Case: Tax and Sales Tax, South Zone, Quilon Vs. Deputy Commissioner of Agricultural Income-Aluminium Industries Limited Kanan Devan Hill Produce Company Limited  Intervener

Aluminium Industries Ltd. is the respondent in both the cases. In the first case, the respondent was finally assessed for the year 1960-61 under the Central Sales Tax Act, 1956, by the Sales officer by his order dated October 18, 1962. For the assessment year 1961-62 the respondent was assessed under the same Act by the Sales Tax Officer on October 29, 1962. In both these assessments, the respondent made a claim for deduction of the trade discount paid to its customers from its gross turnover in determining the taxable turnover. This claim was allowed by the Sales Tax Officer. The Deputy Commissioner of Agricultural Income-tax and Sales Tax took the view that the claim was not admissible under law. Accordingly, he took action under section 15(1) of the General Sales Tax Act, 1125, and revised the orders of the Sales Tax Officer by disallowing the above claim. The assessee took the matter in appeal before the Appellate Tribunal which held that the irregularity sought to be rectified was one relating to escaped turnover and that the order passed by the Deputy Commissioner on June 23, 1966, was clearly beyond four years from the assessment year 1960-61 and was barred by limitation. The Appellate Tribunal did not decide the other question, namely, whether the trade discount was an allowable deduction and therefore no turnover had escaped assessment. The Deputy Commissioner took the matter in revision to the High Court and argued that the Appellate Tribunal was not justified in holding that the irregularity sought to be rectified was assessment of escaped turnover and as such the same was barred by limitation. The High Court did not decide the question as to whether the order impugned was barred by limitation. On the other hand, the High Court examined the question raised by the assessee on the merits as to whether the "trade discount" was a permissible deduction in assessments under the Central Sales Tax Act. The High Court held that in view of section 9(3) of the Central Sales Tax Act read with rule 7(1)(a) of the General Sales Tax Rules, 1950, "all deductions allowed under the State law to be made from the gross turnover in determining the net turnover shall be liable to deduction in determining the taxable turnover under the Central Sales Tax Act, 1956." The High Court accordingly dismissed the tax revision cases.It is necessary at this stage to reproduce the relevant statutory provisions and rules.

Court's reasoning:
In dismissing the tax revision cases the High Court followed the decision of this court in State of Mysore v. Yaddalam Lakshminarasimhiah Setty & Sons ([1965] 16 S.T.C.legal position has, however, been changed as a result of the issue of the Central Sales Tax (Amendment) Ordinance, 1969 (No. 4 of 1969) which was promulgated on June, 9,two clauses have been made expressly retrospective and the result, therefore, is that the law as stated in the majority decision of this court in Lakshminarasimhiahs case ([1965] 16 S.T.C. 231) has beenbehalf of the interveners, Mr. Narasaraju raised a constitutional objection that the Ordinance was in the first place violative of article 19 as it was made retrospective and therefore constituted an unreasonable restriction and secondly that it is violative of article 14 of the Constitution.It is not open to the parties in this case to challenge the constitutional validity of the Ordinance in view of the decision of this court in K. S. Venkataraman & Co. v. State of Madras ([1966] 2 S.C.R. 229; 17 S.T.C. 418). It was held by the majority of the Judges in that case that the Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal are all creatures of the Income-tax Act and whether the provisions of the Act are good or bad is not their concern. As the Appellate Tribunal is a creature of the statute it can only decide the dispute between the assessee and the Commissioner in terms of the provisions of the Act and the question of ultra vires is foreign to the scope of its jurisdiction. As no such question can be raised or can arise on the Tribunals order, the High Court cannot possibly give any decision on the question of ultra vires. Similarly an appeal to this court under section 66A(2) of the Act does not enlarge the scope of the jurisdiction for this court can only do what the High Court can. Mr. Narasaraju conceded that in view of this decision it is not open to him to challenge the constitutional validity of the Ordinance in the presentis not open to the parties in this case to challenge the constitutional validity of the Ordinance in view of the decision of this court in K. S. Venkataraman & Co. v. State of Madras ([1966] 2 S.C.R. 229; 17 S.T.C. 418). It was held by the majority of the Judges in that case that theOfficer, the Appellate Assistant Commissioner and the Appellate Tribunal are all creatures of theAct and whether the provisions of the Act are good or bad is not their concern. As the Appellate Tribunal is a creature of the statute it can only decide the dispute between the assessee and the Commissioner in terms of the provisions of the Act and the question of ultra vires is foreign to the scope of its jurisdiction. As no such question can be raised or can arise on the Tribunals order, the High Court cannot possibly give any decision on the question of ultra vires. Similarly an appeal to this court under section 66A(2) of the Act does not enlarge the scope of the jurisdiction for this court can only do what the High Court can. Mr. Narasaraju conceded that in view of this decision it is not open to him to challenge the constitutional validity of the Ordinance in the presentappeals.For the reasons already expressed we hold that these appeals should be allowed and the judgment dated July 23, 1968, of the Kerala High Court in Tax Revision Cases Nos. 10 and 11 of 1967 should be set aside. We also set aside the orders passed by the Appellate Tribunal and the Deputy Commissioner of Sales Tax and the Sales Tax Officer and direct that the matter should go back to the Sales Tax Officer forin accordance with law.