Case: Deputy Commissioner of Agricultural Income Tax & Sales Tax, Kozhikode & Others Vs. Ballapatam Produce Tea Company

A.N. Grover, J.1. This is an appeal by special leave from a judgment of the Kerala High Court allowing a petition under Article 226 of the Constitution by which certain orders made by the departmental authorities in the matter of assessment of sales tax were quashed.2. The respondent was carrying on the business of buying and selling hill produce as commission agent on behalf of several principals. The Deputy Commercial Tax Officer by his assessment order dated February 15, 1955 fixed the net turnover for the year ending March 31, 1954 at Rs. 2, 97, 756-3-9. By virtue of a licence granted under Section 8 of the Madras General Sales Tax Act, 1939, hereinafter called the Act, to the respondent a turnover of Rs. 4, 27, 904-11-0 representing the value of goods purchased on behalf of the principals was exempted. The deputy Commercial Tax Officer, however, issued a notice on March 20, 1957 proposing to assess the turnover that had been exempted. He revised the assessment of the respondent by an order dated March 31, 1957 and included in it the turnover of the agency transactions which had previously been not included in the total turnover of the respondent. The assessee filed an appeal before the Appellate Assistant Commissioner of Agricultural and Sales Tax. He allowed the appeal on January 14, 1959 and set aside the order dated March 31, 1957 by which the Deputy Commercial Tax Officer had included in turnover on account of the agency transactions. The Deputy Commissioner of Agricultural Income Tax and Sales Tax in exercise of revisional powers under Section 12 of the Act made an order on January 21, 1963 and set aside the order of the Appellate Assistant Commissioner dated January 14, 1959. A direction was made that the matter be disposed of according to law. The Appellate Assistant Commissioner then made an order on August 22, 1964 restoring the original assessment order dated March 31, 1957. Thereupon the respondent moved the Kerala High Court under Article 226 of the Constitution for quashing the orders which affected him adversely and for restoring the order dated January 14, 1959. This petition was allowed by the High Court following its previous decision in K. Saryothama Srinivasa Shenoy & Co. v. Deputy Commissioner of Agricultural Income-tax & Sales Tax, Kozhikode. An appeal was preferred by the department to the Division Bench which was dismissed.3. The facts of the present case are hardly distinguishable from those in Civil Appeal Nos. 2209 and 1177 of 1966 in which judgment has been delivered today. The sole point of distinction that has been pressed by learned counsel for the respondent is that the departmental authorities also the High Court have treated the matter as if it was one of escapement of turnover for which a different period of limitation, i.e., three years has been prescribed by the rules. As has been observed in our judgment in the other appeals that would be wholly erroneous view to take. There can be no manner of doubt that the powers which the Deputy Commissioner had exercised related to the propriety and legality of the order made by the Appellate Assistant Commissioner on January 14, 1959 concerning the inclusion or exclusion of the turnover of buying agency transactions. To these proceedings the period of limitation of three years would be altogether inapplicable. Reference may be made to another decision of this Court in The State of Kerala v. K. M. Cheria Abdulla & Co., regarding the revisional jurisdiction of the Deputy Commissioner for directing an inquiry into the validity of a claim about exemption in respect of commission sales. There also the Deputy Commercial Tax Officer had granted exemption from tax on commission sales under the provisions of Section 8 of the Madras General Sales Tax Act, 1939. The Deputy Commissioner of Commercial Taxes called for the record of the case and directed an inquiry into the validity of the claim about exemption which had been granted. The Deputy Commissioner had found that the assessees had not acted as commission agents but had carried on the business of outright purchase and sale and on that view he purported to exercise powers vested in him by Section 12(2)(i) of the Act and had revoked the exemption granted by the assessing authority. The assessing authority was also directed to take further action to recover the taxes due. In the majority judgment the action taken by the Deputy Commissioner was upheld.

Decision reasoning: 1[ds]The sole point of distinction that has been pressed by learned counsel for the respondent is that the departmental authorities also the High Court have treated the matter as if it was one of escapement of turnover for which a different period of limitation, i.e., three years has been prescribed by the rules. As has been observed in our judgment in the other appeals that would be wholly erroneous view tomay be made to another decision of this Court in The State of Kerala v. K. M. Cheria Abdulla & Co., regarding the revisional jurisdiction of the Deputy Commissioner for directing an inquiry into the validity of a claim about exemption in respect of commission sales. There also the Deputy Commercial Tax Officer had granted exemption from tax on commission sales under the provisions of Section 8 of the Madras General Sales Tax Act, 1939. The Deputy Commissioner of Commercial Taxes called for the record of the case and directed an inquiry into the validity of the claim about exemption which had been granted. The Deputy Commissioner had found that the assessees had not acted as commission agents but had carried on the business of outright purchase and sale and on that view he purported to exercise powers vested in him by Section 12(2)(i) of the Act and had revoked the exemption granted by the assessing authority. The assessing authority was also directed to take further action to recover the taxes due. In the majority judgment the action taken by the Deputy Commissioner was upheld.