Case: Swastik Oil Mills Ltd Vs. H. B. Munshi, Deputy Commissioner Of Sales Tax,Bombay

1. The Swastik Oil Mills Ltd., appellant, carries on business of manufacturing vegetable oils, soaps and other products and selling them in India as well as exporting them outside India. It was registered as a dealer under the various Sales Tax Acts in force in Bombay. The first of these Acts was the Bombay Sales Tax Act 5 of 1946, which was replaced by the Bombay Sales Tax Act 3 of 1953. The third and the latest Act now in force in Bombay is the Bombay Sales Tax Act 51 of 1959. The appellant was assessed to sales tax on its turnover for the periods from 1st April, 1948 to 31st March, 1950, and from 1st April, 1950 to 31st March, 1951 on the basis of Returns of turnover submitted by it. In these Returns, the appellant claimed exemption from tax in respect of the turnover representing the despatches or transfer of goods from its Head Office Bombay to its various Depots or Branches in other States in India, and also exemption in respect of sales which were alleged to have taken place in the course of inter-State trade after 26th January, 1950. The Sales Tax Officer in his order of assessment dated 2nd January, 1954 rejected both these claims. The appellant went up in appeal before the Assistant Collector of Sales Tax, who, in his appellate order dated 29th October, 1956, accepted the claim of the appellant in respect of the despatches to its various Depots or Branches in other States in India, but disallowed the claim in respect of the alleged inter-State sales. As a result of partially allowing the claim of the appellant, the Assistant Collector reduced the tax imposed by a sum of Rs. 19,240-15-6 for the period between 1st April, 1948 to 31st March, 1950, and Rs. 97,208 for the second period between 1st April, 1950 to 31st March, 1951, and directed refund of these amounts to the appellant. The revisions filed by the appellant against the rejection of its claim in respect of inter-State sales were still pending when, on 7th January, 1963, a notice was issued by the Deputy Commissioner of Sales Tax, Bombay City Division, in Form XXIV under Section 31 of the Bombay Sales Tax Act, 1953, intimating the appellant that he proposed to revise suo motu the appellate orders passed by the Assistant Collector of Sales Tax in so far as he had allowed deduction in respect of the entire goods despatched to its Branches in other States outside Maharashtra, because, in so doing, he had overlooked the provisions contained in proviso (b) to sub-clause (ii) of Rule 1 under sub-section (3) of Section 6 of the Bombay Sales Tax Act, 1946 as amended by the Bombay Sales Tax Amendment Act 48 of 1949. On receipt of this notice, the appellant put in appearance before the Deputy Commissioner, who is the respondent in this appeal, and raised several objections against the proposed revisional proceedings, making a request that the proceedings be dropped. Since the respondent did not accept this request, the appellant filed a petition under Article 226 of the Constitution in the High Court of Bombay challenging the notice dated 7th January, 1963, with the prayer that the notice be quashed and the respondent be restrained from taking any action against the appellant in pursuance thereof. The petition was dismissed by the High Court and, now, on certificate granted by that Court, the appellant has come up in this appeal to this Court.

Reasoning: We are unable to accept this principle laid down by that High Court as correct.Whenever a power is conferred on an authority to revise an order, the authority is entitled to examine the correctness, legality and propriety of the order and to pass such suitable orders as the authority may think fit in the circumstances of the particular case before it. When exercising such powers, there is no reason why the authority should not be entitled to hold an enquiry or direct an enquiry to be held and, for that purpose, admit additional material. The proceedings for revision, if started suo motu, must not of course, be based on a mere conjecture and there should be some ground for invoking the revisional powers. Once those powers are invoked, the actual interference must be based on sufficient grounds, and, if it is considered necessary that some additional enquiry should be made to arrive at a proper and just decision, there can be no bar to the revising authority holding a further enquiry or directing such an enquiry to be held by some other appropriate authority3. In the present case, the notice issued by the Deputy Commissioner of Sales Tax, on the face of it, discloses the reasons which led him to take proceedings for exercising his revisional power suo motu, and it cannot be said on those facts that he was acting merely on conjecture. The Deputy Commissioner has not yet proceeded further under the notice to make the assessment. We have no doubt that, when the Deputy Commissioner does make an enquiry, if any, for the purpose of exercising his revisional powers, he will keep within the limitations indicated by this Court in the case cited above. The notice cannot be quashed or the proceedings restrained merely on the ground that the Deputy Commissioner may have to hold some enquiries in order to properly exercise his revisional jurisdictionMr. Desai on behalf of the appellant emphasised the circumstance that in Section 12 (2) of the Madras General Sales Tax Act, which was considered by this Court, the Deputy Commissioners power was expressed by stating that he may pass such order as he thinks fit, while no such words occur in the corresponding provisions in the Bombay Sales Tax Acts with which we are concerned, but we do not think that this circumstance makes any difference. A revising authority necessarily has the power to make such order as, in the opinion of that authority, the case calls for when the authority is satisfied that it is an appropriate case for interference in exercise of revisional powers. In fact, in Sec. 12 (2) of the Madras General Sales Tax Act, the Deputy Commissioner, when exercising his powers, was to call for the record of the order or proceeding before passing any order which he thought fit, so that there was an expression used which could have been interpreted as limiting his powers to the examination of the record only without holding any further enquiry, and, yet, this Court held that the Deputy Commissioner could not be restricted to the record and was empowered to make an enquiry outside that record.In the provisions relating to revisions in the three Bombay Sales tax Acts, there are no such words indicating any limitation; and that would be an additional reason for holding that there can be no bar to an appropriate enquiry being held by the Deputy Commissioner when seeking to exercise his revisional powers suo motuOn this basis, advantage was sought to be taken of the circumstance that, under the Act of 1959, the revisional powers conferred by. S. 57 can be exercised within five years from the date of the order sought to be revised and, at the relevant time in 1963, could only be exercised within two years from the date of that order. The order sought to be revised was passed on 29th October, 1956, so that the notice to exercise revisional powers was being issued more than 6 years after that order had been passed. It appears to us that this submission is adequately met by the provisions contained in S. 77 of the Act of 1959It is true, as urged by Mr. Desai in the alternative, that, in fact, the proceedings should have been taken not under S. 31 of the Act of 1953, but under S. 22 of the Act of 1946. This is so, because, when the Act of 1946 was repealed by the Act of 1953, similar provisions were made in the Act of 1953 to continue in force the provisions of the Act of 1946 in respect of rights and liabilities which may have accrued or have been incurred under the Act of 1946. Section 48 (2) and S. 49 (1) clearly contained provisions indicating that, in respect of a liability to tax under the Act of 1946, the rights and liabilities of the assessee had to be determined in accordance with the provisions of the Act of 1946 and all legal proceedings or remedies in respect thereof had also to be taken under the same Act. Consequently, the Deputy Commissioner, in seeking to exercise revisional powers against the order of the Assistant Collector passed under the Act of 1946, brad to proceed under S. 22 of the Act of 1946. That, however, is not at all material, because the provisions of S. 22 of the Act of 1946 are quite similar to those of S. 31 of the Act of 1953. The mere incorrect mention of S. 31 of the Act of 1953 in the notice is immaterial. The Deputy Commissioner has the jurisdiction and power to revise the order under S. 22 of the Act of 1946 and, consequently, the proceedings initiated by him are not without jurisdictionSection 22 of the Act of 1946 and S. 31 of the Act of 1953 do not lay clown any limitation for exercise of the power of revision by a Deputy Commissioner suo motu, and we are not prepared to accept that any such limitation must be necessarily read in the two ActsThat case, however has no relevance at all, because in the Orissa Sales Tax Act, there was a proviso in general terms laying down that no order "assessing the amount of tax shall be passed after the lapse of 36 months from the expiry of the period", and it was held that this provision was, in substance, not a real proviso to the section in which it was placed, but was, in fact, a period of limitation prescribed for all orders of assessment made under any other provision of the Act. In the Bombay Sales Tax Acts of 1946 and 1953, there is no such general provision prescribing a period of limitation for making an assessment and, even though the effect of the order of the Dy. Commissioner passed in revision may be to briny about an assessment to tax of turnover which was set aside by the Assistant Collector in appeal, such an assessment does not come under any provision relating to limitationIn the present case, the Deputy Commissioner, when seeking to exercise his revisional powers, is clearly not encroaching upon the powers reserved to other authorities. Under the Act of 1946, the first assessment is made by the Sales-Tax Officer under S. 11. If information comes into his possession that any turnover in respect of sales or supplies of any goods chargeable to tax has escaped assessment in any year or has been under-assessed or assessed at a lower rate or any deductions have been wrongly made therefrom, proceedings can be taken afresh under S. 11-A. On the face of it, if a first assessment order is made under S. 11 and any turnove r escapes assessment, the appropriate provision, under which action is to be taken for assessing that turnover to tax, is S. 11-A. There is, however, no provision under which the power now sought to be exercised by the Deputy Commissioner in the case before us could have been exercised by any other authority. In this case, as we have indicated earlier, the first assessment of tax was made by the Sales Tax Officer, and the turnover now in question was assessed to tax by him. Having once assessed that turnover to tax, he could not initiate a fresh proceeding in respect of it under S. 11-A. The assessment made by him was set aside in appeal by the Assistant Collector and it is this order the Assistant Collector which is sought to be revised by the Deputys is, therefore, not a case where the powers are being exercised for the purpose of assessing or reassessing an escaped turnover. The case is one where the revisional powers are sought to be exercised to correct what appears to be an incorrect order passed in appeal by the Assistant Collector, and, for such a purpose, proceedings could not possibly have been taken under S. 11-A. In exercising his revisional powers, therefore, the Deputy Commissioner is not encroaching upon the jurisdiction of any other authority specially entrusted with taking such proceedingsIt appears that, in view of the fact that proceedings for re-assessment would have been taken under S. 11-A in that case and, instead, revisional powers were sought to be exercised, that Court held that the exercise of such revisional powers must be governed by the same limitation which applied to the exercise of power of re-assessment. In fact, the correct principle that should have been applied in that case is the principle mentioned by us earlier laid down in K. M. Cheria Abdulla and Co. 1965-16 STC 875   = (AIR 1965 SC 1585  ) (supra). The revision should have been held to be incompetent on the ground that the power was sought to be exercised for assessment of escaped turnover which had not been assessed at all at the initial stage of assessment under S. 11 and proceedings under S. 11-A could have been competently initiated for bringing that turnover to tax. Instead, the Court equated the proceeding in revision with the proceeding for re-assessment and applied the 4-year period of limitation which was prescribed only for re-assessment and not for exercise of revisional power. In our opinion, the ultimate decision in that case was perfectly correct, but we are unable to affirm the view that the revisional power is governed by any period of limitation laid down in S. 11-A for proceedings for re-assessment of escaped turnoverThis argument ignores the circumstance that, in that case, the last order, under which the income from interest had been exempted from tax, was an order made by the Income-tax Officer himself, though after the assessment proceedings had been remanded to him by the Appellate Assistant Commissioner. Since the income had escaped assessment under an order passed by the Income-tax Officer himself, he could competently take proceedings under Section 34. In the case before us, the turn over of the assessee now sought to be taxed in the revisional proceedings did not escape liability to tax under the orders of the Sales-tax Officer and, on the other hand, was actually taxed by him, which imposition of tax was set aside in appeal. Consequently, the Sales-tax Officer could not possibly take proceedings under S. 11-A in respect of that turnover.