# STA TE OF MADRAS v. MADURAI Mll.LS CO., LTD

- **Citation:** [1967] 1 S.C.R. 732
- **Court:** Supreme Court of India
- **Decided:** 1966-10-04
- **Case number:** Civil Appeal No. 539 of 1965
- **Bench:** J.C. Shah, V. Ramaswami, V. Bhargaya
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sta-te-of-madras-v-madurai-mll-ls-co-ltd-3908
- **Pages:** 7

## Headnote

Madras General Sales-taJC Act (9 of 1939), s. 12(4) (b)--Order of
assuslng authority-When merges In thaJ of appel/att or revlsional autlwrlty-Period of /lmitatiot>---Starting point.
For the asses.men! year 1950-51 the resl"?ndent submitted a return
of its net turnover to the Deputy Commercial Tax Officer who was the
assessing authority. As he determined
the net turnover
at a higher
amount the respondent appealed to the Commercial Tax Officer,
who
allowed the appeal with respect to one item. On 28th November 1952,
the assessing abthority mued a revised assessment order as per the order
of the Commercial 1'ax Officer.
On 27th December 1952, the respondent presented a revision petition before the Deputy Commissioner
of
Commercial Taxes raising the only objection, as a new contention, that
it should not have been assessed to tax on amounts collected by it by way
of tax.
On 21st August 1954, the Deputy Commissioner dismissed the
petition on the ground that the respondent was not entitled to raise a new
contention for the first time. On 4th August I 958, the Board of Revenue
issued a notice to the respondent stating that it proposed to revise
the
assessment by including in the net turnover a sum representing the value
of cotton purchased by the respondent from outside the State and which
was excluded by the assessing authority.
After considering the respondent's objections the Board fi<ed the net ta<able rurnover by including
that amount. The respondent's appeal to the High Court was allowed.
In appeal by the State,
HELD : The order of the Board of Revenue
was invalid, because,
under s. 12(4)(b) of the Madras General Sales-tax Act, 1939, the Board
of Revonue could invoke its revisional jurisdiction only within four years
from the dak on which the order of the assessing authority was commuaicated to the assesseo.
[734 G; 736 B-C]
(i) The subject-matter of the revision proceedings before the Board
of Revenue was only the revised assessment order of the assessing authority dated 28th November 1952, and not the
Deputy Commissioner's
order dated 21st August 1954.
(736 CJ
The objection taken by the Board was with regard to 'the question
of e<emption allowed by the assessing authority on the value of conon
purchased from outside, and that question was
not raised in revision
before the Deputy Commissioner of Commercial Taxes.
(736 C-D)
(ii) It cannot he said that the order of the Deputy Commissioner of
Commercial Taxes, in revision, is the only operative
decision in
law
on the basis that the order of the inferior Tribunal
(the order of the
assming authority dated 28th November 1952)
merged in that of the
superior Tribunal (order of the Deputy
Commissioner of Commercial
Taxes, dated 21st August 1954). (736 FJ
1be application of the doctrine of merger depends on tho nature of
the appcUate or revfsional order in each case and the scope of the statuA
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MADRAS v. MADURAI MILLS (Ramaswami, J.)
733
A
tory provisions conferring the appellate or revisional jurisdiction. Jn the
circumstances of the present case it could not be said that there was a
merger of the order of assessment dated November 28, 1952 with tho
order in revision dated 21st August 1954, because, the question of exclusion of the value of yarn purchased from outside the State was not
the· subject-matter of revision
before the Deputy Commissioner of
Commercial Taxes. [737 A·B, F-HJ
B
Commissioner of lncome-twc, Bombay v. Amritlal
Bhogilat cl Co.
[1959) S.C.R. 713 and State of Uttar Pradesh v. Mohammed
Nooh.
[1958] S,C.R. 595, followed.
c

## Text

STA TE OF MADRAS
v.
MADURAI Mll.LS CO., LTD.
October 4, 1966
(J.C. SHAH, V. RAMASWAMI AND V. BHARGAYA, JJ.J
Madras General Sales-taJC Act (9 of 1939), s. 12(4) (b)--Order of
assuslng authority-When merges In thaJ of appel/att or revlsional autlwrlty-Period of /lmitatiot>---Starting point.
For the asses.men! year 1950-51 the resl"?ndent submitted a return
of its net turnover to the Deputy Commercial Tax Officer who was the
assessing authority. As he determined
the net turnover
at a higher
amount the respondent appealed to the Commercial Tax Officer,
who
allowed the appeal with respect to one item. On 28th November 1952,
the assessing abthority mued a revised assessment order as per the order
of the Commercial 1'ax Officer.
On 27th December 1952, the respondent presented a revision petition before the Deputy Commissioner
of
Commercial Taxes raising the only objection, as a new contention, that
it should not have been assessed to tax on amounts collected by it by way
of tax.
On 21st August 1954, the Deputy Commissioner dismissed the
petition on the ground that the respondent was not entitled to raise a new
contention for the first time. On 4th August I 958, the Board of Revenue
issued a notice to the respondent stating that it proposed to revise
the
assessment by including in the net turnover a sum representing the value
of cotton purchased by the respondent from outside the State and which
was excluded by the assessing authority.
After considering the respondent's objections the Board fi<ed the net ta<able rurnover by including
that amount. The respondent's appeal to the High Court was allowed.
In appeal by the State,
HELD : The order of the Board of Revenue
was invalid, because,
under s. 12(4)(b) of the Madras General Sales-tax Act, 1939, the Board
of Revonue could invoke its revisional jurisdiction only within four years
from the dak on which the order of the assessing authority was commuaicated to the assesseo.
[734 G; 736 B-C]
(i) The subject-matter of the revision proceedings before the Board
of Revenue was only the revised assessment order of the assessing authority dated 28th November 1952, and not the
Deputy Commissioner's
order dated 21st August 1954.
(736 CJ
The objection taken by the Board was with regard to 'the question
of e<emption allowed by the assessing authority on the value of conon
purchased from outside, and that question was
not raised in revision
before the Deputy Commissioner of Commercial Taxes.
(736 C-D)
(ii) It cannot he said that the order of the Deputy Commissioner of
Commercial Taxes, in revision, is the only operative
decision in
law
on the basis that the order of the inferior Tribunal
(the order of the
assming authority dated 28th November 1952)
merged in that of the
superior Tribunal (order of the Deputy
Commissioner of Commercial
Taxes, dated 21st August 1954). (736 FJ
1be application of the doctrine of merger depends on tho nature of
the appcUate or revfsional order in each case and the scope of the statuA
B
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MADRAS v. MADURAI MILLS (Ramaswami, J.)
733
A
tory provisions conferring the appellate or revisional jurisdiction. Jn the
circumstances of the present case it could not be said that there was a
merger of the order of assessment dated November 28, 1952 with tho
order in revision dated 21st August 1954, because, the question of exclusion of the value of yarn purchased from outside the State was not
the· subject-matter of revision
before the Deputy Commissioner of
Commercial Taxes. [737 A·B, F-HJ
B
Commissioner of lncome-twc, Bombay v. Amritlal
Bhogilat cl Co.
[1959) S.C.R. 713 and State of Uttar Pradesh v. Mohammed
Nooh.
[1958] S,C.R. 595, followed.
c
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 539 of
1965.
Appeal by· special leave from the judgment and order dated
September 13, 1961 of the Madras High Court in T.C. No. 162 of
1958.
Bishan Narain and A. V. Rangam, for the appellant.
A. K. Sen and D. N. Gupta, for the respondent.
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The Judgment of the Court was delivered by
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Ramaswami, J. This appeal is brought by special leave against
the judgment of the Madras High Court dated the 13th September,
1961 in T.C. 162 of 1958.
The Madurai Mills Co., Ltd., (hereinafter called the respondent) is
a dealer in yarn, purchasing raw material like cotton
staple-fibre, etc., manufacturing them into yarn and selling the
yarn. Jn .. the assessment year 1950-51, the respondent showed
a return of Rs. 15,27,61,883-8-4 before the Deputy Commercial
Tax Officer, Madurai who after scrutiny of the account books
determined the net turnover at
Rs.
15,44,09,109-3-11. The
respondent preferred an appeal before the Commercial Tax Officer,
Madurai South. It was contended on behalf of the respondent
that a sum of Rs. 1,44,294-14-4 was wrongly included by the first
assessing authority in the purchase value of cotton purchased by
it for production of yarn as that amount only represented the
commission paid by it to Comorin Investment Trading Company
Limited for the purchase. It was also contended that another sum
of Rs. 81,546-0-1 whlch represented sale proceeds realised by selling empty drums etc. was not realisation in the course of its
business. The Commercial Tax Officer upheld the first contention of the respondent and excluded the sum of Rs. 1,44,294-14-4
from the total turnover on the ground that the amount was commission paid by the respondent for the purchase of cotton, but
rejected their second contention with regard. to the sum of
Rs. 81,546-0-1. The Deputy Commercial Tax Officer thereafter issued
a revised assessment. The respondent presented a revision petition before the Deputy Commissioner of Commercial Taxes and
734
SUPREME COUllT REPOllTS
(1967] I S.C.R.
the only objection which the respondent raised was that it should
not have been assessed to tax on amounts collected by it by way
of tax amounting to Rs. 6,57,971-4-9. The respondent did not
raise any other objection regarding the order of assessment of the
Deputy Commercial Tax Officer or the Commercial Tax Officer.
By his order, dated the 21st August, 1954, the Deputy Commissioner of Commercial Taxes dismissed the revision petition holding
that the respondent was not entitled to raise the contention for the
first time and that even otherwise the Madras General Sales Tax
(Definition of Turnover and Validation of Assessments) Act,
1954, permitted the inclusion of tax in the taxable turnover. On
the 4th August, 1958, the Board of Revenue issued a notice to
the respondent stating that it proposed to revise the assessment
of the Deputy Commercial Tax Officer, Madurai, by including
in the net turnover the sum of Rs. 7,74,62,706-1-6 as that amount
was wrongly excluded by the assessing authority. The respondent
objected to the proposed revision on the ground that the proceeding was barred by limitation under s. 12 of the Madras General
Sales Tax Act. The respondent also submitted that there
was
no wrong exclusion of the sum of Rs. 7,74,62,706-1-6 by the Deputy
Commercial Tax Officer in making the a~scssment. By its order,
dated the 25th August, 1958, the Board of Revenue over-ruled
both these contentions of the respondent and fixed the net taxable
turnover as Rs. 23,17,15,948-15-2.
The respondent preferred
an appeal to the Madras High Court against the order of the Board
of Revenue dated the 25th August, 1958. The High Court allowed
the appeal holding that the Board of Revenue could not invoke
its revisional jurisdiction after the expiry of the pP,riod of limitation under s. 12 (4)(b) of the Madras General Sales Tax Act. The
order of the Board of Revenue, dated the 25th August, 1958 was
accordingly set aside.
The question of law to be determined in this appeal is :-
whether the order of the Board of Revenue dated the 25th August,
1958 was illegal because there was a contravention of the rule of
limitation laid down
by s. 12(4)(b) of the Madras General
Sales Tax Act inasmuch as the order of the Board of Revenue
was made after a period of 4 years from the date on which the
order of the Deputy Commercial Tax Officer was communicated
to the assessee.
Section 12 of the Madras General Sales Tax Act, 1939 (Madras
Act 9 of 1939) (hereinafter called the Act) provides :-
"(I) The Commercial Tax Officer may-
(i) suo nwtu, or
(ii') in cases in which an appeal does not lie to him
under section 11, on application, call for and examine
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MADRAS v. MADURAI MILLS (Ramaswami, J.)
735
the record of any order passed or proceeding recorded
under the provisions of this 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.
(2) The Deputy Commissioner may -
(i) suo motu, or
(ii) in respect of any order passed or proceeding recorded by the Commercial Tax Officer under sub-section
(!) 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 record of any order passed or
proceeding recorded under the provisions of this
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.
(3) The Board of Revenue may-
(i) suo motu, or
(ii) .in respect of any order passed or proceeding
recorded by the Deputy Commissioner under
sub-section (2) or any other provision of this
Act and against which no appeal has been preferred to the Appellate Tribunal under s. 12-A,
on application, call for and examine the record
of any order passed or proceeding recorded
under the provisions of this Act by any officer
subordinate to it, for the purpose of satisfying
itself 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 it thinks fit.
( 4) In relation to an order of as8essment passed under
this Act-
(a) Tue power of the Commercial Tax Officer under
clause (i) of sub-section (!) shall be exercisable only within a period of three years from
the date on which the order was communicated to
the assessee;
(b) The power of the Deputy Commissioner under
clause (i) of sub-section (2) and that of the
736
SUPllEMI! COUltT REPORTS
[1967] I S.C.R.
Board of Revenue under clause (i) of sub-section
(3) shall be exercisable only within a period
of four years from the date on which the order
was communicated to the assessce".
It was contended on behalf of the appellant that the order
n . .-ised by the Board of Revenue was the revisional order of the
Deputy Commissioner of Commercial Taxes dated the 21st August,
1954 and not the order of the Deputy Commercial Tax Officer
and therefore the power of revision by the Board of Revenue was
not exercised beyond the period of limitation provided bys. 12
(4) (b) of the Act. We are unable to accept this argument as correct. The only subject-matter of the revision proceedings before
the Board of Revenue was the revised assessment
order of the
Deputy Commercial Tax Officer, Madurai dated the 28th November 1952. The objection taken by the Board of Revenue was with
re!,·· .d to the question of exemption allowed on the value of the
cotton purchased from outside the State of Madras. The exemption was allowed by the Deputy Commercial Tax Officer in his
order of assessment. The question was not raised before the Deputy
Commissioner of Commercial Taxes and the only point raised
before him was with regard to the inclusion of the amount of tax
to !ne exte ·,. of Rs. 6,57,971-4-9 in the taxable turnover. It is
manifest that the subject-matter of the revision proceedings before
the Board of RevP.nue was the revised assessment order of the Deputy Commerciai : ax Officer, Madurai dated the 28th November,
1952.
It follows that the order of the Board of Revenue was
made beyond the limit of four years
p1~scribed by s. 12(4)(b)
of the Act and it is, therefore, invalid. On behalf of the appellant. the argument was put forward that if a statutory appeal
is provided again'
m order passed by a Tribunal, the decision
of the appellate authority is the operative decision in law. It
· ·-is said that if the appellate authority modifies or reverses the
~.der of the Tribunal, there was a merger of the latter order with
the appellate order ~nd it was the appellate order alone that is
effective and can bt enforced. But if the appellate order affirms
the order of the Tribunal, there is a merger of the original order
in •'•! appellate order and it is the appellate order alone which
is operative and
capable of enforcement. In support of this
argument reliance was placed upon the c:,servation of Gajendragadkar, J., as he then was in Commissioner of Income-tax, Bombay
v. Amritlal Bho{?ilal & Co. (') But the doctrine of merger is not a
doctrine of rigid and universal application .and it cannot be said
that wherever there are two orders, one by th.e inferior Tribunal
and the other by a
superior Tribunal, passed in an appeal on
revision, there is a fusion of merger of two orders .irrespective
of the subject-matter of the appellate or revisional order and the
(I) (19591 S.C.R. 713 : 34 l.T.R. 130 at 136.
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MADltAS v. MADURAI MILLS (Ramaswami, J.)
737
scope of the appeal or revision contemplated by the particular
statute. In our opinion, the application of the doctrine depends
on the nature of the appellate or revisional order in each case
and the scope of the statutory provisions conferring the appellate
or revisional jurisdiction. For example in Amrit/al Bhogilal &
Co's.(1) case it was observed by this Court that the order of registration made by the Income-tax Officer did l).Ot merge in the appellate order of the Appellate Commissioner, because the order of
registration was not the subject-matter of appeal before the appellate authority. It should be noticed that the order of assessment made by the Income,Tax Officer in that case was a composite
order viz., an order granting registration of the firm and making
an assessment on the basis of the registration. The appeal was
taken by the assessee to the Appellate Commissioner against the
composite order of the Income-tax Officer. It was held by the
High Court that the order of the Income-tax Officer granting registration to the respondent must be deemed to be merged in the
appellate order and that the revisional power of the Commissioner
of Income-tax
cannot, therefore, be exercised in respect of it.
The view taken by the High Court was over-ruled by this Court
for the reason that the order of the Income-tax Officer granting
registraton cannot be deemed to have merged in the order of the
Appellate Commissioner in an appeal taken against the composite
order of assessment. Similarly, in The State"of Uttar Pradesh v.
Mohammed Nooh(2), it was held by this Court that the principle
of merger cannot apply in the case of an order of dismissal of a
public servant which was made by the departmental Tribunal
on the 20th April, 1948 and against which the appeal was dismissed
by the Appellate Authority on the 7th May, 1949, and the revisional application was rejected on the 22nd April, 1950. In the
circumstances of the present case, it cannot be said that there was
a merger of the order of assessment made by the Deputy Commercial Tax Officer dated the 28th November, 1952 with the order
of the Deputy Commissioner of Commercial Taxes dated the
21st August, 1954 because the question of exemption on the value
of yarn purchased from outside the State of Madras was not the
subject-matter of revision before the Deputy
Commissioner of
Commercial Taxes. The only point that was urged before the
Deputy Commissioner was that the sum of Rs. 6,57,971-4-9 collected
by the respondent by way of tax should not be included in the taxable turnover. This was the only point raised before the Deputy
Commissioner and was rejected by him in the revision proceedings.
On the contrary, the question before the Board of Revenue was
whether the Deputy Commercial Tax Officer, Madu,rai was right
in excluding from the net taxable turnover of the respondent the
sum of Rs. 7,74,62,706-1-6 which was the value of cotton purchased
by the respondent from outside the State of Madras. We are
(I) [19S9] ll.C.R. 713 : 34 LT.R. : 130 at 136.
(2) [19S8] 9.C.R. S9S.
738
SUPREME COURT REPORTS
[1967] 1 S.C.R•
therefore, of opinion that the doctrine of merget cannot be invoked
A
in the circumstances of the present case.
For these reasons, we hold that the judgment of the High
Court is right and this appeal must be dismissed with costs.
·'
V.P.S.
Appeal dismissed.
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