# 8 56 THVL. BOMBAY AMMONIA PVT. LTD v. STATE OF TAMIL NADU

- **Citation:** [1976] 3 S.C.R. 856
- **Court:** Supreme Court of India
- **Decided:** 1976-03-24
- **Case number:** Civil Appeal No. 1699 of 1973
- **Bench:** A. N. Ray, M. H. Beg, Jaswant Singh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/8-56-thvl-bombay-ammonia-pvt-ltd-v-state-of-tamil-nadu-6841
- **Pages:** 6

## Headnote

Madras General Sale Tax Act, 1959 s. 32-Suo Motu Power-Scope of
exe1nption-Ext:mption not clain1ed before assessn1ent-Appeal not preferred-
!/ could plead ntistake !a&cr.
The appellant submitted a sales-tax return showing the taxable turn0ver.
The assessing authority, while checking the accounts, discovered an lij).disclosed
turnover.
He added that sum to the turnover and then assessed sales-tax on
that turnover.
The appellant did not file any appeal against the
assessmt'nt
order.
The Deputy Commissioner of Sales Tax issued a notice to the appellants in exercise of ~;uo 1notu power of revision under s. 32 of the Madras
&'lies-tax Act to show cause why a penalty should not be imposed in respect
1
of the undisclosed turnover.
While challenging the exercise of this !)Ower the -tappellant alternatively prayed for exemption in respect of a sum representin!!
works contracts which, they alleged, did not amount to sale of goods.
The
first ground was rejected; on the second ground it was held that since the
appellants did not file an a!)peal in the regular course against the assessment
order they were not entitled to exemption.
On appeal, the Appellate Tribunal
allowed the clain1 for exemption on the ground that it represented works
contract.
The High Court in revision set aside the order of the Tribunal granting
exemption.
Dismissing the appeal,
E
HELD : The suo n1otu power of revision of the Deputy Commissioner in
;f
·G
s. 32 is wide and can be exercised both in favour of the revenue as well as the
tax-payer in order to correct any error or illegality committed by the assessing -.,..
authority in his order of assessment.
[860Dl
State of Kerala v. K. M. Cheria Abdulla and Company (1965) 16 S.T.C.
875 [1965] 1 S.C.R. 601 and The Swastik Oil Mill" Ltd. v. fl. ll. Muushi,
Deputy Cotn111issioner of Sales Tax, Bon1bay (1968) 21 S.T.C. 383 referred
to.
But in the present case the Deputy Commissioner was right in refusing
to exercise his revisional power in favour of the appellants and the High Ccurt
was right in reversing the order of the Appellate Tribunal.
At no stage of the
proceedings before the assessing authority did the assessee bring it to the assessing authority's notice that a suh.;t}Jntial portion of the turnover related to works
contracts and as such exempt from liability to tax.
Secondly, the appellants
acquiesced in the order ot assess1nent passed by the assessing authority and did
not prefer any appeal.
In face of the decision of this C'ourt in State
of
Madras v. Gannon Dunkerley and Co. Ltd. f 1959] SCR 379 the appe!Jants .rcanr1ot plead that they did hot claim exen1ption under the mist<iken impression
that the transactions iin1ounted to sale of goods. [860 E G; 86 l B]

## Text

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8 56
THVL. BOMBAY AMMONIA PVT. LTD.
V.
STATE OF TAMIL NADU
March 24, 1976
[A. N. RAY, C.J., M. H. BEG AND JASWANT SINGH, JJ.]
Madras General Sale Tax Act, 1959 s. 32-Suo Motu Power-Scope of
exe1nption-Ext:mption not clain1ed before assessn1ent-Appeal not preferred-
!/ could plead ntistake !a&cr.
The appellant submitted a sales-tax return showing the taxable turn0ver.
The assessing authority, while checking the accounts, discovered an lij).disclosed
turnover.
He added that sum to the turnover and then assessed sales-tax on
that turnover.
The appellant did not file any appeal against the
assessmt'nt
order.
The Deputy Commissioner of Sales Tax issued a notice to the appellants in exercise of ~;uo 1notu power of revision under s. 32 of the Madras
&'lies-tax Act to show cause why a penalty should not be imposed in respect
1
of the undisclosed turnover.
While challenging the exercise of this !)Ower the -tappellant alternatively prayed for exemption in respect of a sum representin!!
works contracts which, they alleged, did not amount to sale of goods.
The
first ground was rejected; on the second ground it was held that since the
appellants did not file an a!)peal in the regular course against the assessment
order they were not entitled to exemption.
On appeal, the Appellate Tribunal
allowed the clain1 for exemption on the ground that it represented works
contract.
The High Court in revision set aside the order of the Tribunal granting
exemption.
Dismissing the appeal,
E
HELD : The suo n1otu power of revision of the Deputy Commissioner in
;f
·G
s. 32 is wide and can be exercised both in favour of the revenue as well as the
tax-payer in order to correct any error or illegality committed by the assessing -.,..
authority in his order of assessment.
[860Dl
State of Kerala v. K. M. Cheria Abdulla and Company (1965) 16 S.T.C.
875 [1965] 1 S.C.R. 601 and The Swastik Oil Mill" Ltd. v. fl. ll. Muushi,
Deputy Cotn111issioner of Sales Tax, Bon1bay (1968) 21 S.T.C. 383 referred
to.
But in the present case the Deputy Commissioner was right in refusing
to exercise his revisional power in favour of the appellants and the High Ccurt
was right in reversing the order of the Appellate Tribunal.
At no stage of the
proceedings before the assessing authority did the assessee bring it to the assessing authority's notice that a suh.;t}Jntial portion of the turnover related to works
contracts and as such exempt from liability to tax.
Secondly, the appellants
acquiesced in the order ot assess1nent passed by the assessing authority and did
not prefer any appeal.
In face of the decision of this C'ourt in State
of
Madras v. Gannon Dunkerley and Co. Ltd. f 1959] SCR 379 the appe!Jants .rcanr1ot plead that they did hot claim exen1ption under the mist<iken impression
that the transactions iin1ounted to sale of goods. [860 E G; 86 l B]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1699 of 1973.
H
Appeal by Special Leave from the Judgment and order dated
4-5-73 of the Madras High Court in T.C. No. 223 of 1969.
K. S. Ramamurthi and (Mrs) S. Gopalakrishna, for the appellant.
I
THVL. BOMBAY AMMONIA LTD. v. TAMIL NADU (Jaswant Singh, J.) 857
P. Ram Reddy, A. V. Rangam and (Miss) A. Subhashini, for the
· respondent.
The Judgmen'. of the Court was delivered by
JASWANT SINGH, J.
This is an appeal by special leave against the
judgment and order dated May 4, 1973 passed by the High Court
of Madras in T.C. No. 223 of 1969.
B
It appears that the appellants who are dealers in refrigerators,
spare parts etc. submitted a return for the year 1964-65 to the Joint
Commercial Tax Officer, Madras (hereinafter called the 'Assessing
Authorily') under the Madras General Sales Tax Act, 1959 (hereinafter referred to as 'the Act') showing a total taxable turnover of
Rs. 6,41,031.77.
On checking the accounts of the appellants, the
C
Assessing Authority by its order dated Jaunary 31, 1966 made an
addition of Rs. 33,710.88 to the turnover reported by the appellants
and assessed the sales tax on the turnover of Rs. 6,74,742.65.
The
~ appellants did not choose to prefer an appeal against this assessment.
'
On January 7, 1967, the
Deputy
Commissioner,
Commercial
Taxes, Madras Division, in exercise of his suo n1otu power of revision
under section 32 of the Act issued a notice to the appellants calling
D
upon them to show cause why ~penalty of Rs. 5,056/- on the aforesaid undisclosed turnover of Rs. 33,710.88 be not levied against them.
In response to the notice, the appellants submitted their objections
challenging the jurisdiction of the Deputy Commissioner to levy the
proposed penalty and requested him to drop the proceedings.
In
the alternative, they prayed that they should be granted exemption in
respect of Rs. 6,32,142/- which
represented
works
contracts for
complete fabrication,
erection and
installation or
air-conditioning
pl11.nts with their employers which did not amount to sale of goods.
The Deputy
Commissioner
negatived the
contention of
the
appellant regarding his jurisdiction to levy the penalty, and revising
the assessment levied a penalty of Rs. 3,371/- under section 12(3) of
the Act.
The Deputy Commissioner
also
declined
to allow the
aforesaid exemption claimed by the appellants on the ground that they
'did not file apepals in the regular course as contemplated by the
provisions of the Act'.
The appellants went up in appeal from this order to the Sales
Tax Appellate Tribunal,
Madras, who
substantially
allowed the
appeal, cancelled the penalty and acting on the statements of transactions filed before him by the appellants allowed an exemption for tax
on a turnover of Rs. 5 ,99 ,468 /- as representing the works contracts
holding that as suo motu power of revision could be exercised by the
Deputy Commissioner both for the benefit of the State and the taxpayer, he should have gone into the question of exemption and set right
the assessment by allowing the exemption on the turnover relating to
works contracts.
Ag!(rieved by this order of the Sales Tax Apoellate Tribunal. the
respondent filed a petition under section 38 of the Act to the High
Court of Judicature at Madras for revision of the order of the Sales
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SUPREME COURT REPORTS
[!976) 3 S.C.R.
Tax Appellate
Tribunal.
The High Court allowed
the revision
petition in part and set aside the order of the Tribunal in so far as
it related to the deletion of the turnover of Rs. 5,99,468/-.
\
Counsel for the appellant has urged before us that as the suo
motu power of revision under section 32 of the Act is wide enough
and can be exercised both in favour of the revenue as well as the
assessee regardless of the· fact whether the latter has filed an appeal
against the order of assessment or not, the High Court ought not to
have reversed the order of the Sales Tax Appellate Tribunal in respect of the turnover
of Rs.
5,99,468/-
which related to
worh
contracts.
Two questions arise for determination in this appeal.
Firstly,
what is the scope of the suo motu power under section 32 of the Act.
Secondly, whether the Deputy Commissioner rightly refused to exercise discretion under section 32 of the Act in favour of the appellants.
For the determination of the first question, it is necessary to refer~
to section 32 of the Act which runs as follows:-
"32. Special powers of the Deputy Commissioner.-
(!) The Deputy Commissioner may, of his own motion,
call for and examine an order passed or proceeding recorded by the appropriate authority under section 4-A, section
12, section 14, section 15, or sub-sections (1) and (2) of
section 16 and may make such inquiry or cause such inquiry
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
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 five years have expired after the passing oE
the order.
(3) No order under this section adversely affecting a person shall be passed unless that person has had a reasonable
G
opportunity of being heard.
( 4) In computing the period referred to in clause ( c)
,
of sub-section (2), the time during which the proceedings
/"
before the Deputy Commissioner remained stayed under
the order of a Civil Court or other competent authority shall
be excluded."
H
The language of this section makes it clear that the
suo motu
power conferred on the Deputy Commissioner in regard to the order
or proceeding specified therein is quite wide and he can, subject to
the conditions laid down in sub-sections (2) and (3), exercise the
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THVL. BOMBAY AMMONIA LTD. v. TAMIL NADU (Jaswant Singh, J.) 859
same even at the instance of an assessee who has not filed an appeal
against the order for the
purpose
of rectifying any
illegality or
impropriety thercm.
This section has also been subject matter of interpretation in two
decisions of this Court viz. State of Kera/a v. K. M. Cheria Abduila
and Company( 1) and The Swastik Oil Mills Ltd. v. H. B. Munshi,
Deputy Commissioner of Sales Tax, Bombay('). In the case of K. M.
-Cheria Abdulla and Company (supra) the majority held as follows in
.regard to the scope of the revisional power:-
1
'The Deputy Commissioner is thereby invested with power
to satisfy himself about the legality
or propriety
ot any
order passed or proceedmg recorded by any officer subordinate to
him, or the regularity of any
proceeding of
such officer, and to pass such orders with respect thereto as
he thinks fit
For exercising this power, he may suo motu
or on application call for and examine the record of any
proceeding or order.
There is no doubt that the revising
authority may only call for the record of the order or the
proceedings and the record alone may be scrutinised for
ascertaining the legality or propriety of an order or regularity of the proceeding.
But there is nothing in the Act
that for passing
an order in exercise of his
revisional
jurisdiction, if the revising authority is satisfied that the
subordinate officer has committed an illegality or impropriety
in the order or irregularity in the proceedings, he cannot make
or direct any further enquiry ..... It is, therefore, not right
baldly to propound that in passing an order in the exercise of
his revisional jurisdiction, the Deputy Commissioner must in
all cases be
restricted
to the record
maintained
by the
Officer subordinate to him, and can never make enquiry
outside that record.. . . . Jurisdication to
revise the order
or proceeding of a subordinate officer has to be exercised
for the purpose of rectifying any illegality or impropriety
of the order or irregularity in the proceeding."
The limitations to which
the revisional power is subject were
indicated by the majority thus :-
"It would not invest the revising authority with power to
launch upon enquiries at large so as to trench upon the
powers which are expressly reserved by the Act or by the
Rules to other 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 I 7
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."
(1) (1965) 16 S.T.C. 875 : [1965] 1 S.C.R. 601.
(2)( !968] 21 S.T.C. 383.
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860
SUPREME COURT REPORTS
[1976) 3 S.C.R.
The above view was affirmed by this Court in the case of The
Swastik Oil Mills Ltd. (supra). In regard to the limitations to which
the revisional power is subject, this Court went on in that case to
observe:-
"In fact, when a revisional power is to be exercised, we
think that the only limitations, to which that power is subject, are those indicated by this Court in
K. M. Cheria
Abdulla & Co's case (1965) 16 S.T.C. 875.
These limitations are that the revising authority should not trench upon
the powers which are expressly reserved by the Acts, or by
the Rules to other authorities and should not ignore the
limitations inherent in the exercise of those powers."
In view of the above, we are of opinion that the suo motu power
of revision of the Deputy Commissioner is of wide amplitude and
can be exercised in favour of the Revenue as well as the taxpayer in
~
order to correct any error or illegality committed by the assessing
authority in his order of assessment.
With regard to the second question relating to the refusal by the
Deputy Commissioner to exercise his revisional power in favour of
the appellants, we are of the view that the order does not suffer from
any infirmity.
It is true that money paid under a mistake of law
common both to the assessee and the taxing authority can be got
refunded [See the decision of this Court in The State of Kera/a v.
Aluminium Industries Ltd. ( 1) ].
But in the instant case, the appellants
themselves
submitted
a
return
showing
taxable
turnover
of
Rs. 6,41,031.77. At no stage of the assessment proceedings before the
assessing authority did they bring it to his notice that a substantial
portion of the turnover related to works contracts and was as such
exempt from liability to tax_
The appellants not having raised the
question bv claiming the exemption, the Assessing Authority had no
occasion to consider it.
It cannot, therefore, be said that the order
of assessment suffered from any illegality. It is also significant that the
appellants acquiesced in the order of assessment passed by the assessing authority and did not prefer any appeal against it nor did they
take any other step to have it modified.
Even in the objections
filed by them to the show cause notice issued by the Deputy Commissioner in regard to the levy of penalty, they made a
half-hearted
attempt to claim exemption.
It will be relevant in this connection to
advert to the prayer made by them which is couched in the following
terms:-
•."
/
H
"In the
circumstances we
request you
that the Deputy
Commissioner may either totally drop the proposal to levy
(I) (1965) 16 S.T.C. 689.
'
I
THVL. BOMBAY AMMONIA LTD. v. TAMIL NADU (Jaswant Singh, J.) 861
penalty or in the alternative totally cure the illegality of
the assessment and render justice."
The plea put forth
by the appellants
that they did not claim
exemption under the mistaken impression that the transactions amounted to sale of goods cannot also be countenanced in view of the fact
A
that as far back as in 1954 it was held by the Madras High Court
B:
in Gannon Dunkerley and Co. Ltd. v. State of Madras(') that works
contracts did not involve any element of saJ!e of materials and the
levy of sales tax thereon was unlawful.
This ruling was affirmed
by this Court in State of Madras v. Gannon Dunkerley and Co. Ltd. (2)
We are, therefore, of the view that the Deputy Commissioner rightly
refused to exercise his revisional jurisdiction in favour of the appelC
!ants and the High Court was right in reversing the order of the
•
Appellate Tribunal in so far as it related to the appellants' claim
'
to the aforesaid exemption.
'
For the fore'going reasons, we do not find any merit in this appeal
which is dismissed with costs.
P.B.R.
(I) (1954) 5 S.T.C. 21E.
5-725 SCI/7 6
Appeal dismissed
(2) [1959] S.C.R. 379