State Taxation Tribunal - Tamil Nadu
Salt Sales Corporation And Anr. vs Deputy Commercial Tax Officer ... on 25 January, 2001
Equivalent citations: [2004]134STC529(TRIBUNAL)
JUDGMENT
Kanakaraj, J. (Chairman).
1. Original Petition Nos. 1334 to 1336 of 2000 have been filed by one Salt Sales Corporation seeking to quash notices issued by the first respondent seeking to revise orders of assessment for the years 1996-97 and 1997-98 which were completed on July 17, 1997 and August 31, 1998 respectively. Similarly O.P. No. 1336 of 2000 is to quash the notice to revise assessment for 1998-99, Similarly O.P: Nos. 1451 and 1452 of 2000 have been filed by one Indra Kumar Trading Corporation challenging notices dated October 5, 2000 seeking to revise assessments for the years 1996-97 and 1997-98. In all the cases the notices state that the goods maka poha in the case of Salt Sales Corporation and the goods maka poha and pappad in the case of Indra Kumar Trading Corporation are liable to be taxed at 12 per cent till July 16, 1996 and at 16 per cent from July 17, 1996 on the basis that the goods were branded food products. The notices also refer to a clarification issued by the second respondent under Section 28-A of the Tamil Nadu General Sales Tax Act 1959, for revising the earlier orders of assessment. The grounds of challenge in the original petitions are as follows:
(1) The notices are based only on the clarification issued by the second respondent under Section 28-A of the TNGST Act, 1959.
(2) The clarification was issued under Section 28-A which according to the petitioners is unconstitutional and ultra vires the funda-mental rights enshrined under the Constitution of India.
(3) In particular the provision is ultra vires because of Section 28-A(3) which makes the clarification binding on all officers under the second respondent.
(4) There is no provision for hearing the affected assessees before issuing a clarification under Section 28-A of the TNGST Act, 1959.
2. Mr. V. Ramachandran, learned Senior Counsel appearing for the petitioner, very fairly says that the O.Ps. were entertained only on the question of validity of Section 28-A of the TNGST Act, and therefore confines his argument to that issue. He proceeds to point out the difference between sub-sections (1) and (2) of Section 28-A and points out that in the case of petitioners the clarification was under Sub-section (2) because though the petitioners filed an application seeking clarification, they did not pay any fee as prescribed thereunder. Then it is argued that Sub-section (3) only is the cause for all grievance. He says that both the assessing authority and the first appellate authority (AAC) are subordinates to the Commissioner and therefore the quasi-judicial functions of the authorities are sought to be interfered with and thus the assessees are prevented from getting a free and fair verdict from the assessing authority or the AAC. As a corollary, it is argued that a decision of the Commissioner taken without hearing the parties is thrust down the throat of the assessees. The exercise of quasi-judicial power by the assessing officer and the Appellate Assistant Commissioner are thus reduced to an empty formality. He then cites Section 119 of the Income-tax Act and the decision reported in [1999] 115 STC 99 (AP) [Sri Rajarajeswari Parboiled Rice Industry v. Commercial Tax Officer] and [1999] 237 ITR 889 (SO [UCO Bank v. Commissioner of Income-tax].
3. Learned Senior Standing Counsel Mr. M. Venkateswaran, for the revenue has cited before us the judgment of the Madras High Court in W.P. No. 10709 of 1999 dated June 24, 1999, [2000] 117 STC 218 (TNTST) (Shree Sathyanarayana Co. v. Commercial Tax Officer), [1998] 111 STC 254 (SC) (Collector of Central Excise, Patna v. Usha Martin Industries), [1997] 107 STC 522 (Kar) (Sree Jagadish Colour Company v. Commissioner of Commercial Taxes) and the judgment in O.P. No. 33 of 1999 dated January 12, 1999 to buttress his argument that no prejudice is caused to the parties and they can have their remedies before the statutory forum.
4. We have first analysed the Section 28-A of the TNGST Act, 1959 and its sub-sections. The objects and reasons for which the Section was introduced by Tamil Nadu Act No. 60 of 1997, with effect from November 6, 1997 do not give any clue to find out the intention behind the Legislature. No reasons at all are given for introducing Section 28-A.
5. Having noticed that there was no particular object in introducing Section 28-A, we will now scan the actual provision of law. Sub-sections (1) and (2) are clearly intended for achieving two different objects. Under Sub-section (1) the dealer is given an opportunity to ascertain the correct position on any point concerning the rate of tax, so that he can collect accordingly from his customers. It relates only to the goods mentioned in the application. We do not agree with the learned counsel for the petitioner that only if the required fees are paid, it will be a clarification under Sub-section (1). The emphasis is on the question whether the dealer moves for clarification. The significance is, when the dealer moves, he places all the materials and he cannot have any grievance of violation of the principles of natural justice. When we come to Sub-section (2) the clarification is given suo motu for the purpose of uniformity in the work of assessment and collection of tax and the Commissioner can clarify any point concerning the rate of tax or the procedure relating to assessment and collection of tax. There is no scope for giving opportunity to any dealer or class of dealers. Sub-section (3) says that all persons working under the Commissioner shall observe and follow the clarification given under both sub-sections (1) and (2). The argument of Mr. V. Ramachandran can, if at all, apply only to clarifications given under Sub-section (2). Before looking into the authorities cited, we are satisfied on the basis of Section 28-A that those who seek clarification under Sub-section (1) are bound by the same unless there is a binding authority to the contrary by a High Court, Special Tribunal or Supreme Court. This leads automatically to the question regarding the scope of an assessment proceedings before the assessing officer and an appeal before the Appellate Assistant Commissioner. Undoubtedly such proceedings are quasi-judicial. There is a well accepted principle that a quasi-judicial proceeding is between two parties and the lis between them and no third party interference is permissible. No quasi-judicial authority can take advice from a third party or even a superior or controlling authority. That would mean the end of the "rule of law". One can see with advantage the following decisions. In V.V. Shunmugha Nadar and Brothers v. Joint Chief Controller of Imports and Exports, Madras (1963) 76 LW 76, a division Bench of the Madras High Court says :
"There can be little doubt that the decision of a judicial or quasi-judicial authority given under the direction of, or after consultation with, some other person even if that person be a superior authority, will be invalid as being in violation of the rules of natural justice."
6. In "Administrative Law" by Wade and Forsyth, 7th Edition at pages 358 and 359 a separate paragraph is devoted to "surrender, abdication, dictation" in relation to power given to an authority under the statute. In (1995) 5 SCC 302 (Anirudhsinhji Karansinhji Jadeja v. State of Gujarat), the Supreme Court observes :
"The present was thus a clear case of exercise of power on the basis of external dictation. That the dictation came on the prayer of the DSP will not make any difference to the principle. The DSP did not exercise the jurisdiction vested in him by the statute and did not grant approval to the recording of information under TADA in exercise of his discretion."
7. Therefore, even in the case of a clarification under Sub-section (1) the parties can canvass the clarification on the basis of interpretation, precedence, materials or any other development. It is for the quasi-judicial authority to render his own independent opinion on the basis of arguments and materials placed before him. Then only it will be adjudication by the quasi-judicial authority. Therefore, Sub-section (3) can only relate to administrative or all other matters between the Commissioner and the hierarchy of officers under him and not to a quasi-judicial assessment proceeding. A fortiorari the above principle applies to a clarification under Sub-section (2). Equally the principles apply to quasi-judicial appeal proceedings before the Appellate Assistant Commissioner.
8. Further the very words used in Sub-section (3) to Section 28-A we can come to the same conclusion. The words are, "clarification" as distinct from an "adjudication". Now if we turn to the authorities cited we find that they are in line with the views expressed by us. We will first deal with the cases cited by Mr. V. Ramachandran.
9. The Andhra Pradesh High Court, in Sri Rajarajeswari Parboiled Rice Industry v. Commercial Tax Officer, Kodad, Nalgonda District [1999] 115 STC 99 was dealing with a circular issued under Section 42-A of the Andhra Pradesh General Sales Tax Act, 1957. The scope of Section 42-A is as follows :
".....the Commissioner is empowered to issue instructions and directions not inconsistent with the provisions of the Act to his subordinate officers for the proper administration of the Act and such officers and other persons connected with the enforcement of the Act, shall comply with such orders, instructions and directions. The proviso says that no such orders, instructions or directions shall be deemed to interfere with the discretion of an appellate authority."
Says the Andhra Pradesh High Court.
"It cannot be gainsaid that in the face of the circular issued by the Commissioner, the assessing and appellate authorities under the Act who are subordinates to the Commissioner cannot take an independent view on interpretation of the relevant provisions. It is true that the Act enjoins that the Commissioner's circular is not binding on the appellate authority. But, in effect and in substance, the appellate authority, who is administratively subordinate to the Commissioner and whose orders are also amenable to revision by the Commissioner will be inhibited to take a different view."
10. Next we come to Section 1-19 of the Income-tax Act and [1999] 237 ITR 889 (Tamil Nadu Industrial Investment Corporation Ltd. v. Commissioner of Income-tax). Section 119 of Income-tax Act reads as follows :
"Section 119(1) of the Income-tax Act, 1961, provides that, 'the Central Board of Direct Taxes may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board. Provided that no such orders, instructions or directions shall be issued (a) so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner ; or (b) so as to interfere with the discretion of the Appellate Assistant Commissioner in the exercise of his appellate functions."
The Supreme Court has understood Section 119 thus :
"The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases which can be properly categorised as belonging to a class, can thus be given the benefit of relaxation of law by issuing circulars binding on the taxing authorities."
11. The above decisions are based on the very words of the provisions enabling issue of circulars. In fact Section 119(1) itself contains the safeguards to which we have made a reference on the basis of the quasi-judicial power.
12. Mr. Venkateswaran, learned Senior Standing Counsel for revenue refers to the following pronouncements : [1997] 107 STC 522 (Kar) (Sree Jagadish Colour Company v. Commissioner of Commercial Taxes, Karnataka) deals with a similar provision, namely, Section 3-A of the Karnataka Sales Tax Act, 1957. The Karnataka High Court quoted the following passage in Kerala Financial Corporation v. Commissioner of Income-tax [1994] 210 ITR 129 (SC) ; AIR 1994 SC 2416 in relation to Section 119 of the Income-tax Act.
"The fact that the circular to which Shri Salve has referred is one which had been issued in exercise of powers conferred by Section 119 of the Act has no significance in so far as the point under consideration, namely, whether the circular can override or detract from the provisions of the Act, is concerned, inasmuch as what Section 119 has empowered is to issue orders, instructions or directions for the 'proper administration' of the Act or for such other purposes specified in Sub-section (2) of the section. Such an order, instruction or direction cannot override the provisions of the Act ; that would be destructive of all the known principles of law as the same would really amount to giving power to a delegated authority to even amend the provision of law enacted by Parliament. Such a contention cannot seriously be even raised."
13. [1998] 111 STC 254 (SC) [Collector of Central Excise, Patna v. Usha Martin Industries] is slightly on a different point as to whether the department will be bound by the circulars or clarifications given by the Commissioner or Central Board of Excise and Customs. Interpreting Section 28-A of the TNGST Act, this Special Tribunal in O.P. No. 33 of 1999 dated January 12, 1999 (AS. Balu v. Special Commissioner and Commissioner of Commercial Taxes [2004] 134 STC 524) says :
"We may also point out that Sub-section (3) of Section 28-A which says all persons working under the control of the Commissioner of Commercial Taxes, shall observe and follow the clarifications issued under sub-sections (1) and (2) cannot override the decisions of the Madras High Court or the Supreme Court of India if the point at issue is identical. It is always open to the assessee to bring to the notice of the assessing authority or the Appellate Assistant Commissioner the decision of the High Court or the Supreme Court on identical issues which run against clarifications of the Commissioner."
14. Similarly dealing with Section 28-A of the TNGST Act itself the Madras High Court observes in W.P. No. 10709 of 1999 dated June 24, 1999 (Amul Polycure Industries Ltd. v. Tamil Nadu Taxation Special Tribunal [2004] 134 STC 526) "Learned counsel for the petitioner very strenuously argues that once the clarification is issued by the Special Commissioner, it would be a point of no return for the assessee. We do not agree. The said clarification can be assailed in the appeal as well as before the assessing officer on the basis of proper evidence, if the assessee so feels. Learned counsel further expresses an apprehension that even if the appellate authority does not agree with the clarification and agrees with the contention raised by the assessee, the assessing authority would be bound by the clarification issued because of the provisions of Section 28-A(3) of the Act.
We do not read any such compulsion and binding nature in that provision. In fact, the assessing authority would certainly be bound only by the appellate order........"
They also emphasised that, "..........the clarification issued by the Special Commissioner under section 28-A of the Act is not, we repeat, not an adjudication. It is merely a clarification given by the Special Commissioner to the concerned dealer who may need the same, for collecting taxes."
15. The last mentioned judgment on Section 28-A of TNGST Act seals the issue. We therefore, hold on the issue of validity of Section 28-A that no prejudice will be caused to parties and none of their rights is transgressed.
16. We therefore, dispose of the question of validity of Section 28-A of the TNGST Act by giving the following findings and directions :
1. Section 28-A of the TNGST Act is perfectly valid and intra vires the Constitution of India.
2. Any clarification given by the Commissioner under Sub-section (1) of Section 28-A will bind the parties who sought for clarification. If it is a society or association it will bind all its members. However it will be open to them to canvass such a clarification in assessment proceedings before the assessing officer and appellate proceedings before the Appellate Assistant Commissioner on materials and precedence binding on the assessing officer and Appellate Assistant Commissioner. The ultimate independent decision should be that of the assessing officer or Appellate Assistant Commissioner.
3. Any clarification given under Sub-section (2) of Section 28-A of the TNGST Act can be canvassed before the assessing officer and Appellate Assistant Commissioner in assessment proceedings and appellate proceedings respectively on all aspects of the case, and the assessing officer and Appellate Assistant Commissioner have to give independent decision on the arguments before him.
4. For all other administrative purposes the clarification given under Sub-section (1) or (2) shall be binding on the officers subordinate to him by virtue of Sub-section (3).
17. Once the above conclusions are reached the prayer for quashing the impugned notices falls to the ground. If orders have not already been passed the petitioners will have time till February 28, 2001 for filing objections. If objections are filed the first respondent will consider the same in accordance with the principles enunciated in this judgment. The O.Ps. are ordered in the above terms.
And this Tribunal doth further order that this order on being produced be punctually observed and carried into execution by all concerned.
Issued under my hand and the seal of this Tribunal on the 25th day of January 2001.