# GOI STATE OF KERALA v. K. M. CHARIA ABDULLAH & CO

- **Citation:** [1965] 1 S.C.R. 601
- **Court:** Supreme Court of India
- **Decided:** 1964-10-05
- **Case number:** Civil Appeal No. 466 of 1962
- **Bench:** K. SUBBA RAo, J. C. Shah Ands. M. Sikri
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/goi-state-of-kerala-v-k-m-charia-abdullah-co-3361
- **Pages:** 13

## Headnote

Madras General Sales Tax Act (9 of 1939) s. 12(2) (i) and Madras
General Sales Tax Rules, 1939, r. 14A-Scope of-If rule ultra vires the
Act.
The respondents subn1itted return of their turn-over under the Madras
General Sales Tax Act, 1939, and claimed exemption in respect of certain
transactions on the ground that they were commission sales exempted under
the Act. The Deputy Commercial Tax Officer granted the exemption and
assessed tax only on the rest of the tum-over. The Deputy Commissioner
of Commercial Taxes, called for the record of the case and b exercise
of the powers under s. 12(2) (i) of the Act and r. 14A of the Madras
General Sales Tax Rules, directed fresh enquiry in respect of the exemption, issued a notice calling upon the assessee to sbo\v cause against the
proposed revision, heard objections and on the basis of fresh evidence
came to the conclusion that the respondents did not act 33 commission
agents but carried on the business of outright purchase and sale in respect
of the entire turn-over. He therefore revised the order of assessment. The
asscSsees' appeUI to the Sales Tax: Appellate Tribunal was allov . .'ed.
The
State invoked the revisional jurisdiction of the High Court. The High Court
held that in dealing with a proceeding under s. 12(2), the revising authority is restricted to the record before the assessing authority and the order
passed on fresh evidence could not be sustained. It also held that r. J 4A
which authorised the re\ising authority to correct the amount of tax payable
after ma.king such enquiry as the authority considers necessary was ultra vircs
the Act. The State appealed to the Supreme Court and contended that the
High Court had erred in decl:iring the rule ultra vires.
HELD (per Shah and Sikri JJ.) : The order passed by the High Court
declaring r. 14A to be ultra vires should be set aside and the proceedings
remanded to the High Court for disposal according to law. [613 A].
Under s. 12(2) (i) the revising authority may call for the record of the
order or the proceeding and the record alone may be scrutinised for ascertaining the legality or propriety of an order or the regularity of the proceeding. If after perusing the record the authority is prima foci• satisfied about
the illegality or impropriety or irregularity, it may under r. 14A, before
passing an order, direct an additional enquiry. Tue validity of the rule
even though it is directed to have effect as if enacted in the Act, is always
open to challenge ·on the ground that it is unauthorised.
But there is
nothing in the Act prohibiting the revising authority from making or directing a further enquiry before passing an order in revision, once it is
satisfied on the record about the existence of the illegality' impropriety or
irregularity. The Act, while conferring' revisional jurisdiction under s. 12,
leaves it to the State Government by rules framed under s. 19, to
prescribe the procedure to be followed by the authority. A provision authorising the re\ising authority to make a further enquiry for effectively exercising his jurisdiction must be. regarded as a provision validly conferring
power unless it expressly or by clear implication nullifies, or is inconsistent
with any. provision of the Act The matter should however be remanded
to the High Court to make an enquiry whether in the circumstances of the
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case, the Deputy Commissioner was competent to proceed in the manner
he bad done and to pass the order io revision. For, while the reviaiooal
jurisdiction is not restricted only to cases of arithmetical errors, it would
not iov...i the authority with power to launch upon enquiries at large ao as
either to trench upon the powers which are expressly reaerved by the Act
or by the rules to other authorities, or to ignore the limitations inherent in
the exercise of the power. (608 F, H; 609 A, D-E, G-H: 611 G-H: 612
A, D, HJ.
Per Subba Rao J. (dissenting) : Ruic 14A in so far as it confer. a

## Text

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GO!
STATE OF KERALA
v.
K. M. CHARIA ABDULLAH & CO.
October 5, 1964
(K. SUBBA RAo, J. C. SHAH ANDS. M. SIKRI JJ.)
Madras General Sales Tax Act (9 of 1939) s. 12(2) (i) and Madras
General Sales Tax Rules, 1939, r. 14A-Scope of-If rule ultra vires the
Act.
The respondents subn1itted return of their turn-over under the Madras
General Sales Tax Act, 1939, and claimed exemption in respect of certain
transactions on the ground that they were commission sales exempted under
the Act. The Deputy Commercial Tax Officer granted the exemption and
assessed tax only on the rest of the tum-over. The Deputy Commissioner
of Commercial Taxes, called for the record of the case and b exercise
of the powers under s. 12(2) (i) of the Act and r. 14A of the Madras
General Sales Tax Rules, directed fresh enquiry in respect of the exemption, issued a notice calling upon the assessee to sbo\v cause against the
proposed revision, heard objections and on the basis of fresh evidence
came to the conclusion that the respondents did not act 33 commission
agents but carried on the business of outright purchase and sale in respect
of the entire turn-over. He therefore revised the order of assessment. The
asscSsees' appeUI to the Sales Tax: Appellate Tribunal was allov . .'ed.
The
State invoked the revisional jurisdiction of the High Court. The High Court
held that in dealing with a proceeding under s. 12(2), the revising authority is restricted to the record before the assessing authority and the order
passed on fresh evidence could not be sustained. It also held that r. J 4A
which authorised the re\ising authority to correct the amount of tax payable
after ma.king such enquiry as the authority considers necessary was ultra vircs
the Act. The State appealed to the Supreme Court and contended that the
High Court had erred in decl:iring the rule ultra vires.
HELD (per Shah and Sikri JJ.) : The order passed by the High Court
declaring r. 14A to be ultra vires should be set aside and the proceedings
remanded to the High Court for disposal according to law. [613 A].
Under s. 12(2) (i) the revising authority may call for the record of the
order or the proceeding and the record alone may be scrutinised for ascertaining the legality or propriety of an order or the regularity of the proceeding. If after perusing the record the authority is prima foci• satisfied about
the illegality or impropriety or irregularity, it may under r. 14A, before
passing an order, direct an additional enquiry. Tue validity of the rule
even though it is directed to have effect as if enacted in the Act, is always
open to challenge ·on the ground that it is unauthorised.
But there is
nothing in the Act prohibiting the revising authority from making or directing a further enquiry before passing an order in revision, once it is
satisfied on the record about the existence of the illegality' impropriety or
irregularity. The Act, while conferring' revisional jurisdiction under s. 12,
leaves it to the State Government by rules framed under s. 19, to
prescribe the procedure to be followed by the authority. A provision authorising the re\ising authority to make a further enquiry for effectively exercising his jurisdiction must be. regarded as a provision validly conferring
power unless it expressly or by clear implication nullifies, or is inconsistent
with any. provision of the Act The matter should however be remanded
to the High Court to make an enquiry whether in the circumstances of the
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case, the Deputy Commissioner was competent to proceed in the manner
he bad done and to pass the order io revision. For, while the reviaiooal
jurisdiction is not restricted only to cases of arithmetical errors, it would
not iov...i the authority with power to launch upon enquiries at large ao as
either to trench upon the powers which are expressly reaerved by the Act
or by the rules to other authorities, or to ignore the limitations inherent in
the exercise of the power. (608 F, H; 609 A, D-E, G-H: 611 G-H: 612
A, D, HJ.
Per Subba Rao J. (dissenting) : Ruic 14A in so far as it confer. a
power oo the revising authority to make a fresh enquiry and to determine
oo the basis of the enquiry the correct amount of tax payable is void,
because, while the jurisdiction under s. 12(2) is clearly limited to the
scrutiny of the order passed or the proceedings recorded by the inferior
authority, and the scope of the scrutiny is confined to the question of
legality or propriety of the order or the regularity of the proceedings, the
rule obviously enlarges the enquiry beyond the limits prescribed. [604 G:
605 A-BJ.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 466 of
1962.
Appeal by special leave from the judgment dated December 2,
1959 of the Kerala High Court in Tax Revision Case No. I of
1957.
V. P. Gopaltm Nambyar, Advocare-Genrra/, Kera/a and V. A.
Se_yid Muhammed, for the appellant.
A. V. Viswanatha Sastri and R. Gopalakrishnan, for the respondent.
SuBBA RAo J., delivered a dissenting Opinion.
The Judgment
of SHAH and SlKRI ]]. was delivered by SHAH J.
Sobba Rao J. I regret my inability to agree. The facts arc
fully stated in the judgment of my learned brother Shah J. It
would, therefore, be enough if only the relevant facts were stated.
The respondents are dealers in pepper and other condiments. For
the year 1950-51 they submitted their return under the Madras
General Sales Tax Act, 1939. wherein they claimed exemption
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in respect of certain transactions on the ground that they were
commission sales exempted under s. 8 of the said Act. The Deputy
Commercial Tax Officer, Cannanore (Rural) gave the exemption
claimed and assessed the tax on the tum-over rclatini: to transactions otqer than those exempted. The Deputy Commissioner of
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Commercial Taxes, Coimbatore Division, called for the record of
the case of the respondents for the said assessment year, and in exercise of the powers under s. 12(2)(i) of the Act dir~ted a fresh
enquiry in respect of the said exemption. He issued a notice on
February 9, 1956, calling upon the respondents to show cause
against the proposed rc:_vision of assessment. On the basis of fresh
evidence, the Deputy Commissioner of Commercial Taxes came to
the conclusion that the respondents did not act as commission agents
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STATE V. K.M.C. ABDULLAH & co. (Subba Rao J.)
603
but carried on the business of "outright purchase and sale" in respect
of the entire tum-over.
On that finding, he revised the ordet ot
the Deputy Commercial Tax Officer and assessed the respondents
on a larger tum-over.
The short question is whe. her the Deputy Commissioner of
Commercial Taxes has jurisdiction under s. 12(2) (i) of the Act,
read with the relevant rule, r. 14-A, to make the order he did.
It is well settled that a subordinate provision, if. inconsistent
with the Act, must give way to the Act.
Though there is an
apparent conflict between a section of the Act and a rule made
thereunder. an attempt should be made to reconcile them; that is to
say, the rule may be so construed, if the phraseology permits it, as
to make it consistent with the Act. If it is not possible, the rule
must be struck down.
It is obvious that the rule cannot override s. 12 of the Act.
If s. 12 does not give jurisdiction to the revisional authority to
make a fresh enquiry and decide the case on merits, r. 14-A
cannot confer on him.such power, for r. "14-A in that event comes
into conflict with s. 12 of the Act and must, therefore, yield to it.
This leads us to the question whether the revisional jurisdiction
conferred under s. I 2 of the Act enables the authority concerned
to make a fresh enquiry after issuing notice to the dealer concerned
and determine the question of assessment on merits.
The Act
provides for appeals in some cases·· and revisions in other cases.
Under s. I 1 ( 1) of the Act any assessee objecting to an assessment
made on him may, within 30 days from the date on which he was
served with the notice of assessment, appeal to such authority as
F may be prescribed; un,der s. 11 (3), the appellate authority may,
after giving the appellant an opportunity of being heard, pass such
orders on the appeal as such authority may think fit.
Under
s. 12(2) of the Act, the revisional authority may suo motu "call
for and examine the record of any order passed or proceeding
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recorded under the provisions of the Act by any officer subordinate to him, for the purpose of satisfying himself as to the legality
or propriety of such order, or as to the regularity of such proceeding, and may pass such order with respect thereto as he thinks
fit." When the Legislature confers a right of appeal in one case
and a discretionary remedy of revision in another, it must be deemed
to have created two jurisdictions different in scope and content.
When it introduced the familiar concepts of appeal and revision,
it is also reasonable to assume that the well-known distinction
between these two jurisdictions was also accepted by the
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legisl: lure.
There is an essential distinction between an appeal
and a revision.
The distinction is based on differences implicit in
the said two expressions.
An appeal is u continuation of the
proc~edings; in effect the entire proceedings are before the appellate authority and it has power to review the evidence subject to
the statutory limitations prescribed. But in the case of a revision,
whatever powers the rcvisional authority may or may not have, it
has not the power to review the evidence unless the statute expressly
confers on it that power. That limitation is implicit in the concept
of revision. Section 12 ( 2) is no doubt wider in scope than s. 1 15
of tbe Code of Civil Procedure. Even so the revisional authority's
juri,diction is confined to the question of legality or propriety of
the order or the regularity of the proceedings. The further limitation on that jurisdiction is that it can only exercise the same on the
examination of the record of any order passed or proceedings taken
by any authority. The section, therefore, not only.limits the scope
ot its jurisdiction but also defines the material on the basis of
which the said jurisdiction is exercised.
The general expression
that the authority "may pass such order as he thinks fit" must
necessarily be confined to the scope of the jurisdiction. The revisional authority, therefore, cannot travel beyond the order passed
or proceedings recorded by the inferior authority and make fresh
enquiry and pass orders on merits on the basis of the said enquiry.
If it is not construed in this manner, the distinction between appeal
and revision would be effaced.
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Bea' ing this distinction in mind let me look at r. 14-A.
Ruic 14-A of the rules does not make any distinction between an
appellate and a revisional authority.
It empowers the revisiona1
authority to issue a notice to a dealer and determine the correct
amount of tax after making such enquiry as it considers necessary.
The said rule, therefore, ~onfers a power larger than that conferred
upon the revising authority under s. 12(2} of the Act. While the·
jurisdiction under s. 12(2) of the Act is clearly limited to the
~crutiny of the order passed or the proceedings recorded by the
inferior authority and the scope of the scrutiny is confined to the
question of legality or propriety of an order or the regularity of
such proceedings. r. 14-,\ obviously enl::rges the enquiry beyond
the limits prescribed and permits the revising authority to make a
fresh enquiry ?nd pass fresh assessment orders on the basis of the
said enquiry.
It is not necessary to particularize what kind of
orders the revising authority can make and what are the defects that
~re compre'1ended by the expression "legality", "propriety" and
"rcguhrity'· They arc well-known concepts. But the said defects
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STATE V. K.M.C. ABDULLAH & CO. (Shah/.)
605
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A can only be discovered from the said record and proceedings and
"not by a fresh enquiry. If so, it follows that r. 14-A insofar as it
confers a power on the revising authority to make a fresh enquiry
and to determine on the basis of the enquiry the correct amount
of tax payable by an assessee is void. Therefore, the order of the
High Court is correct.
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In the result, the appeal fails and is dismissed with costs.
Shah J.
The respondents are dealers in pepper and other
condiments and have their place of business at Baliapatam,
Malabar (North) District which formerly was part of the State of
c Madras, but since the reorganisation of States under the States Reorganisation Act, 1956, forms part of the State of Kerala. For
the year 1950-51 the respondents submitted their return under the
Madras General Sales Tax Act, 1939 showing a gross tum-over of
Rs. 67,38,710-10-11 in respect of their business, and claimed exemption in respect of turn-over of the value of Rs. 50,83,441-14-4
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on the plea that it represented commission sales which were exempt
from tax by s. 8 of the Act.. The Deputy Commercial Tax Officer,
Cannanore (Rural) by order, dated February 19, 1952 granted
exemption from tax on the commission saies covered by s. 8 and
computed the net taxable tum-over of the respondents at
Rs. 16,84,060-11-9.
By order, dated February 26, 1952 the
E Deputy Commercial Tax Offi"cer assessed Rs .. 26;313-7-3 as the
tax payable on the taxable turn-over of the respondents. Some time
before February 1956 the Deputy Commissioner of Commercial
Taxes, Coimbatore Division, called for the record of the case of
the respondents for the assessment year in question in exercise of
the powers under s. 12 ( 2) ( i) of the Act and directed an enquiry
F into the validity of the claim about exemption in respect of the
commission sales under s. 8 of the Act.
The Deputy Commissioner then issued a notice on February 9,
1956 calling upon the respondents to show cause against the proposed revision of assessment which would result in enhancement
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of tax.
After hearing the objections raised by the respondents,
by order, dated March 4, 1956, the Deputy Commissioner held
that the respondents did not act as commission agents but "carried
on business of outright purchase and sale" in respect of the turnover of Rs. 50,83,355-13-4 and on that view in purported exercise
of the powers vested in him by s. 12(2)(i) of the Act revoked
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the exemption granted by the assessing officer by his order, dated
February 19, 1952, revised the order, dated February 26, 1952
and assessed the respondents to pay tax on a total net tum-over of
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Rs. 67 ,6 7 ,4 16-9-1 for 1950-51. He directed th~ assessing officer
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to lake further action in the matter and to recover the tax due.
Against that order, the respondents moved the
Sales
Tax
Appellate Tribunal, Madras. The appeal of the respondenis was
heard by the Tribunal and py order, dated October 10, 1956 the
Tribunal held that the assessing officer had in assessing the responB
dents in respect of transactions for which they had previously
obtained exemption, acted in excess of his
jurisdiction under
s. 12 ( 2) (i) of the Act and hi_s order was liable to be set aside.
In coming to that conclusion the Tribunal held that rule 14-A
of the Rules framed under the Act which was brought into force
<m January I, 1948 could be applied only when the amount of tax c
payable is found to be less than the correct amount, thereby indicating that in rule 14-A the "emphasis is more on the arithmetical
aspect rather" than on the merits of an assessment. In the view
of the J'ribunal, rule 14-A was "much more restricted in scope
than s. 12 of the Act, and where a case is taken up under the
general power of revision, one has to look at the scope of s. 12 to
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find out the extent of the general power, and not rule 14-A."
Against the order passed by the Tribunal, the State of Kerala
which had acquired jurisdiction in respect of the sales tax asse.ssment of the respondents by virtue of the States Reorganisation Act,
1956, applied to the High Court of Judicature, Kcrala. It may
suffice to observe that no question about the \"ires of rule 14-A
was raised by the assessees before the Taxing authorities, and the
State was not interested in raising such a contention. But the High
Court held that in dealing with a proceeding under s. '12(2) of
the Madras General Sales Tax Act the revising
authority
is
restricted to the record before the assessing authority and his order
passed on fresh evidence could not be sustained.
Io the view
of the High Court the expression "the record of any order passed
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or proceeding recorded" under s. 12(2) restricted _the revising
authority to the examination of the legalitj or propriety of the
order of a subordinate officer or as to the regularity of the proceeding of such authority and prohibited consideration of any other
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evidence, and rule 14-A made by the State Government in exercise
of the power under s. 19 of the Act, which authorises the revising
authority or the appellate authority to correct the amount of tax
payable by the dealer after issuing a notice to the dealer and after
making such enquiry as such appellate or revising authority considers necessary was ultra vlres the Act.
The State of Kerala in this appeal contends that the High Court
has erred in declaring rule 14-A ultra vires and in the disposing of
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STAT.E v. K.M.C. ABDULLAH & CO. (Shah J.)
607
A its petition invoking the revisional jurisdiction of the High Court
on that footing.
To appreciate the argument it is necessary in
the first instance to read the relevant provisions of the Act and
rules framed thereunder.
Section ·9 of the Act deals with the
procedure of the assessing authority and s. 10 deals with the payment and recovery of tax.
Against an order of assessment an
B appeal lies under s. 11 to such authority as may be prescribed.
By s. 12 as amended by the first sub-section, the Commercial Tax
Officer is authorised either suo motu or on application in cases
in which an appeal does not lie to him under s, 11, to exercise
revisional jurisdiction .. Sub-section (2) with which we are directly
C concerned in this appeal provides ·:
"(2) The Deputy Commissioner may-
(i) suo motu, or
(ii) in respect of an order passed or proceeding
recorded by the Commercial Tax Officer under subD
section (1 ) or any other provision of this Act
and
against which no appeal has been preferred to the
Appellate Tribunal under section 12-A, on application,
call for and examine the ~cord of any order passed or
proceeding recorded undiar the provisions of this Act
by any officer subordinate to him, for the purpose of
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satisfying himself as to the legality or propriety of such
order, or as to· the regularity of such proceeding, and
may pass such order with respect thereto as he thinks fit."
Sub-section ( 4), insofar as it is matc!rial, provides that in relation
to. an order of assessment passed under the Act, the power of the
F Deputy Commissioner under cl. (i) of su!>Cs. (2) shall be exercisable only within a period of four years from the date on which
the order was communicated to the assessee.
Sub-section ( 6)
provides _that no order may be· passed under sub-ss. (1 ), (2) ,or
( 3) enhancing the assesment, without giving an opportunity to the
a.ssessee 10 show cause against the proposed enhancement.
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Sub-section ( 1) of s. 19 authorises the State Government to
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rnake rules to carry out the purpoaes of the Act. By sub-s. (2) it
is provided :
"In. particular and without prejudice to the generality
.of 'the . foregoing power, such rules may provide for-
(j) the duties and powers of officers appointed for the
purpose of enforcing the provisions of this Act;
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(k) generally regulating the procedure to be followed
and the forms to be adopted in proceedings under
this Act; and
(I) any other matter for which there is no provision
or no sufficient provision in. this Act and for which ··
provision is, in the opinion of the State Government, necessary for giving effect to the purposes
of this Act."
Sub-section (5) of s. 19 provides that all rules made under this
section shall be published in the Fort St. George Gazette, and upon
such publication shall have effect as if enacted in the Act.
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The Advocate-General for the State of Kerala contends that
rule 14-A was validly made in exercise of the powers under s. 19
and that in any event the rule having by sub-s. '(5) of s. 19 the
effect as if it is enacted in the Act it is not liable -to be declared
invalid. The alternative ground advanced by the Advocate-General
may .be easily disposed .of. The rules made under s. 19 'and pubD
lished in the Government Gazette have by the express. provision
to have effect as if enacted in the Act : but thereby no additional
sanctity' attaches to the rules. Power to frame rules is conferred by
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the Act upon the Sta'te Goverrunent and. that power may be
exercised within the strict limits of the authority conferred. If in
making a rule, the State transcends its authority; the rule will be E
invalid, fer statutory rules made in exercise of delegated authority
are valid and binding only if made within the limits of authority
conferred. Validity of a rule whether it is declared "to have effect
as if enacted in the Act or otherwise is always open to challenge
on the ground that it is unauthorised.
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Turning then to the jurisdiction. which the revising authority
may exercise under s. 12(2), attention must first be directed to the
phraseology used by the Legislature. The Deputy Commissioner is
thereby invested with power to satisfy himself about the legality
or propriety of any order passed or proceeding recorded by any
officer subordinate to him, or the regularity of any proceeding of G
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 proceeding, and the record
alone may be scrutinised for ascertaining the legality or propriety II
of an· order or regularity of the proceeding. But there is nothing
in the Act that for passing an order in exercise of hi3 revisional
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STATE V. K.M.C. ABDULLAH & CO. (Slzah J.)
609
A jurisdiction, if the reyising .authority is satisfied th~t the subordinate
officer has committed an il.legality or impropriety in the order or
irregularity in the proceedings, he cannot make or direct any
further enquiry. The words of sub-s. (2) of s. 12 that Deputy
Commissioner· "may pass such order with respect thereto as he
thinks fit" .mean such order ·as may in the circumstances of the
B case for rectifying the defeet be regarded by him as just. Power
to pass such order as the revising authority thinks fit may in some
cases include power to make or direct such further enquiry as
the Deputy Commissioner may find necessary for rectifying the
iilegality or impropriety of the order or irregularity in the proceed·
C ipg. 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 main·
tained by the Officer subordinate to him, and . can never make
enquiry outside that record.
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It must be noticed that the Act while conferring upon the
prescribed authority power to entertain an appeal under s. 11, and
a petition in revision under s. 12 does not prescribe the procedure
to be followed by the authorities. Itis left to the State Government
by rules framed under s. 19 to prescribe the procedure of the
appellate and the revising authorities and a provision authorising
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the making of a further enquiry for effectively exercising the
appellate or revisional power;· would in the case of a taxing statute
fall within the scope of the rules. Jurisdiction 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 procee4ing. But in taking that course the proF cedure to be followed is· prescribed by the rules; framed under
s. 19 ( 1 ) to carry out the purposes of the Act and as further
illustrated by the head (1), (k) and (j) of sub-s. (2).
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In our view the amplitude of the power conferred by sub-s. ( I )
and illustrated by sub-s. (2) of s. 19 takes in the power to provide
for making further enquiry enabling the revising authority to
exercise his powers, and unless the power so conferred expressly
or by clear implication nullifies or is inconsistent with. any provi-
~ion of the Act, it must be regarded as validly exercised. Conferment of power to make further enquiry in cases where after being
satisfied about the illegality or impropriety of the order or irregu·
larity in the proceeding, the revising authority thinks it just for
rectifying the defec~. to do so does not amount to enlarging the
jurisdiction conferred by s. 12(2). It is in this light that the
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provisions of rule 14-A may be examined. That Rule which was
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added with effect from January I, I 948, provides :
"Where the: tax as determined by the initial assessfog authority appears to the appellate authority under
section 11 or revising authority under section 12 to be
less than the correct amount of the tax payable by the
dealer, the appellate or revising authority shall, before
passing orders, determine the correct amount of tax payable by the dealer after issuing a notice to. the dealer
and after making such enquiry as such appellate or
revising authority considers necessary."
It must be noticed that the power to determine the t:Orrect amount
of tax after issuing a notice to the dealer and after making such
enquiry as the authority considers necessary is vested by this rule
in the appellate authority as well as the revising authority. It is
usual in taxing statutes to confer such power upon the appellate
and revising authorities.
Under the Income-tax Act, 1922, by
B
c
s. 31 (2) the Appellate Assistant Commissioner was given the
D
power before disposing of any appeal, to make such further inquiry
as he thought fit, or cause further inquiry to be made by the
Income-tax Officer. By s. 33 ( 4) the Appellate Tribunal was given
power to pass such order in the appeal as it thought fit and that
power included the power to direct additional evidence to be taken
or tq take evidence itself : M. L. Tewary v. Commissioner of E
Income-tax, Bihar and Orissa('). Bys. 33-A the Commissidner
could on his ov.:n motion or an application presented within one
year from the date of the order sought to be revised, call for the
record of any proceeding under the Act in which an order had
been passed by any authority subordinate to him and could make
such inquiry or cause such inquiry to be made and subject to the
provisions of the Act to pass such order thereon, as he thought fit.
Similar provisions are now incorporated in the Income-tax Act,
F
Act 43 of 1961. By s. 250 ( 4) of that Act the Appellate Assistant
Commissioner is authorised before disposing of an appeal to make
such further inquiry as he thinks fit or to direct the Income-tax
G
Officer to make further inquiry and report the result of the same
to him. Powers of the Income Tax Appellate Tribunal and the
Commissioner are couched in the same terms as under the Act of
1922 : [see s. 254 (I ) and s. 263 (I ) ]. It cannot therefore be
said_ that a provision which confers upon the appellate or revising
authority power to make ·such inquiry as such appellate or revising
H
.autbority considers necessary in itself amounts to enlarging the
(I) (19,S) 27 l.T.R. 630.
STATE V. K.M.C. ABDULLAH & CO. (Shah J.)
611
A rcvisional or appellate jurisdictiol1. The only difference between
the Income-tax Acts and the Madras General Sales Tax Act is
that whereas the power to entertain the appeal or revision application and to make orders for further enquiry in the hearing of the
appeal or revision is wholly dealt with by the provisions of the
Income-tax Acts, under the Madras General Sales Tax Act the
B revisional jurisdiction and appellate jurisdiction are conferred by
the Act, but the power of the appropriate authority in the exercise
of· the jurisdiction when it appears to the appellate or revising
authority that the correct amount of tax payable by the dealer
has not been paid to make a further inquiry as the authority cone siders necessary is conferred by the rules. But that is no ground
for regarding the conferment of power to travel outside the record
ot the subordinate taxing authorities as unauthorised. Investment
of powers to make such inquiry as the appellate or the revising
authority cons.iders necessary can manifestly be invested by els. (k)
and (I) of s. 19 sub-s. (2) and if such power is invested the rule
D
authorising the making of inquiry is not ultra vires.
· The Madras High Court in the State of Madras v. The Madura
Knitting Company Ltd.(') has held that the powers given to the
revising authority under s. 12 ( 2) are not confined to errors patent
on the face of tile record, but would extend to probing further
into the records like calling for despatch registers and other
E
evidence.
But this is not sufficient to dispose of the appeal before us.
The objection that rule 14-A was ultra vires was raised for th~
first time before the High Court. The Tribunal had merely held
that rule 14-A must be so read as to deal with "the arithmetical
F
aspect rather than on the aspect of the merits of an assessment."
There is, however, no such restriction in either rule 14-A or in
s. 12 ( 2) of the Act. The power to hold an enquiry to take additional evidence is a procedural power in aip of the exercise of the
revisional jurisdiction and if the revisional jurisdiction is not
restricted only to cases of arithmetical errors or as the Tribunal
G calle<I it "arithmetical aspect", there is no reason to assume that
the power under rule 14-A to make such enquiry as the appella~
or the revising authority considers it just to order or t(/ make
would be so restricted. But the power ·conferred by rule 14-A
by the use of the expression "making such enquiry as such appellate
or revising authority· considers necessary" must be read &ubject to
H
the scheme of the Act. It would not invest the revising authority
with power to launch upon enquiric::s ~t large so as either to ttCD,eh
(I) (1959) 10 S.T.C. 155.
'.
612
SUPREME
COURT
REPORTS
[1965] I S.C.R.
A
upon the powers which are expressly reserved by the Act or by
the Rules to other authorities or to ignore ihe limitations inherent
in the exercise of those powers. For instance, the power to reassess escaped turn-over is primarily vested by rule 17 in the
assessing officer and is to be exercised· subject. to certain limitations, :ind the revising authority will not be competent to make
an enquiry for re-assessing a tax-payer. Similarly the power to
B .
make a best judgment assessment is vested bys. 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 revisional power has to be exercised for ascertaining
whether the order passed is illegal or improper or the proceeding
, recorded is irregular and it is in aid of that power that such orders
may be passed as the authority may think fit. One of the inquiries
in considering the legality or propriety_ of the orders passed by the
subordinate officer which the revising or the appellate authority
c
may make is about the correctness of the tax levied and if after
perusing the record the authority is prima fade satisfied about D
the illegality or impropriety of the order or about the irregularity
of the proceeding, it may in passing its order direct an additional
enqui\)'.
Neither s. 12 nor· rule 14-A authoris~ the revising
authority to enter generally upon enquiries which may properly
be made by the assessing authorities and to re-open .assessments.
We are at this stage not. called upon to express any opinion
about the correctness of the order passed by the Deputy CommisE
sioner on the merits. · · The High Court has not investigated that
<Jl!estion; and we have· no materials before us which would justify
us in launching upon an enquiry into this unexplored field. We
j
have, however, thought it necessary to explain the restrictions F
inherent in the exercise of power under s.' 12(2) read with· Rule
14-A, because counsel for the respondents has urged before us
•
that the enquiry made by the Deputy Commissioner is inconsistent
with the scheme of the Act, in violation of the rules of natural
justice, and in circumvention of the restrictions on the po-.ver to
re-assess. That is a matter which will demand investigation before
I.he High Court. We desire only to impress that the view taken
by us that rule 14-A is not ultra vires is not sufficient to dispose
of the revision application filed before the High Court. The High
Court will have to make enquiry whether in the circumstances of
the case the Deputy Commissioner, Coimbatore Division. was competent to proceed in the manner he has done and to pass the 0rder
which was impugned· before the Sales Tax Appellate Tribunal.
The order passed by the High Court declaring rule 14-A to be
G
II
''
STATE V. K.M.C. ABDULLAH & CO. (Shah J.)
613
A ultra vires is set aside, and the proceedings are remanded to the
High Court to be dealt with according to law.
B
There will be no order as to costs.
ORDER BY COURT
In accordance with the opinion of the majority, the order of the
High Court declaring rule 14-A to be ultra vires is set aside and
the proceedings are remanded to the High Court to be dealt with
according tr1 law. There will be no order as to costs.
Appeal allowed and proceedings remanded.