1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE WRIT PETITION NO.4098 OF 2009 The State of Maharashtra. ...Petitioner. Vs. M/s.Bharat Petroleum Corporation Ltd.& Anr. ...Respondents. .... Mr.A.A.Kumbhakoni, Spl. Counsel with Mr. V.A.Sonpal for the Petitioner. Mr.S.P.Surte for Respondent No.1. Mr.R.A. Dada, Sr.Advocate with Mr. Milind Sathe, Sr.Advocate and Mr.B.C.Jshi, Mr. P.S.Jaitley and Mr.Zuber Dada i/b. A.S.Dagal & Asso. for Respondent No.2. ..... CORAM : DR.D.Y.CHANDRACHUD AND J.P.DEVADHAR, JJ. April 20, 2010. ORAL JUDGMENT (PER DR.D.Y.CHANDRACHUD, J.) : In these proceedings under Article 226 of the Constitution, the issue which falls for determination is whether an appeal against an order passed by the Commissioner of Sales Tax under Section 52 of the Bombay Sales Tax Act, 1959, is maintainable under Section 55(1)(c), at the behest of the State Government, to the Tribunal. The Sales Tax Tribunal has, by its decision dated 30 June 2008 come to the conclusion that the 2 appeal filed by the State was not maintainable. 2. Since the question of law which has been urged in the Petition raises a question of interpretation, only a brief reference to the facts would be necessary in order to appreciate the background in which the dispute between the parties has arisen. The First Respondent, Bharat Petroleum Corporation Ltd., entered into an agreement on 24 August 1992 with the Second Respondent, Reliance Industries Ltd., for the supply of Linear Alkyl Benzene Feed Stock (LABFS) through a pipe line from the refinery at Mahul to the petro chemical plant of the Second Respondent at Patalganga. LABFS is raw material for the manufacture of N- Paraffin. N-Paraffin is extracted by the Second Respondent at its plant from the LABFS supplied by the First Respondent. Upon extraction, the residue is returned to the First Respondent in a ‘return stream’. On 21 April 1992 the First Respondent filed an application to the Commissioner of Sales Tax and sought a determination under Section 52 on whether the product in question, had been correctly classified under Entry C-I-26(1) of the Schedule to the Bombay Sales Tax Act, 1959 and whether the 3 return stream despatched by the Second Respondent to the First Respondent constituted a “sales return”. The Commissioner of Sales Tax by a determination dated 14 March 1996 held inter alia that what was returned back by the Second Respondent (RIL) to the First Respondent (BPCL) did not constitute goods returned, but was a purchase of kerosene by the First Respondent. Evidently, the basis of such a determination would be that what is supplied by the First Respondent is LABFS which contains N-paraffin and what goes back to the First Respondent does not contain the material which is extracted by the Second Respondent at its plant. The proceedings were eventually remanded back to the Commissioner by an order, of a Division Bench of this Court, dated 18 February 2003 and the Commissioner was directed to decide whether the return stream, namely, return of kerosene by RIL to BPCL would be legally allowable as a sales return or whether it would amount to a return of kerosene by BPCL to RIL. Upon remand, the Commissioner by his order dated 6 October 2004 came to the conclusion that LABFS supplied by the First Respondent to the Second Respondent and return stream were two different goods and that consequently, what was supplied back 4 did not qualify as a sales return in accordance with Rule 4 of the Bombay Sales Tax Rules, 1959. Once again there was an order of remand, this time by the Tribunal on 12 August 2005. Upon remand, the Commissioner by his order dated 11 September 2006 held that the return stream, after the extraction of N-Paraffin out of the original supply of LABFS, was legally allowable as a sales return and would not amount to a purchase of kerosene by the First Respondent from the Second Respondent. This order of the Commissioner was questioned by the State Government in an appeal before the Tribunal under Section 55 of the Act. The Tribunal by its judgment dated 30 June 2008 came to the conclusion that an appeal by the State against the order of the Commissioner on a decision under Section 52 was not maintainable. The appeal has been dismissed only on the ground of maintainability. The State of Maharashtra has instituted these proceedings under Article 226 of the Constitution and the correctness of the order passed by the Tribunal now falls for determination before the Court. 3. In assailing the order passed by the Commissioner, 5 Counsel appearing on behalf of the State submitted that (i) Section 55(1)(c) is neutrally worded and provides an appeal from every original order, not being an order mentioned in Section 56, passed under the Act or the Rules by the Commissioner, to the Tribunal; (ii) The Commissioner, when he makes a determination of a disputed question under Section 52, exercises quasi judicial powers in the exercise of which he is independent of the State and the State exercises no control directly or indirectly on the exercise of those powers; (iii) The observations contained in a judgment of a Division Bench of this Court in Amar Dye Chem Ltd. vs. The State of Maharashtra,1 are passing observations and the question which arises in the present appeal did not arise in the reference made to the High Court in that case under Section 61; (iv) It is a settled principle of law that a judgment in a reference under Section 61 is in the nature of an advisory opinion rendered on specific questions of law which are referred for the decision of the High Court and a question of law which was not referred to the Court cannot be regarded as arising out of the order of reference; (v) The scheme of the Bombay Sales Tax Act,1959 would clearly 1 (1983) 53 STC 14 (Bom) 6 establish that the powers which are exercised by the Commissioner, upon his appointment under Section 20(1) are those which are conferred by the Act. The decision of the Commissioner is not necessarily the decision of the State. Under Section 52, the Commissioner discharges a quasi judicial duty imposed by the legislation and does not perform an executive act. The decision of the Commissioner under Section 52 is, therefore, not a decision of the State; (vi) An appeal by the State, which has a vital interest in the collection of revenue would be maintainable under Section 55(1)(c) against the decision of the Commissioner; (vii) The Tribunal has manifestly erred in equating the role and position of the Commissioner as a quasi judicial authority with the position of the State under the Act. The basis of the judgment of the Tribunal is hence, flawed. 4. On the other hand, it has been urged on behalf of the First Respondent by Counsel that (i) Tax legislation contemplates a distinction between statutory provisions relating to the charge of tax and those relating to assessment, remedies and recovery of revenue; (ii) The assessment of tax under Sales Tax legislation is 7 done by the Commissioner or by his subordinates. The Commissioner protects the interests of the revenue and of the State and he has no independent interest of his own; (iii) Powers of reassessment, revision and of imposing penalties, amongst others, are vested in the Commissioner; (iv) Under the Act the Commissioner is a representative of the Government, the object being to protect the interests of the State; (v) If the logic of the State Government that it can file an appeal against an order passed by the Commissioner under Section 52 to the Tribunal is held to be correct, that would mean that an appeal can be filed by the State against an order passed by the Sales Tax Officer. Sufficient powers have been given to the Commissioner to make a reassessment or to exercise revisional jurisdiction under the Act; (vi) The State has no independent interest except to ensure that the provisions of the Act are implemented and that tax is properly collected. The Commissioner is expected to protect the interests of the State; (vii) The provisions of the Act, must result in the inference that even if Section 55 is facially neutral, an appeal by the State Government against an order of the Commissioner is not contemplated; (viii) The interpretation which is sought to be 8 placed on the provisions of the Act is buttressed by relying on the provisions of the Rules and forms prescribed for the filing of an appeal. 5. The publication of the Government of Maharashtra suffers from a printing error in Section 55(1)(c). As would be noted in greater detail later, Section 55(1)(c) provides that an appeal from every original order, not being an order as set out in Section 56, shall lie “if the order is made by the Deputy Commissioner, Additional Commissioner or Commissioner to the Tribunal”. The Bombay Government Gazette of 28 September 1959 in which the Act has been initially published, specifically makes the aforesaid provision which contemplates an appeal against the decision of the Commissioner to the Tribunal. The same provision continued in subsequent publications of the State Government, there being no amendment to Section 55(1)(c), in so far as it provides for an appeal against an original order of the Commissioner to the Tribunal. The deletion of the words “or Commissioner” in the version of the Act published by the State Government is, therefore, an obvious printing error. The Petition 9 has been argued by all the Counsel on that basis, upon verification that this is a printing error and that the aforesaid provision has not been altered by the legislature. 6. The salient provisions of the Act and the statutory scheme must be elucidated. Section 2(7) defines the expression “Commissioner” to mean the person appointed to be the Commissioner of Sales Tax for the purposes of the Act. Clause (11) of section 2 defines the expression “dealer” to mean any person who whether for commission, remuneration or otherwise carries on the business of buying or selling goods in the State, and includes the Central Government, or any State Government which carries on such business, and also any society, club or other association of persons which buys goods from or sells goods to, its members. The expression “State” is defined in clause (31) of Section 2 to mean the State of Maharashtra. The incidence and levy of tax is provided in Chapter II and under Section 3(1) a dealer whose turnover either of all sales or of all purchases exceeds the limit prescribed is liable to pay tax under the Act on his turnover of sales and turnover of purchases made on or after the notified day. 10 Chapter III provides for the constitution of sales tax authorities and the Tribunal. Sub-section (1) of Section 20 provides that for carrying out the purposes of the Act, the State Government shall appoint an officer to be called the Commissioner of Sales Tax. Under Sub-section (2) the State Government is similarly vested with the power to appoint Additional Commissioners of Sales Tax and other subordinate officers. By Sub-section (3) of Section 20, the Commissioner has jurisdiction over the whole of the State of Maharashtra, while an Additional Commissioner has also jurisdiction over the whole of the State or, where the State Government so directs, over any local area thereof. The jurisdiction of the other officers is over such local areas as the State Government may specify. Sub-section (4) of Section 20 provides that the Commissioner shall have and exercise all the powers and perform all the duties, conferred or imposed on the Commissioner by or under the Act. An Additional Commissioner save as otherwise directed by the State Government, can exercise the jurisdiction conferred upon the Commissioner. By sub-section (7) the State Government is empowered to delegate to the Commissioner the powers conferred upon it by sub-sections (2) 11 and (3), other than for the appointment of Additional Commissioners or Deputy Commissioners. The constitution of the Tribunal is provided for in Section 20. 7. Chapter IV of the Act deals with registrations, licences, authorizations, recognitions and permits. In several provisions of the Act, powers have been vested in the Commissioner of Sales Tax. These include inter alia the power to refuse an authorization (Section 27); and to cancel or suspend an authorization (Section 28). Chapter V of the Act provides for returns, assessment, payment, penalty, recovery and refund of tax. The Commissioner is conferred with the power to make an assessment of taxes under Section 33. In certain situations, the Commissioner is empowered to issue directions not to proceed with the assessment of a particular dealer or class of dealers for a particular period if the assessment involves a decision of a point which is concluded against the State by a judgment of the Tribunal or the High Court and the State Government or the Commissioner have initiated proceedings against such a judgment before an appropriate forum. The power to reassess, where there is reason to believe that any 12 turnover of sales or purchases has escaped assessment is vested in the Commissioner under Section 35. The Commissioner is empowered to impose a penalty for the contravention of Section 37 and to issue orders in the nature of garnishee orders under Section 39. 8. In this background now it is necessary to advert to the provisions of Section 52. Sub-section (1) of Section 52 empowers the Commissioner to determine a question which arises, otherwise than in proceedings before a Court or before the Commissioner has commenced assessment or reassessment of a dealer under Section 33 or 35, whether, for the purposes of the Act: “(a) any person, society, club or association or any firm or any branch or department of any firm, is a dealer, or (b) any particular thing done to any goods amounts to or results in the manufacture of goods, within the meaning of that term, or (c) any transaction is a sale or purchase, or where it is a sale or purchase the sale price or the purchase price, as the case may be, therefor, or (d) any particular dealer is required to be registered, or (e) in the case of any person or dealer liable to pay tax, any tax is payable by such person or dealer in respect of any particular sale or purchase, or if tax is payable the rate thereof.” 13 In discharging the functions conferred by or under the Act, the Commissioner under Section 53 has all the powers of a Civil Court for the purpose of (a) Proof of facts by affidavit; (b) Summoning and enforcing the attendance of any person, and examining him on oath or affirmation; (c) Compelling the production of documents; and (d) Issuing commissions for the examination of witnesses. Section 55 of the Act provides for appeals and reads as follows: “55. (1) An appeal from every original order, not being an order mentioned in section 56 passed under this Act or the rules made thereunder shall lie- (a) if the order is made by a Sales Tax Officer, or any other officer subordinate thereto, to the Assistant Commissioner; (b) if the order is made by an Assistant Commissioner, to the Deputy Commissioner; (c) if the order is made by a Deputy Commissioner, additional Commissioner or Commissioner to the Tribunal.” Sub-section (3) of Section 55 provides that every order passed in appeal under the Section shall, subject to the provisions of Sections 57, 61 and 62 be final. Sub-section (4) provides a limitation of 14 sixty days from the date of the communication of the order appealed against for the filing of an appeal. Section 59 provides that in computing the period of limitation, the provisions of Sections 4 and 12 of the Limitation Act, 1963 shall, so far as may be, apply. Sub-section (5) of Section 55 inter alia provides that an appeal against an order of assessment with or without penalty, or interest or against an order imposing a penalty, or interest, or against an order directing the forfeiture of any tax collected by a dealer, shall not ordinarily be entertained by an appellate authority, unless it is accompanied by satisfactory proof of the payment of the tax with or without penalty, or interest, or as the case may be, of the payment of the penalty, or interest, or the amount forfeited. The Appellate Authority is permitted to waive this requirement for reasons to be recorded in writing. Under sub- section (6), the Appellate Authority both in first and second appeals has the power (a) In an appeal against an order of assessment to confirm, reduce, enhance or annul the assessment, or set it aside and refer the case back to the assessing authority for making a fresh assessment; (b) In an appeal against an order of imposing a penalty or interest to confirm, cancel or vary the order 15 so as to enhance or reduce the penalty or interest; and (c) in any other case to pass such orders in the appeal as it deems just and necessary. Certain orders are made non-appealable under Section 56. These orders include a notice issued under the Act calling upon a dealer for an assessment or to show cause against prosecution, orders pertaining to the seizure or retention of documents, orders sanctioning prosecution and other orders as specifically provided. Section 56 provides as follows : “56. No appeal and no application for revision shall lie against- -(1) a notice issued under this Act, calling upon a dealer for assessment or asking a dealer to show cause as to why he should not be prosecuted for an offence under this act, or notices issued under any of the provision of section 38B of this act, or notice or any order issued under the provisions of section 39-1A or -(1A) Orders issued by the Commissioner under the third proviso to sub-section (4A) of section 33, or -(2) an order pertaining to the seizure or retention of account books, registers and other documents, or -(2A) any order issued under sub-section(1) of section 53, or -(3) an order sanctioning a prosecution under this act, or -(4) an order ......... under section 70.” 16 9. Section 57 of the Act empowers the Commissioner, subject to Section 56, to call for and examine the record of his own motion, or any order passed (including an order passed in appeal) under the Act or the rules by any officer or person subordinate to him and to pass such orders thereon as he thinks just and proper. Prior to its amendment by Maharashtra Act 24 of 1990, Section 57 inter alia contemplated a revision to the Tribunal on an application made to it against an order of the Commissioner, not being an order passed under Section 55(2), in second appeal. The State Legislature amended the provision in 1990 so as to delete the remedy of a revision against an order passed by the Commissioner to the Tribunal that was available under clause (b) of Sub-section (1) of Section 57. -10. In Section 55, the legislature has made a provision for an appeal against original orders passed by the various authorities. An appeal against an order of the Sales Tax Officer lies to the Assistant Commissioner; an appeal against an order of the Assistant Commissioner lies to the Deputy Commissioner and an appeal against an order passed by the Deputy Commissioner, Additional 17 Commissioner or Commissioner lies to the Tribunal. Sub-section (1) of Section 55 provides that an appeal from every original order, not being an order mentioned in Section 56 passed under the Act or the rules, would lie if an order is made by one of the authorities stipulated therein to the appellate authorities as specified. The appellate authority against an original order passed by the Commissioner is the Tribunal. The mandate of the law is that an appeal lies against every original order passed under the Act or rules which is made by one of the authorities specified. The exception is that certain orders specified in Section 56 are non- appealable. -11. The submission which has been urged on behalf of the Respondents is that though Section 55(1) is neutrally worded, the scheme of the Act would result in the conclusion that the State Government cannot be aggrieved by an order passed by the Commissioner so as to maintain an appeal under Section 55(1). The submission which has been urged is that the Commissioner is appointed with the intent and purpose of protecting the revenue concern of the State Government and in numerous provisions of the Act, it is the Commissioner who discharges the role of being the 18 protector of the revenue. Hence, it has been urged that the State cannot maintain an appeal against an order passed by the Commissioner. 12. Reading Section 55 as it stands, the provision does not contain a restriction of the nature sought to be inferred on behalf of the Respondents. Section 55 provides for an appeal from every original order except for those orders mentioned in Section 56. An original order under Section 52 is not mentioned in Section 56. On its plain and natural meaning, an appeal against an original order passed under Section 52 is maintainable under Section 55. In construing the provisions of a fiscal statute, the Court must adopt the ordinary and natural meaning of the words used by the legislature, for the legislature is deemed to intend and mean what it says. Where the language of a statute is clear and unambiguous, the Court cannot read a restriction which has not been introduced by the legislature. The intention of the legislature has to be construed from the words used and by the language adopted. The words that have been used in Section 55 are not susceptible to the interpretation that the appellate remedy is available only to the assessee. 19 12. The fallacy in the submission of the Respondents, which found acceptance by the Tribunal, lies in equating the exercise of the quasi judicial powers by the Commissioner, with the exercise of powers by the State. Undoubtedly, under Section 20(1), the State Government appoints the Commissioner of Sales Tax for carrying out the purpose of the Act. The Commissioner is vested with the exercise of all the powers and with the performance of the duties conferred by the Act. In these proceedings, the issue before the Court relates to the exercise of powers by the Commissioner while deciding a disputed question under Section 52. The power which the Commissioner exercises to decide such a question is a quasi judicial power. Section 52 is a part of Chapter VII which is entitled “Proceedings”. The nature of the determination under Section 52 is quasi judicial. Section 53 which immediately follows Section 52, specifically confers upon the Commissioner, the powers of a Civil Court though in certain specific areas for proof of facts by affidavit, summoning and enforcing the attendance of any person, compelling the production of documents and for issuing commissions for the examination of witnesses. In the discharge of 20 his quasi judicial powers, the Commissioner is required to apply his mind independently and is not subservient to the State. The exercise of quasi judicial power by the Commissioner cannot be subject to the dictate or to the directions of the State. Though the Commissioner is vested with statutory powers under the Act and his appointment is with a view to carry out the purposes of the Act, when he exercises quasi judicial powers, the exercise of those powers is subject to the discipline of the law which attaches to the discharge of a quasi judicial power. A determination by the Commissioner under Section 52 is an original order within the meaning of sub-section (1) of Section 55. To hold that an appeal at the behest of the State would not be maintainable against such determination, is liable to produce startling results. The submission