Case: State Of Madras Vs. Madurai Mills Co., Ltd

2. The Madurai Mills Co., Ltd. (herein after called the respondent) is a dealer in yarn, purchasing raw material like cotton staple-fibre, etc., manufacturing them into yarn and selling the yarn. In the assessment year 1950-51, the respondent showed a return of Rs. 15,27,61,883-8-4 before the Deputy Commerical Tax Officer, Madurai who after scrutiny of the account books determined the net turnover at Rs. 15,44,09,109-3-11. The respondent preferred an appeal before the Commercial Tax Officer, Madurai South. It was contended on behalf of the respondent that a sum of Rs. 1,44,294-14-4 was wrongly included by the first assessing authority in the purchase value of cotton purchased by it for production of yarn as that amount only represented the commission paid by it to Comorin Investment Trading Company Limited for the purchase. It was also contended that another sum of Rupees 81,546-0-l which represented sale proceeds realised by selling empty drums etc. was not realisation in the course of its business. The Commercial Tax Officer upheld the first contention of the respondent and excluded the sum of Rs. 1,44,294-14-4 from the total turnover on the ground that the amount was commission paid by the respondent for the purchase of cotton, but rejected their second contention with regard to the sum of Rs. 81,546-0-1. The Deputy Commercial Tax Officer thereafter issued revised assessment. The respondent presented a revision petition before the Deputy Commissioner of Commercial Taxes and the only objection which the respondent raised was that it should not have been assessed to tax on amounts collected by it by way of tax amounting to Rs. 6,57,971-4-9. The respondent did not raise any other objection regarding the order of assessment of the Deputy Commercial Tax Officer or the Commercial Tax Officer. By his order, dated the 21st August, 1954, the Deputy Commissioner of Commercial Taxes dismissed the revision petition holding that the respondent was not entitled to raise the contention for the first time and that even otherwise the Madras General Sales Tax (Definition of Turnover and Validation of Assessments) Act, 1954, permitted the inclusion of tax in the taxable turnover. On the 4th August, 1958, the Board of Revenue issued a notice to the respondent stating that it proposed to revise the assessment of the Deputy Commercial Tax Officer, Madurai, by including in the turnover the sum Rs. 7,74,62,706-l-6 as that amount was wrongly excluded by the assessing authority. The respondent objected to the proposed revision on the ground that the proceeding was barred by limitation under S. 12 of the Madras General Sales Tax Act. The respondent also submitted that there was no wrong exclusion of the sum of Rs. 7,74,62,706-1-6 by the Deputy Commercial Tax Officer in making the assessment. By its order, dated the 25th August, 1958, the Board of Revenue overruled both these contentions of the respondent and fixed the net taxable turnover at Rupees 23,17,15,948-15-2. The respondent preferred an appeal to the Madras High Court against the order of the Board of Revenue dated the 25th August, 1958. The High Court allowed the appeal holding that the Board of Revenue could not invoke its revisional jurisdiction after the expiry of the period of limitation under S. 12(4)(b) of the Madras General Sales Tax Act. The order of the Board of Revenue, dated the 25th August, 1958 was accordingly set aside.

Court's reasoning:
In our opinion, the application of the doctrine depends on the nature of the appellate or revisional order in each case and the scope of the statutory provisions conferring the appellate or revisional jurisdiction. For example in Amritlal Bhogilal and Cos case, 1958-34 ITR 130 : (AIR 1958 SC 868 ) (supra) it was observed by this Court that the order of registration made by the Income-tax Officer did not merge in the appellate order of the Appellate Commissioner, because the order of registration was not the subject-matter of appeal before the appellate authority. It should be noticed that the order of assessment made by the Income-tax Officer in that case was a composite order viz., an order granting registration of the firm and making an assessment on the basis of the registration. The appeal was taken by the assessee to the Appellate Commissioner against the composite order of the Income-tax Officer. It was held by the High Court that the order of the Income-tax Officer granting registration to the respondent must be deemed to be merged in the appellate order and that the revisional power of the Commissioner of Income-tax cannot, therefore, be exercised in respect of it. The view taken by the High Court was overruled by this Court for the reasons that the order of the Income-tax Officer granting registration cannot be deemed to have merged in the order of the Appellate Commissioner in an appeal taken against the composite order of assessment. Similarly, in State of Uttar Pradesh v. Mohammad Nooh, 1958 SCR 595 : (AIR 1958 SC 86 ) it was held by this Court that the principle of merger cannot apply in the case of an order of dismissal of a public servant which was made by the departmental Tribunal on the 20th April, 1948 and against which the appeal was dismissed by the Appellate Authority on the 7th May, 1949, and the revisional application was rejected on the 22nd April, 1950.In the circumstances of the present case it cannot be said that there was a merger of the order of assessment made by the Deputy Commercial Tax Officer dated the 28th November, 1952 with the order of the Deputy Commissioner of Commercial Taxes dated the 26th August, 1954 because the question of exemption on the value of yarn purchased from outside the State of Madras was not the subject-matter of revisions before the Deputy Commissioner of Commercial Taxes. The only point that was urged before the Deputy commissioner was that the sum of Rs. 6,57,971-4-9 collected by the respondent by way of tax should not be included in the taxable turnover. This was the only point raised before the Deputy Commissioner and was rejected by him in the revision proceedings. On the contrary, the question before the Board of Revenue was whether the Deputy Commercial Tax Officer, Madurai was right in excluding from the net taxable turnover of the respondent the sum of Rs. 7,74,62,706-1-6 which was the value of cotton purchased by the respondent from outside the State of Madras. We are, therefore, of opinion that the doctrine of merger cannot be invoked in the circumstances of the present caseWe are unable to accept this argument as correct. The onlyr of the revision proceedings before the Board of Revenue was the revised assessment order of the Deputy Commercial Tax Officer, Madurai dated the 28th November, 1952. The objection taken by the Board of Revenue was with regard to the question of exemption allowed on the value of the cotton purchased from outside the State of Madras. The exemption was allowed by the Deputy Commercial Tax Officer in his order of assessment. The question was not raised before the Deputy Commissioner of Commercial Taxes and the only point raised before him was with regard to the inclusion of the amount of tax to the extent of Rs.9 in the taxable turnover.It is manifest that ther of the revision proceedings before the Board of Revenue was the revised assessment order of the Deputy Commercial Tax Officer, Madurai dated the 28th November, 1952. It follows that the order of the Board of Revenue was made beyond the limit of four years prescribed by S. 12 (4) (b) of the Act and it is, therefore, invalidthe doctrine of merger is not a doctrine of rigid and universal application and it cannot be said that wherever there are two orders, one by the inferior Tribunal and the other by a superior Tribunal, passed in an appeal or revision, there is a fusion or merger of two orders irrespective of ther of the appellate or revisional order and the scope of the appeal or revision contemplated by the particular statute.