M/S. Chandaji Kubaji and Co vs The State Of Andhra Pradesh

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 420 of 1957, Civil Appeal No. 142 of 1958

Decision Date: 29 April 1960

Coram: S.K. Das, J.L. Kapur, M. Hidayatullah

In this case, the Court recorded that the petitioner, M/S. Chandaji Kubaji & Co., was a business engaged in the trade of ghee and groundnut oil. The Deputy Commercial Tax Officer had assessed sales tax on the petitioner for the financial year 1948‑49 on a turnover of Rs. 28,69,151 and an odd amount, and similarly for the year 1949‑50 on a turnover of Rs. 28,72,083 and an odd amount. The petitioner challenged both assessments, and the first appeal was presented before the Commercial Tax Officer. After the Commercial Tax Officer declined to modify the assessments, the petitioner proceeded to a second appeal before the Sales Tax Appellate Tribunal. During the Tribunal proceedings, the petitioner did not produce any documentary material to support its contention, and the Tribunal disposed of both appeals by holding that the assessments were correct. Dissatisfied with the Tribunal’s orders, the petitioner filed applications for review under section 12A(6)(a) of the Madras General Sales Tax Act, 1939 (Madras Act IX of 1939), asserting two separate grounds. In the first application, the petitioner claimed that it could not present any material before the Tribunal because there was no advocate available who could understand English or Telugu to instruct the petitioner. In the second application, the petitioner alleged that the pertinent correspondence had become mixed up with other records, preventing its submission. The Tribunal rejected both applications, holding that a failure to produce necessary material caused by gross negligence or deliberate withholding did not fall within the scope of section 12A(6)(a). The High Court affirmed the Tribunal’s rejection. The petitioner then appealed, obtaining special leave in one case and a certificate of the High Court in the other. The Court examined whether section 12A(6)(a) permits a review when, because of oversight, mistake, or error, essential facts or evidence were not before the reviewing authority at the time it rendered its order, and whether a party may seek review where it has intentionally or deliberately concealed evidence. The Court held that the provision does allow a review in situations where the requisite facts or evidence were absent due to inadvertent oversight, but it barred a party from obtaining a review when it had deliberately withheld evidence necessary to support its claim. The Court noted that the decision in State of Andhra v. Sri Arisetty Sriyamulu, A.I.R. 1057 Andhra Pradesh 130, was not approved as authority on the point. Consequently, the Court concluded that the petitioner’s applications for review under section 12A(6)(a) could not be granted because the alleged reasons for non‑submission of material fell within the category of deliberate or intentional withholding, which the statute excludes. The judgment was delivered in the Civil Appellate Jurisdiction, concerning Civil Appeal No. 420 of 1957, arising from the judgment and order dated 8 August 1955 of the former Andhra High Court in Tax Revision Case No. 2 of 1955, and also Civil Appeal No. 142 of 1958, arising from the judgment and order dated 28 July 1955 of the former Andhra High Court in Tax Revision Case No. 32 of 1954.

In this matter the Court dealt with two separate appeals that were heard together because their facts were substantially the same. The first appeal, Civil Appeal No. 420 of 1957, was taken on special leave from the Supreme Court, while the second appeal, Civil Appeal No. 142 of 1958, was filed on a certificate granted by the former Andhra High Court. Both appeals arose from judgments and orders dated 8 August 1955 and 28 July 1955 respectively, the latter in Tax Revision Case No. 32 of 1954. Counsel for the appellants, identified as N. Rajeswara Rao and Sardar Bahadur, appeared for both cases, and counsel for the respondent, T. V. R. Tatachari together with T. M. Sen, represented the State in each appeal. The judgment was pronounced on 29 April 1960 by Justice S. K. Das.

The central issue presented to the Court was whether the appellant, Messrs Chandaji Kubaji & Co., a dealer in ghee, groundnut oil, chillies and similar commodities operating from Guntur, could invoke section 12A(6)(a) of the Madras General Sales Tax Act, 1939 (Madras Act IX of 1939) as it applied in Andhra, to obtain a review of an order passed by the Sales Tax Appellate Tribunal under section 12A of that Act. The factual background for both appeals was as follows. In the first appeal the Deputy Commercial Tax Officer of Guntur assessed the appellant to sales tax for the financial year 1948‑49 on a total turnover of Rs 28,69,151 and some additional amount. After an unsuccessful revision before the Commercial Tax Officer, the appellant made a second appeal to the Sales Tax Appellate Tribunal, hereinafter referred to as the Tribunal. Before the Tribunal the appellant contended that a portion of the total turnover, amounting to approximately Rs 10,45,156, represented commissions earned on the purchase of commodities that were sold on behalf of principals residing outside the State of Andhra, and therefore such amounts should not be subject to tax by the State. The Tribunal observed that the appellants had neither advanced arguments nor produced any material in support of this commission‑agency contention. Consequently, the Tribunal dismissed the appeal on 30 May 1953.

In the second appeal the appellant was again assessed by the Deputy Commercial Tax Officer of Guntur, this time for the year 1949‑50, on a net turnover of Rs 28,72,083 and a similar additional sum. The appellant objected to the inclusion of an amount of roughly Rs 19,89,076 on the ground that the goods concerned had been consigned to the appellant and subsequently dispatched to locations outside the State, and that the delivery actually took place outside Andhra. The Sales Tax authorities rejected this plea, and the Tribunal recorded that the appellant had argued that ownership of the goods remained with the appellant until the sale price was collected and the goods were delivered to buyers outside the State. Beyond this general argument, the appellant did not provide any further documentation or detailed evidence to support the claim.

In the proceedings before the Tribunal, the appellant did not produce any material before the Court or before the assessing authority or the Commercial Tax Officer to substantiate the claim that title to the goods transferred to the buyer only at locations outside the State. It was acknowledged, however, that although no written contracts existed, the transactions originated from written correspondence in which the appellant acted as seller and various other persons acted as buyers. The existence of this correspondence was admitted, but the appellant chose not to make the letters or other documents available either to the Court or to the subordinate officer. When documents capable of conclusively establishing the character of the transaction are in the appellant’s possession and are deliberately withheld, the usual consequence is that an adverse inference is drawn against the appellant’s contention. Accordingly, the Court formed the opinion that, in the present case, the sales must be treated as having taken place within the State and that they were properly included in the taxable turnover. The appeal was decided on that finding on 19 August 1952. Following both of those orders, the appellant lodged applications for review under section 12A(6)(a) of the Act. The relevant portion of that provision reads: “12A(6)(a) – The Appellate Tribunal may, on the application either of the assessee or of the Deputy Commissioner, review any order passed by it under sub‑section (4) on the basis of facts which were not before it when it passed the order: Provided that no such application shall be preferred more than once in respect of the same order.” In Civil Appeal No. 420 of 1957, the appellant argued that the accounts were in Gujarati language and that there was no person on the appellant’s side who could give instructions to the appellant’s counsel in Telugu or English when the appeal was heard, and therefore the appellant could not place the materials before the Tribunal. In the second appeal, the appellant contended that the relevant correspondence had become intermingled with other records and consequently could not be produced before the Tribunal. The Tribunal rejected both applications for review, holding that a failure to produce the necessary materials in support of a plea, whether caused by gross negligence or deliberate withholding, did not satisfy the condition in section 12A(6)(a) that the review be based on facts which were not before the Tribunal at the time it made its order. The appellant then approached the High Court in revision under section 12B of the Act, asserting that the Tribunal’s interpretation of section 12A(6)(a) was incorrect. The High Court distinguished between what it described as “basic facts” and the evidence required to prove those facts, and observed that there is an essential distinction between a fact and the

In the judgment, the Court observed that Section 12A(6)(a) was not meant to give every assessee two chances to prove his case before a Tribunal; rather, the provision was intended to protect an assessee who could not present certain facts at the first hearing and whose omission might have altered the Tribunal’s decision. Accordingly, the Court held that the High Court’s interpretation of Section 12A(6)(a) was correct and that the applications for review had been properly rejected. Both appeals before the Court raised the contention that the Tribunal as well as the High Court had adopted an erroneous view of the true scope and effect of Section 12A(6)(a) of the Act. The Court’s attention was drawn to a later Full Bench decision of the same High Court in The State of Andhra v. Sri Arisetty Sriramulu (1), and counsel submitted that the opinion expressed in that case represented the correct approach. In that Full Bench judgment, it was held that the term “facts’’ in Section 12A(6)(a) should be understood in the sense employed in the law of evidence, encompassing both the principal fact to be proved (factum probandum) and the evidentiary facts (factum probans) from which the principal fact follows directly or by inference. Thus, “facts’’ could be either “facts in issue’’—the principal matters in dispute—or “relevant facts’’—the evidentiary matters that directly prove or disprove the facts in issue. The Court noted that, for the purposes of the present appeals, it was unnecessary to discuss at length the divergent views expressed by the High Court of Andhra regarding the true scope of Section 12A(6)(a). A Division Bench of that High Court had opined that the word “facts’’ in the subsection meant basic facts, i.e., the facts necessary to sustain a claim, and distinguished these basic facts from the evidence required to establish them. That Division Bench further held that the Tribunal could review its order under Section 12A(6)(a) only if any of the basic facts had not been before it when the order was passed, and that the subsection was not intended to provide a second opportunity to a party to introduce fresh evidence. By contrast, the Full Bench adopted a broader view, stating that the “facts’’ referred to in the subsection might include both “facts in issue’’ and “evidentiary facts.’’ The Court agreed that, in appropriate cases, evidentiary facts could be so closely linked with the facts in issue that they might also fall within the ambit of the subsection. Moreover, the Full Bench went further and held that even where relevant evidentiary facts were deliberately withheld or suppressed, the party responsible for such suppression could still seek a review under Section 12A(6)(a). The Court considered these observations in forming its own view on the two appeals before it.

In considering the application of section 12A(6)(a), the Court respectfully observed that the provision does not allow a party to obtain a fresh hearing on the basis of evidence that the party failed to present at the original hearing, whether through negligence or deliberate refusal. The Full Bench had earlier explained that the wording of section 12A(6)(a) is broad and general, but that breadth could produce undesirable consequences if it permitted an assessee to secure another opportunity before the Appellate Tribunal by relying on evidence that had been omitted or concealed at the first hearing. The Bench further stated that the language of the section is clear, unequivocal and admits only a single interpretation, and therefore the Court must apply it as written, even if the result is inconvenient. Any inconvenience, the Court noted, does not fall on the assessee for whose benefit the statute was enacted; any correction of the provision is a matter for the Legislature, not the judiciary. In the two appeals before this Court, the records showed that the petitioners had deliberately withheld or suppressed material evidence. In one appeal the respondents claimed that the documents were in Gujarati and that no counsel could be instructed in English or Telugu to translate them, while in the other appeal the respondents asserted that the correspondence had been mixed with other files for approximately two years. Because these explanations were unfounded and amounted to intentional neglect, the Court concluded that the appellants were not entitled to invoke a review under section 12A(6)(a). Consequently, the Court found no merit in either appeal, ordered their dismissal, and directed that the parties bear the costs.