Madras High Court
K.O. Angumanickam vs Joint Commissioner-Ii, Office Of The ... on 30 September, 1991
Author: A.S. Anand
Bench: A.S. Anand
JUDGMENT Kanakaraj, J.
1. The assessee is a dealer in "nannari" syrup. He reported a total and taxable turnover of Rs. 41,612.25 for the assessment year 1976-77. After referring to certain defects in the accounts the assessing authority proposed to reject accounts and resort to best judgment assessment. According to the assessing authority "nannari" syrup was an item of food since the same was bottled and sold under a brand name and it was taxable at 8 per cent. single point under item 103 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959, (hereinafter called "the Act"). Since the dealer did not file objections the proposal was confirmed and the turnover of Rs. 45,773 was taxed at 8 per cent. single point. The assessee filed an appeal contending that "nannari" syrup could be classified only as a soft drinks falling under item 91 of the First Schedule to the Act taxable at 5 per cent. single point. However the assessee changed his stand and filed additional grounds contending that "nannari" syrup was a product of sugar mixed with essence of nannari and hence taxable only as multi-point item under section 3(1) of the Act. The appellate authority by his order dated January 6, 1978, agreed with the contentions raised in the additional grounds that "nannari" syrup would not fall under the First Schedule to the Act and taxable only as a multi-point item. Consequently he held that since the turnover was below Rs. 50,000 it could not be subjected to tax under section 3(1) of the Act. He, therefore, allowed the appeal. The Joint Commissioner issued a notice on January 7, 1981 proposing to hold that "nannari" being a root could be considered only as a vegetable and therefore any preparation of "nannari" would properly come within the entry 103 of the First Schedule to the Act. The assessee filed objections contesting the stand taken in the notice and seeking to maintain the order of the appellate authority. The Joint Commissioner issued a revised show cause notice on February 5, 1982 stating that "nannari" syrup would properly come under entry 91 of the First Schedule of the Act as "soft drinks" and therefore proposed to revise the appellate order treating the goods as falling under entry 91 of the First Schedule to the Act. The assessee again filed objections. The Joint Commissioner has held by his order dated August 31, 1982 that the goods fell under entry 91 of the First Schedule and directed the assessing authority to give effect to his order by assessing the turnover of Rs. 45,773 at 5 per cent. under entry 91.
2. Mrs. Chitra Venkataraman, learned counsel appearing for the appellant, raised a preliminary issue that the Joint Commissioner had no power to refix the turnover in the manner in which he has done, by sitting in the arm chair of the assessing officer. The contention is that the scope of section 34 of the Act would not permit the Joint Commissioner to determine the turnover and bring to tax a particular item for the first time which had not originally been taxed by an assessing officer. It is also contended that if the assessing officer could not revise his order dated February 17, 1981 under section 16 of the Act in respect of the assessment year 1976-77 after expiry of the date on March 31, 1982 it follows automatically that the Joint Commissioner cannot also revise the assessment. We could see that the "nannari" syrup manufactured by the assessee has created enough confusion. But if we examine the issue on first principles we have no difficulty in rejecting the contention of the learned counsel for the appellant. Reliance is placed on a Division Bench of this Court in Reliance Motor Company Private Limited v. State of Tamil Nadu (T.C. No. 89 of 1982 dated April 12, 1991 (Reported in [1992] 84 STC 201)). In that case the assessing authority had passed an order on October 30, 1976. An appeal was filed disputing the annual turnover of Rs. 90,123.50. The appellate authority by order dated October 6, 1978 allowed the appeal to the extent of the said turnover. There was an inspection of the premises on July 17, 1980. The value of certain spare parts amounting to Rs. 1,84,985 was found to have escaped the attention of the officer. The Joint Commissioner exercising his suo motu power of revision proposed to levy tax on the said escaped turnover of Rs. 1,84,985 at 15 per cent. single point. The contention was that the Joint Commissioner had no power to bring to tax the escaped turnover of Rs. 1,84,985 for the first time and in any event the power to bring to tax such an escaped turnover was barred by limitation under section 16 of the Act. This Court laid down as follows :
"It therefore follows that the power can be exercised to revise an order which the statutory authority had not at all made. The Joint Commissioner cannot exercise the power which the assessing authority should have exercised but did not so exercise. The power to bring an escaped turnover to tax is the power of an assessing authority under section 16 of the Act. The Joint Commissioner or the Appellate Assistant Commissioner can however get the escaped assessment brought to tax within the period of limitation only."
We do not think that the said ratio will apply to the facts of the present case. In this case the Joint Commissioner is certainly not bringing any new turnover to be assessed for the first time. The turnover remains the same and while assessing authority applied entry 103 the Joint Commissioner has sought to apply entry 91. In State of Madras v. Madurai Mills Co. Ltd. the Board of Revenue exercising suo motu powers sought to include in the net turnover a certain sum representing the value of cotton purchased by the assessee from outside the State of Madras on the ground that it was wrongly excluded in the computation of the turnover. The Supreme Court had only to deal with doctrine of merger and found that the order of the assessing authority did not merge with the order of the Deputy Commissioner in revision because the question of exemption of the value of the yarn purchased from outside the State of Madras was not the subject-matter of revision. We do not think that this case also helps the appellant in any way. In A. Velayutha Raja v. Board of Revenue (C.T.) [1970] 26 STC 176 this Court pointed out as follows :
"We have noticed that section 34 is made subject to the provisions of the Act. Section 16 is one such provision. If section 16 stood alone like any other section, such as section 12, 14, 15, 31 or 32 the position would be different. But section 16(1) adumbrates a substantial rule of limitation. If the assessing authority could not bring into the net of taxation escaped turnover, beyond the period of five years from the date of the year of escape, can the Board, which is expected to revise the order of the assessing authority, make an order so as to defeat the substantive legislative provision as to limitation under section 16(1) of the Act ? We are of the view that the Board cannot pass such an order."
It is needless to point out that the said judgment also will not apply to this case because we are not concerned in this case with an escaped turnover. On the other hand in P. Hajee Mohamed D. Saliah & Co. v. State of Tamil Nadu [1983] 54 STC 62 a Division Bench of this Court while dealing with the similar power under section 32 of the Act has laid down as follows :
"We are therefore of the view that the expression 'pass such orders as he thinks fit' will include a power to modify the order of the subordinate authority by refixing the taxable turnover as a result of the cancellation of the exemption granted by the assessing authority."
They also pointed out that it is only when an escaped turnover is brought to tax the question of applicability of section 16 and the question of limitation contained therein would apply. We therefore hold that the Joint Commissioner has the power to refix the assessment without altering the turnover and without bringing any turnover to tax for the first time. In this case the taxable turnover has been kept intact. The Joint Commissioner has only sought to apply entry 91 of the First Schedule instead of entry 103 applied by the assessing authority to fix the liability. Similarly the Appellate Assistant Commissioner had held in respect of the very same turnover that it would properly come within section 3(1) of the Act as multi-point item. Therefore all the authorities are concerned with the same turnover and the difference of opinion is only on the question of rate of tax or the question of applying section 3(1) of the Act or section 3(2) of the Act. We therefore reject the preliminary objections of the appellant and hold that the Joint Commissioner had power to pass the order in question.
3. On the question whether "nannari" syrup will fall under section 3(1) or section 3(2) of the Act and if it falls under section 3(1) of the Act which of the entries in the First Schedule will apply to the goods reliance was sought to be placed on Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. P. Sukumaran [1989] 74 STC 185 (Ker). That judgment also will not apply to the facts of the present case, because in that case "Rasna" was held to be only a concentrate and not a liquid. It was only a raw material for the preparation of soft drinks and therefore it was held that it would not come within the scope of words "non-alcoholic drinks and beverages, bottled or canned and sold under a brand name". The Joint Commissioner has brought the goods within the entry 91 of the First Schedule to the Act. They therefore quoted the entry 91 as it stood at the relevant time.
"91. Aerated waters bottled or packed soft drinks sold under a brand name registered under the Trade and Merchandise Marks Act, 1958 (Central Act 43 of 1958), whether or not flavoured or sweetened and whether or not containing vegetable or fruit juices or fruit pulp."
The argument of Mrs. Chitra Venkataraman is that "nannari" syrup cannot be consumed as such and can be used only after dilution with water. It was only a sweetening agent to be used in the preparation of lemon juice, orange juice, etc. The words "whether or not flavoured or sweetened and whether or not containing vegetable or fruit juice or fruit pulp" show that even if the "nannari" syrup is diluted with water or with lemon juice or orange juice the same would fall under entry 91 of the First Schedule to the Act. We therefore agree with the decision of the Joint Commissioner that "nannari" syrup is an item of goods which would properly fall under entry 91 of the First Schedule of the Act. In this connection we cannot ignore the fact that the assessee at one stage did contend in the ground of appeal before the appellate authority as follows :
"The appellant begs to submit that the commodity sold by him is only bottled "nannari syrup which is to be classified as bottled soft drinks only falling under item No. 91 of the Tamil Nadu General Sales Tax Act, 1959."
Though the assessee changed the above stand by filing additional grounds there is clear indication that "nannari" syrup could really fall under entry 91 of the First Schedule of the Act.
4. For all the above reasons we reject the appeal. The tax case is therefore dismissed. But there will be no order as to costs.
5. Appeal dismissed.