Karnataka High Court
Mahaveer Drug House vs The State Of Karnataka And Anr. on 1 April, 1986
Equivalent citations: [1986]63STC262(KAR)
JUDGMENT K.S. Puttaswamy, J.
1. As the questions that arise for determination in these cases are either common or inter-connected, we propose to dispose of them by a common order.
2. M/s. Mahaveer Drug House, Bangalore, a partnership firm of partners, is primarily engaged in the purchase and sale of pharmaceuticals, drugs and other ancillary goods. The firm is a registered dealer on the file of the Commercial Tax Officer, XIV Circle, Bangalore ("CTO") under the Karnataka Sales Tax Act, 1957 ("the Act") and the Central Sales Tax Act, 1956 ("CST Act").
3. For the assessment periods from (i) 1st November, 1978 to 21st October, 1979 (1978-79); (ii) 22nd October, 1979 to 7th November, 1980 (1979-80); (iii) 11th November, 1980 to 27th October, 1981 (1980-81); (iv) 29th October, 1981 to 15th November, 1982 (1981-82) and (v) 16th November, 1982 to 4th November, 1983 (1982-83), the assessee filed its returns under the Act and CST Act before the CTO on different dates. On an examination of the returns filed, books of accounts and other documents produced by the petitioner, the CTO completed the assessments for the said years on different dates. With the assessments made by the CTO, the petitioner was not aggrieved and did not challenged then in appeals or revisions.
4. But, the Deputy Commissioner of Commercial Taxes (Administration) City Division-II, Bangalore-9 ("DC") to whom the CTO is subordinate, initiated suo motu revisional proceedings under section 21 of the KST Act in relation to all the said assessments and has issued show cause notices to the petitioner on different dates. A detailed reference to all the them except for the assessment periods 1979-80 and 1980-81 to appreciate the special contentions urged before us, is not very necessary.
5. For the assessment period 1979-80 (22nd October, 1979 to 7th November, 1980) the DC has issued a show cause notice to the petitioner on 5th March, 1984 (annexure A in W.P. No. 5112 of 1984) proposing to revise the assessment order made by the CTO on 26th March, 1981 (annexure B in W.P. No. 5112 of 1984) for the said period. But, before that the DC had earlier issued a show cause notice and had even made an order revision that very order.
6. For the assessment period 1980-81 (11th November, 1980 to 27th October, 1981) the DC issued a show cause notice No. SMR 116/83-84 dated 16th January, 1984 (annexure C in W.P. No. 5159 of 1984) proposing to revise the order of the CTO on the grounds stated therein. But, before making any order on the same, the DC on 27th February, 1984 (annexure A) has issued another show cause notice proposing to revise the order of the CTO on the grounds stated therein, however, stating that the same was in continuation of his earlier notice dated 16th January, 1984 (annexure C).
7. Sri B. P. Gandhi, learned Advocate, had appeared for the petitioner Sri S. Rajendra Babu, learned Government Advocate, had appeared for the respondents.
8. The petitioner has urged that section 21(2) of the Act was repugnant to section 22A of the Act and on that ground the same is liable to be struck down. But, Sri Gandhi, in out opinion, did not rightly pursue this manifestly untenable contention on which score itself the same is liable to be rejected,
9. In Md. Samiulla v. Commissioner of Commercial Taxes [1986] 61 STC 107 (FB); ILR (1985) Kar 481 (FB) a Full Bench of this Court of which one of us (Puttaswamy, J.) was a member has traced the history of legislation leading to the enactment of section 21 and 22A of the Act (vide paras 14 of 16). The original section 21 of the Act that conferred power of revision on the Commissioner and the Deputy Commissioner was substituted by the Karnataka Sales Tax (Amendment) Act, 1963 (Karnataka Act No. 9 of 1964) and were enacted as sections 21 and 22A (vide sections 16 and 18 of that Act). A cursory or careful reading of sections 21 and 22A incorporated by Karnataka Act No. 9 of 1964 shows that there is no repugnancy whatsoever between them. We see no merit in this contention of the petitioner and we reject the same.
10. Sri Gandhi had urged that the DC as Deputy Commissioner (Administration) who was not the appellate authority under the Act, was not competent to revise the orders of the CTO.
11. Sri Rajendra Babu had urged that the DC (Administration) was competent to exercise revisional jurisdiction under section 21(2) of the Act.
12. Section 21(2) of the Act confers power of revision on the DC of the area over the proceedings and orders of the ACCT and CTO. Sri Gandhi did not dispute that the officer who had initiated suo motu revisional proceedings was the DC appointed by Government. The fact that there is one DC designated as DC (Administration) and another DC as DC (Appeals) was only for purposes of smooth and efficient discharge of duties. The designation and internal allocation of work among the several DCs of the area for efficient and smooth discharge of the duties was hardly relevant to decide the jurisdiction and competence of the DC. Under section 21(2) of the Act the DC (Administration) and DC (Appeals) occupy one and the same potions. The prohibition contained in section 21(2) not to exercise sup motu revisional proceedings when an assessee under the Act had already filed an appeal does not touch on the powers of either of the DCs to exercise suo motu power of revision under section 21(2) of the Act. For these reasons, we see no merit in this contention of Sri Gandhi and we reject the same.
13. Sri Gandhi had urged that persons similarly situated were subjected to a hostile, discriminatory and arbitrary treatment in that those picked and dealt under section 21(2) of the Act were subjected to two attacks by the DC and the Commissioner and those picked up by the Commissioner were subjected to only one attack with necessary extension of limitation and harassment and the same was plainly violative of article 14 of the Constitution as ruled by the Supreme Court in Suraj Mall Mohta and Co. v. Visvnatha Sastri .
14. Sri Rajendra Babu had urged that the challenge was concluded by the Full Bench ruling of this Court in Md. Samiulla's case [1986] 61 STC 107 (FB); ILR (1985) Kar 481 and even otherwise there was no merit in the same.
15. In Md. Samiulla's case [1986] 61 STC 107 (FB); ILR (1985) Kar 481 (FB) this Court examining a similar challenge to section 22A of the Act introduced by Act No. 9 of 1964 conferring power of revision on the Commissioner noticing the very ruling relied on by Sri Gandhi had upheld its validity. We are of the view that every one of the reasons on which this Court in Md. Samiulla's case [1986] 61 STC 107 (FB); ILR (1985) Kar 481 (FB) had upheld section 22A of the Act, holds good for upholding the validity of section 21(2) of the Act also. But, still Sri Gandhi who had argued Md. Samiulla's case [1986] 61 STC 107 (FB); ILR (1985) Kar 481 (FB) and filed, did not give up the challenge and again argued the same at great length. We, therefore, out of defence to him, propose to examine the same independently.
16. In md. Samiulla's case [1986] 61 STC 107 (FB); ILR (1985) Kar 481 (FB) this Court had noticed as to how the present section 21 was enacted.
17. The hierarchy of officers under the Act are Assistant Commercial Tax Officer (ACTO), Commercial Tax Officer (CTO), Assistant Commissioner of Commercial Taxes (ACCT), Deputy Commissioner of Commercial Taxes (DC), Joint Commissioner of Commercial Taxes (Joint Commissioner) and Commissioner of Commercial Taxes (Commissioner). The ACTO, CTO, ACCT and the DC exercise their jurisdiction over the limited territorial areas authorised by Government.
18. Section 21(1) of the confers power of revision on the ACCT over the orders and proceedings of the ACTOs of the area. Section 21(2) of the Act confers power of revision on the DC over the proceedings or orders of the CTOs and ACTOs of his jurisdictional area.
19. The object of enacting section 21 was that the superior officers like the ACCTs and DCs should exercise suo motu powers of revision over their respective subordinates within their respective territorial areas over which they function. Section 22A confers power of revision over the entries State on the Commissioner who is the head of the department. Both these powers are conferred to safeguard the interests of public revenue. When we have regard to the magnitude to work involved in the even growing department of sales tax which is one of the main and elastic sources of revenue, it is somewhat odd to expect the Commissioner to examine all assessment orders made by all the original and appellate authorities that are subordinate to him under the Act. If we have regard to all these aspects, as we are bound to, then there is hardly any ground to hold that section 21 of the Act is violative of article 14 of he Constitution.
20. We are of the view that section 21 of the Act does not subject anybody to a hostile, discriminatory and arbitrary treatment at all. We are of the view that the grievance of the petitioner is more imaginary than real.
21. Before making his order the DC is enjoined to issue a show cause notice and afford an opportunity of hearing. An adverse order made by the DC is appealable under section 22 both on questions of fact and law to an independant Tribunal called the "Karnataka Appellate Tribunal". An adverse order made by the Tribunal on such appeal is subject to a revision on questions of law before this Court under section 23 of the Act. With all these safeguards, it is even inconceivable to hold that section 21 of the Act is violative of article 14 of the Constitution.
22. In Md. Samiulla's case [1986] 61 STC 107 (FB); ILR (1985) Kar 481 (FB) this Court had distinguished the ratio in Suraj Mall Mohta's case and the same holds good to sustain section 21 of the Act also.
23. As early as in 1868, Thomas M. Cooley in his classic treatise on the "Constitutional Limitations" on the principle of equality in taxation, reprinted and published by Da Capo Press in 1972 in Chapter XIV "Power of Taxation" has expressed thus :
"Absolute equality and strict justice are unattainable in tax proceedings."
What was said by Cooley in 1868 is more true and relevant today in the complex tax laws. On the application of this principle there is hardly any ground to condemn section 21 of the Act as violative of article 14 of the Constitution.
24. On the foregoing discussion, we hold that the challenge of the petitioner to section 21 of the Act based on article 14 of the Constitution is without any merit and we reject the same.
25. In the concluding paras of the notice, the DC had expressed thus :
"I therefore under the powers vested in me under sub-section (2) of section 21 of the Act, hereby propose to set aside the assessment order dated 20-3-1980 and to remand the case for re-examination in the interest of Government revenue ..."
On the terms stated herein the DC proposes to set aside the assessment orders and remit the cases to the CTO to make fresh assessments.
26. Sri Gandhi had urged that the course proposed by the DC was not in conformity with section 21(2) of the Act and illegal. In support of his contention Sri Gandhi had strongly relied on the ruling of the Supreme Court in State of Kerala v. K. M. Cheria Abdulla and Company and a Division Bench ruling of this Court in Patikonda Balasubba (deceased) v. Commissioner of Income-tax [1967] 65 ITR 252.
27. Sri Rajendra Babu had urged that the notices should be construed as the DC proposing to revise the orders under section 21(2) of the Act and that it was premature to adjudicate the same.
28. We have to doubt that the language employed by the DC is not happily worded and had given room to an unnecessary complaint by the petitioner. We must really construe all the notices as the DC proposing to revise the orders in conformity with section 21(2) of the Act and in no other manner. When so construed, we must read the sentence extracted earlier as hereunder :
"I therefore under the powers vested in me under sub-section (2) of section 21 of the Act, hereby propose to revise the assessment order dated 20-3-1980 in the interest of Government revenue."
This is in conformity with the Act and that is what the DC had really proposed to do. We need hardly say that the DC should examine and decide the proceedings from this standpoint and the principles enunciated by this Court in Pathikonda Balasubba Setty's case [1967] 65 ITR 252.
29. With the disposal of this general grievance, we propose to deal with the two specific grievance in Writ Petitions Nos. 5112 and 5159 of 1984 that are peculiar to them only.
30. For the assessment year 1979-80 or for the period from 22nd October, 1979 to 7th November, 1980, the CTO had made an order on 26th March, 1981. In notice No. SMR 79/82-83 dated 27th November, 1982, the very DC proposed to revise the very order of the CTO on certain grounds set out in the said notice and ultimately made an order also on that notice on 30th June, 1983, revising the same as set out in the order made by him on that day with which also the petitioner is not aggrieved. But, still the DC issued another show cause notice on 5th March, 1984 (annexure A in Writ Petition No. 5112 of 1984) to over again revise the order of the CTO, of course on different grounds.
31. On the above facts found, which are not also in dispute, Sri Gandhi has contended that the DC who had become functus Officio cannot exercise the power under section 21(2) of the Act.
32. Sri Rajendra Baby sought to support to second show cause notice issued by the DC.
33. Section 21 of the Act which confers suo motu powers of revision on the DC does not empower him to revise the orders of the CTO now and then or on more than on occasion as if it is a child's play. The power of revision cannot be exercised on more than one occasion and successively. If we were to countenance such a course, the assessees will be exposed to endless harassment. We are clearly of the view that the DC on making his order on 30th June, 1983, for the year 1979-80 had become functus officio. We have no hesitation in holding that the present show cause notice issued by the DC for the year 1979-80 (from 22nd October, 1979 to 7th November, 1980) is wholly without jurisdiction and is liable to be quashed.
34. For the assessment period 1980-81 from 11th November, 1980 to 27th October, 1981, the DC issued a show cause notice on 16 January, 1984 (annexure C) and gave time to the petitioner to file its objections which it did not file. On 27th February, 1984, the DC has issued another notice however stating that it was in continuance of his earlier show cause notice.
35. In the original proceedings pertaining to that year produced by the learned Government Advocate (File No. SMR 116/83-84) we do not find any notes or orders for issuing the second notice.
36. On these facts disclosed Sri Gandhi has urged that notwithstanding the fact that the DC had not made a specific order, affirming or rejecting the first notice, we should construe that the DC had made his order on the same and hold as in Writ Petition No. 5112 of 1984.
37. We have carefully examined the original file of the DC produced before us. What had really happened was that the DC had proposed to issue the second notice as the first notice issued by him was somewhat very general and did not contain specific grounds on which he proposed to revise the same. We wish that the DC had made that clear in the order sheet maintained by him and had avoided an unnecessary controversy over the same. But, that infirmity, if any, cannot be a ground to hold that he had made an order on the first show cause notice. We are of the view that on any principle we cannot hold so.
38. When the DC had not made an order on the first show cause notice, his power to revise is not exhausted. So long as the DC had not made his order, it was open to him to issue a further notice setting out further grounds which according to him justified his interference under section 21(2) of the Act. For all these reasons, we find no merit in this contention Sri Gandhi and we reject the same.
39. Sri Gandhi had urged a large number of grounds on merits as justifying the invalidation of the show cause notices issued by the DC.
40. We are of the view that on the very terms of the show cause notices as also in law, it is open to the petitioner to urge all such grounds as are available to it before the DC who is bound to examine them and decide one way or the other. After the DC decides them, the correctness of which can also be challenged in appeals and revisions, we do not consider it proper to examine the merits of the contentions urged before us. We, therefore, refrain to examine them.
41. While issuing rule nisi this Court had stayed further proceedings before the DC. We, therefor, consider it proper to grant one month's time from this day to the petitioner to file its objections to the show cause notice except in W.P. No. 5112 of 1984.
42. In the light of out above discussion, we make the following orders and directions :
(i) We dismiss these writ petitions in so far as they challenge section 21(2) of the KST Act;
(ii) We quash the show cause notice No. SMR 183/83-84 dated 5th March, 1984 (annexure A in W.P. No. 5112 of 1984) for the reasons set out in paras 28 to 33 of our order;
(iii) We dismiss all other writ petitions without examining the validity of the notices issued by the DC. But, we however grant one month's time from this day to the petitioner to file its objections before the DC and if they are so filed within that time, then the DC shall dispose of them in accordance with law and the observations made in this order.
43. Writ petitions are disposed of in the above terms. But, in the circumstances of the cases, we direct the parties to bear their own costs.
44. Let this order be communicated to the Deputy Commissioner of Commercial Taxes (Administration), respondent 2, within 10 days from this day.
45. Writ petitions dismissed.