Judgment:
ORDER
R.V. Raveendran, J.
1. Notice regarding Rule was issued and on appearance, by consent these petitions were finally heard.
The petitioner is a manufacturer and dealer in cement and is an assessee under the Karnataka Sales-tax Act, 1957 (hereinafter referred to as 'the Act'). These petitions relate to asst. yrs. 1980-81, 1981- 82, 1982-83, 1983-84 and 1984-85 and involve a common question of law. Petitioner has filed these writ petitions challenging the five orders of rectification made under s. 25A adding packing charges regarding cement to the taxable turnover. The petitioner contends that the assessment orders do not suffer from any mistake apparent from the record and consequently the orders of rectification are without jurisdiction and without authority of law.
2. The petitioner was initially assessed to tax in regard to the said five years by orders dt. 27th May, 1988, 27th May, 1988, 28th May, 1988, 20th July, 1988 and 20th July, 1988. On appeal by the petitioner, the appellate authority set aside the said orders by order dt. 12th Jan., 1989, and remanded the matters for fresh assessment. On such remand, the petitioner filed revised returns and the assessing authority passed fresh orders of assessment respectively, dt. 30th April, 1992, 30th Sept., 1991, 25th May, 1992, 26th May, 1992 and 26th May, 1992. In these orders, the assessing authority deducted the following amounts being the packing charges relating to cement, from the total turnover and thereby excluded the said amounts from taxable turnover of the assessee :
Year AmountRs. 1980-81 2,05,39,940.251981-82 2,09,00,929.121982-83 2,50,86,247.621983-84 3,58,10,709.181984-85 6,01,74,906.93
3. The assessing authority thereafter issued notices dt. 23rd Dec., 1992 under s. 25A of the Act proposing to rectify the assessments completed as aforesaid, by including packing charges in the taxable turnover of the petitioner. The assessing authority proposed to rectify the orders of assessment on the ground that there was an error apparent from the record regarding packing charges, for the following reasons :
'(1) The assessee has sold cement after packing in gunny bags or container.
(2) The expenditure incurred towards the packing material gunny bag in which cement is packed and sold before the same is made available to the customers and such expenses would not come within the meaning of 'charges for packing materials' as specified under r. 6(4)(b)(ff) of Karnataka Sales-tax Rules, 1957.
(3) Further, cement could not be sold without a container for consumption by the general public and the sale of cement in bags impliedly included the sale of the bags themselves for which the consumer had paid. As such, once the cost of bags had been recovered from purchaser as part of sale price, there was no way by which it could be excluded from the taxable turnover.'
4. The petitioner filed objections to the proposed rectification contending :
(a) Deduction of packing charges from the total turnover to arrive at the taxable turnover was justified under r. 6(4)(ff) of the Karnataka Sales-tax Rules, 1957 ('Rules' for short);
(b) Whether packing charges relating to cement has to be excluded or included in the taxable turnover is a question of fact, to be decided in each case;
(c) The assessing authority having decided that packing charges are to be deducted from total turnover, while passing the orders of assessment, there was no 'mistake apparent from the record' which could be rectified under s. 25A of the Act. After considering the objections, the assessing authority passed orders of rectification on 2nd April, 1993 holding that the deduction of packing charges from the total turnover, was a 'mistake apparent from the record' and rectified the orders by including the packing charges in the taxable turnover of the assessee. Aggrieved by the said rectification orders, the petitioner has filed these petitions.
5. Sri Kishore Mallya, learned counsel for the petitioner, submitted that unless there is a mistake apparent from the record, jurisdiction under s. 25A could not be exercised; that there was no error or mistake at all, in deducting the packing charges as such deduction was authorised by r. 6(4)(ff); and even assuming that an error can be made out now, it does not follow that there is any mistake apparent from the record, as the question whether packing charges were taxable was very much an issue open to much debate, doubt and conflict at the time of passing the assessment orders, and the mere fact that subsequently the Supreme Court had resolved and settled the issue did not obliterate the existence of such debate, doubt and conflict prior to such decision and in such circumstances, there was no jurisdiction in the assessing authority to rectify any order, under s. 25A. He also submitted that the alleged mistake could not be made out except upon a long and elaborate argument and further investigation of facts. He, therefore, submitted that the rectification orders were without jurisdiction and, therefore, liable to be set aside in writ proceedings, even though remedy by way of appeal was available under the statute.
6. Sri H.L. Dattu, learned Government Advocate, appearing for respondents contended that excluding packing charges from the taxable turnover was clearly a mistake apparent from the record having regard to the decision of the Supreme Court in Ramco Cement Distribution Co. (P) Ltd. vs. State of Tamil Nadu (1993) 88 STC 151 and the decision of this Court in Visvesvaraya Iron & Steel Ltd. vs . Dy. Commr. of Commercial-taxes ; and, therefore, the assessing authority had jurisdiction to rectify the mistake under s. 25A and he was fully justified in exercising such power.
7. On the aforesaid facts and contentions, the following points arise for consideration :
(i) Whether deduction of packing charges from the total turnover, for purpose of determining the taxable turnover was erroneous;
(ii) If so, whether it can be said to be a mistake apparent from the record, inviting rectification under s. 25A.
8. A preliminary objection raised by Mr. H.L. Dattu requires to be noted at the outset. He contended that, after filing these petitions, the petitioner had also filed appeals in regard to some of the rectification orders; that as efficacious alternative remedy by way of appeal is available, these petitions should not be entertained. He relied on the observations of the Supreme Court while dealing with the provisions of Orissa Sales-tax Act in Titaghur Paper Mills Co. Ltd. vs . State of Orissa : [1983]142ITR663(SC) , to contend that the writ petitions should not be entertained if an efficacious alternative remedy by way appeal was available under the Act. But it is equally well settled that where an authority acts without jurisdiction or patently in excess of jurisdiction or when rules of natural justice or well accepted rules of procedure are violated or when an assessment is made on the basis of a provision which is ultra vires, it is quite proper to exercise the writ jurisdiction to set right the wrong. In these petitions, the petitioner is challenging the orders of rectification on the ground that the pre-requisites for exercise of jurisdiction under s. 25A are non-existent and, therefore, the orders are without jurisdiction. No doubt the orders of rectification are appealable under the Act. But in view of the question of jurisdiction raised, these cases deserve an examination on merits rather than dismissal at the threshold on the ground of availability of an alternative remedy.
Re: Point (i):
9. The learned counsel for the petitioner contended that cement was sold either in unpacked condition (naked cement) or packed in bags; that many a time cement was packed in bags only after sale, on receipt of instructions of the buyer; that there may be instances where the buyers may provide the packing material; that packing charges were always charged separately; that r. 6(4)(ff) clearly authorised the deduction of all packing charges from the total turnover, where such charges were charged by the dealer separately, without including the same in the price of goods sold; that even if packing was completed before sale, so long as the price of packing was not included in the sale price of cement, but separately charged, r. 6(4)(ff) would apply; and, therefore, packing charges were rightly excluded from the taxable turnover, when the orders of assessment were made. Petitioner also sought support from the provisions of the Cement Control Order 1967, which was in force at the relevant time. Reference was made to clause 8 which specified the price of naked cement and separately provided for packing charges under the proviso. The inference sought is that packing was not a compulsory concomitant of sale of cement, but only an optional addition. He referred to the following observations of the Supreme Court in Raj Sheel vs. State of Andhra Pradesh (1989) 74 STC 379:
'It is commonly accepted that a transaction of sale may consist of a sale of the product and a separate sale of the container housing the product with respective sale considerations for the product and the container separately; or it may consist of a sale of the product and a sale of the container but both sales being conceived of as integrated components of a single sale transaction; or, what may yet be a third case, it may consist of a sale of the product with the transfer of the container without any sale consideration therefor. The question in every case will be a question of fact as to what are the nature and ingredients of the sale. It is not right in law to pick on one ingredient only to the exclusion of the others and deduce from it the character of the transaction. For example the circumstance that the price of the product and the price of the container are shown separately may be evidence that two separate transactions are envisaged, but that circumstance alone cannot be conclusive of the true character of the transaction. It is not unknown that traders may, for the advantage of their trade, show what is essentially a single sale transaction of product and container, or a transaction of a sale of the product only with no consideration for the transfer of the container, as divisible into two separate transactions, one of sale of the product, and the other a sale of the container, with a distinct price shown against each...... In every case, the assessing authority is obliged to ascertain the true nature and character of the transaction upon a consideration of all the facts and circumstances pertaining to the transaction. That the problem almost always requires factual investigation into the nature and ingredients of the transaction has been repeatedly emphasised by this Court.'
.... .... .... ....
'In a case where the packing material is an independent commodity and the packing material as well as the contents are sold independently, the packing material is liable to tax on its own footing. Whether, a transaction for sale of packing material is an independent transaction will depend upon several factors, some of them being :
....
Relying on the said observations, the learned counsel for respondent [sic-petitioner] contended that whether packing charges is to be included in the taxable turnover or not is a question of fact requiring investigation and depending on the true nature and character of the transaction and there can be no general statement of law that packing charges in regard to cement should be included in the taxable turnover; and the assessing authority having held that packing charges were to be excluded in arriving at the taxable turnover, that finding of fact cannot be sought to be rectified, merely on the basis of a subsequent decision of the Supreme Court; and that there was no factual or legal basis for including the packing charges in the taxable turnover, by way of rectification.
10. In the case of Visvesvaraya Iron & Steel Ltd. (supra), a Division Bench of this Court had occasion to consider an identical question. In that case, for the relevant assessment years, the assessee claimed deduction in regard to packing charges under r. 6(4)(ff). The assessee was a manufacturer of cement. The assessing authority initially allowed such deduction. His successor-in-office found the allowance of deduction impermissible and proposed to rectify the same under s. 25A. After notice, the assessment orders were rectified in the light of the decision of the Madras High Court in Natarajan & Sons vs. State of Tamilnadu (1977) 39 STC 443 (Mad). The said rectification was challenged and ultimately came up in revision before this Court. This Court held :
'It is common knowledge that during the relevant assessment years, cement was declared to be a controlled commodity and its sale and distribution were controlled by order made by the Government of India under the provisions of the Industries (Development & Regulation) Act, 1951. Under the provisions of the order so made, price of cement was fixed from time to time and that price was uniform throughout India. The components of such sale price itself was provided in the order. One such component of the price fixed under the Cement Control Order, 1967, was the cost of the packing material. Therefore, it is obvious that cement was envisaged as a controlled commodity and it could not be sold without containers for consumption of the general public. In that view of the matter, sale of cement in bags impliedly included the sale of the bags themselves for which the consumer had paid. If that is the correct position, pressing into service, r. 6(4)(ff) to compute out the turnover relating to the cost of packing material was clearly an error of law which could be rectified under s. 25A of the Act.'
11. In Ramco's case (supra), the Supreme Court held, while considering the sale of cement covered by the Cement Control Order, 1967, that freight charges and packing charges with excise duty thereon should be included in arriving at the taxable turnover for purposes of both Central Sales-tax (CST) and Tamilnadu Sales-tax. The Supreme Court held that packing charges, formed part of 'sale price' under the CST Act, 1956, because the expression 'any sum charged for anything done by the dealer in respect of the goods' used in the definition in s. 2(h) of CST Act squarely covered such charges, as packing is an integral element of the transaction of sale and packing charges are an integral part of the sale price. The Supreme Court also held that the position was no different under the Tamilnadu General Sales-tax Act, 1959. The Supreme Court held that :
'Packing charges and excise duty on the packing materials cannot be deducted under r. 6(cc) of the Tamil Nadu General Sales-tax Rules, 1959, in computing the taxable turnover for the purposes of the Tamil Nadu General Sales-tax Act, 1959, and the Tamil Nadu Additional Sales-tax Act, 1970, for the reasons that the words 'without including them in the sale price of the goods sold' make it clear that such charges are not to be deducted unless the pre-requisite for their deduction, viz., that these charges should not have been included in the price of the goods sold, is satisfied, and such charges have been included of the Control Order as part of the price of the goods sold.'
The Supreme Court approved the view that the packing of cement was to effectuate the sales and, therefore, packing charges formed an integral part of the sale price in the following words :
'Nor will, for the reasons earlier discussed in relation to freight charges, the assessee be in a position to claim a deduction in respect of these charges by virtue of r. 6(cc) of the Tamil Nadu General Sales-tax Rules. In our view, this position has been correctly set out, applying the decision in the case of Rai Bharat Das & Bros. : AIR1989SC315 in State of Tamil Nadu vs. Vanniaperumal & Co. (1990) 76 STC 203 , Dalmia Cement (Bharat) Ltd. vs. State of Tamil Nadu (1991) 83 STC 422 (Mad) . We are, therefore, of the opinion that the packing charges and excise duty thereon cannot also be deducted in computing the taxable turnover for the purposes of the Tamil Nadu Acts.'
The wording of r. 6(4)(ff) of the Karnataka Sales-tax Rules is in pari materia with r. 6(cc) of the Tamil Nadu General Sales-tax Rules. Further, the provisions of the Cement Control Order, 1967, referred to and relied on by the Supreme Court continued to be in force during the assessment years which are the subject-matter of these petitions. Therefore, in view of the law declared by the Supreme Court in Ramco's case, there can now be no doubt or debate on the position that packing charges has to be included in the taxable turnover and cannot be deducted from the total turnover under r. 6(4)(ff), in regard to sale of cement covered by Cement Control Order, 1967. One of the factors that weighed with the Courts in several decisions approved in Ramco's case and in Ramco's case itself, to come to the conclusion that packing charges are to be included in the taxable turnover is that clause 8 of the Cement Control Order, 1967, specifies the price of cement for delivery free on rail destination railway station; that is, for the price fixed, the cement had to be transported and delivered by the producer at the destination railway station. This implies that the cement sold had to be in a packed condition, at the time of delivery and, therefore, packing is a necessary concomitant of sale. Ramco's case deals with the sale of cement covered by the Cement Control Order, 1967. The cases on hand also relate to sale of cement under the Cement Control Order, 1967. Though Raj Sheel's case deals with sale of cement, there is nothing to indicate that observations therein relate to sale of cement under the Cement Control Order, 1967. Thus, when the later decision of the Supreme Court in Ramco's case specifically covers the issue relating to sale of cement under Cement Control Order, 1967, the earlier observations in Raj Sheel's case will have to be considered as general in nature not applicable to sale of cement under Cement Control Order, 1967. Hence, the faint attempt by the learned counsel for the petitioner, that in spite of Ramco's case, there is still a doubt or debate in regard to packing charges relating to cement, having regard to the observations in Raj Sheel's case, cannot be accepted.
12. It is true that the decision of the Supreme Court in Ramco's case was rendered subsequent to the dates of assessment orders in these cases. But even before the date of assessment orders, there was no doubt regarding the position that packing charges was to be included in the taxable turnover, having regard to the Division Bench Ruling of this Court in Visvesvaraya's case. Thus, the first point has to be answered in the affirmative.
Re : Point (ii):
13. The assessment orders do not disclose any reason as to why packing charges were deducted from the total turnover. There is neither any reference to the nature and character of the transaction nor consideration of the circumstances relating to packing charges, nor r. 6(4)(ff) or satisfaction or requirements of r. 6(4)(ff). The assessment orders are non-speaking orders, in regard to packing charges. Except describing the amount deducted from total turnover as 'packing charges' there is no reference to 'packing charges' anywhere in the assessment orders. In fact, in the assessment order relating to 1980-81, the amount deducted is not even described as packing charges, but wrongly described as 'freight charges'. There is thus no material to show that the assessing authority had applied his mind to the question whether packing charges are to be excluded from the taxable turnover or not. It is evidently a mechanical deduction, apparently following what had been done during some previous years. The question is whether in such circumstances, having regard to the decisions in Ramco's case and Visvesvaraya's case, it can be said that the mistake relating to deduction of packing charges, is a mistake apparent from the record, justifying rectification. Section 25A provides as follows :
'With a view to rectifying any mistake apparent from the record, the assessing authority, appellate authority or revising authority, may, at any time, within five years from the date of an order passed by it, amend such order.'
What is a 'mistake apparent from the record' has been the subject- matter of several decisions under the IT Act, Sales-tax Laws and Civil Procedure Code. Reference to the relevant decisions will be useful.
14. In M.K. Venkatachalam, ITO vs . Bombay Dyeing & . : [1958]34ITR143(SC) , the Supreme Court considered the scope of rectification under s. 35 of Indian IT Act, 1922. In that case the assessing authority had given credit for interest on advance tax acting under s. 18A(5). Subsequently s. 18A(5) was amended with retrospective effect and consequently the assessing authority rectified his previous order on the basis of the amended section. The Bombay High Court took the view that s. 35 did not permit rectification on the basis of retrospective amendment of a statutory provision, holding that the order giving credit for interest on advance tax when made, was wholly in accordance with the provision of law which then existed. This was reversed by the Supreme Court which took the view as a consequence of retrospective amendment of s. 18A(5), the section as amended should be regarded as having been in force on the date of the original order and that would make the order wrong automatically; the mistake so brought about in the order, by the retrospective amendment was a 'mistake apparent on the record' amenable to rectification under s. 35 of the IT Act. To quote the principle in the words of the Supreme Court :
'The same argument is put in another form by contending that the finality of the order passed by the ITO cannot be impaired by the retrospective operation of the relevant provision. In our opinion, this argument does not really help the respondent's case because the order passed by the ITO under s. 18A(5) cannot be said to be final in the literal sense of the word. This order was and continued to be liable to be modified under s. 35 of the Act. What the ITO has purported to do in the present case is not to revise his order in the light of the retrospective amendment made by s. 13 of the Amendment Act alone, but to exercise his power under s. 35 of the Act; and so the question which falls to be considered in the present appeal centres round the construction of the expression 'mistake apparent from the record' used in s. 35. That is why we think the principle of the finality of the orders or the sanctity of the existing rights cannot be effectively invoked by the respondent in the present case.'
15. The principle laid down in Venkatachalam's case regarding retrospective operation of law, making valid orders invalid, was extended and applied by the Bombay High Court in a case where a subsequent decision of the Supreme Court, had the effect of rendering an order passed by the authority wrong in law [Walchand Nagar Industries Ltd. vs . . Gaitonde : [1962]44ITR260(Bom) . Rejecting the contention that the principle laid down in Venkatachalam's case while dealing with retrospective legislation, cannot be applied to decisions of Supreme Court, the Bombay High Court held :
'It would be seen that even though the assessment order made by the ITO was a good order on the date it was made, the subsequent enactment rendered that order into a mistaken order, and it was held that that mistake could be rectified under s. 35 of the Act. Mr. Joshi tried to distinguish this case from the present case. It is his argument that the order made by the ITO in that case was rendered bad by the subsequent enactment, while the order in the instant case, which was a good order, was rendered bad as a consequence of a subsequent judicial pronouncement. We find it difficult to accept this argument and the distinction. In our opinion, the present case is stronger than the other case. The effect of the decision of their Lordships of the Supreme Court is that the levy of excess dividend tax was, at no time, good. The levy was invalid, and that being the true legal position, the order made by the ITO was bad at its inception on the date it was made, and that was a mistake; to point out that mistake, no elaborate argument or debate is required, because there is a binding Supreme Court decision, clearly bringing out that mistake. This mistake, therefore, in our opinion, is a mistake apparent from the record, within the meaning of s. 35 of the Act. The authorities concerned, i.e., the respondents were, therefore, clearly in error in not rectifying that mistake under s. 35 of the Act.'
16. The decision of the Supreme Court in S.A.L. Narayana Row, CIT vs . Model Mills Nagpur Ltd. : [1967]64ITR67(SC) is very relevant, though the question is not discussed in detail. In that case, the ITO passed an order on 27th July, 1955, levying an additional tax on the excess dividend declared by the assesses company. Thereafter the Bombay High Court in Khatau Makanji Spg. & Wvg. Co. Ltd. vs . CIT : [1956]30ITR841(Bom) (Bom), held that the levy of tax on excess dividend was illegal. In pursuance of it, the assessee applied to the ITO for refund of tax paid, that is, virtually applied for rectification. The ITO declined to accede to the said request on the ground that the assessment order had been passed prior to the judgment in Khatau's case. On appeal, the CIT held that the application for rectification was not maintainable, since the error was not apparent from the record, but was one which could be made out only by a long process of elucidation and debate. The assessee moved the High Court of Bombay under Art. 226, praying for an order compelling the ITO to revise the order rejecting the application for rectification. The High Court granted the prayer, thereby directing rectification, on the basis of the later judgment in Khatau's case. The Revenue took up the matter to Supreme Court. The Supreme Court held that there was no doubt that in view of the judgment in Khatau's case, the levy of additional tax was illegal and consequently upheld the direction of the High Court directing refund of tax. The ratio of the decision is that the Supreme Court recognised and confirmed the principle that orders of assessment are liable to be rectified, on the basis of subsequent decisions declaring the law, subject, of course, to any provision relating to limitation.
17. In J.M. Bhatia, AAC vs . J.M. Shah : [1985]156ITR474(SC) , the Supreme Court was concerned with a case under the WT Act. The order for the asst. yr. 1969-70 was passed by AAC on 26th June, 1970, whereby the jewellery and ornaments had been excluded from computation of total wealth, under s. 5(1)(viii), the said section was amended by Finance Act No. 2 of 1971, with retrospective effect from 1st April, 1963, by adding the words 'but not including jewellery'. In view of it, rectification proceedings were initiated in January, 1972, well within the prescribed period of four years, under s. 35 of the WT Act. The High Court set aside the order effecting rectification, on the ground that the question whether the Amendment Act applied to assessments which were already completed was a highly debatable question and, therefore, not a case of error apparent on the record. The Supreme Court reversing the said view held that such a question would arise only if it is really a case of completed assessment in the literal sense of the word. If the limitation for rectification had not expired, the order could not be said to have become final or complete merely because the time for filing an appeal had expired. The Supreme Court held -
'.... it must be held that the AAC's order dt. 26th June, 1970 had not become final in the literal sense of the word notwithstanding the fact that no appeal had been preferred against the order or that the requisite period for appeal was allowed to expire. The said order was and continued to be liable to be modified under s. 35(7) of the Act and, in this view of the matter, the assessee herein also would not be in a position to invoke the principle of finality of orders or the sanctity of the existing rights which are said to have been acquired by her under the initial order'.
18. In A.S. Gauraya vs . S.N. Thakur : 1986CriLJ1074 , the Supreme Court had occasion to consider the binding nature of its judgment. When a judgment of the Supreme Court was brought to the notice of a Session Judge, he held :
'So far as Art. 141 of the Constitution of India and the ratio of these decisions concerned, there can be no dispute whatsoever. At the same time a pronouncement as to the position of law in a judicial decision by the Supreme Court cannot be treated as a sort of legislation by the Parliament giving retrospective effect as to enjoin reopening of all matters which have already become final and closed.'
The Supreme Court held :
'The observations of the Sessions Judge, extracted above, discloses a confusion of thought about the effect of a decision rendered by this Court and a misreading of Art. 141 of the Constitution. There is nothing like any prospective operation alone of the law laid down by this Court..... He got rid of the effect of this Court's judgment by observing that a decision by this Court cannot be treated as 'a sort of legislation by Parliament' and thus overlooked the binding nature of the law declared by this Court, mandating under Art. 141, every Court subordinate to this Court to accept it......'
19. In M.V. Govindaraju Chetty vs . CTO , a Division Bench of this Court had to consider the question whether an order of assessment could be rectified on the basis of law declared subsequently by this Court and the Supreme Court. The provision for the rectification considered by this Court was r. 38 of Mysore Sales- tax Rules, which is in pari materia with s. 25A of the Act and s. 35 of the IT Act, 1922. Rejecting a contention that subsequent decisions of the Supreme Court or concerned High Courts do not have the result of reopening concluded matters and following the decision of the Bombay High Court in Walchand Nagar case (supra), A. Narayana Pai, J. (as he then was) speaking for the Division Bench, observed :
'To say that a decision of the Supreme Court to the effect that a particular levy was wrong or not in accordance with law means that the levy was at no time good, is nothing more than to state in clear terms the real effect of a decision of the Court. The decision gets rid of the order as it was originally made which gave rise to the appeal to the Supreme Court in which the decision in question was rendered. That is the position so far as the particular case decided is concerned. It is no doubt true that every decision does not reopen every other concluded matter. But it is equally emphatic that under Art. 141 of the Constitution, the law declared by the Supreme Court shall be binding on all Courts within the territory of India. Whenever, therefore, any Court or any authority in India has occasion to apply the law, it is bound to apply it as declared by the Supreme Court. Although a decision of the Supreme Court may not reopen a concluded decision, if an appeal is pending against an order at the time a decision of the Supreme Court is rendered, there is no question that the appeal will have to be decided in accordance with the decision of the Supreme Court applying the law as declared by the Supreme Court. If an appeal had not been filed, but the time for presenting the same has not expired, the appellant is certainly entitled to ask the appellate Court to reverse the original order in the light of the decision of the Supreme Court.
If such is the clear position in law, we cannot see any difficulty in one taking advantage of a provision for rectification of a mistake by the original authority in the same way as he may take advantage of a provision for preferring an appeal against his order, provided the circumstances are such that he can bring the case within the four corners of the provision for rectification.'
20. He then proceeded to examine the scope of the words 'mistake apparent on the record' and held :
'The error apparent can be both of fact as well as law. It is well settled that an order can be rectified on either ground. If the revisional order made under s. 21 in this case was not in conformity with the law laid down by this Court, such an order could be rectified under s. 25A within 5 years from the date of the order in which the mistake had occurred.'
21. In Visvesvaraya Iron & Steel Ltd. case, referred to above, on identical facts, this Court held that applying r. 6(4)(ff) to deduct the cost of packing material, in case of cement, was clearly an error of law which could be rectified under s. 25A of the Act.
22. In the Selection Committee for Admission to Medical and Dental Colleges, Bangalore vs. M.P. Nagaraj AIR 1972 Mys 44 a Division Bench of this Court had occasion to consider what is a 'mistake or error apparent on the face of the record' under order 47, r. 1, CPC. One view canvassed before this Court was that if a binding decision bearing on a material question was overlooked, that would be an error apparent on the face of the record. The contrary view submitted was that even if the Court overlooks a binding decision, that will not be an error apparent on the face of the award [sic record]. This Court after considering the matter held :
'In this state of divergence of views as to whether overlooking a binding decision amounts to an error apparent on the face of the record, the key to the solution of this question is, in our opinion, found in the test laid down by Rajagopala Iyengar, J. who spoke for the Court in Tungabhadra Industries Ltd. vs . Govt. of Andhra Pradesh : [1964]5SCR174 . Without intending to deal with that question exhaustively his Lordship said that where without any elaborate argument one could point to the error and say here is a substantial point of law which stares one in the face, and there could reasonably be no two opinions entertained about it, a clear case of error apparent on the face of the record would be made out.
Art. 141 of the Constitution provides that the law declared by the Court, shall be binding on all Courts within the territory of India. Hence, where there is a decision of the Supreme Court bearing on a point and where a Court has taken a view on that point which is not consistent with the law laid down by the Supreme Court, it needs no elaborate argument to point to the error and there could reasonably be no two opinions entertained about such error. Applying the above test laid down by Rajagopala Ayyangar, J. in : [1964]5SCR174 , such an error would clearly be an error apparent on the face of the record. The reasoning of Srinivasa Iyengar, J. in : AIR1927Mad998 and of Waller, J. in AIR 1933 Mad 731, that a mistake of law apparent from a contrary decision of a superior Court, cannot be said to be apparent on the face of the record, cannot prevail in view of the test laid down by the Supreme Court as to what constitutes an error apparent on the face of the record.'
23. In T.S. Balaram, ITO vs . Volkart Bros. & Ors. : [1971]82ITR50(SC) , the Supreme Court held that 'a mistake apparent on record' must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions; and a decision on a debatable point of law is not a mistake apparent from the record.
24. In Kil Kotagiri Tea & Coffee Estates Co. Ltd. vs . ITAT : [1988]174ITR579(Ker) , K.S. Paripoornan, J. speaking for a Division Bench of Kerala High Court observes :
'An order of assessment, based upon an interpretation or application of law which is ultimately found to be wrong in the light of judicial pronouncements rendered subsequently, discloses a mistake apparent from the record. When the Court decides a matter, it does not make the law in any sense but all it does is that it interprets the law and states what the law has always been and must be understood to have been. Where an order is made by an authority, on the basis of a particular decision, the reversal of such decision in further proceedings will justify a rectification of the order based on that decision.....
We would state, that the view of the Tribunal, that rectification contemplated by s. 254(2) or s. 154 of the IT Act, must be of a mistake which is a mistake in the light of the law in force at the time when the order sought to be rectified was passed, is a clear error. A binding decision rendered by a Court is always retrospective and the decision which overruled was never the law. The overruling decision should be deemed to have been in force even on the day when the order sought to be rectified was passed. We are further of the view that the Tribunal was in error in holding that the subsequent decision of the High Court has no retrospective operation as in the case of subsequent legislation or the decision of the Supreme Court. A subsequent binding decision of the Supreme Court or of the High Court has retrospective operation and overruling is always retrospective.'
25. Any decision on this aspect will be incomplete without reference to a passage from Salmond on Jurisprudence (Twelfth Edition) at page 148 :
'As we have seen, the theory of case law is that a judge does not make law; he merely declares it; and the overruling of a previous decision is a declaration that the supposed rule never was law. Hence, any intermediate transactions made on the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regards matters that are res judicatae, or accounts that have been settled in the meantime.'
26. Therefore, in the final analysis, what is a 'mistake apparent from the record', capable of being rectified A mistake, either of fact or of law, glaring and obvious from the record itself, capable of identification, without a detailed investigation or enquiry or elaborate arguments, in regard to which there could reasonably be no two opinions is a 'mistake apparent from the record'. If it relates to a fact, it should be possible to say 'this is obviously a mistake'. A decision on a debatable point of law will not, however, be a mistake apparent from the record. A point on which there is no decision of the Supreme Court or of the concerned High Court, and in regard to which two or more views are possible, is a debatable point of law. A point of law on which there are divergent views of other High Courts, is a debatable point of law. Hence, there cannot be a rectification of an order, merely on the ground that a contrary decision was rendered on the point involved by a High Court other than the High Court of the concerned State. It is needless to point out that when a point is covered by a decision of the Supreme Court or concerned High Court, either rendered prior to or subsequent to the order proposed to be rectified, then the point ceases to be a debatable point; it also ceases to be a point requiring elaborate arguments or detailed investigation/enquiry. To encapsulate, the following will be 'mistakes apparent from the record' relating to a question of law :
(a) An order made, ignoring or overlooking : (i) a binding decision of the Supreme Court or the concerned High Court rendered prior to the date of such order; and/or (ii) a relevant provision of existing law;
(b) An order, found to be erroneous : (i) by applying a subsequent enactment given retrospective effect; and/or (ii) by applying a subsequent decision of the Supreme Court or concerned High Court.
27. It should, however, be borne in mind that orders which have become final, cannot be rectified. This is not because a mistake apparent on the record ceases to be so in regard to an order which has become final, but because the time/limitation prescribed for appeal, revision, review or rectification, had expired. In other words, so long as the time prescribed for rectification or other remedy under the relevant Statute has not expired, the order cannot be said to have become final, for purpose of rectification.
28. Before applying these principles to the case on hand, it is necessary to refer to two decisions relied on by the petitioners which take a different view. The first is a decision of a Division Bench of the Calcutta High Court in Jiyajeerao Cotton Mills Ltd. vs . ITO : [1981]130ITR710(Cal) dealing with s. 154 of the IT Act, 1961, wherein it was held :
'We are, however, unable to accept the contention of Mr. Pal that the principle of retrospective legislation is applicable to the decisions of the Supreme Court declaring the law or interpreting a provision in a statute. The law is laid down or a provision in a statute is interpreted by the Supreme Court only when there is a debate or doubt on the interpretation of any provision of a statute requiring interpretation by the Supreme Court or when there is a conflict of judicial opinion on a provision of a statute between the different High Courts of India which is required to be resolved and settled by the Supreme Court. The law laid down by the Supreme Court, in our opinion, cannot be said to have retrospective operation in the sense that although a debate or doubt or a conflict of judicial opinion is resolved and settled by the Supreme Court, yet still that does not obliterate the existence of such debate or doubt or conflict that existed prior to the decision of the Supreme Court setting at rest such debate or doubt or conflict.'
The second is a decision of a Division Bench of the Madras High Court in the State of Tamil Nadu vs . M.G. Meenambal & Co , wherein it was held :
'The learned counsel for the assessee put forward the well known doctrine of jurisprudence that whenever a Court declares what the law is, it takes effect not from the date of the judgment, but from the very date of the commencement of the law in question. This is a well known fiction of our jurisprudence. Cynics sometimes refer to this doctrine by describing Court judgment as always being retrospective, in contrast to Acts of the legislature which are generally prospective and where occasional retrospectivity is the butt of high faulting criticism from legal purists and from the pulpit of the Bench. We quite agree with the learned counsel for the assessee that retrospectivity is the very life-breath of Court decisions generally. But this doctrine of jurisprudence cannot alter the realities of time or space. At the time when the Tribunal rendered their decision in these cases, there was no Supreme Court decision at all. So it cannot be said that the Tribunal's decision could be regarded, ex facie, as running counter to the Supreme Court's decision, and so ex facie erroneous. The Supreme Court have no doubt clarified what the law under the Tamil Nadu General Sales-tax Act, 1959, was from its very commencement, but their judgment has not the effect of rendering the orders of the Tribunal dt. 31st Jan., 1973, and 25th April, 1978, as mistake apparent from the record.
The learned counsel for the assessee submitted that on the wording of s. 55 for an error to be apparent from the face of the record it is not correct to say that the error could have been avoided even at the time when it had been committed. The learned counsel pointed out that s. 55 carries a three year period of time to rectify the error, and this shows that an error can become apparent at any time within that period, which means that it could become apparent subsequent to the commission of the error. This argument is misconceived. Section 55 contains two things : one is the commission of apparent error; the other is its rectification. The period of limitation prescribed by the section relates to the aspect of rectification. The learned counsel's contention is based on a transference of limitation period of three years prescribed for rectification to the very basic requirement, namely, the commission of an apparent error which is the provocation for the exercise of the certificatory power.'
29. The Calcutta and Madras High Courts have proceeded on the basis that an order ex facie legal and correct, when made, cannot become erroneous by reason of any subsequent declaration of law by the Supreme Court or the respective High Court. They further assume that a 'mistake apparent on the record' should be demonstrated on the date of making of the order and not with reference to any subsequent binding decision of a superior Court. There is an inherent fallacy in this reasoning. In Jiyajeerao's case and Meenambal's case, though the principle that when a superior Court whose declarations of law are binding, declares what the law is, it takes effect not from the date of judgment but from the very inception of the law in question has been referred, it was not given effect, as they made a distinction between the retrospective operation of statutes and retrospective operation of binding decisions of superior Courts. When a superior Court declares the law, it is not 'making' law on the date of judgment but merely declaring the law. The decision being an enunciation of the true and correct position of law, becomes applicable from the date when the concerned law came into effect. If, therefore, the Supreme Court or the concerned High Court declared the true position on the point of law, it relates back to the date of the enactment itself. If so, the law so declared is deemed to have existed and applied, on the date of the order which is sought to be rejected. Hence, the validity of the order will necessarily have to be examined with reference to the legal position as enunciated by the Supreme Court, even though such enunciation may be subsequent to the order of assessment. If so done, it would be seen that the order to the contrary, suffers from an error apparent from the record. The decisions of Calcutta and Madras High Court in Jiyajeerao and Meenambal, run counter to the law laid down by the Supreme Court in the cases of Bombay Dyeing, Model Mills, Bhatia and Gauraya. I, therefore, respectfully disagree with the views expressed in Jiyajeerao and Meenambal. It now remains to examine whether the orders of rectification are justified in these cases, in the light of the principles stated in para 26 above.
30. The decision of this Court in Visvesvaraya's case was rendered on 20th Sept., 1990. The said decision was binding on all authorities in Karnataka. The orders of assessments were passed on 30th Sept., 1991, 30th April, 1992, 25th April, 1992 and 26th May, 1992, all subsequent to the date of decision in Visvesvaraya. It needs no arguments to say that if the assessing authority had applied the ratio decidendi in Visvesvaraya, he could not have excluded packing charges from the taxable turnover. The Assessing Officer did not refer to that decision. Nor do the orders contain any discussion or reason as to why packing charges were excluded while calculating taxable turnover. In these circumstances, no long or elaborate argument is necessary to hold that the said orders were passed by overlooking or ignoring the binding decision of this Court in Visvesvaraya. Thus, the said deduction of packing charges is a mistake apparent on the record amenable to rectification on the ground stated in para 26(a) above.
31. Learned counsel for the petitioner contended that the decision in Visvesvaraya's case was contrary to the decision of the Supreme Court in Raj Sheel's case and, therefore, the question regarding packing charges was still debatable on the date of the assessment order. It is not necessary to go into the question whether Visvesvaraya's case was contrary to Raj Sheel's case. Even assuming for the purpose of argument, that the decision in Visvesvaraya's case was not available, the position is no different. When the Supreme Court categorically declared in Ramco's case that packing charges should also be included in the taxable turnover for both Central Sales-tax and Tamil Nadu Sales-tax, the said declared law became applicable even in regard to Karnataka Sales-tax Act. The said decision in Ramco's case though rendered on 20th Oct., 1992 subsequent to the orders of assessment, will have to be applied to find out whether there is any mistake apparent from the record. It should be deemed that in regard to sale of cement governed by Cement Control Order of 1967, packing charges should be included in taxable turnover, even from the beginning. Tested on the touch stone of Ramco's case, exclusion of packing charges from taxable turnover becomes ex facie illegal and erroneous, amenable to rectification on the ground stated in para 26(b) above. Thus, the assessing authority was justified in rectifying the orders of assessment by including the packing charges in the taxable turnover.
32. I, therefore, hold that the orders of rectification impugned in these writ petitions, in so far as they seek to include packing charges in the taxable turnover are valid and justified. If the petitioner has any other grievance in regard to the orders of rectification, on the calculations made in pursuance of the rectification, it is open to them to urge that limited question in the appeals filed or to be filed by them. 33. It is stated that the petitioner has not filed appeals in regard to asst. yrs. 1983-84 and 1984-85 having regard to the pendency of these petitions. It is needless to say that if such appeals are filed, the appellate authority will have to take note of the time spent in these writ petitions and condone the delay in filing such appeals. Subject to the above observations, these writ petitions are rejected.