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PETITIONER: SALES-TAX OFFICER, CIRCLE-1, JABALPUR

       Vs.

RESPONDENT: HANUMAN    PRASAD

DATE OF JUDGMENT: 11/10/1966

BENCH: BHARGAVA, VISHISHTHA BENCH: BHARGAVA, VISHISHTHA SHAH, J.C. RAMASWAMI, V.

CITATION:  1967 AIR  565            1967 SCR  (1) 831  CITATOR INFO :  RF         1972 SC  38  (8,9,10)  R          1985 SC 582  (38)

ACT: Madhya Pradesh General Sales Tax Act (M.  P. Act 2 of  1959) ss. 19(1) and 52-Assessment under repealed Act-Reassessment- Period of limitation-Amendment of s. 19(1)-Proviso-Effect.

HEADNOTE: Pending  assessment  to Sales-tax of  respondent’s  turnover under  the Central Provinces and Berar Sales Tax Act,  1947, the  Madhya Pradesh General Sales Tax Act, 1958,  came  into farce repealing the former Act Thereupon, the respondent was assessed to tax under s. 11-A(1) of the repealed Act.  After more  than three years from this assessment, the  Sales  Tax Officer  issued a notice for reassessment under s. 19(1)  of the new Act, which provided five years period for  reopening escaped assessment.  The respondent objected that his  sales had  been  assessed  under  the  repealed  Act,  where   the limitation  of three years for reassessment  was  prescribed and  the  proviso to s. 19(1) of the new Act  preserved  the rights  acquired  under  the repealed  Act.   The  Sales-tax Officer rejected the objection.  The respondent filed a writ petition  in the High Court which was allowed.   Thereafter, the principal clause of s. 19(1) was amended retrospectively to include assessments under the repealed Act.  In appeal to this Court-. the appellant Sales-tax Officer, contended that the  main clause of s. 19(1) was applicable and that by  the subsequent  amendment  to  s. 19(1),  the  principal  clause became  applicable to cases assessed under the repealed  Act and not the proviso. HELD:The appeal must be dismissed. The mere enforcement of the new Act by the time the order of assessment  was  passed by the Sales-tax Officer  could  not lead  to the conclusion that the assessment was made.  under the new Act and not under repealed Act. [833 H] The  assessment,  after enforcement of the new Act,  was  an assessment in accordance with the rights and liabilities  of the respondent under the repealed Act; so the proviso to  s. 19(1)  of the new Act was applicable.  The proviso to s.  52 of the new Act also preserved this right of the  respondent.

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[834 E] Even  if the effect of the subsequent amending Act was  that under  the  principal clause of s.  19(1)  the  reassessment could  be  taken  up within a period  of  five  years,  that provision  became  ineffective  because  of  the   Continued existence of the proviso. A proviso is added to a principal clause primarily with  the object  of taking out of the scope of that principal  clause what  is  included in it and what  the  Legislature  desires should be excluded. [835 D]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 548 of 1965. Appeal  by special leave from the judgment and  order  dated February 28, 1963 of the Madhya Pradesh High Court in  Misc. Petition No. 381 of 1962. A.   P.  Sen,  Advocate-General,  Madhya Pradesh  and  L  N. Shroff, for the appellant. Yogeshwar Prasad and M. V. Goswami, for the respondent. 832 The Judgment of the Court was delivered by Bhargava, J. The respondent was a registered dealer carrying on  the business of selling goods liable to sales-tax  under the  Central  Provinces  and  Berar  Sales  Tax  Act,   1947 (hereinafter  referred to as "the repealed Act").   For  the period  from 3rd November, 1956 to 23rd October,  1957,  the respondent  filed his return, which was not accepted by  the Sales-tax  Officer, who, on March 10, 1959, issued a  notice in  Form XII to the respondent.  Subsequent to this  notice, on May 23, 1959, the turnover of the sales of the respondent was assessed to tax under s. 11 (4)(a) of the repealed  Act. In the meantime, on April 1, 1959 the Madhya Pradesh General Sales  Tax  Act,  1958 (Act No.  11  of  1959)  (hereinafter referred  to as "the new Act") came into force.  On  October 23, 1962, the Sales-tax Officer discovered that part of  the turnover  of the respondent for the period  mentioned  above had escaped assessment and issued a notice under s. 19(1) of the new Act.  The respondent raised a preliminary  objection that  his  sales had been assessed under the  repealed  Act, under  which the limitation of a period of three  years  was prescribed  by  section  11 -A  for  assessment  of  escaped turnover.  The Sales-tax Officer rejected that objection  by Ms  order dated 29th October, 1962, and decided  to  proceed with  the reassessment.  Thereupon, the respondent  moved  a petition  under  Articles 226 and 227  of  the  Constitution before  the High Court of Madhya Pradesh, Jabalpur,  praying for the quashing of the order of the Sales-tax Officer dated 29th October, 1962, and the notice dated 23rd October, 1962. The High Court held that the period of limitation  governing the proceedings instituted by the notice dated 23rd October, 1962,  was that laid down under S. 11-A(1) of  the  repealed Act,  so  that  the proceedings were barred  by  time.   The notice  dated 23rd October, 1962, and the  subsequent  order dated  29th  October, 1962 were consequently  quashed.   The Sales-tax Officer of Jabalpur has now come up to this  Court in  this appeal by special leave against this order  of  the High Court.               Section  19(1)  of  the  new  Act,  on   which               reliance was placed by the Sales-tax  Officer,               reads as follows               "19.  (1)  Where an assessment has  been  made               under  this  Act  and  the  Commissioner,   in               consequence of any information which has  come

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             into  his  possession, is satisfied  that  any               sale  or purchase of goods chargeable  to  tax               under  this  Act, during any  year,  has  been               under-assessed  or has escaped  assessment  or               assessed at a lower rate or any deduction  has               been wrongly made therefrom, the  Commissioner               may,  at any time within five  calendar  years               from the expiry of such year, after giving the               dealer a reasonable opportunity of being heard               and after making such enquiry as he  considers               necessary, proceed, in such                833               manner  as may be prescribed, to reassess  the               tax  payable on any such sale or purchase  and               the  Commissioner may direct that  the  dealer               shall  pay, by way of penalty in  addition  to               the  amount  of  tax so assessed,  a  sum  not               exceeding that amount :               Provided  that  in the case of  an  assessment               made under any Act repealed by Section 52, the               period of reassessment on the ground of under-               assessment,  escapement  or  wrong   deduction               shall    be   as   provided   in   such    Act               notwithstanding the repeal thereof." The  contention on behalf of the Sales-tax Officer was  that for  the  sake  of  assessing  the  escaped  turnover,   the provision  applicable was that contained in the main  clause of s. 19(1), and that the proviso was not applicable in this case.   On the other hand, the respondent’s  contention  was that,  in his case, the assessment had been made  under  the repealed  Act,  so that the proviso was applicable  and  the period  of limitation for issue of a valid notice  was  that laid  down  in s. II A(1) of the repealed Act  which  is  as follows:               "  11  -A.(1).  If,  in  consequence  of   any               information   which   has   come   into    his               possession, the Commissioner is satisfied that               any turnover of a dealer during any period has               been under-assessed or has escaped  assessment               or  assessed at a lower rate or any  deduction               has   been   wrongly   made   therefrom,   the               Commissioner  may,  at any time  within  three               calendar years from the expiry of such period,               after   giving   the   dealer   a   reasonable               opportunity  of being heard and  after  making               such   enquiry  as  he  considers   necessary,               proceed, in such manner as may be  prescribed,               to reassess or assess, as the case may be, the               tax  payable  on any such  turnover;  and  the               Commissioner may direct that the dealer  shall               pay,  by  way of penalty in  addition  to  the               amount of tax so assessed, a sum not exceeding               that amount." The  High Court has accepted the plea put forward on  behalf of the respondent. The  facts given by us above clearly show that the  original assessment of the respondent was in respect of a period when the  new  Act had not come into force.  The  respondent  had filed the return, and even the notice in that connection was issued by the Sales-tax Officer prior to the enforcement  of the  new  Act.  The actual order of assessment was  made  on 23rd  May,  1959, shortly after the new Act  had  come  into force.   The  mere enforcement of that Act by the  time  the order  of  assessment was passed by  the  Sales-tax  Officer cannot  lead  to the conclusion that the assessment  of  the

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respondent  was  made under the new Act and  not  under  the repealed  Act.  It was under s. 52 of the new Act  that  the repealed 834 Act  was  repealed,  and  that  section  itself,  under  the proviso,  laid  down that such repeal shall not  affect  the previous  operation  of the said Act or  any  right,  title, obligation   or  liability  already  acquired,  accrued   or incurred  thereunder.  There was also the  further  addition that subject thereto, anything done or any action taken (in- cluding any appointment, notification, notice, order,  rule, form, regulation, certificate or licence) in the exercise of any  power conferred by or under the said Act shall,  in  so far  as it is not inconsistent with the provisions  of  this Act, be deemed to have been done or taken in exercise of the powers  conferred by or under this Act, as if this Act  were in force on the date on which such thing was done or  action was  taken.  In view of this proviso it has to be held  that when  this new Act came into force on 1st April,  1959,  all rights,  title,  obligation or liability  already  acquired, accrued or incurred under the repealed Act by the respondent remained unaffected and intact.  The rights and liabilities, which had been acquired or incurred under the repealed  Act, included the right or liability to be assessed in accordance with  the  provisions  of the repeated  Act  in  respect  of turnover of sales effected during the time when that Act was in  force.   The repealed Act laid down  that  turnover  was taxable, how it was to be computed, and at what rate the tax was to be charged.  These provisions clearly created  rights as  well  as  liabilities  of  dealers.   Those  rights  and liabilities  were  thus preserved by s. 52 of the  new  Act. The  assessment  which  was completed in  the  case  of  the respondent on 23rd May, 1959, was, therefore, an  assessment in  accordance  with  the  rights  and  liabilities  of  the respondent  under the repealed Act ; and this being  so,  it has  to be held that the proviso to s. 19(1) of the new  Act was  applicable to the case of the respondent.  As a  result of this proviso, the period of reassessment on the ground of under-assessment, escapement or wrong deduction in the  case of  the respondent had to be as provided in s. II  -A(1)  of the repealed Act, so that the period was three years and not five  years  as laid down by s. 19(1) of the new  Act.   The notice  dated 23rd October, 1962, was clearly issued  beyond the  period of limitation prescribed by s. II -A(1)  of  the repealed  Act, and the proceedings in pursuance of  it  were time barred. In the alternative, this question may be examined in another aspect.  Section 11-A(1) of the repealed Act itself  created a  right in favour of the respondent not to be  assessed  in respect  of turnover that was under-assessed or had  escaped assessment after the expiry of the period prescribed in that sub-section.  The proviso to s. 52 of the new Act  preserved this right of the respondent, and on this ground also,  the, Sales-tax Officer was not competent to issue the notice  for reassessment after that period of limitation had expired. In  this  connection,  learned  counsel  for  the  Sales-tax Officer  drew.  our attention to two  subsequent  pieces  of legislation that  835 amended  the new Act.  The first one of these is the  Madhya Pradesh General Sales Tax (Second Amendment) Act, 1963  (Act 23  of  1963):  (hereinafter referred to  as  "the  Amending Act").  By section 3 of this Amending Act, section 19(1)  of the  new Act was amended, so as to introduce some  words  in the principal clause of s. 19(1).  The words introduced were

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:  "or any Act repealed by section 52" and they were  to  be inserted  at  both  the places where the  words  "this  Act" occurred  in the principal clause.  It was urged that, as  a result  of  this  amendment, this  principal  clause  became applicable  even to cases in which assessment had been  made under the repealed Act, and, taking into account the  effect of this subsequent amendment, we should hold that the Sales- tax Officer was not incompetent to make the assessment  when he  purported to issue the notice on 23rd October, 1962,  as the  notice was issued within the period of five years  laid down  in the principal clause of s. 19(1). of the  new  Act. It  is,  however,  significant that,  though  the  principal clause  of s. 19(1) was amended, the proviso to it  was  not deleted  by  the  Amending  Act.   The  proviso,  therefore, continued to remain in force.  It is well-recognised that  a proviso  is added to a principal clause primarily  with  the object  of taking out of the scope of that principal  clause what  is  included in it and what  the  legislature  desires should  be excluded.  Consequently, even if it be held  that the effect of the Amending Act was that, under the principal clause  of s. 19(1), the reassessment of the  under-assessed or  escaped turnover in the case of the respondent could  be taken  up  within  a period of  five  calendar  years,  that provision  became  ineffective  because  of  the   continued existence  of  the proviso.  The Amending Act had  not  come into  force  when the High Court decided the  petition’  and consequently, the High Court had no occasion to consider its effect.  However, as we have indicated above, the order made by  the  High  Court  remains  unaffected  even  after  this amendment,  and  the  decision  given  that  the  limitation applicable  to the case of the respondent is that laid  down by  s. 11 -A(1) of the repealed Act is correct.  It is  true that  the amendment is s. 19(1) of the new Act made  by  the Amending  Act was, given retrospective effect under s. 5  of the Amending Act, but that also is immaterial, because, even after the amendment, the provision contained in the  proviso had to prevail over the principal clause of s. 19(1). The  second piece of legislation brought to our  notice  was the Madhya Pradesh General Sales Tax (Second Amendment) Act, 1964 (Act 20 of 1964) by which also s. 19(1) of the new  Act was.  slightly  amended.  That amendment,  however,  has  no bearing on, the point which we are called upon to decide  in this appeal, and’ consequently, needs no consideration. The appeal fails and is dismissed with costs. Y. P.                                             Appeal  dismissed.. 836