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TMI Blog2015 (8) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... nder rule 6(7) of the Central Sales Tax (Kerala) Rules, 1957. The said notices were challenged before this court. This court granted stay of all further proceedings pursuant to the notice. While so, the Commissioner of Commercial Taxes issued notice to the appellant under section 37 of the Kerala General Sales Tax Act, 1963, hereinafter referred to as "the Act", proposing to set aside the assessment order. The reason stated was that subsequent to the completion of assessment by the fast track team, invalidation of F form issued to Sakthi Murugan Trading Company was reported by the Commercial Tax Officer, Tamil Nadu. The appellant sent a reply raising objections, including the jurisdiction of the Commissioner. Thereafter, writ petition was filed by the appellant challenging the notice issued by the Commissioner. The said writ petition was disposed of by this court directing the Commissioner to consider all the contentions raised by the appellant, including the question of jurisdiction and to pass appropriate orders. On the basis of the same, annexure 7 order was passed by the Commissioner. The said order has been challenged in this appeal. 2. The following questions of law are rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings are barred by limitation. 5. Per contra, the learned Government Pleader would contend that there is no embargo against the Commissioner invoking powers under section 37 of the Act. He would point out the difference between the powers conferred under section 37 of the Act and the provisions of section 263 of the Income-tax Act. He would further submit that the order is prejudicial to the interest of the Revenue. He would contend that the proceedings are not barred by limitation. He would in fact submits that it is not open to the appellant to raise question of law regarding limitation not having raised any question of law. 6. The learned counsel for the appellant draw our attention to the following case law:- In Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Debi Prasad Shyam Sunder and Sons[1991] 82 STC 305 (Ker), a Division Bench of this court considered the case of a purchasing dealer who filed declaration in form 25. The goods were taxable at the last purchase point. This court took the view that the subsequent cancellation of registration of the purchasing dealer with retrospective effect would not affect the past tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession 'prejudicial to the interests of the Revenue' is not to be construed in a pettifogging manner, but must be given a dignified construction. The interests of the Revenue are not to be equated to rupees and paise merely. There must be some grievous error in the order passed by the Income-tax Officer which might set a bad trend or pattern for similar assessments which, on a broad reckoning, the Commissioner might think to be prejudicial to the revenue administration. The prejudice must be prejudice to the revenue administration." 9. The court also referred the following paragraph from the judgment of the apex court reported in Malabar Industrial Co. Ltd. v. Commissioner of Income-tax[2000] 243 ITR 83 (SC) (page 88 in 243 ITR):- "10. The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the assessing officer. Every loss of revenue as a consequence of an order of assessing officer cannot be treated as prejudicial to the interests of the revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income-tax v. Gabriel India Ltd.[1993] 203 ITR 108 (Bom) and the High Court of Gujarat in Commissioner of Income-tax v. Smt. Minalben S. Parikh[1995] 215 ITR 81 (Guj) treated loss of tax as prejudicial to the interests of the Revenue. Mr. Abraham relied on the judgment of the Division Bench of the High Court of Madras in Venkatakrishna Rice Company v. Commissioner of Income-tax[1987] 163 ITR 129 (Mad) interpreting 'prejudicial to the interests of the Revenue'. The High Court held (page 138): 'In this context, it must be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income-tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue administration.' In our view, this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs of the Deputy Commissioner dated April 25, 1994 would clearly show that it was the assessment records which were called for by the revisional authority and scrutinised. On such scrutiny it was found that the assessments were not properly made. The investigation conducted by the intelligence officer is then referred. The intelligence officer who is also an assessing authority had brought to the notice of the assessee the inter-State sale of rubber products effected by him during the relevant years which were not accounted and also the suppressed purchase of rubber and other materials used for the manufacture of such goods. Pursuant thereto the assessee admitted the irregularity before the intelligence officer in writing, the offence was permitted to be compounded departmentally by remitting a compounding fee of Rs. 24,000 for the year 1981-82 and Rs. 41,490 for the year 1982-83. We find no merit in the contention raised by the assessee that the revisional authority cannot look into any material other than those available in the assessment records." (emphasis supplied) 14. In Bombay Ammonia Pvt. Ltd. v. State of Tamil Nadu[1976] 37 STC 517 (SC), the apex court took the vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her authorities or to ignore the limitations inherent in the exercise of those powers. For instance, the power to reassess escaped turnover is primarily vested by rule 17 in the assessing officer and is to be exercised subject to certain limitations, and the revising authority will not be competent to make an enquiry for reassessing a taxpayer Similarly, the power to make a best judgment assessment is vested by section 9(2)(b) in the assessing authority and has to be exercised in the manner provided. It would not be open to the revising authority to assume that power.' The above view was affirmed by this court in the case of Swastik Oil Mills Ltd. v. H. B. Munshi, Deputy Commissioner of Sales Tax, Bombay[1968] 21 STC 383 (SC)." 15. In Madras Rubber Factory Ltd. v. State of Kerala[1979] 44 STC 208(Ker)[FB], a Full Bench of this court dealt with the powers of the revisional authority under section 35 of the Act and held as follows:- "The power of assessing escaped turnover under section 19 of the Kerala General Sales Tax Act, 1963, and the power of revision under section 35 are two distinct and separate powers. They have been conferred on two different authorities, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Subsequent information received revealed that F form furnished was invalid. The Commissioner found that in the present case the F form declaration was invalid at the point of issue itself, but information came about the invalidity only subsequently. The decision in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Emakulam v. Debi Prasad Shyam Sunder and Sons[1991] 82 STC 305 (Ker), was distinguished by holding that that is a case where registration was cancelled subsequently. It is found that granting of exemption on the strength of invalid declaration was prejudicial to the interests of the Revenue. It is also found that there was no need for the order which is sought to be revised to be found erroneous. 18. Unlike the provisions under section 263 of the Income-tax Act which requires not merely that the orders sought to be revised is prejudicial to the interest of the Revenue but further more that order is erroneous, under section 37 of the Act the only requirement is that the order must be prejudicial to the interest of the Revenue. Therefore, it may not be proper to go into the question as to whether there is any error in the order of the assessing autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FB]." 20. In Alukkas Jewellery's case[2009] 26 VST 584 (Ker)[FB];[2009] 1 KLT 785 (FB) this court held that under section 35(2A) of the Kerala General Sales Tax Act the Deputy Commissioner was entitled to exercise jurisdiction on any point that had not been decided in appeal. As far as the judgment of this court in Bismillah Trading Co.[2000] 119 STC 558 (Ker);[2001] 248 ITR 292 (Ker) is concerned, the decision turned on the facts which as we already noted is that penalty was imposed without observing the principles of natural justice. The said order was set aside by the Deputy Commissioner and the matter was remanded for fresh consideration. It is the said order which was revised by the Commissioner under section 37 of the Act. It is in the said circumstances, it was found that the order could not be found to be prejudicial to the interest of the Revenue, as following the order of the Deputy Commissioner the order could be passed after affording an opportunity of hearing to the assessee. 21. We have our own reservations about the judgment to the effect that the provision could be invoked only when the order is erroneous. The law does not require that the order is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. No doubt, it is contended by the appellant that the materials, which was allegedly received from the officer in Tamil Nadu, was not made available and, therefore, at any rate, the matter must be remitted back to the Commissioner with an opportunity to the appellant to go through such materials. We are of the view that, it may not be necessary, as the appellant was informed about the materials and also as we are leaving open all the contentions on the same when the matter is redone pursuant to the order of the Commissioner and we would think that no prejudice is caused. No doubt, the appellant would have opportunity, when the matter is considered pursuant to the impugned order, to raise all the contentions before the officer with regard to the cancellation of the F forms on the assessment in question and we leave all such contentions open. 24. Another contention raised by the learned counsel for the appellant is that the assessment is barred by limitation. It is so, according to the appellant, as under rule 6(7) of the Central Sales Tax (Kerala) Rules, 1957, the original order of assessment, which was revised by the Commissioner, was itself barred. In this connect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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