officer, Special Circle, Bangalore (1960 (40)
ITR 298 SC) and Superintendent (Tech.I) Central
Excise,I.D.D. Jabalpur and Ors. v. Pratap Rai (1978 (114)
ITR 231 SC). In Commisioner of Sales Tax, U.P. v. R.P.
Dixit Saghidar ( 2001 (9) SCC 324), it was held as follows:
“We are unable to subscribe to the
view of the High Court. The aforementioned
passage quoted from the Tribunal’s order
shows that the Tribunal was of the view that
once the order is quashed by the Assistant
Commissioner, he could not in law remand the
case for a decision afresh. As has been
noted, before the Assistant Commissioner the
counsel for the respondent had contended
that the ex parte order should have been
set aside because no notice had been
received. When principles of natural justice
are stated to have been violated it is open
to the appellate authority, in appropriate
cases, to set aside the order and require
the Assessing Officer to decide the cases de
novo. This is precisely what was directed by
the Assistant Commissioner and the Tribunal,
in our opinion, was clearly in error in
taking a contrary view.”
The view is clearly applicable to the facts of the present
case.
The emerging principles are:-
(i) Non-issue of notice or mistake in the issue of
notice or defective service of notice does not affect the
jurisdiction of the assessing officer, if otherwise
reasonable opportunity of being heard has been given;
(ii) Issue of notice as prescribed in the Rules
constitutes a part of reasonable opportunity of being
heard;
(iii) If prejudice has been caused by non-issue or
invalid service of notice the proceeding would be vitiated.
But irregular service of notice would not render the
proceedings invalid; more so, if assessee by his conduct
has rendered service impracticable or impossible.
(iv) In a given case when the principles of natural
justice are stated to have been violated it is open to the
appellate authority in appropriate cases to set aside the
order and require the Assessing Officer to decide the case
de novo.
In the instant case, the learned Single Judge and the
Division Bench have not considered the question of
prejudice, grant of reasonable opportunity in the aforesaid
perspective.
In view of what has been stated in R.P.Dixit’s case
(supra), learned Single Judge was justified in directing de
novo assessment by an order of remand. The direction was
appropriate as the only ground on which the interference
was made related to the violation of principles of natural
justice by alleged improper service of notice. The Division
Bench was not justified in upsetting the direction. The
appeal is allowed but in the circumstances without any
order as to costs.
We however make it clear that no opinion has been
expressed by us on any aspect except limitation. It shall be
open to the assessee to raise all other issues before the
Assessing Officer which shall be considered in the proper
perspective and in accordance with law.