1962 (10) TMI 40 - SC - VAT and Sales Tax

Whether the order of assessment was according to law? Held that - Appeal allowed. Rule 17 confers on the Deputy Commissioners the power to determine and tax escaped turn- over in cases where revisions have been taken to them sub-rule (1-A) and also where revisions have not been taken to them sub-rule (3-A) . Provisions of section 9(1) and (2) therefore are no bar to the exercise of power of assessing escaped turnovers. Moreover section 9 does not deal with escaped turnovers but is a provision for the determination of the turnover of a dealer in the first instance nor can it be said that rule 17 is in conflict with section 12(2). That section deals with another state of affairs and another jurisdiction i.e. where the Deputy Commissioner suo motu or on an application made calls for the record and deter- mines the legality or propriety of an order made by one of the subordinate officers. It cannot be said in view of rule 17 that the power of revision by the Deputy Commissioners is limited to powers under section 12(2). Rule 17 deals with a separate and independent jurisdiction in regard to the determining and taxing escaped turnovers. The provisions of section 12(2) are in no way in conflict with the powers conferred under rule 17(1) 17(1-A) and 17(3-A).

Summary

Issues Involved:
1. Jurisdiction of the Deputy Commissioner of Commercial Taxes to issue a notice for escaped turnover.
2. Validity of Rule 17 under the Madras General Sales Tax Act, 1939.
3. Whether Rule 17 is ultra vires the provisions of the Act.

Detailed Analysis:

1. Jurisdiction of the Deputy Commissioner of Commercial Taxes to Issue a Notice for Escaped Turnover:
The Tribunal initially held that the powers conferred on the Deputy Commissioner of Commercial Taxes under section 12(2) and rule 17(3-A) are distinct, and action taken under rule 17(3-A) was not without jurisdiction. The High Court reversed this finding, agreeing with the respondent's argument that the Deputy Commissioner's power to assess escaped turnover is merely incidental to the revisional jurisdiction under section 12(2). The Supreme Court, however, disagreed, stating that the power to assess escaped turnover does not arise out of the revisional jurisdiction. Rule 17 confers power to assess escaped turnover independently of the record of assessment proceedings before the Deputy Commercial Tax Officer. Therefore, the Deputy Commissioner acted within his jurisdiction under rule 17(3-A) when he issued the notice and determined the escaped turnover.

2. Validity of Rule 17 under the Madras General Sales Tax Act, 1939:
The Supreme Court examined whether Rule 17 and its sub-rules fall within the rule-making power conferred by section 19 of the Act. The Court concluded that Rule 17 properly falls under section 19(2)(f), which allows the State Government to make rules for the assessment of any turnover that has escaped assessment. The Court referenced the Privy Council's decision in King Emperor v. Sibnath Banerji, noting that the rule-making power under sub-section (1) of section 19 is broad and not restricted by sub-section (2). Therefore, Rule 17 and its various clauses are valid and within the rule-making power of the State Government.

3. Whether Rule 17 is Ultra Vires the Provisions of the Act:
The respondent argued that Rule 17 is ultra vires because the power to assess is given to the assessing authority under section 9(1) and (2), and the Deputy Commissioner, as a revising authority, is not authorized by the State Government to assess escaped turnover. The Supreme Court rejected this argument, pointing to section 2-B, which authorizes the State Government to appoint Deputy Commissioners for performing functions under the Act, including assessing escaped turnover. Rule 17 confers this power on the Deputy Commissioners in cases where revisions have been taken to them (sub-rule 1-A) and where revisions have not been taken to them (sub-rule 3-A). The Court held that section 9 does not deal with escaped turnovers but rather with the initial determination of turnover. Additionally, Rule 17 is not in conflict with section 12(2), which deals with the legality or propriety of an order made by a subordinate officer. Rule 17 provides a separate and independent jurisdiction for determining and taxing escaped turnovers.

The Supreme Court concluded that the High Court's judgment was erroneous and set it aside, allowing the appeal with costs.

Conclusion:
The Supreme Court allowed the appeal, holding that the Deputy Commissioner had jurisdiction to issue the notice for escaped turnover under Rule 17(3-A). The Court also upheld the validity of Rule 17, stating it was within the rule-making power conferred by section 19 of the Act and not ultra vires the provisions of the Act.