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PETITIONER: STATE OF MADRAS

       Vs.

RESPONDENT: MADURAI MILLS CO., LTD.

DATE OF JUDGMENT: 04/10/1966

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

CITATION:  1967 AIR  681            1967 SCR  (1) 732  CITATOR INFO :  RF         1974 SC1380  (31)

ACT: Madras  General-  Sales-tax  Act  (9  of  1939),  s.   12(4) (b)--Order  of  Assessing authority-When merges in  that  of appellate  or  revisional  authority-Period  of  limitation- Starting point.

HEADNOTE: For  the assessment year 1950-51 the respondent submitted  a return  of  its net turnover to the  Deputy  Commercial  Tax Officer  who was the assessing authority.  As he  determined the net turnover at a higher amount the respondent  appealed to  the Commercial Tax Officer, who allowed the appeal  with respect  to one item.  On 28th November 1952, the  assessing authority issued a revised assessment order as per the order of  the Commercial Tax Officer.  On 27th December 1952,  the respondent  presented a revision petition before the  Deputy Commissioner of Commercial Taxes raising the only objection, as a new -contention, that it should not have been  assessed to  tax on amounts collected by it by way of tax.   On  21st August 1954, the Deputy Commissioner dismissed the  petition on the ground that the respondent was not entitled to  raise a  new Contention for the first time.  On 4th  August  1958. the  Board  of  Revenue issued a notice  to  the  respondent stating  that  it  proposed  to  revise  the  assessment  by including  in the net turnover a sum representing the  value of cotton purchased by the respondent from outside the State and  which was excluded by the assessing  authority.   After considering the respondent’s objections the Board fixed  the net   taxable  turnover  by  including  that  amount.    The respondent’s appeal to the High Court was allowed. In appeal by the State, HELD  :  The  order of the Board  of  Revenue  was  invalid, because, under s. 12(4) (b) of the Madras General  Sales-tax Act, 1939, the Board of Revenue could invoke its  revisional jurisdiction.only  within four years from the date on  which the order of the assessing authority was communicated to the assessee. [734 G; 736 B-C] (i)The  subject-matter of the revision proceedings  before the  Board of Revenue was only the revised assessment  order

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of the assessing authority dated 28th November 1952, and not the Deputy Commissioner’s order dated 21st August 1954. [736 C] The  objection  taken by the Board was with  regard  to  the question of exemption allowed by the assessing authority  on the  value  of  cotton  purchased  from  outside,  and  that question  was  not’  raised in revision  before  the  Deputy Commissioner of Commercial Taxes. [736 C-D] (ii)It  cannot  be  said  that  the  order  of  the  Deputy Commissioner  of Commercial Taxes, in revision, is the  only operative decision in law on the basis that the order of the inferior  Tribunal  (the order of  the  assessing  authority dated  28th  November 1952) merged in that of  the  superior Tribunal  (order  of the Deputy Commissioner  of  Commercial Taxes, dated 21st August 1954). [736 F] The  application  of the doctrine of merger depends  on  the nature of the appellate or revisional order in each case and the scope of the statu-                             733 tory  provisions  conferring  the  appellate  or  revisional jurisdiction.   In the circumstances of the present case  it could  not be said that there was a merger of the  order  of assessment  dated  November  28,  1952  with  the  order  in revision  dated 21st August 1954, because, the  question  of exclusion  of the value of yarn purchased from  outside  the State  was  not the subject-matter of  revision  before  the Deputy Commissioner of Commercial Taxes. [737 A-B, F-H] Commissioner  of Income-tax, Bombay v. Amritlal  Bhogilal  & Co. [1959] S.C.R. 713 and State of Uttar Pradesh v. Mohammed Nooh, [1958] S.C.R. 595, followed.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 539 of 1965. Appeal  by special leave from the judgment and  order  dated September 13, 1961 of the Madras High Court in T.C. No.  162 of 1958. Bishan Narain and A. V. Rangam, for the appellant. A. K. Sen and D. N. Gupta, for the respondent. The Judgment of the Court was delivered by Ramaswami,  J.  This  appeal is  brought  by  special  leave against the judgment of the Madras High Court dated the 13th September, 1961 in T.C. 162 of 1958. TheMadurai  Mills  Co.,  Ltd.,  (hereinafter  called   the respondent) isa  dealer  in yarn, purchasing  raw  material like cotton staple-fibre, etc., manufacturing them into yarn and  selling the yarn.  In the assessment year 1950-51,  the respondent  showed a return of Rs.  15,27,61,883-8-4  before the  Deputy  Commercial  Tax  Officer,  Madurai  who   after scrutiny of the account books determined the net turnover at Rs.  15,44,09,109-3-1 1. The respondent preferred an  appeal before  the  Commercial Tax Officer Madurai South.   It  was contended  on  behalf of the respondent that a  sum  of  Rs. 1,44,294-14-4  was wrongly included by the  first  assessing authority  in the purchase value of cotton purchased  by  it for  production of yarn as that amount only represented  the commission paid by it to Comorin Investment Trading  Company Limited for the purchase It was also contended that  another sum  of  Rs.  81,546-0-1  which  represented  sale  proceeds realised by selling empty drums etc. was not realisation  in the  course  of its business.  The  Commercial  Tax  Officer upheld  the first contention of the respondent and  excluded the sum of Rs. 1,44,294-14-4 from the total turnover on  the ground that the amount was commission paid by the respondent

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for  the  purchase  of cotton,  but  rejected  their  second contention  with regard to the sum of Rs. 81,546-0-  1.  The Deputy  Commercial Tax Officer thereafter issued  a  revised assessment.   The respondent presented a  revision  petition before the Deputy Commissioner of Commercial Taxes and 734 the  only objection which the respondent raised was that  it should not have been assessed to tax on amounts collected by it  by  way  ,of tax amounting  to  Rs.  6,57,971-4-9.   The respondent  did not raise any other objection regarding  the order of assessment of the Deputy Commercial Tax Officer  or the  Commercial Tax Officer.  By his order, dated  the  21st August,  1954, the Deputy Commissioner of  Commercial  Taxes dismissed the revision petition holding that the  respondent was not entitled to raise the contention for the first  time and  that  even  otherwise  the  Madras  General  Sales  Tax (Definition of Turnover and Validation of Assessments)  Act, 1954,  permitted  the  inclusion  of  tax  in  the   taxable turnover.   On  the 4th August, 1958, the Board  of  Revenue issued  a notice to the respondent stating that it  proposed to  revise  the  assessment of  the  Deputy  Commercial  Tax Officer,  Madurai, by including in the net turnover the  sum of  Rs. 7,74,62,706-1-6 as that amount was wrongly  excluded by the assessing authority.  The respondent objected to  the proposed  revision  on the ground that  the  proceeding  was barred by limitation under s. 12 of the Madras General Sales Tax  Act.  The respondent also submitted -that there was  no wrong  exclusion  of the sum of Rs. 7,74,62,706-1-6  by  the Deputy Commercial Tax Officer in making the assessment.   By its order, dated the 25th August, 1958, the Board of Revenue over-ruled  both  these contentions of  the  respondent  and fixed  the  net taxable turnover as  Rs.  23,17,15,948-15-2. The respondent preferred an appeal to the Madras High  Court against  the  order of the Board of Revenue dated  the  25th August,  1958.   The High Court allowed the  appeal  holding that  the Board of Revenue could not invoke  its  revisional jurisdiction  after the expiry of the period  of  limitation under s. 12 (4)(b) of the Madras General Sales Tax Act.  The order  of the Board of Revenue, dated the 25th August,  1958 was accordingly set aside. The  question  of  law to be determined in  this  appeal  is whether  the  order of the Board of Revenue dated  the  25th August,  1958 was illegal because there was a  contravention of  the rule of limitation laid down by s. 12(4)(b)  of  the Madras  General Sales Tax Act inasmuch as the order  of  the Board of Revenue was made after a period of 4 years from the date  on  which  the ,order of  the  Deputy  Commercial  Tax Officer was communicated to the assessee. Section 12 of the Madras General Sales Tax Act, 1939 (Madras Act 9 of 1939) (hereinafter called the Act) provides -- "(1) The Commercial Tax Officer may- (i)  suo motu, or (ii)  in cases in which an appeal does not he to  him  under section 11, on application-, call for and examine 735 the record of any order passed or proceeding recorded  under the  provisions  of this Act by any officer  subordinate  to him,  for  the  purpose  of satisfying  himself  as  to  the legality or propriety of such order, or as to the regularity of  such  proceeding, and may pass such order  with  respect thereto as he thinks fit. (2)  The Deputy Commissioner may - (i)  suo motu, or (ii)in  respect of any order passed or proceeding  recorded by the Commercial Tax Officer under sub-section

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(1)  or any other provision of this Act and against which no appeal  has been preferred to the Appellate  Tribunal  under section  12-A,  on  application, call for  and  examine  the record of any order passed or proceeding recorded under  the provisions  of this Act by any officer subordinate  to  him, for the purpose of satisfying himself as to the legality  or propriety  of  such order, or as to the regularity  of  such proceeding, and may pass such order with respect thereto  as he thinks fit. (3)  The Board of Revenue may- (i)  suo motu, or (ii)in  respect of any order passed or proceeding  recorded by  the  Deputy Commissioner under sub-section  (2)  or  any other provision of this Act and against which no appeal  has been  preferred to the Appellate Tribunal under s. 12-A.  on application,  call for and examine the record of  any  order passed  or proceeding recorded under the provisions of  this Act  by  any officer subordinate to it, for the  purpose  of satisfying  itself as to the legality or propriety  of  such order,  or as to the regularity of such proceeding, and  may pass such order with respect thereto as it thinks fit., (4)  In relation to an order of assessment passed under this Act- (a)  The  power of the Commercial Tax Officer  under  clause (i)  of sub-section (1) shall be exercisable only  within  a period  of three years from the date on which the order  was communicated to the assessee; (b)  The  power of the Deputy Commissioner under clause  (i) of sub-section (2) and that of the 736 Board  of Revenue under clause (i) of sub-section (3)  shall be  exercisable only within a period of four years from  the date on which the order was communicated to the assessee". It  was contended on behalf of the appellant that the  order revised by the Board of Revenue was the revisional order  of the  Deputy Commissioner of Commercial Taxes dated the  21st August, 1954 and not the order of the Deputy Commercial  Tax Officer and    therefore the power of revision by the  Board of Revenue was not  exercised    beyond   the   period    of limitation provided by s. 12 (4)   (b)  of the Act.  We  are unable  to  accept  this  argument  as  correct.   The  only subject-matter of the revision proceedings before the  Board of  Revenue was the revised assessment order of  the  Deputy Commercial  Tax  Officer, Madurai dated the  28th  November, 1952.  The objection taken by the Board of Revenue was  with regard to the question of exemption allowed on the value  of the cotton purchased from outside the State of Madras.   The exemption  was allowed by the Deputy Commercial Tax  Officer in  his  order of assessment.  The question was  not  raised before  the Deputy Commissioner of Commercial Taxes and  the only  point  raised  before  him  was  with  regard  to  the inclusion  of  the  amount  of tax  to  the  extent  of  Rs. 6,57,971-4-9  in the taxable turnover.  It is manifest  that the  subject-matter of the revision proceedings  before  the Board of Revenue was the revised assessment order of the De- puty   Commercial  Tax  Officer,  Madurai  dated  the   28th November,  1952.  It follows that the order of the Board  of Revenue  was made beyond the limit of four years  prescribed by s. 12(4)(b) of the Act and it is, therefore, invalid.  On behalf  of the appellant, the argument was put forward  that if a statutory appeal is provided against an order passed by a  Tribunal, the decision of the appellate authority is  the operative  decision  in  law.   It  was  said  that  if  the appellate  authority modifies or reverses the order  of  the Tribunal,  there was a merger of the latter order  with  the

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appellate order and it was the appellate order alone that is effective  and can be enforced.  But if the appellate  order affirms the order of the Tribunal, there is a merger of  the original  order  in  the  appellate  order  and  it  is  the appellate order alone which is operative andcapable      of enforcement.  In support of this argument   reliance  was placed  upon  the observation of Gajendragadkar, J.,  as  he then was in Commissioner of Income-tax, Bombay v.   Amritlal Bhogilal  &  Co.  (1) But the doctrine of merger  is  not  a doctrine of rigid and universal application and it cannot be said that wherever there are two orders, one by the inferior Tribunal and the other by a superior Tribunal, passed in  an appeal  on  revision,  there is a fusion of  merger  of  two orders  irrespective of the subject-matter of the  appellate or revisional order and the (1)  [1959] S.C.R. 713 : 34 I.T.R. 130 at 136. 737 scope  of  the  appeal  or  revision  contemplated  by   the particular statute.  In our opinion, the application of  the doctrine   depends  on  the  nature  of  the  appellate   or revisional order in each case and the scope of the statutory provisions   conferring   the   appellate   or    revisional jurisdiction.   For example in Amritlal Bhogilal &  Co’s.(1) case it was observed by this Court that the order of  regis- tration made by the Income-tax Officer did not merge in  the appellate  order of the Appellate Commissioner, because  the order  of registration was not the subject-matter of  appeal before  the appellate authority.  It should be noticed  that the  order of assessment made by the Income-Tax  Officer  in that  case  was a composite order viz., an,  order  granting registration  of  the firm and making an assessment  on  the basis  of  the registration.  The appeal was  taken  by  the assessee to the Appellate Commissioner against the composite order  of the Income-tax Officer.  It was held by  the  High Court  that  the order of the  Income-tax  Officer  granting registration  to the respondent must be deemed to be  merged in the appellate order and that the revisional power of  the Commissioner  of Income-tax cannot, therefore, be  exercised in  respect  of it.  The view taken by the  High  Court  was over-ruled  by this Court for the reason that the  order  of the  Income-tax  Officer  granting  registration  cannot  be deemed  to  have  merged  in  the  order  of  the  Appellate Commissioner in an appeal taken against the composite  order of assessment.  Similarly, in The State of Uttar Pradesh  v. Mohammed  Nooh(2),  it  was  held by  this  Court  that  the principle of merger cannot apply in the case of an order  of dismissal  of  a  public  servant  which  was  made  by  the departmental  Tribunal on the 20th April, 1948  and  against which the appeal was dismissed by the Appellate Authority on the  7th  May,  1949, and  the  revisional  application  was rejected  on the 22nd April, 1950.  In the circumstances  of the present case, it cannot be said that there was a  merger of the order of assessment made by the Deputy Commercial Tax Officer dated the 28th November, 1952 with the order of  the Deputy  Commissioner  of  Commercial Taxes  dated  the  21st August, 1954 because the question of exemption on the  value of  yarn purchased from outside the State of Madras was  not the   subject-matter   of   revision   before   the   Deputy Commissioner  of Commercial Taxes.  The only point that  was urged before the Deputy Commissioner was that the sum of Rs. 6,57,971-4-9  collected  by  the respondent by  way  of  tax should  not be included in the taxable turnover.   This  was the only point raised before the Deputy Commissioner and was rejected  by  him  in  the  revision  proceedings.   On  the contrary,  the  question before the Board.  of  Revenue  was

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whether the Deputy Commercial Tax Officer, Madurai was right in excluding from the net taxable turnover of the respondent the sum of Rs. 7,74,62,706-1-6 which was the value of cotton purchased  by  the  respondent from  outside  the  State  of Madras.  We are (1)[1959] S.C.R. 713:341.T.R. :130 at 136. (2) [1958] S.C.R. 595. 738 ’therefore, of opinion that the doctrine of merger cannot be invoked in the circumstances of the present case. For  these  reasons, we hold that the judgment of  the  High Court is right and this appeal must be dismissed with costs. V.P.S.                                 Appeal dismissed. 739