1. In all these petitions, the main challenge is to the validity of the Tamil Nadu General Sales Tax (Fourth Amendment) Act, 1999 (Act 14 of 1999). There are some minor differences in the prayers sought for in the various petitions. We therefore, first refer to the nature of the plea of the petitioners. In O.P. Nos. 1157, 1158 of 1999 and 1336 to 1339 of 1999, the prayer is to declare Tamil Nadu Act 14 of 1999 as unconstitutional and ultra vires. These petitions have been filed by outdoor advertising agencies and they have also made averments relating to the exigibility to tax under Section 3A of the Tamil Nadu General Sales Tax Act, 1959. O.P. No. 1270 of 1999 mainly questions the second proviso to Section 31 of the Tamil Nadu General Sales Tax Act and the validity of Tamil Nadu Act 14 of 1999. They are chartering ships to Poompuhar Shipping Agency. O.P. No. 1245 of 1999 seeks a direction to the respondents not to insist upon 25 per cent of admitted tax before entertaining an appeal under Section 31 of the Tamil Nadu General Sales Tax Act. O.P. Nos. 1325 to 1328 of 1999 relate to assessment years 1993-94 to 1996-97 and they seek to quash orders passed by the appellate authority refusing to waive the payment of 25 per cent of admitted tax under Tamil Nadu Act 14 of 1999 before entertaining the appeals. The correctness of Section 3A of the Tamil Nadu General Sales Tax Act has already been decided by this Special Tribunal in favour of the Revenue and the allegations are nothing but repetitions and no arguments were in fact advanced in this regard. Similarly, no arguments were advanced with reference to the second proviso of Section 31 of the Tamil Nadu General Sales Tax Act regarding satisfactory proof of payment of the tax admitted by the appellant/assessee before filing an appeal. Therefore, the one and only issue in all these petitions relates to the validity of Tamil Nadu Act 14 of 1999. Even here it has to be mentioned that at the time of arguments, no serious attempts were made to invalidate the amendment because there are a number of decisions upholding the imposition of condition for entertaining appeals. The main arguments centred over the issue of retrospective operation of the Act and the transaction in respect of Act will apply.
2. The Tamil Nadu Act 14 of 1999 which comes into effect from June 14, 1999 has introduced amendments to Sections 31, 31-A and 36 of the Tamil Nadu General Sales Tax Act, 1959. In Sub-section (1) of the second proviso to Section 31 the following words are added : "and twenty-five per cent of the difference of the tax assessed by the assessing authority and the tax admitted by the appellant".
Similarly, in Sub-section (1) of the second proviso to Section 31-A the following words are added : "and twenty-five per cent of the difference of the tax assessed by the assessing authority and the tax admitted by the appellant".
"Provided further that no appeal filed by any person objecting to an order passed,-- (a) under Sub-section (3) of Section 31 or under Sub-section (3) of Section 31-A shall be entertained unless it is accompanied by satisfactory proof of the payment of the tax as ordered by the Appellate Assistant Commissioner or by the Appellate Deputy Commissioner, as the case may be ; (b) under Sub-section (1) of Section 32, unless it is accompanied by satisfactory proof of the payment of the tax admitted by the appellant to be due or of such instalments thereof as might have become payable, as the case may be, and twenty-five per cent of the difference of the tax ordered by the Deputy Commissioner under Section 32 and the tax admitted by the appellant." 3. It is not disputed that the enactment has not been given retrospective effect as and from an anterior date. In other words, the Act is prospective. According to the Revenue in all appeals filed after the said date, the above conditions should be satisfied before appeals are entertained. According to the assessees/petitioners the above restrictions placed on the appeals will not relate to assessments and returns filed by the assessees prior to June 14, 1999, In other words, the arguments of the assessee is that at the moment returns are filed, they have a pre-existing right to appeal and in respect of such appeal, no restrictions can be made by the impugned enactment because it is prospective legislation. Thus, the arguments have been considerably narrowed down to a single issue as to the assessments or returns which would be affected by the impugned legislation.
4. It is well-established that the right to appeal is a matter of substantive right and not merely a matter of procedure. This right of appeal from the decision of an inferior to a superior Tribunal becomes vested in a party when the Us commences. This pre-existing right of appeal cannot be destroyed by an amendment, it is not retrospective in nature by express words or necessary intendments. The question is as to when such a preexisting right of appeal becomes vested in a party Is it on the date when proceedings are initiated for reopening an assessment Is it on the date when an order of assessment is passed Is it on the date when an appeal is actually filed 5. Mr. C. Natarajan, has advanced the main arguments for the petitioners. Mr. R.L. Ramani and Mr. K. Ramgopal have chipped in with useful additional points supported by decisions. Mr. K. Soundararajan, the learned Government Advocate, has given a fitting reply trying to sustain our earlier view that the right of appeal vests in an assessee only from the date of the order of assessment.
6. In [1999] 113 STC 122 (TNTST) (Goodluck Agencies v. State of Tamil Nadu) we have answered this issue while considering the validity of the Tamil Nadu Act 11 of 1997. While upholding the power of stay in a Sales Tax Appellate Tribunal, we had to answer the question as to when and in respect of what assessments Tamil Nadu Act 11 of 1997 could apply. In paragraph 30 of the said judgment we observed as follows : ".....The word Us means a suit or action, where there is an issue between the parties in dispute. Therefore, it can be said that when return is filed and the same is not accepted and the officer proposes to assess the dealer in a different way by issuing a pre-assessment notice the Us no doubt commences. But only when this difference of opinion takes the form of an assessment order, it can be said that the Us has actually taken a proper and legal form.
Instead of leaving the matter in doubt or to the whims and fancies of the parties or the assessing authorities, it is proper to hold that the dispute between the parties commences only when an order of assessment is made. Therefore, in all cases where orders of assessment have been made the right of the assessee to file a first appeal before the A.A.C. and a second appeal before the Sales Tax Appellate Tribunal is recognised." 7. The learned counsel appearing for the petitioners have brought to our notice that the said view taken by us may not be in consonance with some of the judgments of the Supreme Court. We do agree with the said contention and we hold that our view requires some rectification. For this purpose we will now advert to the decisions relied on by the parties and find out when the "lis" commenced or when the right of appeal gets vested in a party. The famous decision on the issue is the one rendered in [1953] 4 STC 114 (SC) [Hoosein Kasam Dada (India) Ltd. v. State of Madhya Prades]. To appreciate the ratio of the judgment we will refer to some of the facts. On November 28, 1947, the assessee in that case submitted a return. On January 25, 1949 the officer issued a notice fixing the date of disposal as February 5, 1949. The hearing of the case commenced on June 9, 1949 and on April 8, 1950, the order of assessment was made. On November 25, 1949 an amendment was introduced that no appeal against an order of assessment shall be admitted unless the appeal is accompanied by satisfactory proof of the payment of the tax with penalty. The amendment was not retrospective, as in our case.
The question therefore, was in respect of what assessment the assessees had a vested right of appeal and could escape from the said amendment.
The Supreme Court observed after considering certain decisions as follows : "It was there regarded as settled that the right of appeal was not mere matter of procedure but was a vested right which inhered in a party from the commencement of the action in the court of first instance and such right could not be taken away except by an express provision or by necessary implication." "Finally, Sri Ganapathy Aiyar faintly urges that until actual assessment there can be no "lis" and, therefore, no right of appeal can accrue before that event. There are two answers to this plea.
Whenever there is a proposition by one party and an opposition to that proposition by another a "lis" arises. It may be conceded, though not deciding it, that when the assessee files his return a "lis" may not immediately arise, for under Section 11(1) the authority may accept the return as correct and complete. But if the authority is not satisfied as to the correctness of the return and calls for evidence, surely a controversy arises involving a proposition by the assessee and an opposition by the State. The circumstance that the authority who raises the dispute is himself the Judge can make no difference, for the authority raises the dispute in the interest of the State and in so acting only represents the State. It will appear from the dates given above that in this case the "lis" in the sense explained above arose before the date of amendment of the section." 8. Since the above decision is cited in many of the later decisions it is necessary to find out the ratio of this decision. The Supreme Court has clearly held that the date of filing of return does not commence the Us. But they have not conclusively decided this issue because they have used the words "though not deciding it". Further, in that case the first hearing was proposed on February 5, 1949 and the hearing commenced on June 9, 1949, both of which were prior to the date of amendment namely, November 25, 1949. One other sentence in the said judgment of the Supreme Court which in our view has a key to solve the entire issue is as follows : "For the purposes of the accrual of the right of appeal the critical and relevant date is the date of initiation of the proceedings and not the decision itself." Before taking any particular view it is but proper that we look into the other decisions also.(Garikapati Veeraya v. N. Subbiah Choudhry) relates to a suit and the Supreme Court observed as follows : "For reasons stated above we think that the suit, out of which this application arises, having been instituted before the date of the Constitution the parties thereto had, from the date of the institution of the suit, a vested right of appeal upon terms and conditions then in force and the judgment sought to be appealed from being a judgment of reversal and the value of the subject-matter being above Rs. 10,000 the applicant had a vested right of appeal to the Federal Court under the provisions of the old Civil P.C. read with the Government of India Act, 1935 and the Federal Court (Enlargement of Jurisdiction) Act, 1947." It is in that judgment that Mr. Venkatarama Ayyar, J. gave a dissenting opinion as follows : "It is one thing to say that right of appeal is a substantive right, and quite a different thing to hold that it vests at the commencement of the proceedings. It would be perfectly logical to hold that the right of appeal is a substantive right and at the same time that it arises only when the decision which is to be appealed against is rendered. The result of that view will be that a right of appeal which arises when a judgment is given, would stand unimpaired by a subsequent legislation altering or abridging it, unless that is made retrospective, expressly or by necessary implication." We can take consolation from the said minority judgment that our earlier view in [1999] 113 STC 122 (TNTST) (Goodluck Agencies v. State of Tamil Nadu) is in consonance with the views expressed by Venkatarama Ayyar, J.10. In [1962] 46 ITR 516 (Pat) (Raja Bahadur Kamakhya Narayan Singh v.State of Bihar) a division Bench of the Patna High Court observed as follows : "In my opinion the right of appeal vested in the assessee on the date of initiation of the proceedings for assessment, I think that for the purpose of accrual of the right of appeal the critical date is the date of initiation of the assessment proceeding or, in the other words, the date of the commencement of the lis."(SC) (Vitthalbhai Naranbhai Patel v.Commissioner of Sales Tax, Madhya Pradesh, Nagpur), a similar question arose and the Supreme Court observed : "That leaves over for consideration the question whether Hoosein Kasam Dada's case [1953] 4 STC 114 (SC) ; [1953] SCR 687, should be applied. That also presents some difficulty to us. We have before us the petition which was made in the High Court, and we cannot allow that petition to be amended. That petition does not mention the dates on which the return was filed, so that we could apply the dictum of this Court in Hoosein Kasam Dada's case [1953] 4 STC 114 (SC) ; [1953] SCR 687. Dr. Barlingay deduces the date of the filing of the return from the dates on the challans accompanying the payment of tax in the treasury, and argues that this was prior to the amendment. He contends that this is sufficient for the application of the principle in the said case.
The decision in Hoosein Kasam Dada's case [1953] 4 STC 114 (SC) ; [1953] SCR 687 proceeded on the ground that when a lis commences, all rights get crystallised and no clog upon a likely appeal can be put, unless the law was made retrospective, expressly or by clear implication. From the record of this case, we cannot say when the lis commenced, and unless it can be proved conclusively that it was before the amendment of the law, the rule in Hoosein Kasam Dada's case [1953] 4 STC 114 (SC) ; [1953] SCR 687 cannot apply. There is no averment that a right of appeal had vested, and has been wrongly taken away." It has to be remembered that this last decision is by a Constitution Bench and they did not follow [1953] 4 STC 114 (SC) ; [1953] SCR 687 (Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh) because necessary facts were not available. In that case the assessment was made on March 17, 1953 and before an appeal was filed an amendment was introduced necessitating the deposit of the assessed tax as a condition precedent to the admission of the appeal. They held that the amendment will apply.
12. In [1968] 21 STC 476 (State of Madras v. Latheef Hameed & Co.), a division Bench of the Madras High Court observed as follows : "There is no controversy before us that the assessee's right to file an appeal and a further appeal under the earlier Act is a vested right. Such a right becomes vested in the assessee, the moment he filed his return which commenced the assessment proceedings ....." 13. In [1988] 68 STC 220 (AP) (State of Andhra Pradesh v. Hindustan Shipyard Limited), the court observed as follows : "Therefore, when the Andhra Pradesh General Sales Tax (Amendment) Act, 1985, by the introduction of Sub-Sections (6) and (6-A) in Section 21 of the Andhra Pradesh General Sales Tax Act, 1957 with effect from 1st July, 1985, deprived the Tribunal altogether of the power of granting stay of collection of tax pending an appeal, the amendment cannot be taken to have retrospective effect. The power of the Tribunal to grant stay is preserved in respect of all appeals relating to assessment years falling prior to 1st July, 1985 and in respect of provisional assessment proceedings relating to months falling prior to 1st July, 1985." 14. In [1977] 39 STC 147 (All.) (Commissioner, Sales Tax, Uttar Pradesh v. Tika Ram Arhti), the Allahabad High Court has observed that proceedings for assessment or reassessment are initiated either by issue of notice or by filing of returns.
15. In [1986] 62 STC 40 (Bom) (Siemens India Ltd. v. State of Maharashtra) the Bombay High Court has observed that assessment proceedings against a registered dealer commence when he files his return and against an unregistered dealer, when the Commissioner calls upon him to file a return of his turnover. When the registered dealer has not filed a return the proceedings commence when the Commissioner issues a notice.
16. In [1989] 74 STC 303 (Mad) (Tamil Nadu Small Industries Corporation Limited v. State of Tamil Nadu) a Full Bench of the Madras High Court has considered the meaning lis with reference to a taxing statute. The Full Bench observed as follows : "The task of an appellate authority under the taxing statute, especially a non-departmental authority like the Tribunal, is to address its mind to the factual and legal basis of an assessment for the purpose of properly adjusting the taxpayer's liability to make it accord with the legal provisions governing his assessment. Since the be-all and end-all of the statutory provisions, especially those relating to the administration and management of income-tax, is to ascertain the taxpayer's liability correctly, to the last pie, if it were possible, the various provisions relating to appeal, second appeal, reference and the like can hardly be equated to a lis or dispute as arises between the two parties in a civil litigation.
Although the income-tax statute makes the department or its officers figure as parties in appeal proceedings, they are not in the strict sense what are called by American writers as parties to adversary proceedings. This is so, because the very object of the appeal is not to decide a point raised as a dispute, but any point which goes into the adjustment of the taxpayer's liability. In that sense, a view prevails, even in England, that the authorities sitting in appeal in a tax case, cannot be regarded as deciding a Us, but they are only engaged in an administrative act of adjusting the taxpayer's liability. Under our fiscal jurisprudence, we may regard the appellate authorities as exercising quasi-judicial functions in the same sense as a taxing officer does".
17. On behalf of the Revenue Mr. K. Soundararajan, strongly relied upon the Constitutional Bench judgment in [1961] 12 STC 219 (SC) (Vitthalbhai Naranbhai Patel v. Commissioner of Sales Tax, Madhya Pradesh, Nagpur) already referred to by us. He also relies on [1970] 26 STC 10 (SC) (Hardeodas Jagannath v. State of Assam) which is also a Constitutional Bench judgment. In this case the main issue related to the extension of the Assam Sales Tax Act to Shillong administered areas and after getting a clarification from the Government of India it was decided that the extension of the laws to the said areas was correct.
The second question which is of relevance to our case relates to the applicability of Section 30(1) of the amended Act which prescribed that no appeal shall be entertained by the appellate authority unless he is satisfied that the amount of tax assessed or the penalty levied has been paid, if not otherwise directed by him. In respect of the retrospective operation of the said amended provision the Supreme Court observed as follows : "It was contended that the amendment came into force with effect from April 1, 1958, and it cannot be given retrospective effect so as to apply to assessment periods ending on September 30, 1956, March 31, 1957, and September 30, 1957. We are unable to accept this argument as correct because the assessments for these three periods were completed after the amending Act came into force, i.e., after April 1, 1958. The appeals against the assessments were also filed after the amendment." 18. In [1999] 115 STC 222 (Assistant Commercial Taxes Officer v. Ambe Namkin & Provision Centre) the Rajasthan Taxation Tribunal relied on the above decision in coming to the conclusion that a similar amended provision would not apply to accounting/assessment purpose wherein orders of assessment were made after the amendment.
19. In the above state of affairs we have to elicit the correct proposition of law. While doing so we have to exclude certain decisions as not falling under the long line of cases which categorically and uniformly lay down the ratio, in an authoritative manner. The first case to be excluded in Hardeodas Jagannath v. State of Assam [1970] 26 STC 10 (SO. In this case the main question related to the extension of Assam Sales Tax Act to the Shillong administered area. It was held in favour of the Government. Then came the question, whether the amended Section 30(1) requiring payment of tax before filing an appeal could apply to certain assessments. The court observed : "It was contended that the amendment came into force with effect from April 1, 1958, and it cannot be given retrospective effect so as to apply to assessment periods ending on September 30, 1956, March 31, 1957, and September 30, 1957. We are unable to accept this argument as correct because the assessments for these three periods were completed after the amending Act came into force, i.e., after April 1, 1958. The appeals against the assessments were also filed after the amendment." There was no argument that the right of appeal was vested in the dealer from the date of commencement of Us or when proceedings were initiated.
Therefore, no reference was made to Hoosein Kasam Dada (India) Ltd. v.State of Madhya Pradesh [1953] 4 STC 114 (SC) and all the cases following that case and referred to by us, earlier.
20. The above case was followed in [1999] 115 STC 222 (Assistant Commercial Taxes Officer v. Ambe Namkin & Provision Centre) by Rajasthan Taxation Tribunal. In that case the following questions were raised for consideration : "(i) the assessment/accounting period, the assessment order and the filing of the appeal all antedate the amendment but the appeal is pending, (ii) the assessment/accounting period and the assessment order antedate the amendment but the appeal is filed after the amendment has been made, and (iii) the assessment/accounting period alone antedates the amendment and the assessment order is made and the appeal filed after the amendment has been made as has happened in the case in hand." 21. The Tribunal answered the questions in the following manner, even though they considered all the decisions including [1953] 4 STC 114 (SC).
"...........the amended provisions would apply in all cases in which the assessments are made and appeals are filed after the coming into effect of the amended provisions and their remaining in force irrespective of the accounting/assessment periods to which the appeals relate as this would not amount to giving the amendments retrospective effect as has been held in Hardeodas' case [1970] 26 STC 10 (SC) ; AIR 1970 SC 724." 22. Once the above cases are excluded the ratio becomes clear and explicit. To recapitulate the binding decisions, briefly, we find as follows : Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh [1953] 4 STC 114 (SC) talks of initiation of proceedings. Garikapati Veeraya v. N. Subbiah Choudhry AIR 1957 SC 540 refers to the date of filing of suit. Raja Bahadur Kamakhya Narayan Singh v. State of Bihar [1962] 46 ITR 516 (Pat) again says initiation of proceedings or the date of commencement of Us. Vitthalbhai Naranbhai Patel v. Commissioner of Sales Tax, Madhya Pradesh, Nagpur [1961] 12 STC 219 (SC) did not have materials to decide the issue. State of Madras v. Latheef Hameed & Co. [1968] 21 STC 476 (Mad.) in our opinion should be considered as cutting at the root of the Revenue's stand. So also is the judgment reported in State of Punjab v. Tara Chand Lajpat Rai [1967] 19 STC 493 (SC). They observed that the right vests in an assessee the moment he filed the return, which according to them commenced the proceedings.
State of Andhra Pradesh v. Hindustan Shipyard Limited [1988] 68 STC 220 (AP) refers to assessment years falling prior to amendment. Siemens India Ltd. v. State of Maharashtra [1986] 62 STC 40 (Bom) also refers to the date of return as commencing proceedings. Commissioner, Sales Tax, Uttar Pradesh v. Tika Ram Arhti [1977] 39 STC 147 (All.) is also to the same effect.
23. We also give considerable weight to the Full Bench judgment in Tamil Nadu Small Industries Corporation Limited v. State of Tamil Nadu [1989] 74 STC 303 (Mad.). They have diluted the emphasis on "Us" and therefore the emphasis on commencement of proceedings in tax laws, become important. In this connection, we can also refer to Rules 7 to 18 of the Tamil Nadu General Sales Tax Rules framed under the Tamil Nadu General Sales Tax Act. They prescribed the dates when dealers are obliged to file returns, under various circumstances. Even if a nil return is filed and accepted, there is no guarantee that it will not be re-opened. Any assessment order can also be revised. It is not proper to leave the discretion to the authorities, as to when they call for accounts or when they issue a pre-assessment notice or a revision notice. It is wiser and safer to adopt a firm date as the date on which the vested right of appeals vests on the assessee. We, therefore hold that the date of filing a return or the date on which the return is due as per the Tamil Nadu General Sales Tax Act and Rules, whichever is earlier, as the date on which right of appeal vests on the dealer/assessee. Therefore, in all cases where the date of return or when the return became due under the Tamil Nadu General Sales Tax Act and Rules, whichever is earlier, was prior to Tamil Nadu Act 14 of 1999, will not apply and appeals can be filed in accordance with law prevailing prior to June 14, 1999, when Act 14 of 1999 came into force.
24. Consequently, instead, of the prayers sought for in the original petitions we uphold the validity of Tamil Nadu Act 14 of 1999, but give below the following directions regarding the retrospective nature of the Act. The Act is admittedly prospective in nature. However, a right of appeal inheres in a dealer/assessee the very moment when he files a return under the Tamil Nadu General Sales Tax Act or when he is obliged to file a return within the dates prescribed under the Tamil Nadu General Sales Tax Rules, whichever is earlier. Therefore, Tamil Nadu Act 14 of 1999 cannot apply to assessment proceedings relating to such returns filed or the dates prescribed in the Rules for filing such returns whichever is earlier. In respect of those transactions and assessments the law as it existed prior to Tamil Nadu Act 14 of 1999 will alone apply. The original petitions are disposed of in the above manner.
And this Tribunal doth further order that this order on being produced be punctually observed and carried into execution by all concerned.
Issued under my hand and the seal of this Tribunal on the 22nd day of November, 1999.