S.T.Rev.No.422 of 2004 (Cardamom Marketing Corporation v. State of Kerala)

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT :- THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER WEDNESDAY, THE 24TH SEPTEMBER 2008 / 2ND ASWINA 1930 **ST.Rev..No.422 of 2004** ----------------------------------------- ( TA.No.656/1999 OF KERALA SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH-II, ERNAKULAM (ORDER DATED 23[rd] JANUARY, 2004) (ASSESSMENT YEAR 1991-1992) .................... ## REVISION PETITIONER/APPELLANT/ASSESSEE:- ----------------------------------------------------------------------- M/S.CARDAMOM MARKETING CORPORATION, VANDANMEDU, IDUKKI DISTRICT, REPRESENTED BY THE MANAGING PARTNER, R.KRISHNASWAMY. BY ADV. SRI.C.K.THANU PILLAI ## RESPONDENT/RESPONDENT/REVENUE:- ----------------------------------------------------------- THE STATE OF KERALA. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ. THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 24/09/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:- ## H.L.Dattu,C.J. & A.K.Basheer,J. -------------------------------------------S.T.Rev.No.422 of 2004 -------------------------------------------Dated, this the 24[th] September, 2008 ## **ORDER** ## **H.L.Dattu,C.J.** This revision petition relates to the assessment year 1991-92 under the provisions of the Central Sales Tax Act (“CST Act” for short). (2) The petitioner is a firm, carrying on auction sale of cardamom brought by agriculturists and small traders. The assessee is also a dealer, registered both under the provisions of the Kerala General Sales Tax Act (“KGST Act” for short) and CST Act. (3) The original assessments under the provisions of the CST Act came to be completed by the assessing authority on 3.3.1994, granting exemption from payment of tax under the provisions of CST Act, on the ground that the sales effected by the petitioner would come within the purview of Section 5(3) of the CST Act. (4) Subsequently, the assessing authority, being of the opinion that the whole of the turnover of the dealer has escaped assessment to tax in the orders of assessment passed earlier, had initiated reassessment proceedings under Section 19(1) of the KGST Act read with Section 9(2) of the CST Act. The assessing authority, after hearing the petitioner, has passed an order dated 31.5.1996 bringing to tax the turnover which had been exempted in the original order of assessment passed on 3.3.1994. S.T.Rev.422 of 2004 - 2 - (5) The assessee, being aggrieved by the orders of reassessment passed by the assessing authority, had filed an appeal before the first appellate authority in S.T.A.No.424 of 1996. The first appellate authority has set aside the reassessment orders passed by the assessing authority purely on the ground of limitation, without entering into the merits or demerits of the appeal filed by the assessee. (6) In the interregnum, the Deputy Commissioner of Commercial Taxes has initiated _suo motu_ revisional proceedings by issuing a notice under Section 35(1) of the KGST Act to revise the original orders of assessment passed by the assessing authority dated 3.3.1994. (7) The notice issued by the Deputy Commissioner of Commercial Taxes, in exercise of his powers under Section 35(1) of the KGST Act, is as under: _“In the circumstances, in the absence of any privity of contract for export from a foreign buyer, the purchases made by M/s.A.V.Thomas & Co., from the assessee cannot be to satisfy any foreign contract (since there is no contract with AIT) and hence the sale is not in the course of export as per section 5 (3) of the C.S.T.Act. As such, the exemption allowed does not appear to be in order._ _Hence it is proposed to cancell the assessment orders - dtd.3.3.94 for 91 92 under G.S.T. (.sic) & C.S.T. completed by the inspecting Asst. Commissioner, AIT & ST, Kumily, under section 35(1) of the K.G.S.T.Act 1963._ S.T.Rev.422 of 2004 - 3 - _Your objection, if any, against the proposal should be filed within 7 days of receipt of this notice, failing which the case will be disposed of on it merits. You are also given an opportunity of personal hearing on 16..10..97 at 11.A.M. in my office at Kattappana, with all evidences you rely on”._ (emphasis supplied by us) (8) After receipt of the aforesaid notice, petitioner had filed its reply letter dated 27[th] November, 1997. Apart from others, the assessee had specifically contended as under: _“1. Eventhough section 35 of the KGST Act, vests you with powers to revise an order passed by the Inspecting Asst. Commissioner, such revision can be made only in respect of an order which is live and existing at the time of issuing the notice u/s 35. The order dtd: 3.3.1994, proposed to be revised u/s 35 has been re-opened and vacated and set aside, and substituted by a fresh order dtd: 31.5.1996 passed by the Inspecting Asst. Commissioner himself and hence the initial order dtd: 3.3.1994 cannot be said to survive in any manner to any extent thereafter. Further, the facts and allegations contained in the notice u/s 35 have been duly considered by the Inspecting Asst. Commissioner in his fresh order passed on 31.5.1996 in substitution of the original order dtd: 3.3.1994. We may in this connection draw your kind reference to the observations of the Hon: High Court of Kerala in Importee International Private Ltd. v. State of Kerala 1991 (1) KLT 281”._ S.T.Rev.422 of 2004 - 4 - ## (9) The revisional authority, after considering the objections so filed by the assessee, in its cryptic order has observed as under: _“I have gone through their contentions and perused the records of case. It is alleged that the order dt.3.3.94 proposed to be revised u/s 35 has already been re-opened and vacated and set aside and substituted by a fresh order dt.31.5.96 passed by the Inspg. Asst. Commissioner, Kumily himself and hence the initial order dt.3.3.94 cannot be said to survive in any manner to any extent thereafter. Further, it is argued that the facts and allegations contained in the notice under section 35 have been duly considered by the Inspg. Asst. Commissioner in his fresh order passed on 31.5.96 in substitution of the original order dt.3.3.94. But the Addl. Deputy Commissioner (Appeals) Agrl. Incometax & Salestax, Ernakulam in his order STA No.424/96 dt.23.2.98 has quashed the order dt.31.5.96 passed by the Inspg. Asst. Commissioner, Kumily in substitution of the original order dt.3.3.94, being time barred._ _Hence the contention of the assessee is not worth considering. All other contentions of the assessee merit no consideration. In the circumstances, the following orders are passed._ ## _ORDER No.A4-5125/97 dt.26.2.1998_ _In exercise of the powers conferred upon me under section 35 of the KGST Act, 1963, the CST Assessment order dt.3.3.94 passed by the Inspg. Asst. Commissioner, Agrl. Incometax & Salestax, Kumily in respect of M/s.Cardamom_ S.T.Rev.422 of 2004 - 5 - _Marketing Corporation, Vandenmedu for the year 91-92 is hereby cancelled”._ (10) Aggrieved by the orders so passed by the revisional authority, the assessee was before the Sales Tax Appellate Tribunal in T.A.No.656 of 1999. The Tribunal has rejected the appeal, by its order dated 23[rd] January, 2004. Correctness or otherwise of the said order is the subject matter of this revision petition filed under Section 41 of the KGST Act. (11) Sri.C.K.Thanu Pillai, learned counsel appearing for the assessee, would submit that the notice issued by the revisional authority in exercise of his powers under Section 35(1) of the KGST Act read with Section 9(2) of the CST Act is void, irregular, illegal and improper, for the reason, that, the orders passed by the assessing authority dated 3.3.1994 had been re-opened by the assessing authority in exercise of his powers under Section 19(1) of the KGST Act and, therefore, the original order of assessment had merged with the orders passed by the assessing authority under Section 19(1) of the KGST Act. The learned counsel would, further, contend, that, when the notice came to be issued by the revisional authority in exercise of his powers under Section 35(1) of the KGST Act, the original order of assessment dated 3.3.1994 was not alive and, therefore, the revisional authority cannot revise an order which is not in existence. S.T.Rev.422 of 2004 - 6 - (12) Per contra, Sri.Mohammed Rafiq, learned counsel appearing for the Revenue, would submit that merely because the reassessment proceedings had been initiated by the assessing authority, it cannot be said that the original order of assessment was merged with the reassessment order. In support of that contention, the learned counsel intends to rely upon the observations made by the apex Court in the case of _CIT_ v. _Alagendran Finance Ltd._ [(2007) 162 TAXMAN 465 (SC)]. (13) The one and only issue that would arise for our consideration and decision is, whether the revisional authority was justified in invoking his powers under Section 35 of the KGST Act to revise the order which was not in existence. To resolve the issue that we have raised for our consideration and decision, the provisions of section 35 of the KGST Act requires to be noticed. The said provision reads as under: _**“35. Powers of revision of the Deputy Commissioner suo motu:** -(1) The Deputy Commissioner may, of his own motion, call for and examine any order passed or proceedings recorded under this Act by any officer or authority subordinate to him other than an Appellate Assistant Commissioner which in his opinion is prejudicial to revenue and may make such enquiry or cause such enquiry to be made and, subject to the provisions of this Act, may pass such order thereon as he thinks fit._ _(2). The Deputy Commissioner shall not pass any order_ S.T.Rev.422 of 2004 - 7 - _under sub-section(1) if.-_ _(a). the time for appeal against the order has not expired;_ _(b). the order has been made the subject of an appeal to the Appellate Assistant Commissioner or the Appellate Tribunal or of a revision in the High Court; or_ _(c). more than four years have expired after the passing of the order referred to therein._ _**(2A)** Notwithstanding anything contained in sub-section (2), the Deputy Commissioner may pass an order under sub-section (1) on any point which has not been decided in an appeal or revision referred to in Clause (b) of sub-section (2), before the expiry of a period of one year from the date of the order in such appeal or revision or before the expiry of the period of four years referred to in Clause ( c) of the sub-section, whichever is later._ _(3). No order under this Section adversely affecting a person shall be passed unless that person has had a reasonable opportunity of being heard”._ (14) A perusal of the aforesaid provision would clearly demonstrate, that, the revisional authority can exercise its suo motu powers to revise an order, if the said order is prejudicial to the interest of the Revenue, after issuing a notice and after making such enquiry as may be S.T.Rev.422 of 2004 - 8 - deemed necessary. In the instant case, as we have already noticed, an original order of assessment came to be passed by the assessing authority on 3.3.1994. In the said order, the assessing authority had granted certain exemptions to the assessee, primarily on the ground that the transaction of the assessee would come within the purview of Section 5(3) of the CST Act. Subsequently, the assessing authority had issued a notice under Section 19(1) of the KGST Act read with Section 9(2) of the CST Act to reassess the escaped turnover. In the said reassessment order passed, the assessing authority has levied tax under the provisions of the CST Act, which was exempted by him earlier while passing the original assessment order dated 3.3.1994. These facts are not in dispute. (15) The orders of reassessment passed by the assessing authority was the subject matter of first appeal before the first appellate authority. The first appellate authority has allowed the appeal filed by the assessee, primarily on the ground of limitation. (16) During the pendency of the appeal, the revisional authority has initiated suo motu revisional powers by issuing a notice dated 30.09.1997. In the said notice, the revisional authority has categorically stated that he intends to revise the orders of assessment dated 3.3.1994, passed by the assessing authority for the assessment year 1991-92 under the provisions of the CST Act. S.T.Rev.422 of 2004 - 9 - (17) On the day when the revisional authority had issued the aforesaid notice, the original order of assessment dated 3.3.1994 was not in existence, in the sense, that, the said order was the subject matter of reassessment proceedings by the assessing authority. An order, which was not in existence, cannot be revised by the revisional authority by invoking his suo motu revisional jurisdiction and on that sole ground, in our opinion, the orders passed by the revisional authority pursuant to his notice dated 30.9.1997, and the subsequent orders passed by the Tribunal require to be set aside. (18) Accordingly, while answering the questions of law framed by the assessee in favour of the assessee and against the Revenue, we allow the revision petition and set aside the orders passed by the revisional authority dated 26.02.1998 issued pursuant to the notice dated 30.09.1997 as well as the orders passed by the Tribunal in T.A.No.656 of 1999 dated 23.01.2004. (19) I.A.No.3181 of 2004 is dismissed. Ordered accordingly. H.L.Dattu Chief Justice vku/dk A.K.Basheer Judge