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PETITIONER: STATE OF MADRAS

       Vs.

RESPONDENT: P.M. BATCHA & COMPANY

DATE OF JUDGMENT: 12/04/1967

BENCH: SHAH, J.C. BENCH: SHAH, J.C. SIKRI, S.M. RAMASWAMI, V.

CITATION:  1967 AIR 1537            1967 SCR  (3) 617

ACT: Madras  General  Sales Tax Act, 1939, ss. 5 and  11;  Madras General Sales Tax Act, 1959, s. 32-’Nil’ assessment made  by Commercial  Tax  Officer under s. 5 of  1939  Act-Order  not communicated  to assessee-Change of judicial view  regarding taxing provisions-Power of Deputy Commissioner of Commercial Taxes  under  s.  32 of 1959 Act to revise  order  of  ’Nil’ assessment-Assessee’s  whether  had  right  to  file  appeal against  ’Nil’ assessment under s. 11 of 1939 Act-Effect  of such right on powers of Deputy Commissioner under s. 32.

HEADNOTE: The  respondent firm carried on business in hides and  skins in Madras.  For the assessment year 1953-54 they applied for a  licence under s. 5 of the Madras General Sales  Tax  Act, 1939.  The Commercial Tax Officer relying on a judgment  of the  Madras  High  Court held that the  respondent  was  not liable  to tax and made a ’Nil’ assessment.  The  order  was however  not communicated to the respondent.  The  aforesaid judgment of the Madras High Court was later reversed by this Court.  The Deputy Commissioner of Commercial Taxes  Madras, being  of  the  view  that the  order  of  ’nit’  assessment relating to 1953-54 was illegal commenced proceedings  under s.  32  of  the  Madras General  Sales  Tax  Act,  1959  and thereafter assessed the respondent.  The Sales Tax  Tribunal confirmed  the  order of Commercial Tax Officer.   The  High Court in revision held that since the Commercial Tax Officer had not communicated his order to the assessee the time  for appeal had not expired and therefore the Deputy Commissioner had no power to revise the order under s.   32 of the Act of 1939.  The State appealed. HELD : In the present case no tax was assessed, not even the taxable turnover was determined.  No appeal could  therefore lie  under  s. 11 of the Act of 1939 against  the  order  of ’Nil’ assessment.   There  was thus  no  bar  against  the exercise of jurisdiction of the Deputy Commissioner under s. 32(1) to commence Proceedings of re-assessment. [621D] M/s.  M.A. Noor Mohamed & Company v. State of Madras & Anr., A.I.R.  1957 Mad. 33 and State of Madras & Anr. v. Mls.   M. A.  Noor Mohamed & Company, A.I.R. 1960 S.C. 1254,  referred to.

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S.   B.  Periasami Nadar and Company v. State of Madras,  13 S.T.C. 328, approved.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 578 of 1966. Appeal  by special leave from the judgment and  order  dated August 31, 1964 of the Madras High Court in Tax Case No. 127 of 1963 (,Revision No. 83). P.   Ram Reddy and A. V. Rangam, for the appellant. R.   Ganapathy Iyer, for the respondent. 618 The Judgment of the Court was delivered by Shah, J. The respondents are a firm carrying, on business in bides and skins in the State of Madras and is registered  as a  "dealer"  under the Madras General, Sales Tax  Act  9  of 1939.   For  the  assessment year  1953-54  the  respondents applied for a licence under s. 5 of the Madras General Sales ’Fax  Act  and provisionally paid a sum of Rs.  450  towards licence  fee.   The  respondents were  directed  to  pay  an additional  amount of Rs. 400.  The respondents declined  to pay  the  additional  amount  and  informed  the   assessing authority  that the transactions carried on by them were  of the nature of export of hides and skins and no sales-tax was payable on goods exported to places outside India. The  Commercial Tax Officer scrutinised the accounts of  the respondent for the year 1953-54 and by order dated March 29, 1957  determined their turnover from purchases of hides  and skins from dealers outside the State and from dealers within the  State both tanned and untanned and of sales  of  tanned hides  and  skins ,on behalf of  resident  and  non-resident principals.  But, following the judgment of the Madras  High Court in Messrs.  M. A. Noor Mohamed & Company v. The  State of  Madras and Another(1), the Commercial Tax  Officer  held that the respondents were exempt from tax and no licence fee for  the year 1953-54 was payable.  He, therefore,  declared that there was no demand under s. 8 (B) (2) of the Act, that the  tax due for the year was nil and that a notice in  Form ’C’ be issued for refund of Rs. 450 paid by the respondents. No intimation of this order was given to the respondents. The  judgment  of  the  Madras High  Court  in  M.  A.  Noor Mohamed’s  case(1) was carried in appeal to this  Court  and this Court reversed the judgment : see State of  Madras  & Another v. Mls.  M. A. Noor Mohammed & Company (2 ). In  the meantime  the  Madras General Sales Tax Act 9  of  1939  was repealed  and was replaced by the Madras General  Sales  Tax Act 1 of 1959.  The Deputy Commissioner of Commercial Taxes, Madras, being of the view that the "order of nil assessment" dated  March 29, 1957 was illegal and that  the  respondents were liable to pay sales-tax on their turnover of hides  and skins for the year 1953-54, commenced proceeding under s. 32 of the Madras General Sales Tax Act 1 of 1959 and issued  a notice  to the respondents calling upon them to file  their objections, if any, to the proposal to revise the "order  of nil  assessment".   The  Deputy  Commissioner  rejected  the contention of the respondents that he had no jurisdiction to revise  the  assessment and determined the turnover  of  The respondents at Rs. 11,25,000 odd.  The Sales Tax Appellate (1) A.I.R. 1957 Mad. 33. (2) A.I.R. 1960 S.C. 1254-                             619 Tribunal  substantially  confirmed the order of  the  Deputy Commissioner. The High Court in exercise of their revisional  jurisdiction

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under  s.  38 of Act 1 of 1959 set aside the  order  of  the Tribunal holding that it was obligatory upon the  Commercial Tax Officer to communicate the order dated March 29, 1957  : if it was not so communicated the time to appeal against the order  cannot  be  deemed to have  expired  and  the  Deputy Commissioner  had no jurisdiction under s. 32 of the  Madras General  Sales  Tax Act 1 of 1959 to revise the  order.   In recording their conclusions the learned Judges followed  the judgment  in  The State of Madras v. M/s A.  M.  Safiulla  & Company(1) in which the rule was stated ,is follows               "To  sum  up  in the  case  of  an  assessment               completed  and signed by the Officer, but  not               communicated to the assessee, our  conclusions               are as follows :               (a)   The   order   of   assessment   can   be               communicated to the assessee without any  time               limit,  but  no  liability  would  arise  till               communication;               (b)   The  limitation  for  the  assessee   to               prefer  either an appeal or a  revision  would               commence  to  run  only  after  the  order  is               communicated to him;               (c)   The   time  for  exercising  powers   of               revision  would commence to run from the  date               of  the  order itself and there cannot  be  an               enlarged  period of limitation merely  because               the   Department   takes  its  own   time   to               communicate the order." In our judgment, the order of the High Court cannot be  sus- tained.  The Commercial Tax Officer commenced proceeding  in the manner provided by S. 9 of Act.9 of 1939 for  assessment of  sales-tax  due by the respondents, but  ultimately  held that  no tax was due by the respondents.  Section 11 of  the Act  provided that an assessee objecting to  an.  assessment made  on  him under s. 9 sub-s. (2) may within  thirty  days from  the  date on which he was served with  notice  of  the assessment, appeal to such authority as may be prescribed. Rule 15 of the rules framed by the Governor of Madras  under the  Madras  General Sales Tax Act required the  dealers  in hides  and  skins  to submit a return in  Form  A-4  to  the assessing  authority  on  or before the 25th  day  of  every month.  The Commercial Tax Officer had to process the return submitted  by  the dealer.  If no return  was  submitted  in respect of any month or if the return was submitted  without payment  of  the  full  amount of tax,  or  the  return  was otherwise  defective,  the  Commercial  Tax  Officer   could determine the turnover to the best of his judgment.  Rule 620 16 dealt with the levy of tax on hides and skins.  There was no  provision  in the Act or the Rules framed by  the  State Government  which  required that an order made  under  S.  9 shall,  before  it  may be regarded  as  validity  made,  be communicated to the dealer.  An appeal lay under S. II by an assessee  objecting  to an assessment made on him  under  s. 9(2).   Since the assessment was "nil", no question  of  the respondents objecting to the assessment arose, and no appeal could be contemplated to be filed by them. We  agree  with the view of the Madras High Court in  S.  B. Periasami Nadar and Company v. The State of Madras(1) at p.   333 that :               "In  a case where the assessee is  not  levied               with  tax, there is no rule which compels  the               assessing  authority  to inform  the  assessee               that  the tax levied against him is nil.   The               word "assessment" may have a wide  connotation

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             including  several aspects of  the  assessment               proceedings.               But  however  wide  the  significance  of  the               expression   "assessment"   may  be,   it   is               impossible to hold that an               assessment is  incomplete  or invalid  in  the               absence of the order of   assessment     being               served upon the assessee. Once the  competent               authority makes an assessment under the  Madras               General  Sales Tax Act after scrutinising  the               return  submitted by the assessee,  and  after               giving  the assessee a reasonable  opportunity               of proving the correctness and completeness of               any return submitted by him it is complete and               valid." It is true that when proceedings for re-assessment were com- menced,  Act  9 of 1939 stood repealed and was  replaced  by Madras  Act  1 of 1959, and the authority which  the  Deputy Commissioner  could exercise was under S. 32 (1) which  read as follows :               "The  Deputy  Commissioner  may,  of  his  own               motion,, call for and examine an order  passed               or  proceeding  recorded  by  the  appropriate               authority  under  section  4-A,  section   12,               section  14, section 15, or  sub-sections  (1)               and  (2)  of  section 16  and  may  make  such               inquiry or cause such inquiry to be made  and,               subject  to  the provisions of this  Act,  may               pass such order thereon as he thinks fit."               Sub-section  (2)  provided, insofar as  it  is               material               "The  Deputy Commissioner shall not  pass  any               order under sub-section (1) if-               (1)   13 S.T.C. 328.               621               (a)   the  time for appeal against  the  order               has not expired;" There was, however, no assessment of tax against the respon- dents.   There could be no appeal against the order of  "nil assessment" under s. 11 of Act 1 of 1959, and no bar to  the jurisdiction  of ’,,he Deputy Commissioner under sub-s.  (1) of s. 32 of the Act could arise.  The High Court was, in our judgment, in error in holding that because "the order of nit assessment"  was not communicated, the respondent could  not appeal  against  that  order, and  the  time  for  appealing against  that  order had not expired within the  meaning  of sub-s. (2) of s. 32 of Act 1 of 1959.  We are unable also to agree  with the High Court that in an appeal under s. 11  of Act  9 of 1939 an assessee may object to, a  mere  statement setting out the sales and purchases during the course of his business, or even his turnover.  An appeal lies against  the assessment of tax.  In the present case, no tax was assessed : not even the taxable turnover was determined.  No  appeal, in  our  judgment, could lie under s. II of Act  9  of  1939 against the order of "nil assessment".  There was  therefore no  bar against the exercise of jurisdiction of  the  Deputy Commissioner under s.    32(1)  to commence proceedings  for re-assessment. Our  attention  was invited to s. 31 (1) of Act 1  of  1959, which confers a right of appeal upon any person who  objects to  an  order  passed by  the  appropriate  authority  under various  sections including s. 4A, s. 12, s. 14 and  others. But  if no appeal lay against the order of "nil  assessment" under s. 11 of Act 9 of 1939, it is difficult to  appreciate how  an  appeal  could still be  filed  by  the  respondents

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against  that  order under Act 1 of 1959,  which  came  into force two years after the order. It  is unnecessary in that view to consider the  alternative argument advanced by counsel for the State that it was  open to  the  Deputy  Commissioner to revise the  order  of  "nil assessment"’  under  the power reserved to him to  revise  a "proceeding recorded". The  order  passed by the High Court is set aside,  and  the order passed by the Sales Tax Tribunal restored, with  costs in this Court and the High Court. G.C.                             Appeal allowed. 622