PETITIONER: STATE OF MADRAS Vs. RESPONDENT: MADURAI MILLS CO., LTD. DATE OF JUDGMENT: 04/10/1966 BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. SHAH, J.C. BHARGAVA, VISHISHTHA CITATION: 1967 AIR 681 1967 SCR (1) 732 CITATOR INFO : RF 1974 SC1380 (31) ACT: Madras General- Sales-tax Act (9 of 1939), s. 12(4) (b)--Order of Assessing authority-When merges in that of appellate or revisional authority-Period of limitation- Starting point. HEADNOTE: For the assessment year 1950-51 the respondent submitted a return of its net turnover to the Deputy Commercial Tax Officer who was the assessing authority. As he determined the net turnover at a higher amount the respondent appealed to the Commercial Tax Officer, who allowed the appeal with respect to one item. On 28th November 1952, the assessing authority issued a revised assessment order as per the order of the Commercial Tax Officer. On 27th December 1952, the respondent presented a revision petition before the Deputy Commissioner of Commercial Taxes raising the only objection, as a new -contention, that it should not have been assessed to tax on amounts collected by it by way of tax. On 21st August 1954, the Deputy Commissioner dismissed the petition on the ground that the respondent was not entitled to raise a new Contention for the first time. On 4th August 1958. the Board of Revenue issued a notice to the respondent stating that it proposed to revise the assessment by including in the net turnover a sum representing the value of cotton purchased by the respondent from outside the State and which was excluded by the assessing authority. After considering the respondent's objections the Board fixed the net taxable turnover by including that amount. The respondent's appeal to the High Court was allowed. In appeal by the State, HELD : The order of the Board of Revenue was invalid, because, under s. 12(4) (b) of the Madras General Sales-tax Act, 1939, the Board of Revenue could invoke its revisional jurisdiction.only within four years from the date on which the order of the assessing authority was communicated to the assessee. [734 G; 736 B-C] (i)The subject-matter of the revision proceedings before the Board of Revenue was only the revised assessment order of the assessing authority dated 28th November 1952, and not the Deputy Commissioner's order dated 21st August 1954. [736 C] The objection taken by the Board was with regard to the question of exemption allowed by the assessing authority on the value of cotton purchased from outside, and that question was not' raised in revision before the Deputy Commissioner of Commercial Taxes. [736 C-D] (ii)It cannot be said that the order of the Deputy Commissioner of Commercial Taxes, in revision, is the only operative decision in law on the basis that the order of the inferior Tribunal (the order of the assessing authority dated 28th November 1952) merged in that of the superior Tribunal (order of the Deputy Commissioner of Commercial Taxes, dated 21st August 1954). [736 F] The application of the doctrine of merger depends on the nature of the appellate or revisional order in each case and the scope of the statu- 733 tory provisions conferring the appellate or revisional jurisdiction. In the circumstances of the present case it could not be said that there was a merger of the order of assessment dated November 28, 1952 with the order in revision dated 21st August 1954, because, the question of exclusion of the value of yarn purchased from outside the State was not the subject-matter of revision before the Deputy Commissioner of Commercial Taxes. [737 A-B, F-H] Commissioner of Income-tax, Bombay v. Amritlal Bhogilal & Co. [1959] S.C.R. 713 and State of Uttar Pradesh v. Mohammed Nooh, [1958] S.C.R. 595, followed. JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 539 of 1965.
Appeal by special leave from the judgment and order dated
September 13, 1961 of the Madras High Court in T.C. No. 162
of 1958.
Bishan Narain and A. V. Rangam, for the appellant.
A. K. Sen and D. N. Gupta, for the respondent.
The Judgment of the Court was delivered by
Ramaswami, J. This appeal is brought by special leave
against the judgment of the Madras High Court dated the 13th
September, 1961 in T.C. 162 of 1958.
TheMadurai Mills Co., Ltd., (hereinafter called the
respondent) isa dealer in yarn, purchasing raw material
like cotton staple-fibre, etc., manufacturing them into yarn
and selling the yarn. In the assessment year 1950-51, the
respondent showed a return of Rs. 15,27,61,883-8-4 before
the Deputy Commercial Tax Officer, Madurai who after
scrutiny of the account books determined the net turnover at
Rs. 15,44,09,109-3-1 1. The respondent preferred an appeal
before the Commercial Tax Officer Madurai South. It was
contended on behalf of the respondent that a sum of Rs.
1,44,294-14-4 was wrongly included by the first assessing
authority in the purchase value of cotton purchased by it
for production of yarn as that amount only represented the
commission paid by it to Comorin Investment Trading Company
Limited for the purchase It was also contended that another
sum of Rs. 81,546-0-1 which represented sale proceeds
realised by selling empty drums etc. was not realisation in
the course of its business. The Commercial Tax Officer
upheld the first contention of the respondent and excluded
the sum of Rs. 1,44,294-14-4 from the total turnover on the
ground that the amount was commission paid by the respondent
for the purchase of cotton, but rejected their second
contention with regard to the sum of Rs. 81,546-0- 1. The
Deputy Commercial Tax Officer thereafter issued a revised
assessment. The respondent presented a revision petition
before the Deputy Commissioner of Commercial Taxes and
734
the only objection which the respondent raised was that it
should not have been assessed to tax on amounts collected by
it by way ,of tax amounting to Rs. 6,57,971-4-9. The
respondent did not raise any other objection regarding the
order of assessment of the Deputy Commercial Tax Officer or
the Commercial Tax Officer. By his order, dated the 21st
August, 1954, the Deputy Commissioner of Commercial Taxes
dismissed the revision petition holding that the respondent
was not entitled to raise the contention for the first time
and that even otherwise the Madras General Sales Tax
(Definition of Turnover and Validation of Assessments) Act,
1954, permitted the inclusion of tax in the taxable
turnover. On the 4th August, 1958, the Board of Revenue
issued a notice to the respondent stating that it proposed
to revise the assessment of the Deputy Commercial Tax
Officer, Madurai, by including in the net turnover the sum
of Rs. 7,74,62,706-1-6 as that amount was wrongly excluded
by the assessing authority. The respondent objected to the
proposed revision on the ground that the proceeding was
barred by limitation under s. 12 of the Madras General Sales
Tax Act. The respondent also submitted -that there was no
wrong exclusion of the sum of Rs. 7,74,62,706-1-6 by the
Deputy Commercial Tax Officer in making the assessment. By
its order, dated the 25th August, 1958, the Board of Revenue
over-ruled both these contentions of the respondent and
fixed the net taxable turnover as Rs. 23,17,15,948-15-2.
The respondent preferred an appeal to the Madras High Court
against the order of the Board of Revenue dated the 25th
August, 1958. The High Court allowed the appeal holding
that the Board of Revenue could not invoke its revisional
jurisdiction after the expiry of the period of limitation
under s. 12 (4)(b) of the Madras General Sales Tax Act. The
order of the Board of Revenue, dated the 25th August, 1958
was accordingly set aside.
The question of law to be determined in this appeal is
whether the order of the Board of Revenue dated the 25th
August, 1958 was illegal because there was a contravention
of the rule of limitation laid down by s. 12(4)(b) of the
Madras General Sales Tax Act inasmuch as the order of the
Board of Revenue was made after a period of 4 years from the
date on which the ,order of the Deputy Commercial Tax
Officer was communicated to the assessee.
Section 12 of the Madras General Sales Tax Act, 1939 (Madras
Act 9 of 1939) (hereinafter called the Act) provides —
“(1) The Commercial Tax Officer may-
(i) suo motu, or
(ii) in cases in which an appeal does not he to him under
section 11, on application-, call for and examine
735
the record of any order passed or proceeding recorded under
the provisions of this Act by any officer subordinate to
him, for the purpose of satisfying himself as to the
legality or propriety of such order, or as to the regularity
of such proceeding, and may pass such order with respect
thereto as he thinks fit.
(2) The Deputy Commissioner may –
(i) suo motu, or
(ii)in respect of any order passed or proceeding recorded
by the Commercial Tax Officer under sub-section
(1) or any other provision of this Act and against which no
appeal has been preferred to the Appellate Tribunal under
section 12-A, on application, call for and examine the
record of any order passed or proceeding recorded under the
provisions of this Act by any officer subordinate to him,
for the purpose of satisfying himself as to the legality or
propriety of such order, or as to the regularity of such
proceeding, and may pass such order with respect thereto as
he thinks fit.
(3) The Board of Revenue may-
(i) suo motu, or
(ii)in respect of any order passed or proceeding recorded
by the Deputy Commissioner under sub-section (2) or any
other provision of this Act and against which no appeal has
been preferred to the Appellate Tribunal under s. 12-A. on
application, call for and examine the record of any order
passed or proceeding recorded under the provisions of this
Act by any officer subordinate to it, for the purpose of
satisfying itself as to the legality or propriety of such
order, or as to the regularity of such proceeding, and may
pass such order with respect thereto as it thinks fit.,
(4) In relation to an order of assessment passed under this
Act-
(a) The power of the Commercial Tax Officer under clause
(i) of sub-section (1) shall be exercisable only within a
period of three years from the date on which the order was
communicated to the assessee;
(b) The power of the Deputy Commissioner under clause (i)
of sub-section (2) and that of the
736
Board of Revenue under clause (i) of sub-section (3) shall
be exercisable only within a period of four years from the
date on which the order was communicated to the assessee”.
It was contended on behalf of the appellant that the order
revised by the Board of Revenue was the revisional order of
the Deputy Commissioner of Commercial Taxes dated the 21st
August, 1954 and not the order of the Deputy Commercial Tax
Officer and therefore the power of revision by the Board
of Revenue was not exercised beyond the period of
limitation provided by s. 12 (4) (b) of the Act. We are
unable to accept this argument as correct. The only
subject-matter of the revision proceedings before the Board
of Revenue was the revised assessment order of the Deputy
Commercial Tax Officer, Madurai dated the 28th November,
1952. The objection taken by the Board of Revenue was with
regard to the question of exemption allowed on the value of
the cotton purchased from outside the State of Madras. The
exemption was allowed by the Deputy Commercial Tax Officer
in his order of assessment. The question was not raised
before the Deputy Commissioner of Commercial Taxes and the
only point raised before him was with regard to the
inclusion of the amount of tax to the extent of Rs.
6,57,971-4-9 in the taxable turnover. It is manifest that
the subject-matter of the revision proceedings before the
Board of Revenue was the revised assessment order of the De-
puty Commercial Tax Officer, Madurai dated the 28th
November, 1952. It follows that the order of the Board of
Revenue was made beyond the limit of four years prescribed
by s. 12(4)(b) of the Act and it is, therefore, invalid. On
behalf of the appellant, the argument was put forward that
if a statutory appeal is provided against an order passed by
a Tribunal, the decision of the appellate authority is the
operative decision in law. It was said that if the
appellate authority modifies or reverses the order of the
Tribunal, there was a merger of the latter order with the
appellate order and it was the appellate order alone that is
effective and can be enforced. But if the appellate order
affirms the order of the Tribunal, there is a merger of the
original order in the appellate order and it is the
appellate order alone which is operative andcapable of
enforcement. In support of this argument reliance was
placed upon the observation of Gajendragadkar, J., as he
then was in Commissioner of Income-tax, Bombay v. Amritlal
Bhogilal & Co. (1) But the doctrine of merger is not a
doctrine of rigid and universal application and it cannot be
said that wherever there are two orders, one by the inferior
Tribunal and the other by a superior Tribunal, passed in an
appeal on revision, there is a fusion of merger of two
orders irrespective of the subject-matter of the appellate
or revisional order and the
(1) [1959] S.C.R. 713 : 34 I.T.R. 130 at 136.
737
scope of the appeal or revision contemplated by the
particular statute. In our opinion, the application of the
doctrine depends on the nature of the appellate or
revisional order in each case and the scope of the statutory
provisions conferring the appellate or revisional
jurisdiction. For example in Amritlal Bhogilal & Co’s.(1)
case it was observed by this Court that the order of regis-
tration made by the Income-tax Officer did not merge in the
appellate order of the Appellate Commissioner, because the
order of registration was not the subject-matter of appeal
before the appellate authority. It should be noticed that
the order of assessment made by the Income-Tax Officer in
that case was a composite order viz., an, order granting
registration of the firm and making an assessment on the
basis of the registration. The appeal was taken by the
assessee to the Appellate Commissioner against the composite
order of the Income-tax Officer. It was held by the High
Court that the order of the Income-tax Officer granting
registration to the respondent must be deemed to be merged
in the appellate order and that the revisional power of the
Commissioner of Income-tax cannot, therefore, be exercised
in respect of it. The view taken by the High Court was
over-ruled by this Court for the reason that the order of
the Income-tax Officer granting registration cannot be
deemed to have merged in the order of the Appellate
Commissioner in an appeal taken against the composite order
of assessment. Similarly, in The State of Uttar Pradesh v.
Mohammed Nooh(2), it was held by this Court that the
principle of merger cannot apply in the case of an order of
dismissal of a public servant which was made by the
departmental Tribunal on the 20th April, 1948 and against
which the appeal was dismissed by the Appellate Authority on
the 7th May, 1949, and the revisional application was
rejected on the 22nd April, 1950. In the circumstances of
the present case, it cannot be said that there was a merger
of the order of assessment made by the Deputy Commercial Tax
Officer dated the 28th November, 1952 with the order of the
Deputy Commissioner of Commercial Taxes dated the 21st
August, 1954 because the question of exemption on the value
of yarn purchased from outside the State of Madras was not
the subject-matter of revision before the Deputy
Commissioner of Commercial Taxes. The only point that was
urged before the Deputy Commissioner was that the sum of Rs.
6,57,971-4-9 collected by the respondent by way of tax
should not be included in the taxable turnover. This was
the only point raised before the Deputy Commissioner and was
rejected by him in the revision proceedings. On the
contrary, the question before the Board. of Revenue was
whether the Deputy Commercial Tax Officer, Madurai was right
in excluding from the net taxable turnover of the respondent
the sum of Rs. 7,74,62,706-1-6 which was the value of cotton
purchased by the respondent from outside the State of
Madras. We are
(1)[1959] S.C.R. 713:341.T.R. :130 at 136.
(2) [1958] S.C.R. 595.
738
‘therefore, of opinion that the doctrine of merger cannot be
invoked in the circumstances of the present case.
For these reasons, we hold that the judgment of the High
Court is right and this appeal must be dismissed with costs.
V.P.S. Appeal dismissed.
739