1976 (1) TMI 59 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Deputy Commissioner under Section 32(2) of the TNGST Act, 1959.
2. Merits of the levy of tax on the turnover of Rs. 2,50,019.21.
3. Admissibility of additional grounds raised by the appellant.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Deputy Commissioner under Section 32(2) of the TNGST Act, 1959:

The appellant contended that the Deputy Commissioner lacked jurisdiction to revise the assessment order because the order had already been appealed before the Appellate Assistant Commissioner, thus invoking Section 32(2)(b) of the TNGST Act, 1959. This section states that the Deputy Commissioner shall not pass any order under sub-section (1) if the order has been made the subject of an appeal to the Appellate Assistant Commissioner or the Appellate Tribunal. The Tribunal agreed with the appellant, noting that once an order becomes the subject matter of an appeal, it cannot be revised by the Deputy Commissioner. The Tribunal emphasized that the Appellate Assistant Commissioner has powers of enhancement under Section 31 of the Act, and any error in the order could be rectified by the Appellate Assistant Commissioner or further revised by the Board under Section 34 of the Act. The Tribunal concluded that the Deputy Commissioner's jurisdiction was barred under Section 32(2) because the assessment order was already under appeal.

2. Merits of the levy of tax on the turnover of Rs. 2,50,019.21:

On merits, the appellant argued that the sales of gunnies, discarded machinery, and empty drums were not incidental or ancillary to their business and thus not taxable. However, the Tribunal found that these items were acquired in the course of the appellant's manufacturing business and were incidental or ancillary to it. The Tribunal referenced Section 2(d)(ii) of the Act, which deems any transaction in connection with or incidental or ancillary to the business as a transaction in the course of business. The Tribunal concluded that the rationale of the Supreme Court's decision in the Burmah Shell case applied to the appellant's case, affirming that the sales were indeed incidental or ancillary to the appellant's business. Despite this finding, the Tribunal did not confirm the order of revision on merits due to the jurisdictional issue.

3. Admissibility of additional grounds raised by the appellant:

The appellant raised additional grounds challenging the Deputy Commissioner's jurisdiction, which were opposed by the State Representative on the grounds of delay and lack of initial objection. The Tribunal, however, admitted the additional grounds, recognizing that the issue of jurisdiction is a question of law that can be raised at any stage. The Tribunal noted that the appellant had initially questioned the legality of the Deputy Commissioner's order in the grounds of appeal, which was sufficient to cover the jurisdictional argument. The Tribunal rejected the preliminary objection of the State Representative and proceeded to consider the jurisdictional issue on its merits.

Conclusion:

The Tribunal concluded that the Deputy Commissioner's order was beyond his jurisdiction under Section 32(2) of the TNGST Act, 1959, and thus, the order was cancelled, restoring the orders of the assessing and appellate authority. The Tribunal also noted that had it not found in favor of the appellant on the jurisdictional issue, it would have confirmed the order of revision on merits.