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TMI Blog1983 (1) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... export of the goods out of the territory of India, where such sale occasioned the movement of the goods from the State of Maharashtra, is to be considered as a sale within the State of Maharashtra. By reason of the aforesaid certificates given by the applicants to their vendors, the sales of raw materials covered by the said certificates made by the applicants' vendors to the applicants were exigible to tax at a reduced rate. During the said period, the applicants also purchased machinery of the aggregate value of Rs. 12,74,412 by giving certificates in form 15. The applicants had also purchased raw materials of the aggregate value of Rs. 36,01,414 otherwise than against certificates in form 15. The applicants also have branches outside the State of Maharashtra. They despatched to their said branches outside the State about one-third quantity of the total goods manufactured by them, the remaining quantity being sold by them in terms of the certificates in form 15 given by them. The goods transferred by the applicants to their branches outside the State were sold by the said branches and such sales were, therefore, outside-State sales and in breach of the certificates in form 15 giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent. The Sales Tax Officer, therefore, disallowed an identical percentage of the purchases of raw materials by the applicants against certificates in form 15, viz., purchases of the value of Rs. 3,52,597 and held that the said purchases were exigible to purchase tax at the rate of 3 per cent. The assessment order was passed by the Sales Tax Officer on 2nd May, 1969. Against the said order of the Sales Tax Officer, the applicants filed an appeal to the Assistant Commissioner of Sales Tax on 21st June, 1969. Appeals are provided for by section 55 of the Act. Under section 55(1) an appeal, from every original order made by a Sales Tax Officer, or any other officer subordinate thereto, lies to the Assistant Commissioner of Sales Tax; from an original order made by the Assistant Commissioner, to the Commissioner of Sales Tax; and from an original order made by a Deputy Commissioner, Additional Commissioner, or Commissioner, to the Sales Tax Tribunal. Under section 55(2), in the case of an order passed in appeal by an Assistant Commissioner, a second appeal lies at the option of the appellant, either to the Commissioner or to the Tribunal. Under section 55(3), subject to revision, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chedule B, C, D or E shall be the aggregate of all taxes which would have been leviable thereon but for the certificate given under section 11 or 12." The said amending Act was brought into force with effect from 18th November, 1970. The above amendment to section 14 was effected because in some of the decisions of the Tribunal a doubt had been raised as to the rate at which the purchase tax under section 14 of the Act was leviable. Even after this amendment, some of the decisions of the Tribunal raised a doubt about the rate of purchase tax under section 14 and yet another Amending and Validating Act was passed by the State Legislature in 1973 being the Bombay Sales Tax (Amendment and Validating Provisions) Act, 1973 (Maharashtra Act No. 13 of 1973). The said Amendment Act came into force with effect from 7th February, 1973. By that Act sub-section (2A) of section 14 was substituted with retrospective effect as follows: "(2A) Where any dealer or commission agent becomes liable to pay purchase tax under sub-section (1) or (2), as the case may be, there shall be levied a purchase tax- (a) on the turnover of purchases of goods specified in columns 2 of Schedules B, C and D, at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly passed an order in appeal in terms of the said notice issued by him holding that the goods purchased of the value of Rs. 7,69,246 and not of the value of Rs. 3,52,597 as held by the Sales Tax Officer, were utilised in contravention of the declaration made by the applicants in the certificates in form 15 given by them, and were exigible to purchase tax at the rate of 5 per cent. Against the said appellate order of the Assistant Commissioner, the applicants filed a second appeal to the Tribunal. Before the Tribunal the applicants, inter alia, contended that the Assistant Commissioner had no jurisdiction under section 55(6) of the Act to enhance the rate of purchase tax or to enhance the quantum of turnover of purchases of goods which were utilised in contravention of the declarations contained in certificates in form 15 given by the applicants, inasmuch as their appeal was governed by the provisions of sub-section (6) of section 55 prior to its amendment and the amended sub-section (6) had no application to their appeal. These contentions were negatived by the Tribunal which dismissed the said second appeal. At the instance of the applicants the following four questions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case or because separate accounts have not been kept by the assessee, it is not possible for an assessee to prove that the goods purchased by them against certificates in form 15 have been utilised in the manner specified in the declarations made in the said certificates. The Berar Oil Industries' case [1975] 36 STC 473 related to the purchase of raw materials only. Here we have two types of purchases made by the applicants: (1) purchase of raw materials and (2) purchase of machinery for the purpose of manufacturing goods for sale. It is not the case of the department that the applicants had not kept separate accounts in respect of the two types of purchases made by them. What the Assistant Commissioner, however, did was to read the judgment in Berar Oil Industries' case [1975] 36 STC 473 as referring to all kinds of purchases irrespective of whether these were purchases in respect of which it was impossible for the assessee to prove that he had complied with the declarations given by him in certificates in form 15 or not. In so doing the Assistant Commissioner misunderstood the ratio of that case and equally so did the Tribunal. The contravention of the certif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hance the assessment. It was further submitted that the only power of the appellate authority under the old sub-section (6) was either to accept or reject the grounds upon which the appeal was filed. According to the applicants, by the new sub-section (6) a wider jurisdiction and greater powers have been conferred upon the appellate authority. It was submitted that the right to appeal is a right which becomes vested in a party when the proceedings commence or the lis starts and that in the case of an assessment the lis commences when a return is filed and if thereafter any change is made in the law the amended law cannot apply either to the procedure to be followed in determining the appeal or the powers to be exercised by the appellate authority in deciding the appeal and the appeal must be decided in accordance with law as it stood at the date of the commencement of the proceedings. The very same arguments were also advanced with respect to increasing the rate of tax on the turnover of purchases held to be exigible to purchase tax under section 14. On behalf of the respondent it was contended that the new sub-section (6) was substituted merely to specify elaborately the powers al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 247. We must, therefore, leave the Statement of Objects and Reasons out of consideration while construing the true scope and effect of the old and the new sub-sections. Reliance was next placed on behalf of the applicants upon certain decisions under the old Indian Income-tax Act, 1922. Section 31 of that Act provided for the powers of the Appellate Assistant Commissioner while hearing an appeal. Sub-section (3) of that section is relevant. The material part of that sub-section was as follows: "31. (3) In disposing of an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment,- (a) confirm, reduce, enhance or annul the assessment, or (b) set aside the assessment and direct the Income-tax Officer to make a fresh assessment after making such further inquiry as the Income-tax Officer thinks fit or the Appellate Assistant Commissioner may direct, and the Incometax Officer shall thereupon proceed to make such fresh assessment, and determine where necessary the amount of tax payable on the basis of such fresh assessment, Provided that the Appellate Assistant Commissioner shall not enhance an assessment or a penalty unless the appellant has had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner to the Appellate Tribunal. Sub-section (1) of section 33 of the old Income-tax Act specifically conferred such right upon an assessee. Sub-section (2) of section 33 provided that the Commissioner of Income-tax might, if he objected to any order passed by an Appellate Assistant Commissioner under section 31, direct the Income-tax Officer to appeal to the Appellate Tribunal against such order. Sub-section (4) of section 33 of the old Income-tax Act provided as follows: "The Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate any such orders to the assessee and to the Commissioner." Section 253 of the new Income-tax Act also provides for an appeal both by the assessee as also by the department against an order of an Appellate Assistant Commissioner or a Commissioner (Appeals). Section 254(1) of the new Income-tax Act provides that "The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit". It will thus be seen that both under the old Income-tax Act as also under the new Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31, when the legislature thought of giving power to the Appellate Assistant Commissioner to enhance the assessment, it has in terms enacted that. In our opinion, that fact is against the contention that the words of section 33(4) are wide enough to include a power of enhancement, without an appeal by the Commissioner. The word 'thereon' used in section 33(4) only means 'on the appeal', which must mean on the grounds raised in the appeal. Read in that way, the sub-section only gives power to the Appellate Tribunal to give its decision and pass orders in respect of all grounds urged (which must be on behalf of the appellant) in respect of the decision appealed against. In deciding those grounds it can pass appropriate orders. But, in our opinion, it is not open to the Tribunal itself to raise a ground or permit the party, who has not appealed to raise a ground, which will work adversely to the appellant." The above decision was followed and its ratio reiterated by another Division Bench of this High Court in Puranmal Radhakishan and Company v. Commissioner of Income-tax, Bombay [1957] 31 ITR 294 and in New India Life Assurance Co. Ltd. v. Commissioner of Income-tax, Excess Profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s v. Commissioner of Income-tax, U.P. [1974] 94 ITR 107 a Division Bench of the Allahabad High Court, after referring to the above Supreme Court case and the Bombay case of New India Life Assurance Co. Ltd. v. Commissioner of Income-tax [1957] 31 ITR 844, held that the word "thereon" restricted the jurisdiction of the Tribunal to the subject-matter of the appeal and that the subject-matter of the appeal is stated in the original grounds of appeal and such additional grounds as might be raised by leave of the Tribunal and that it is not open to the Tribunal to adjudicate or give a finding on a question which is not in dispute and which does not form the subject-matter of the appeal and that the Tribunal, therefore, cannot enhance an assessment on an appeal by the assessee. It further held that it is not open to the Tribunal to give a finding adverse to the assessee, which does not arise from any question raised in the appeal nor is it open to it to raise any grounds which would work adversely to the assessee and pass an order which makes his position worse than it was under the order appealed against. The language of the new sub-section (6) of section 55 of the Act corresponds wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before him but which had been considered by the Income-tax Officer and determined in the course of the assessment. The position which, therefore, emerges on the aforesaid authorities is that the Income-tax Appellate Tribunal, though it may exercise the widest power in deciding an appeal, is confined to the subject-matter of the appeal, that is, to the questions raised before it by the party which has approached it, whether such party be the assessee or the Commissioner; and that in an appeal by the assessee it is open to the department to raise a contention for the first time so long as that contention relates to the question which falls for determination in the said appeal arising out of those questions with respect to which the appeal has been preferred and that the Tribunal has also the power to remand the matter for the purpose of further enquiry. However wide its power, the Tribunal's jurisdiction is none the less confined only to the subject-matter of the appeal, namely, those parts of the assessment to which the appellant-whether it be the assessee or the department-has objected and which call for determination by the Tribunal. It cannot go into a question which does not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment can approach the Appellate Tribunal in appeal. There is no such provision under the Act. The scheme of section 55 of the Act makes it clear that the appeal can only be by the assessee and not by the department, whether it be a first appeal or a second appeal. Thus, unlike under the Income-tax Act, under the Bombay Sales Tax Act, the department, if aggrieved by an original order, has no remedy by way of an appeal. The only remedy for the Commissioner is to exercise his suo motu power of revision under section 57 of the Act, within the time prescribed by that section. The question which arises is, "whether when an appeal is filed, the only remedy for the Commissioner is to exercise his power of suo motu revision or whether he can, while deciding the appeal, also correct a wrong part of the order passed by a subordinate officer?" Whether he could do so or not would depend upon whether what is sought to be done is an integral part of the questions which arise for determination in the appeal and is not something wholly outside its scope and unconnected with it. If it is only with respect to a matter wholly unconnected with the actual subject-matter of the appeal, then, the onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he deductions given to them in respect of their purchase of groundnuts was held to be wrongly given. This decision of the Tribunal altered the basis of the assessment and as a result thereof, in respect of the turnover outside the State, the purchase price of the relative groundnuts could not be deducted but had to be included in the turnover of the assessees. The Tribunal thereupon directed the assessing authority to effect the assessment in accordance with the principles laid down by it. The assessees then went in revision to the Madras High Court. It was the contention of the assessees that both the lower authorities had held that they were entitled to the deduction and the only question before the Tribunal was whether they were entitled to an exemption or not, and if the Tribunal came to the conclusion that they were entitled to an exemption in respect of their outside State sales by reason of the provisions of article 286(1)(a) of the Constitution, the Tribunal was bound to grant to them such exemption but could not disturb the findings of the lower authorities that they were entitled to deduction and the Tribunal was, therefore, not entitled to hold that under the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal was that the Tribunal could not of its own accord disturb those parts of the assessment order or of the order appealed against, which did not expressly or by necessary implication arise for determination before it. If a part of the assessment order was not complained of in appeal, that is to say, was not the subject-matter of the appeal, the appellate authority would have no jurisdiction to pass an order with reference thereto under the old sub-section (6) of section 55. For instance, had an assessee appealed against the rejection of his claim with regard to certain export sales made by him on the ground that they were not liable to be taxed under article 286(1)(b) of the Constitution, while deciding that question the appellate authority would have no jurisdiction under the old subsection (6) of section 55 to go into the question whether a transaction which had been accepted by the Sales Tax Officer as a works contract was not a works contract but a sale. Similarly, if the question before the appellate authority was whether certain deductions were to be allowed in respect of sales of particular goods made by an assessee, the appellate authority would have no juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pass any other order which the appellate authority may think fit. These powers, which are of the widest amplitude, are expressly conferred both on the Appellate Assistant Commissioner and on the Appellate Tribunal, vide sections 31 and 36 of the Tamil Nadu General Sales Tax Act, 1959. The provisions show clearly that the power of the appellate authority concerning an assessment under appeal is no different, and not less wide, than the power of the assessing authority to make the assessment in the first instance." This part of the decision, therefore, turns upon the language of sections 31 and 36 of the Tamil Nadu General Sales Tax Act, 1959, and can have no relevance for interpreting the old sub-section (6) of our section 55 which is couched in entirely different language. For the reasons set out above, we are unable to accept the contention of the department that the new sub-section (6) of section 55 of the Act merely enumerates the power already possessed by the appellate authority under the old sub-section (6) of section 55 of the Act. Under the new sub-section (6) of section 55 of the Act the appellate authority became clothed with wider power and jurisdiction than it had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal to the Federal Court, since replaced by the Supreme Court. The appellant's contention was accepted by the Supreme Court and leave to appeal was granted. The Supreme Court held that the right of appeal was not a mere matter of procedure but was a substantive right and the institution of the suit carried with it the implication that all rights of appeal then in force were preserved to the parties thereto till the rest of the carreer of the suit. Further, it held that the right of appeal was a vested right and such a right to enter the superior court accrued to the litigant and existed on and from the date the lis commenced and such right was governed by the law prevailing at the date of the institution of the suit and could be taken away only by a subsequent enactment if it so provided expressly or by necessary intendment and not otherwise. In our opinion, this case does not touch the point which we have to decide. The applicants' right of appeal is not taken away or sought to be taken away by the new sub-section (6) of section 55, but what has happened is that their right to have the appeal decided in a particular manner is sought to be affected and has been affected. The appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing right but in truth whittled down the right itself and could not be regarded as a mere rule of procedure. In our view, this decision too is not quite to the point because the question involved in it was of the right of filing an appeal. Imposition of the condition that the amount of tax assessed should be deposited as a pre-condition of filing an appeal was one which restricted the right to prefer an appeal, and in cases where an assessee would be unable to make such a deposit denied to him that right. In the present case, the applicants' appeal had already been filed and was pending and there was no impediment placed by the new sub-section (6) of section 55 to the hearing of that appeal by the appellate authority. The authority which now requires to be considered is the decision of the Supreme Court in Moti Ram v. Suraj Bhan AIR 1960 SC 655. That was a case under the East Punjab Urban Rent Restriction Act, 1949. Prior to the amendment of section 15 of that Act by Act 29 of 1956 the decision of the District Court against an order of the Rent Controller was final under section 15 of the said Act. By the amending Act 29 of 1956 the finality of the appellate decision was taken aw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case for the purpose of satisfying itself that the decision in appeal was according to law, which jurisdiction the High Court did not possess prior to the date of the amending Act, and that in deciding the said revisional application the High Court had exceeded its jurisdiction by exercising the wider power conferred by the amending Act. The Supreme Court distinguished its earlier decision in Moti Ram v. Suraj Bhan AIR 1960 SC 655 on the ground that in that case the decision of the appellate authority, which was brought before the High Court in the exercise of its revisional jurisdiction under the amended section 15 of the East Punjab Urban Rent Restriction Act, was delivered after the amending Act had come into force, and therefore, on the date on which the appellate order was made it had not acquired finality, for it was subject to an order which might be passed in revisional application which might be filed before the High Court under the amended section. In the present case, the applicants' appeal was filed before the amendment of sub-section (6) of section 55 had come into force. On the date when they filed an appeal the applicants had acquired the right to have their app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assistant Commissioner was wrong and had misunderstood and misapplied our decision in the case of Berar Oil Industries [1975] 36 STC 473, referred to earlier, is beside the point. He had jurisdiction under the unamended sub-section (6) of section 55 to decide the method of working out the percentage and the fact that the method adopted by him was wrong touched the merits of the case and did not affect the exercise of his power. Further, the sole question was whether the applicants were not liable to pay any purchase tax under section 14 of the Act. The Sales Tax Officer had held that the applicants were liable to pay the purchase tax on purchases of the value of Rs. 3,52,597 at the rate of 3 per cent. What the Assistant Commissioner held was that by reason of the method of working out the percentage applied by him the applicants were liable to pay the purchase tax under section 14 on purchases of the value of Rs. 7,69,246 at the rate of 5 per cent. Mr. Patel, on behalf of the applicants, contended that the dispute was about liability to pay the purchase tax and not as to the rate of purchase tax. The question of liability to pay the purchase tax under section 14 would by n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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