Judgment:
Y.V. Anjaneyulu, J.
1. These two tax revision cases were filed by the State and the respondent is the same in both the cases. The two cases relate to the sales tax assessment years 1974-75 and 1975-76. A common question arises for consideration in both the cases and it will be convenient to dispose of those together.
2. The assessee carries on business in wheat products. In accordance with the licence issued by the Director of Civil Supplies, the assessee was under an obligation to sell atta, maida and other wheat products to the person nominated by the Director. During the financial year 1974-75, the assessee supplied wheat products of the value of Rs. 45,11,740 to the persons nominated by the Director of Civil Supplies; for the assessment years 1975-76 the assessee likewise supplied wheat products of the value of Rs. 79,61,310 to the nominees of the Director. In connection with the sales tax assessments for these two years the assessee claimed that the supplies of wheat products made to the persons nominated by the Director of Civil Supplies cannot be regarded as 'sales' within the meaning of section 2(n) of the A.P. General Sales Tax Act, 1957 ('the Act', for short), as these 'sales' were not made at the volition of the assessee. It was claimed that the supply of goods to the nominees of the Director was compulsory under the terms of the licence and consequently the ingredients of a sale were lacking in the supplies so made to the nominees of the Director. The assessing authority accepted the above contention of the assessee and completed the assessments for the two years without including the value of supplies made by the assessee of wheat products to the nominees of the Director. The assessment for the year 1974-75 was completed on 31st March, 1976. The assessing authority determined the gross turnover at Rs. 1,39,10,795 and allowed what the assessing authority called 'exemption', to the extent of Rs. 45,11,740. As already pointed out the so-called exemption was in relation to the wheat products supplied by the assessee to the nominees of the Director. For the assessment year 1975-76, the assessing authority completed the assessment on 14th June, 1977 determining the gross turnover at Rs. 1,46,63,952. As in the assessment year 1974-75 the assessing authority granted 'exemption' from the levy of sales tax in respect of Rs. 79,61,310 representing the supplies of wheat products by the assessee to the persons nominated by the Director.
3. For the assessment year 1974-75 the assessing authority issued a notice on 1st March, 1979 under section 14(4)(cc) of the Act requiring the assessee to show cause as to why the exemption from the levy of sales tax allowed in respect of wheat products supplied to the nominees of the Director should not be withdrawn in view of the judgment of the Andhra Pradesh High Court in T.R.C. Nos. 27 and 66 of 1975 dated 11th February, 1976 (Sri Vijayalakshmi Rice Mill Contractors Company v. State of A.P. [1976] 38 STC 19). A similar show cause notice was issued for the assessment year 1975-76 on 22nd June, 1979. The show cause notices issued for both the assessment years referred to the 'exemption' granted by the assessing authority for the two assessment years in question, and it was proposed to withdrawn such exemption acting under section 14(4)(cc) of the Act. Eventually the assessee's objections were considered and an order was passed by the assessing authority on 9th March, 1979 withdrawing the exemption for the assessment year 1974-75. For the assessment year 1975-76 an order withdrawing exemption was passed by the assessing authority on 4th July, 1979. The orders withdrawing exemption for these two assessment years categorically state that the exemption was withdrawn invoking the provisions contained in section 14(4)(cc) of the Act.
4. The assessee appealed against the assessments made by the assessing authority which were confirmed by the Assistant Commissioner (Commercial Taxes), Appeals. Thereupon, the assessee filed second appeals before the Sales Tax Appellate Tribunal. Before the Tribunal the assessee raised two pleas; firstly, it was contended that the original assessing authority was correct in exempting the supplies made by the assessee of wheat products to the nominees of the Director of Civil Supplies, as such supplies did not fulfil the requirements of 'sale', according to section 2(n) of the Act. The assessee reiterated the submission that these supplies were made by the assessee, not on its own volition but under compulsion from the Director of Civil Supplies and consequently the supplies made under such compulsion could not be regarded as 'sales' for the purpose of the Act. It was claimed that the assessing authority erred in reopening the matter under section 14(4)(cc) of the Act.
5. The second contention was that the reopening of the assessments under section 14(4)(cc) of the Act was invalid, inasmuch as that provision was introduced by the A.P. General Sales Tax (Amendment) Act which came into force on 17th January, 1978. It was pointed out that the assessments for the years 1974-75 and 1975-76 were made long prior to 17th January, 1978 and they had become final and it was not open to the assessing authority to disturb the finality of these assessments by taking recourse to the provisions contained in section 14(4)(cc) which came into force long after the assessments became final. The assessee accordingly pleaded before the Tribunal that the orders passed by the assessing authority invoking the provisions of section 14(4)(cc) of the Act were without jurisdiction.
6. The Tribunal considered the pleas raised by the assessee. It refused to accept the first contention that the supplies of wheat products to the nominees of the Director could not be regarded as sales for the purpose of the Act. The Tribunal held that these supplies possessed the characteristics of sale and consequently the supplies made by the assessee for the two assessment years under consideration were liable to be taxed under the Act.
7. Dealing with the second plea regarding jurisdiction raised by the assess the Tribunal accepted the contention. The Tribunal pointed out that prior to the coming into force of section 14(4)(cc) on 17th January, 1978 the assessments had become final and the assessee acquired a vested right to ensure that these assessments were not revised or disturbed by any provision of law that might come into force subsequently, unless such a provision is given retrospective operation either expressly or by necessary implication. The Tribunal did not find in the language of section 14(4)(cc) of the Act any retrospective operation, and consequently the orders passed by the assessing authority by invoking section 14(4)(cc) were held to be invalid and without jurisdiction. Eventually the Tribunal set aside the orders of the Assistant Commissioner as also of the assessing authority levying tax in respect of sales effected by the assessee to the nominees of the Director of Civil Supplies. Aggrieved by the order of the Tribunal holding that the orders passed by the assessing authority invoking section 14(4)(cc) of the Act were without jurisdiction, these two revision cases were filed by the State.
8. We have heard the learned Government Pleader for the Commercial Taxes Department and Sri P. Venkatarami Reddi, learned counsel for the assessee.
9. It is necessary to notice the provisions contained in section 14(4) of the Act. They are extracted below :
'In any of the following events, namely, where the whole or any part of the turnover of a business of a dealer has escaped assessment to tax, or has been under-assessed or assessed at a rate lower than the correct rate, or where the licence fee or registration fee has escaped levy or has been levied at a rate lower than the correct rate, the assessing authority may, after issuing a notice to the dealer, and after making such enquiry as he may consider necessary, by order, setting out the grounds therefor -
(a) determine to the best of his judgment the turnover that has escaped assessment and assess the turnover so determined;
(b) assess the correct amount of tax payable on the turnover that has been under-assessed;
(c) assess at the correct rate the turnover that has been assessed at a lower rate;
(cc) assess the correct amount of tax payable, in a case where any deduction or exemption has been wrongly allowed;
(d) levy the licence fee after determining to the best of his judgment the turnover on which such fee is payable;
(e) levy the registration fee that has escaped levy; or
(f) levy the correct amount of licence fee or registration fee in a case where such fee has been levied at a rate lower than the correct rate.
In addition to the tax assessed or fee levied under this sub-section, the assessing authority may also direct the dealer to pay a penalty as specified in sub-section (8).'
A scrutiny of the above provisions would show that basically the provisions contained in sub-section (4) come into operation to set right escapement of turnover, etc., in the original assessment. Prior to the Andhra Pradesh General Sales Tax (Amendment) Act 14 of 1978, which came into force from 17th January, 1978, no power was conferred on the assessing authority to set right matters relating to the grant of exemption in the original assessment erroneously or allowance of any deduction in the original assessment erroneously. In order to cover these two situations, clause (cc) was inserted by Act 14 of 1978, so that the assessing authority may 'assess the correct amount of tax payable, in a case where any deduction or exemption has been wrongly allowed'. In the present case, the assessing authority initiated action under section 14(4)(cc) of the Act for the purpose of withdrawing the so-called exemption granted in the original assessments for the years 1974-75 and 1975-76. The assessee's contention was that section 14(4)(cc) came into force only on 17th January, 1978 and the assessments for both the years were completed and became final prior to the coming into force of section 14(4)(cc). The assessee's contention, therefore, was that assessments which had already become final cannot be modified by recourse to an amendment brought about subsequently, unless the amending provision authorised action to be taken retrospectively. The assessee urges that no such retrospective operation is given to section 14(4)(cc) of the Act and consequently it must be held that the assessments, which had become final prior to the coming into force of section 14(4)(cc), cannot be modified by taking recourse to the newly inserted provision. As already indicated by us, this argument appealed to the Tribunal and it accepted the assessee's plea. The Tribunal held that inasmuch as the two assessments for the years 1974-75 and 1975-76 had reached a state of finality prior to the coming into force of section 14(4)(cc), the assessing authority cannot initiate action by taking recourse to the newly inserted provision.
10. Learned counsel for the assessee, Sri Venkatarami Reddi, invited our attention to the decision of a Division Bench of this Court In Udipi Vasanta Vihar v. Deputy Commercial Tax Officer [1969] 23 STC 6, wherein it was held that section 14(4) of the Act is not a provision merely affecting procedure, but a provision affecting substantive rights and, therefore, any amendments to that section could not be given retrospective effect so as to affect assessments completed before the amendment. The Division Bench further held that as there was no provision for best judgment assessment under section 14(4) before its amendment by Act 16 of 1963, it was not open to the assessing authority to issue a notice after the coming into force of Act 16 of 1963, as by that time the assessment was already completed and had become final. The decision in the aforesaid case directly covers the matter under consideration in favour of the assessee.
11. The principle is well-settled that if the right of an assessing authority to reopen an assessment is barred under the law for the time being in force, no subsequent enlargement of the right can revive such right in the absence of express words or necessary intendment. Please see the decision of the Supreme Court in S. S. Gadgil v. Lal & Co. : [1964]53ITR231(SC) , the decision of the Bombay High Court in A. N. Mafatlal v. Deputy Controller of Estate Duty : [1968]67ITR449(Bom) and the decision of the Supreme Court in J. P. Jani, I.T.O. v. Induprasad Devshanker Bhatt : [1969]72ITR595(SC) . It is not necessary to multiply the authorities, as the above principle is well-settled. In the present case, the assessing authority did not think it fit to modify the assessments already completed by invoking any other provision contained in section 14(4) of the Act. This, by necessary implication, means that the assessing authority was not in a position to make the modification in the assessments already completed until section 14(4)(cc) was inserted by Act 14 of 1978. If this were to be the logical inference flowing from the action of the assessing authority, then it would mean that the assessments which had become final prior to the insertion of clause (cc) in section 14(4) of the Act cannot be reopened. It is not possible to say that the Tribunal committed any error in accepting the assessee's plea in the above regard. Learned Government Pleader invited our attention to the decision of a Division Bench of this Court in New Kailash Bangles Stores v. State of Andhra Pradesh [1986] 63 STC 156. It is pointed out that under identical circumstances the Division Bench affirmed the action taken. Having carefully gone through the order of the Division Bench, we find that no contention was taken before the Court in the form in which it is urged in the present case. We are, therefore, unable to accept the learned Government Pleader's plea that the aforesaid decision of the Division Bench of this Court constitutes authority in support of the proposition that action could be initiated under section 14(4)(cc) of the Act even in cases where the assessments already made had become final.
12. We would not, however, like to rest our decision in this case based on the above aspect of the matter, as we feel there is a more formidable reason for quashing the assessment proceedings initiated by the assessing authority. We had already indicated earlier, while setting out the facts, that before the assessing authority the assessee's contention initially was that the supplies of wheat products made to the nominees of the Director of Civil Supplies could not be regarded as 'sales' at all and consequently those sales are not subject to the levy of sales tax. This contention was accepted by the assessing authority and the extent of such sales was excluded from the gross turnover. It was not the assessee's case at any time that the supplies of wheat products to the nominees of the Director constituted sales but were exempt under any provision of the Act, the rules or the notifications. Exemption of a sale presupposes that, but for the exemption provided either by the Act, the rules or the notifications, the sales were liable to be taxed. In the assessments originally completed the assessing authority loosely employed the word 'exemption' while excluding the turnover consisting of supplies of wheat products to the nominees of the Director of Civil Supplies. The fact, however, remains that there was neither a claim for exemption under any provision of law of such supplies, nor did the assessing authority purport to allow any exemption wrongly. All that could be said was that the assessing authority accepted erroneously the claim that the supplies of wheat products by the assessee to the nominees of the Director of Civil Supplies did not constitute 'sales' at all under the Act. It is the erroneous decision that required modification by recourse to section 14(4) of the Act.
13. We may now examine the provisions contained in section 14(4)(cc) of the Act. It envisages a case where any deduction or exemption has been wrongly allowed, power is conferred on the assessing authority to assess the correct amount of tax payable in such a case. This provision applies only to cases where a deduction or exemption has been wrongly allowed by the assessing authority. In the present case, there was neither a claim for deduction in the original assessment, nor was any deduction allowed. Therefore, this is not a case where a deduction has been wrongly allowed. There was much less a claim for exemption, by the assessee. As we have already mentioned, the claim for exemption must be with reference to any of the provision contained in the Act, the rules or the notifications. A mere claim to non-liability under the Act cannot amount to a claim for 'exemption', as it is statutorily understood. The assessee in this case claimed that the supplies to the Director's nominees are not 'sales' at all and the assessing authority accepted that claim. This does not, in our opinion, amount to allowing a claim for exemption wrongly. Thus there was neither a deduction nor an exemption that has been wrongly allowed in this case so as to warrant taking action under section 14(4)(cc) of the Act. The proceedings initiated by the assessing authority for the two years under consideration should fail on this fundamental ground.
14. We may refer to the fact that in the show cause notices and in the orders passed the assessing authority purported to proceed under section 14(4)(cc) only. It was not the case of the assessing authority that the assessments already made could be modified by any other provision contained in section 14(4) of the Act. Such a plea has not been raised by the Revenue before the Tribunal, nor such a contention has been urged before us in the memorandum of revision. Learned Government Pleader also did not urge before us that the impugned orders passed by the assessing authority could be sustained under any other provision of law. In the absence of any such plea before us, we do not think it appropriate to examine the question whether the assessments could be sustained by reference to any other provision of law. We are also not certain whether we could possibly enter into such an exercise in view of the consistent stand taken by the Revenue supporting the action taken under section 14(4)(cc) of the Act and also in view of the fact that the matter has passed through so many stages before reaching this Court. We, therefore, consider that the impugned orders passed by the assessing authority under section 14(4)(cc) are without jurisdiction.
15. In the result, the tax revision cases are dismissed, but, in the circumstances, without costs. Advocate's fee Rs. 250 in each.
16. Petitions dismissed.