Paragraph numbers below are the court’s original numbering, recovered from the source text.
21. Appearing in support of the appeal, Mr. V. Lakshmikumaran, learned counsel, contended that the Assessing Authority having passed the order dated 28th March, 2008 taking into consideration the decision of the Tribunal, which in turn distinguished the decision in Sonic Electrochem (supra), and such decision having attained finality, the Revisional Authority could not have assumed a jurisdiction to suo motu issue the impugned show-cause notices as well as the final revisional orders under section 34 of the VAT Act holding that mosquito repellent mats being unscheduled goods, are taxable at the general rate of tax. According to him, the Revisional Authority was as much bound by the order of the Tribunal as the Assessing Authority was having regard to the similarity of issues involved and it was not open to such authority to take a view different from the one expressed by the Tribunal.
22. Our attention was drawn by Mr. Lakshmikumaran to the decision of this Court reported in 1992 SUPP (1) SCC 443 (Union of India and Ors. Vs. Kamlakshi Finance Corporation Ltd.) in support of the proposition that in disposing of quasi-judicial issues before them, the Revenue Officers are bound by the decisions of the appellate authorities and that the principle of judicial discipline requires that the orders of the higher appellate authorities are followed unreservedly by the subordinate authorities.
23. Mr. Lakshmikumaran, accordingly, prayed that upon the revisional orders being set aside, the orders of the Assessing Authority be restored.
24. Per contra, Mr. Alok Sangwan, learned counsel appearing for the respondents, contended that the Revisional Authority did not exceed its jurisdiction in exercising suo motu powers under section 34 of the VAT Act. By referring to notifications issued at or about the relevant time amending Schedule C and the decision in Sonic Electrochem (supra), he sought to argue on the merits of the determination made by the Revisional Authority and how she was right in her findings that the mosquito repellants manufactured by the appellant were liable to be taxed @ 10% in terms of the decision in Sonic Electrochem (supra), and not 4% as assessed by the Assessing Authority in the orders under revision. He also submitted that the orders of the Revisional Authority do not merit interference, and the appeal ought to be dismissed.
25. At the hearing, we made it clear that the issue as to whether the impugned orders of the Revisional Authority were sustainable on merits would not be examined unless the Court was persuaded by Mr. Sangwan to accept that the Revisional Authority did have the authority, competence and jurisdiction to issue the impugned show-cause notices and pass the consequential final revisional orders impugned in the writ petition enhancing the liability of the appellant to tax @ 10% instead of 4%.
26. Since section 34 of the VAT Act appears to have been the source of power exercised by the Revisional Authority, we shall first notice its contents as it stood on the date of the impugned orders, i.e. 2nd March, 2009. Prior to its amendment with effect from 20th March, 2009, section 34 read as follows: “Section 34. Revision. : – (1) The Commissioner may, on his own motion, call for the record of any case pending before, or disposed of by, any taxing authority for the purposes of satisfying himself as to the legality or to the propriety of any proceeding or of any order made therein which is prejudicial to the interests of the State and may, after giving the persons concerned a reasonable opportunity of being heard, pass such order in relation thereto, as he may think fit: Provided that no order passed by a taxing authority shall be revised on an issue, which on appeal or in any other proceeding from such order is pending before, or has been settled by, an appellate authority or the High Court or the Supreme Court, as the case may be: M/S GODREJ SARA LEE LTD. v. THE EXCISE AND TAXATION OFFICER-CUM-ASSESSING AUTHORITY [DIPANKAR DATTA, J.] Provided further that no order shall be revised after the expiry of a period of three years from the date of the supply of the copy of such order to the assessee except where the order is revised as a result of retrospective change in law or on the basis of a decision of the Tribunal in a similar case or on the basis of law declared by the High Court or the Supreme Court.” (2) The State Government may, by notification in the Official Gazette, confer on any officer not below the rank of Deputy Excise and Taxation Commissioner, the powers of the Commissioner under sub-section (1) to be exercised subject to such exceptions, conditions and restrictions as may be specified in the notification and where an officer on whom such power have been conferred passes an order under this section, such order shall be deemed to have been passed by the Commissioner under sub-section (1).”
27. To the extent relevant for the present decision, suo motu power of revision could be exercised by the Revisional Authority for the purposes of satisfying himself as to the legality or propriety of any order made in any proceeding which is prejudicial to the interests of the State. The first proviso, however, imposed a restriction on exercise of such suo motu power, if an issue had been settled, inter alia, by an appellate authority. Thus, the sine qua non for exercise of power under section 34 is the satisfaction of the Revisional Authority that an order has been made by a taxing authority in any proceeding prejudicial to the interests of the State, the legality or propriety of which appears to him to be prima facie vulnerable. Nevertheless, such power cannot be exercised if the issue involved is pending before or has been settled by an appellate authority. It cannot be disputed that the Tribunal is comprehended within the meaning of ‘appellate authority’ as defined in section 2(b) of the VAT Act.
28. These being the contours of section 34, as it then stood, it needs to be seen how far the Revisional Authority was justified in drawing power from such provision and exercising it.
29. A bare perusal of the impugned revisional orders reveals that the decision in Sonic Electrochem (supra) formed the plinth for the satisfaction that the orders of assessment are liable to be revised. The decision in Sonic Electrochem (supra) was rendered upon consideration of the Gujarat Sales Tax Act, 1969 (hereafter ‘the Sales Tax Act’, for short). The short question that arose for a decision was, whether ‘Jet Mat’ produced by the appellant therein would come within Entry 129 of Schedule II Part A of the Sales Tax Act, issued under section 49 thereof. Entry 129, at the relevant point of time, read thus:
30. Having regard to the specific entry, i.e. Entry 129, dealing with mosquito repellents, this Court overruled the contention of the appellant therein that ‘Jet Mat’ would not come within the ambit of Entry 129 since one of its constituents happens to be an insecticide. It was also held that the product manufactured by the appellant therein, viz. ‘Jet Mat’, which was commercially known as “Mosquito Repellent Mat” is a mosquito repellant notwithstanding the fact that it not only repels mosquitoes but is also capable of killing mosquitoes. For the reasons assigned in the decision, it was held that ‘Jet Mat’ is not an insecticide which would be entitled for partial exemption under Entry 98 of the Sales Tax Act.
31. It is, therefore, clear that because of the specific entry dealing with mosquito repellents, this Court held ‘Jet Mat’ to be covered under Entry 129.
32. As the Tribunal in its order dated 21st November, 2001 found, there was no such corresponding entry in the VAT Act. Bearing in mind the same as well as on consideration of a decision of the Madras High Court and other decisions, the Tribunal had proceeded to hold that mosquito repellents containing 4% ‘Alethrin’ was an insecticide and hence, liable to concessional rate of tax.
33. While deciding the present appeal, we are primarily concerned with the issue of assumption of jurisdiction by the Revisional Authority on the face of the unchallenged order of the Tribunal dated 21st November, 2001, and not with the merits of the decision either given by the Tribunal or by the Revisional Authority. What stares at the face of the respondents is that the aforesaid decision of the Tribunal, quoted in the order of the Assessing Authority, has attained finality. Once the issue stands finally concluded, the decision binds the State, a fortiori, the Revisional Authority. The decision of the Tribunal may not be acceptable to the Revisional Authority, but that cannot furnish any ground to such authority to perceive M/S GODREJ SARA LEE LTD. v. THE EXCISE AND TAXATION OFFICER-CUM-ASSESSING AUTHORITY [DIPANKAR DATTA, J.] that it is either not bound by the same or that it need not be followed. The first proviso, in such a case, gets activated and would operate as a bar to the exercise of powers by the Revisional Authority.
34. In our view, the Revisional Authority might have been justified in exercising suo motu power to revise the order of the Assessing Authority had the decision of the Tribunal been set aside or its operation stayed by a competent Court. So long it is not disputed that the Tribunal’s decision, having regard to the framework of classification of products/ tax liability then existing, continues to remain operative and such framework too continues to remain operative when the impugned revisional orders were made, the Revisional Authority was left with no other choice but to follow the decision of the Tribunal without any reservation. Unless the discipline of adhering to decisions made by the higher authorities is maintained, there would be utter chaos in administration of tax laws apart from undue harassment to assesses. We share the view expressed in Kamlakshi Finance Corporation Ltd. (supra).
35. In the midst of hearing, we had enquired from Mr. Sangwan whether there has been any decision of any other competent Tribunal or High Court taking a view different from the one taken by the Tribunal in its order dated 21st November, 2001, which was considered by the Assessing Authority. Fairly, he answered in the negative. If only Mr. Sangwan could have invited our attention to any such decision, which were acceptable to us, the issue decided by the Tribunal could have been reopened on the ground that it is a debatable issue and interference with the final orders passed by the Revisional Authority may not have been resorted to, leaving the appellant to pursue the appellate remedy under the VAT Act.
36. There is also substance in the contention of Mr. Lakshmikumaran that suo motu power of revision, on the terms of section 34, could have been exercised only if the orders sought to be revised suffered from any illegality or impropriety.
37. A decision may be questioned as suffering from an illegality if its maker fails to understand the law that regulates his decision making power correctly or if he fails to give effect to any law that holds the field and binds the parties. On the other hand, having regard to the purpose section 34 seeks to serve, to take exception to a decision on the ground of lack of propriety of any proceedings or order passed in such proceedings, it essentially ought to relate to a procedural impropriety. It is incumbent for the accuser to show that the decision maker has failed to observe the standard procedures applicable in case of exercise of his power. Additionally, to impeach an order on the ground of moral impropriety, it has to be shown that the weight of facts together with the applicable law overwhelmingly points to one course of action but the decision has surprisingly gone the other way, giving reason to suspect misbehaviour or misconduct in the sphere of activity of the decision maker warranting a revision.
38. There is nothing on record to justify either illegality or (procedural/moral) impropriety in the proceedings before the Assessing Authority or the orders passed by him, as such. As noted above, the Assessing Authority was bound by the order of the Tribunal and elected to follow it having no other option. Such decision of the Tribunal was even binding on the Revisional Authority. In such circumstances, to brand the orders of the Assessing Authority as suffering from illegality and impropriety appears to us to be not only unjustified but also demonstrates thorough lack of understanding of the principle regulating exercise of suo motu revisional power by a quasi-judicial authority apart from being in breach of the principle of judicial discipline, while confronted with orders passed by a superior Tribunal/Court. We are inclined to the view that it is not the Assessing Authority’s orders but those passed by the Revisional Authority, which suffer from a patent illegality.
39. For the foregoing reasons, we have no other option but to invalidate the impugned final revisional orders dated 2nd March, 2009 for the Assessment Years 2003-04 and 2004-05. It is ordered accordingly.
40. The interim order dated 18th January, 2010 is made absolute.
41. The appeal stands allowed. However, the parties are left to bear their own costs. Nidhi Jain Appeal allowed. (Assisted by : Tamana, LCRA) M/S GODREJ SARA LEE LTD. v. THE EXCISE AND TAXATION OFFICER-CUM-ASSESSING AUTHORITY [DIPANKAR DATTA, J.]