IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER TUESDAY, THE 22ND JULY 2008 / 31ST ASHADHA 1930 W.A.No.278 of 2005 ---------------------------------- AGAINST THE JUDGEMENT IN W.P.(C).2794/2005 DATED 25/01/2005 .................... APPELLANT: PETITIONER:- ----------------------------------------- M/S.ISLAND SEA FOODS PVT.LTD., ISLAND CLUB HOUSE, WILLINGDON ISLAND, KOCHI-682 003, REPRESENTED BY ITS DIRECTOR, SRI.BABU.C.GEORGE. BY ADV. SRI.C.KOCHUNNY NAIR SRI.S.ARUN RAJ RESPONDENTS: RESPONDENTS:- --------------------------------------------------- 1. THE ADDL.SALES TAX OFFICER-I, SALES TAX OFFICE, FIRST CIRCLE, KOTTAYAM. 2. THE ADDL.APPELLATE ASST.COMMISSIONER, AGRICULTURAL INCOME TAX & SALES TAX, KOTTAYAM. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ. THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 22/07/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:- H.L.Dattu, C.J. & A.K.Basheer, J. --------------------------------------------- W.A.No.278 of 2005 --------------------------------------------- Dated, this the 22nd day of July, 2008 JUDGMENT H.L.Dattu,C.J. This Writ Appeal is directed against the orders passed by the learned Single Judge in W.P.(C).No.2794 of 2005 dated 25th January, 2005. 2. In order to appreciate the contentions canvassed by the learned counsels for the parties to the lis, it may be necessary to briefly refer to the facts pleaded by the petitioner. 3. The assessee is a dealer, registered under the provisions of the Kerala General Sales Tax Act, 1963 (“Act” for short). The assessing authority has passed regular assessment orders for the assessment years 1981-82 to 1990-91. 4. Aggrieved by those orders of assessment, the assessee had preferred the first appeals before the first appellate authority as provided under the Act. The first appellate authority, by its order dated 25.2.1997, has allowed the appeals and has remanded the matters to the assessing authority to redo the assessments in accordance with law. The orders passed by the first appellate authority reads as under: “In the result the appeals are allowed and impugned orders are remitted back for fresh disposal according to law”. W.A.No.278 of 2005 - 2 - 5. For the reasons best known, the remand order was questioned by the assessee by filing second appeals before the Sales Tax Appellate Tribunal, Additional Bench, Kottayam in T.A.Nos.127 of 1997 to 136 of 1997. Before the Tribunal, the appellant had not requested the Tribunal to grant any interim order and, as such, there was no interim order passed by the Tribunal, which prevented the assessing authority to complete the assessments or at least to approach the Commissioner of Commercial Taxes to permit him to defer the completion of the assessment proceedings as directed by the first appellate authority. 6. The Tribunal, by its order dated 20th June, 2003 (Exhibit P5 order), has concurred with the views expressed by the first appellate authority and has, accordingly, rejected the assessee's appeals. 7. After the disposal of the appeals by the Tribunal filed by the assessee, a notice came to be issued by the assessing authority, dated 20.12.2004 (Exhibit P4 notice). In that notice, the assessing authority had directed the assessee to produce the books of accounts for the assessment years 1981-82 to 1990-91. The notice so issued by the assessing authority was called in question by the assessee by filing W.P.(C).No.9 of 2005 before this Court. This Court, by order dated 3.1.2005, has disposed of the writ petition and in that had specifically directed the assessing authority to consider the question of limitation raised by the assessee. W.A.No.278 of 2005 - 3 - 8. After disposal of the writ petition, the petitioner had filed his detailed objections/reply by his letter dated 4.1.2005 to the notice issued by the assessing authority dated 20.12.2004. 9. After considering the objections so filed, the assessing authority has once again issued notice dated 14.1.2005 (Exhibit P8 notice) and, in that, again had directed the assessee to produce the books of accounts for the assessment years 1981-82 to1990-91. In so far as the grounds urged by the petitioner with regard to the period of limitation, the assessing authority had only stated that: “........ time bar does not apply to cases of revision of assessments pursuant to remand orders of the Tribunal”. (emphasis supplied by us) 10. Aggrieved by Exhibit P8 notice issued by the assessing authority, the petitioner was once again before this Court in W.P (C) No.2794 of 2005. 11. The learned Single Judge, accepting the stand of the assessee, has allowed the writ petition, but, while doing so, has observed:- “Therefore, the officer is directed to consider the petitioner's objection in detail and pass orders which should form part of the revised assessment so that petitioner while challenging revised order can raise the question of limitation also”. (underlining is by us) W.A.No.278 of 2005 - 4 - 12. Aggrieved by the aforesaid order passed by the learned Single Judge, the petitioner in the writ petition has presented this writ appeal. 13. The learned counsel appearing for the appellant would contend, that, by virtue of Section 17(8) read with Section 17(9) of the Act, the assessing authority ought to have completed the assessment/ reassessment within four years from the date of receipt of the orders passed by the appellate/revisional authority. The learned counsel would, further submit, that only in such of those cases, where the interim order passed by the Court or other competent authority which restrains the assessing authority to complete the assessment proceedings could be excluded for the purpose of computing the period of limitation for completion of assessment proceedings. To substantiate the aforesaid contention canvassed, the learned counsel for the assessee has taken us through sub-sections (8) and (9) of Section 17 of the Act. 14. Per contra, Sri.Muhammed Rafiq, learned counsel appearing for the Revenue, would submit, that, the time starts ticking for the purpose of computing limitation only from the date on which the orders are passed by the Sales Tax Appellate Tribunal and, therefore, the assessing authority was justified in observing that the limitation prescribed under sub-section (8) would not apply to such of those cases where the matters W.A.No.278 of 2005 - 5 - were pending before the Sales Tax Appellate Tribunal. To substantiate his contention, the learned counsel has placed reliance on the observations made by the apex Court in the case of Kunhayammed & others v. State of Kerala & others [(2000) 119 STC 505] and also the observations made by the apex Court in the case of Union of India & others v. West Coast Paper Mills Ltd. & another [(2004) 135 STC 265]. 15. For disposal of this Writ Appeal, in our opinion, the provisions of sub-sections (8) and (9) of Section 17 requires to be noticed. They are as under: “(8) Any assessment or reassessment in pursuance of an order of appellate or revisional authority shall, be completed within a period of four years from the expiry of the year in which the order was received. Provided that all such assessments or reassessments pending as on the 1st day of April, 1993 shall be completed on or before the 30th day of September 1998. (9) In computing the period for the completion of an assessment under this Section, the time during which the proceedings for assessment remained stayed under the orders of a court or other competent authority shall be excluded”. 16. Sub-section (8) of Section 17 of the Act provides for passing of an order of assessment or reassessment pursuant to an order passed by the appellate or revisional authority. The said sub-section W.A.No.278 of 2005 - 6 - mandates, that, it shall be completed within four years from the expiry of the year in which the order is received. 17. Sub-section (9) of Section 17 of the Act provides a breathing time for the assessing authority while computing the period of limitation. We say “breathing time” for the reason that if, for any reason, the proceedings for assessment or reassessment have been stayed by an order of a Court or by other competent authority, that period requires to be excluded. That only means, that, if, for any reason, the assessing authority is prevented from passing an order of assessment by virtue of an interim order passed by a superior forum or a competent authority by granting interim order of stay, then the limitation prescribed under sub-section (8) of Section 17 gets excluded till the interim order is vacated/modified. 18. In the instant case, as we have already noticed, Exhibit P3 order came to be passed by the first appellate authority in the appeals filed by the assessee for the assessment years 1981-82 to 1990-91. This order was passed on 25.02.1997. In the normal course, the assessing authority should have completed the assessments on or before 25.02.2001 or within four years from the date of receipt of the copy of the orders passed by the appellate authority or the revisional authority. 19. In the instant case, a notice was issued some time in the year 2004, directing the assessee to produce the books of accounts. This W.A.No.278 of 2005 - 7 - notice was issued only after the disposal of the appeals filed by the assessee before the Tribunal. It is apropos to notice here, that the Tribunal, while entertaining the appeals filed by the assessee, had not granted any interim order of stay, which prohibits or restrains the assessing authority from passing any orders of assessment pursuant to the orders passed by the first appellate authority. If, for any reason, the assessing authority was of the opinion that the pendency of the appeal before the Tribunal would prevent him from passing an order of assessment as directed by the first appellate authority, he should have approached the Commissioner for Commercial Taxes, who is the Head of the Department, with a request to permit him to defer the passing of the orders of assessment or in the alternative requested the Appellate Tribunal to permit him to complete the assessment proceedings as directed by the first appellate authority, subject to the result of the second appeal. The assessing authority has not taken recourse to any of the options available to him under the Act. 20. The learned counsel for the Revenue would submit that time limit for completion of the assessment starts running from the date of the orders passed by the Tribunal. This submission of the learned counsel, in our opinion, is without any merit or substance. Mere pendency of an appeal, without there being any interim order which prevents the assessing authority to complete the assessment, would not come in the way of the W.A.No.278 of 2005 - 8 - assessing authority in complying with the orders and directions issued by the first appellate authority. 21. The learned counsel for the Revenue has relied on the observations made by the apex Court in the case of Kunhayammed (supra). That was a case where the apex Court had to decide the concept of “merger” theory. While doing so, the apex Court, in conclusion, has stated that: “Where an appeal or revision is provided against an order passed by a court, Tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law”. 22. In our opinion, the aforesaid decision of the apex Court, in no way, would assist the Revenue for canvassing the issue that the period of limitation prescribed under sub-section (8) of Section 17 of the Act would commence only from the date of the orders passed by the Tribunal. 23. The learned counsel for the Revenue has also relied on the observations made by the apex Court in the case of West Coast Paper Mills (supra). In that case, the apex Court was once again considering the concept of “merger” theory. It is now well settled law, that, if there is an order passed by a superior forum or by any other authority under the Act, W.A.No.278 of 2005 - 9 - the orders passed by the lower authority would merge with the orders passed by the final authority on the issue decided therein. Therefore, in our opinion, none of the decisions, on which reliance has been placed by the learned counsel for the Revenue, would assist him in any manner whatsoever. 24. In view of the unambiguous language employed by the Legislature in sub-sections (8) and (9) of Section 17 of the Act, in our considered opinion, the learned Single Judge was not justified in directing the assessing authority to complete the assessments as directed by the first appellate authority in spite of clear prohibition envisaged under Section 17 (8) of the Act. 26. In view of the above discussion, we cannot sustain the order passed by the learned Single Judge. Accordingly, we allow the Writ Appeal and set aside the order passed by the learned Single Judge. Ordered accordingly. H.L.Dattu Chief Justice A.K.Basheer Judge vku/dk.