State of Kerala vs K. M. Charia Abdullah and Co

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

Court: supreme-court

Case Number: Civil Appeal No. 466 of 1962

Decision Date: 5 October, 1964

Coram: J.C. Shah, S.M. Sikri, Subbarao J.

In this case the Supreme Court recorded that the matter concerned a dispute between the State of Kerala as petitioner and K. M. Charia Abdullah & Co. as respondent, with the judgment dated 5 October 1964. The bench that heard the appeal consisted of Justices J. C. Shah, S. M. Sikri and Subbarao, K. The citation of the decision was 1965 AIR 1585 and 1965 SCR (1) 601, with additional citator references noted. The statutory framework involved the Madras General Sales Tax Act of 1939, specifically section 12(2)(1), and the Madras General Sales Tax Rules of 1939, particularly rule 14A, the validity of which was questioned as possibly being ultra vires the Act.

The Court explained that the respondents had filed a return of their total turnover under the Madras General Sales Tax Act and had claimed exemption for certain transactions on the basis that those transactions were commission sales, which the Act exempted. The Deputy Commercial Tax Officer accepted the exemption claim and assessed tax only on the remaining turnover. Subsequently the Deputy Commissioner of Commercial Taxes, exercising powers under section 12(2)(i) of the Act and rule 14A of the Rules, called for the case record, issued a notice directing the assessee to show cause against a proposed revision, conducted a fresh enquiry, heard objections, and, relying on new evidence, concluded that the respondents did not act as commission agents but had carried on an outright purchase‑and‑sale business for the entire turnover. Accordingly the Deputy Commissioner revised the assessment order. The respondents appealed the revision to the Sales Tax Appellate Tribunal, which allowed the appeal, and the State then invoked the revisional jurisdiction of the High Court. The High Court held that, in proceedings under section 12(2), the revising authority was limited to examining the record before the assessing authority and therefore could not sustain an order based on fresh evidence; it also declared rule 14A to be ultra vires the Act. The State appealed this finding to the Supreme Court, contending that the High Court erred in holding the rule ultra vires. The Supreme Court, speaking through Justices Shah and Sikri, set aside the High Court’s order declaring rule 14A ultra vires and remanded the proceedings to the High Court for disposal in accordance with law. The Court further clarified that under section 12(2)(i) the revising authority may call for the record of the order or proceeding and may scrutinise that record to determine the legality, propriety or regularity of the order or the proceeding. If, after reviewing the record, the authority is prima facie satisfied that there is illegality, impropriety or irregularity, it may, in exercise of power under rule 14A, direct an additional enquiry before passing its own order.

In this case the Court explained that the revising authority may, before issuing a revisional order, direct an additional enquiry. Although the rule is expressed to operate as if it were enacted in the Act, its validity remains open to challenge on the ground that it is unauthorised. The Court observed, however, that the Act contains no prohibition against the revising authority making or directing a further enquiry once the authority is satisfied, based on the record, that an illegality, impropriety or irregularity exists. The Act, while granting revisional jurisdiction under section 12, entrusts the State Government, by rules framed under section 19, with the power to prescribe the procedure to be followed by the revising authority. Accordingly, a provision that authorises the revising authority to conduct a further enquiry for the purpose of effectively exercising its jurisdiction should be regarded as a valid conferment of power unless it expressly, or by clear implication, nullifies or conflicts with any provision of the Act. The Court directed that the matter be remanded to the High Court to inquire whether, in the circumstances of the 602 case, the Deputy Commissioner was competent to proceed in the manner he had adopted and to pass the revisional order. The Court further noted that, although revisional jurisdiction is not confined solely to arithmetical errors, it does not endow the authority with a power to launch unrestricted enquiries that would encroach upon powers expressly reserved by the Act or by the rules for other authorities, or that would disregard the inherent limitations on the exercise of the power. The Court cited authorities at pages 608 F‑H, 609 A, D‑E, G‑H, 611 G‑H and 612 A, D, H in support of this reasoning.

The dissenting opinion of Justice Subba Rao was also recorded. He held that Rule 14A, to the extent that it confers on the revising authority a power to make a fresh enquiry and to determine, on the basis of that enquiry, the correct amount of tax payable, is void. Justice Subba Rao reasoned that the jurisdiction under section 12(2) is clearly limited to the scrutiny of the order passed or the proceedings recorded by the inferior authority, and that the scope of such scrutiny is confined to questions of legality, propriety of the order, or regularity of the proceedings. Consequently, he concluded that Rule 14A expands the enquiry beyond the limits prescribed by the statute, rendering it invalid. He referred to the passages on pages 604 and 605 A‑B.

The respondents, who dealt in pepper and other condiments, filed a return under the Madras General Sales Tax Act, 1939, asserting that certain transactions were exempt because they were commission sales covered by section 8 of that Act. The Deputy Commercial Tax Officer in Cannanore (Rural) accepted the claimed exemption and consequently taxed only the turnover arising from transactions that were not exempt. Later, the Deputy Commissioner of Commercial Taxes for the Coimbatore Division requested the complete record of the respondents’ case for the same assessment year and, invoking the authority granted by section 12(2)(i) of the Act, ordered a fresh enquiry into the exemption claim. On February 9, 1956, the Deputy Commissioner issued a notice requiring the respondents to show cause why the proposed revision of their assessment should not be made.

After examining new evidence, the Deputy Commissioner concluded that the respondents did not function as commission agents. Instead, he found that they purchased goods outright and sold them, thereby generating the entire turnover on their own account. Based on this determination, he altered the earlier order of the Deputy Commercial Tax Officer and reassessed the respondents on the basis of a larger turnover amount. The principal issue presented for consideration was whether the Deputy Commissioner possessed jurisdiction under section 12(2)(i) of the Act, read together with rule 14‑A, to issue the revised order he issued.

The Court noted that a subordinate provision that conflicts with the primary statute must yield to the statute. When a direct conflict appears between a section of the Act and a rule made under it, the preferred approach is to attempt a harmonious construction; the rule may be interpreted, if its language permits, so as to be consistent with the Act. If such reconciliation is impossible, the rule must be declared void. Applying this principle, the Court observed that rule 14‑A could not override section 12 of the Act. If section 12 did not empower the revisional authority to conduct a fresh enquiry and decide the case on its merits, then rule 14‑A could not supply that power, because doing so would place the rule in conflict with section 12, and the rule would consequently have to give way.

This reasoning raised the further question of whether the revisional jurisdiction conferred by section 12 of the Act included the power to initiate a fresh enquiry after issuing a notice to the dealer and to determine the assessment issue on merits. The Act differentiates between appeals and revisions. Section 11(1) provides that any assessee dissatisfied with an assessment may, within thirty days of receiving the notice of assessment, appeal to the authority prescribed by the statute. Section 11(3) authorises the appellate authority, after giving the appellant an opportunity to be heard, to pass any order it deems appropriate. Section 12(2) empowers the revisional authority to, on its own motion, call for and examine the record of any order or proceeding made by a subordinate officer, for the purpose of ascertaining the legality, propriety, or regularity of such order, and to pass any order it considers fit.

The provision authorises the revisional authority to call for and examine the record of any order passed or any proceeding recorded under the Act by any subordinate officer, for the purpose of being satisfied as to the legality or propriety of that order, or as to the regularity of that proceeding, and to pass such order with respect thereto as he thinks fit. When the legislature creates a statutory right of appeal in one situation and a discretionary remedy of revision in another, it is understood that it intends to establish two separate jurisdictions that differ in both scope and content. By introducing the familiar concepts of appeal and revision, the legislature is presumed to have accepted the well‑known distinction that exists between those two jurisdictions. An essential difference therefore exists between an appeal and a revision. The difference stems from the meanings implicit in the two terms. An appeal constitutes a continuation of the original proceedings; consequently the entire record of the case is placed before the appellate authority, which may review the evidence subject to any statutory limitations that the legislation imposes. By contrast, a revisional authority, whatever powers it may possess, does not acquire the power to rehear or re‑examine the evidence unless the statute explicitly confers that power. That limitation is inherent in the very concept of revision. Section 12(2) of the Act is undoubtedly broader in scope than section 115 of the Code of Civil Procedure, yet the jurisdiction of the revisional authority under that provision remains confined to the question of the legality or propriety of the order or the regularity of the proceedings. Moreover, that jurisdiction can be exercised only by examining the record of the order or the proceeding taken by the inferior authority. Accordingly, the section not only restricts the extent of the revisional authority’s power but also defines the material on which that power may be exercised. The general language that the authority “may pass such order as he thinks fit” must therefore be read as limited to the scope of the jurisdiction granted by the statute. As a result, the revisional authority cannot go beyond the order or the proceeding recorded by the inferior authority, cannot conduct a fresh enquiry, and cannot pass orders on the merits based on such an enquiry. If the provision were interpreted otherwise, the distinction between appeal and revision would disappear. Keeping this distinction in mind, the court examined rule 14‑A. Rule 14‑A makes no separation between an appellate authority and a revisional authority. It empowers the revisional authority to issue a notice to a dealer and to determine the correct amount of tax after making such enquiry as it considers necessary. Consequently, rule 14‑A confers a power that is greater than the power given to the revisional authority under section 12(2) of the Act. While the jurisdiction under section 12(2) is clearly limited to scrutiny of the order passed or the proceeding recorded by the inferior authority, and the scope of the

It was held that the scope of the statutory scrutiny was limited to examining whether an order was legal, proper or regular. Rule 14‑A, however, extended the inquiry beyond those limits by allowing the revising authority to conduct a fresh investigation and to issue new assessment orders based on that investigation. The judgment explained that it was unnecessary to enumerate every type of order the revising authority might issue, nor to list every defect captured by the terms “legality”, “propriety” and “regularity”, as these concepts are well known. Nevertheless, the court stressed that such defects may be discovered only from the existing record and the proceedings before the inferior authority, and not through a new enquiry. Consequently, the provision in Rule 14‑A that granted the revising authority power to make a fresh enquiry and to determine the correct tax liability of a taxpayer was declared void. On this basis, the order of the High Court was affirmed as correct. The appeal was therefore dismissed, with costs awarded, and the opinion was delivered by Justice Shah.

The respondents were dealers in pepper and other condiments who operated their business from Baliapatam in the Malabar (North) District, an area that had previously formed part of the State of Madras but, following the States Reorganisation Act, 1956, now lay within the State of Kerala. For the fiscal year 1950‑51, the respondents filed a return under the Madras General Sales Tax Act, 1939, indicating a gross turnover of Rs 67,38,710‑10‑11. They claimed an exemption on a portion of the turnover amounting to Rs 50,83,441‑14‑4, asserting that this amount represented commission sales which were exempt under section 8 of the Act. The Deputy Commercial Tax Officer, Cannanore (Rural), by an order dated 19 February 1952, granted the claimed exemption and calculated the net taxable turnover at Rs 16,84,060‑11‑9. Subsequently, on 26 February 1952, the same officer assessed tax of Rs 26,313‑7‑3 on the taxable turnover. Before February 1956, the Deputy Commissioner of Commercial Taxes for the Coimbatore Division, invoking the powers conferred by section 12(2)(i) of the Act, requested the case records and initiated an enquiry into the legitimacy of the exemption claimed under section 8. On 9 February 1956, the Deputy Commissioner issued a notice requiring the respondents to show cause why the proposed revision of assessment, which would increase their tax liability, should not be made. After hearing the respondents’ objections, the Deputy Commissioner, by order dated 4 March 1956, concluded that the respondents had not acted as commission agents but had engaged in the outright purchase and sale of goods amounting to Rs 50,83,355‑13‑4, and therefore, in what he considered a proper exercise of the powers granted by section 12(2)(i), proceeded to revise the assessment accordingly.

The revising authority exercising powers under the Act set aside the exemption that had earlier been granted by the assessing officer in an order dated 19 February 1952. The revising authority then amended the earlier assessment dated 26 February 1952 and required the respondents to pay sales tax on a total net turnover of Rs 67,67,4.16‑9‑1 for the financial year 1950‑51. In addition, the revising authority instructed the assessing officer to undertake further steps to recover the tax that was now deemed payable. Dissatisfied with this revised assessment, the respondents filed an application before the Sales Tax Appellate Tribunal, Madras, seeking relief from the order.

The Tribunal heard the respondents’ appeal and, by an order dated 10 October 1956, held that the assessing officer had exceeded his jurisdiction when he assessed the respondents on transactions for which an exemption had previously been obtained. The Tribunal concluded that the assessing officer’s action was ultra vires of section 12(2)(i) of the Act and consequently set aside the assessment. In reaching this conclusion, the Tribunal examined rule 14‑A of the Rules framed under the Act, which had been brought into force on 1 January 1948. The Tribunal observed that rule 14‑A could be invoked only where the amount of tax calculated was less than the correct amount, indicating that the rule focused primarily on a purely arithmetic correction rather than on the substantive merits of the assessment. The Tribunal therefore described rule 14‑A as “much more restricted in scope than section 12 of the Act” and held that when a case is taken up under the general power of revision provided by section 12, the scope of that section, and not rule 14‑A, determines the extent of the revisional authority.

Following the Tribunal’s decision, the State of Kerala, which had obtained jurisdiction over the respondents’ sales‑tax matters pursuant to the States Reorganisation Act, 1956, filed an application before the High Court of Judicature, Kerala. It is noteworthy that the respondents had never questioned the validity of rule 14‑A before the tax‑authorities, and the State itself did not raise any objection to the rule. Nevertheless, the High Court held that, in proceedings governed by section 12(2) of the Madras General Sales Tax Act, the revising authority is limited to the record that was before the assessing officer at the time of the original assessment. Accordingly, the High Court ruled that the revising authority could not consider fresh evidence to modify the assessment. The Court interpreted the phrase “the record of any order passed or proceeding recorded” in section 12(2) to mean that the revising authority may examine only the legality, propriety, and regularity of the subordinate officer’s order, and may not entertain any other evidence. Consequently, the Court declared that rule 14‑A, which had been promulgated by the State Government under the power conferred by section 19 of the Act and which authorized a revising or appellate authority to alter the tax payable after serving a notice and conducting an enquiry, was ultra vires of the statutory scheme.

In this appeal the State of Kerala asserted that the High Court had erred in declaring rule 14‑A to be beyond the powers of the State and in rejecting the State’s petition that invoked the revisional jurisdiction of the High Court on that basis. To understand the State’s submission it was necessary first to examine the relevant sections of the Act and the rules made thereunder. Section 9 of the Act prescribes the procedure to be followed by the assessing authority, while Section 10 deals with the payment and recovery of tax. An order of assessment may be appealed under Section 11 to an authority that is specified by the statute. Section 12, as amended by its first sub‑section, empowers the Commercial Tax Officer to exercise revisional jurisdiction either on his own motion or on application in cases where an appeal under Section 11 is not available to him. The Court’s attention was directed to Sub‑section (2) of Section 12, which reads: “The Deputy Commissioner may— (i) suo motu, or (ii) in respect of an order passed or proceeding recorded by the Commercial Tax Officer under subsection (1) or any other provision of this Act and against which no appeal has been preferred to the Appellate Tribunal under section 12‑A, on application, call for and examine the record of any order passed or proceeding recorded under the provisions of this Act by any officer subordinate to him, for the purpose of satisfying himself as to the legality or propriety of such order, or as to the regularity of such proceeding, and may pass such order with respect thereto as he thinks fit.” Sub‑section (4), to the extent it is relevant, limits the Deputy Commissioner’s power under clause (1) of sub‑section (2) to a period of four years from the date the assessment order was communicated to the assessee. Sub‑section (6) requires that before any order is made under sub‑sections (1), (2) or (3) that enhances the assessment, the assessee must be given an opportunity to show cause against the proposed increase. Section 19, sub‑section (1), authorises the State Government to make rules for the purpose of giving effect to the Act. Sub‑section (2) of that section provides: “In particular and without prejudice to the generality of the foregoing power, such rules may provide for— (j) the duties and powers of officers appointed for the purpose of enforcing the provisions of this Act; (k) generally regulating the procedure to be followed and the forms to be adopted in proceedings under this Act; and (l) any other matter for which there is no provision or no sufficient provision in this Act and for which provision is, in the opinion of the State Government, necessary for giving effect to the purposes of this Act.” Finally, sub‑section (5) of Section 19 stipulates that all rules made under this section must be published in the Fort St. George Gazette, and that such publication gives the rules the effect of being enacted as if they were part of the Act.

The judgment noted that a rule published in the Fort St. George Gazette is deemed to have the same effect as if it were enacted by the statute itself. The Advocate‑General for the State of Kerala argued that rule 14‑A was validly created under section 19 and, because sub‑section (5) of that section declares the rule to have the force of an enacted provision, it could not be struck down. The Court observed that this alternative argument could be disposed of readily. It affirmed that the rules made under section 19 and placed in the Gazette do acquire the effect of being enacted, but that this does not confer any additional sanctity on the rules. The power to frame such rules is delegated by the Act to the State Government, and that power must be exercised strictly within the limits of the authority granted. If the State exceeds those limits while making a rule, the rule becomes invalid, because rules issued under delegated authority are binding only when they stay within the conferred scope. Consequently, the validity of any rule, whether it is said to have the force of an enacted provision or not, may always be challenged on the ground of being unauthorized.

The Court then turned to the extent of the revisional jurisdiction conferred by section 12(2). It examined the language used by the Legislature and concluded that the Deputy Commissioner is empowered to determine the legality or propriety of any order or proceeding made by an officer subordinate to him, as well as the regularity of such proceedings, and to issue appropriate orders as he deems fit. The Deputy Commissioner may, of his own initiative or on application, request and examine the record of any proceeding or order. While it is clear that the revising authority may call for the record and scrutinise it to assess legality, regularity, or propriety, the Act does not limit the authority to merely the existing record. There is no provision in the Act that prevents the revising authority, once satisfied that an illegality, impropriety, or irregularity exists, from making or directing further enquiry. The wording of sub‑section (2) of section 12, which states that the Deputy Commissioner “may pass such order with respect thereto as he thinks fit,” is understood to mean an order that, in the circumstances, the Commissioner considers appropriate to correct the defect. Accordingly, the power to pass such an order may, in some situations, include the power to order further enquiry that the Deputy Commissioner deems necessary to remedy the illegality, impropriety, or irregularity. Therefore, it would be erroneous to assert categorically that, in exercising his revisional jurisdiction, the Deputy Commissioner must be confined solely to the record maintained by the subordinate officer and may never look beyond that record.

In this matter the Court observed that, while exercising revisional jurisdiction, the Deputy Commissioner is not free to go beyond the record kept by the subordinate officer; the authority must be confined to that record and may not conduct inquiries outside it. The Court further noted that the Act, although it grants the prescribed authority the power to entertain an appeal under section 11 and a petition for revision under section 12, does not lay down any specific procedural requirements for those authorities. Accordingly, the responsibility to prescribe the procedure for both appellate and revising authorities rests with the State Government, which may formulate rules under section 19. A rule that authorises the making of a further inquiry in order to give effect to appellate or revisional powers, particularly in the context of a taxing statute, would fall within the ambit of those rules. The Court explained that the power to revise the order or proceeding of a subordinate officer must be exercised solely for the purpose of correcting any illegality, impropriety, or procedural irregularity. Yet, the manner in which that power is exercised is governed by the rules framed under section 19(1), which are intended to implement the purposes of the Act and are further detailed in heads (1), (k) and (j) of subsection (2). In the Court’s view, the scope of the power conferred by subsection (1) and illustrated by subsection (2) of section 19 includes the authority to provide for a further enquiry, thereby enabling the revising authority to perform its functions; unless such a power is expressly or clearly inconsistent with any provision of the Act, it must be regarded as validly exercised. The Court held that granting the revising authority the power to make an additional enquiry, after being satisfied that an illegality, impropriety or irregularity exists and when the authority deems it just to rectify the defect, does not amount to an expansion of the jurisdiction created by section 12(2). With this perspective, the Court turned to the provisions of rule 14‑A, which came into force on 1 January 1948. The rule provides that where the tax determined by the initial assessing authority appears, to the appellate authority under section 11 or the revising authority under section 12, to be less than the correct amount payable by the dealer, the appellate or revising authority shall, before passing any order, determine the correct tax amount after issuing a notice to the dealer and after conducting such enquiry as it considers necessary. The Court noted that this rule vests in both the appellate and revising authorities the power to determine the correct tax amount after giving notice and undertaking any enquiry it deems required. The Court observed that it is a common feature of taxing statutes to confer such powers on appellate and revising authorities, citing, for example, section 31(2) of the Income‑Tax Act, 1922, which gave the Appellate Assistant Commissioner the authority to make further inquiries before disposing of an appeal.

In the earlier Income‑tax legislation, the appellate officer was empowered to conduct any additional investigation that he deemed appropriate before finalising an appeal, or to require the Income‑tax Officer to carry out such an investigation. Section thirty‑three, clause four, granted the Appellate Tribunal the authority to issue any order it considered suitable in the course of an appeal, including the power to command the gathering of further evidence or to take evidence itself, as illustrated in the decision of M L Tewary versus the Commissioner of Income‑tax, Bihar and Orissa. Section thirty‑three‑A further provided that the Commissioner, either on his own initiative or upon receipt of an application filed within one year from the date of the order that was to be revised, could request the record of any proceeding under the Act in which a subordinate authority had made an order, could conduct an inquiry or cause an inquiry to be conducted, and, subject to the provisions of the Act, could pass a revised order as he thought proper. The same type of provisions have been retained in the Income‑tax Act, Act 43 of 1961. Under section two‑fifty, clause four of that Act, the Appellate Assistant Commissioner was likewise authorised, before disposing of an appeal, to make any further inquiry he thought necessary or to direct the Income‑tax Officer to make such an inquiry and to submit the result of that inquiry to him. The powers vested in the Income‑tax Appellate Tribunal and in the Commissioner are expressed in the same language as those found in the earlier 1922 Act, as indicated by sections two‑fifty‑four (1) and two‑sixty‑three (1). Consequently, it cannot be said that a provision which simply gives the appellate or revising authority the power to conduct an inquiry it deems necessary amounts to an unlawful expansion of its revisional or appellate jurisdiction. The distinction between the Income‑tax Acts and the Madras General Sales Tax Act lies in the manner in which the power to entertain an appeal or a revision application and to order further inquiry during the hearing of that appeal or revision is addressed. In the Income‑tax statutes, these powers are fully embedded within the primary legislation. In contrast, under the Madras General Sales Tax Act, while the statutes confer the revisional and appellate jurisdiction, the authority to make an additional inquiry—when the appellate or revising authority is of the opinion that the dealer has not paid the correct amount of tax—is derived from the rules rather than directly from the statute. Nonetheless, this does not make the power to look beyond the records of subordinate taxing authorities unauthorized. The ability to invest such investigative powers in the appellate or revising authority can clearly be effected by clauses (k) and (1) of section nineteen, sub‑section (2); when such power is lawfully invested, the rule permitting the inquiry is not ultra vires. The Madras High Court, in the case of the State of Madras versus the Madura Knitting Company Ltd., affirmed that these powers are valid.

In this case, the Court observed that the authority granted to the revising authority under section 12(2) is not limited to correcting errors that are obvious on the face of the record; it also includes the power to probe deeper into the records, for example by calling for dispatch registers and other documentary evidence. However, the Court noted that this observation alone does not resolve the appeal before it. The objection that Rule 14‑A was beyond the powers conferred by the statute was raised for the first time before the High Court. The Tribunal had merely interpreted Rule 14‑A as applying only to the arithmetic aspect of an assessment and not to the merits of the assessment. The Court found that neither Rule 14‑A nor section 12(2) contains any such limitation. The power to hold an enquiry to take additional evidence is a procedural power that assists the exercise of revisional jurisdiction, and because revisional jurisdiction is not confined solely to cases of arithmetic error, as the Tribunal described, there is no basis for assuming that the power under Rule 14‑A to make such an enquiry, as the appellate or revising authority deems appropriate, is likewise restricted. Nevertheless, the Court held that the expression in Rule 14‑A that allows “making such enquiry as such appellate or revising authority considers necessary” must be read in harmony with the overall scheme of the Act. It would not invest the revising authority with a power to launch broad inquiries that would, as held in (1) (1959) 10 S.T.C. 155, encroach upon powers expressly reserved by the Act or the Rules for other authorities, nor would it permit the authority to disregard the limitations built into those powers. For example, the power to reassess escaped turnover is vested by Rule 17 in the assessing officer and is subject to specific limitations; consequently the revising authority is not competent to make an enquiry for reassessing a taxpayer. Likewise, the power to make a best‑judgment assessment is vested by section 9(2)(b) in the assessing authority and must be exercised according to the prescribed procedure, and the revising authority cannot assume that power. The revisional power is to be exercised to determine whether an order is illegal, improper, or the proceeding is irregular, and it is in aid of that purpose that the authority may issue orders it deems fit. One line of inquiry that the revising or appellate authority may pursue is the correctness of the tax levied; if, after examining the record, the authority is prima facie satisfied that the order is illegal, improper, or the proceeding irregular, it may, in the course of its order, direct an additional enquiry. Neither section 12 nor Rule 14‑A authorises the revising authority to embark generally on enquiries that are properly within the domain of the assessing authorities.

The Court indicated that it was not required at this stage to give any judgment on the substantive correctness of the order issued by the Deputy Commissioner, Coimbatore Division, on its merits. It observed that the High Court had not examined that issue and that there were no records or materials before the Court that would permit it to embark on an investigation into that as yet unexplored area. Nevertheless, the Court considered it necessary to set out the limits that are built into the power conferred by section 12(2) read with Rule 14‑A, because the respondents’ counsel had submitted that the enquiry undertaken by the Deputy Commissioner conflicted with the overall scheme of the Act, breached the principles of natural justice and evaded the statutory restrictions on the authority to reassess. The Court explained that such a submission calls for a detailed inquiry by the High Court. It further emphasized that its own conclusion that Rule 14‑A is not ultra vires does not, by itself, resolve the revision petition pending before the High Court. The High Court must still determine whether, given the factual circumstances, the Deputy Commissioner was empowered to act in the manner he did and to issue the order that was subsequently challenged before the Sales Tax Appellate Tribunal. Accordingly, the judgment of the High Court that had declared Rule 14‑A to be ultra vires was set aside, and the matter was remanded to the High Court for further proceedings in accordance with law. No order as to costs was made. In line with the majority view, the appellate order declaring Rule 14‑A ultra vires was vacated, the case was sent back to the High Court for proper adjudication, and the appeal was allowed without any costs order.