Kapur, J. - (1.) In this appeal by special leave against the judgment and order of the High Court of Kerala the appellant is the State of Kerala and the respondent is the assessee. The appeal arises out of proceedings under the Madras General Sales Tax Act, 1939 (Madras Act No. IX of 1939) read with the rules made under S. 19 of that Act. In this judgment the former will be referred to as the Act and the latter as the rules. The area of Kozhikode was originally within the State of Madras, but by the States Reorganisation Act was transferred to the State of Kerala. The Madras General Sales Tax Act, however, continued to apply.
(2.) The assessment period for the purposes of the turnover in dispute is 1952-53. By an order dated March 27, 1954 the Deputy Commercial Tax Officer, Kozhikode, imposed sales tax on the respondent on a net turnover of Rs. 12,56,178-14 -0 and the appeal taken against that order to the Commercial Tax Officer was dismissed. On March 15, 1956 a notice was issued by the Deputy Commissioner of Commercial Taxes against the assessee proposing to determine the escaped turnover for the period of assessment. By an order dated March 31, 1956, the Deputy Commissioner determined the revised turnover. An appeal was taken against that order to the Sales Tax Appellate Tribunal, Trivandrum, but that appeal was dismissed on March 23, 1957. Against that order a revision was taken to the Kerala High Court and by its judgment dated September 25, 1958 the High Court set aside the order of the Deputy Commissioner on the ground that the notice issued by the Deputy Commissioner of Commercial Taxes was without jurisdiction and the order of the appellate tribunal was therefore erroneous. Another question which had been raised before the High Court that the rule under which the Deputy Commissioner purported to act was ultra vires of the Act was not decided because of the decision on the first question i.e. of jurisdiction. Against that judgment and order the State of Kerala has come in appeal by special leave to this court.
(3.) In appeal, before us, two main contentions have been raised:One on behalf of the appellant -the State of Kerala - that the notice issued by the Deputy Commissioner was not without jurisdiction and the High Court's opinion on that point is erroneous; and the second on behalf of the respondent assessee that if the notice was not without jurisdiction then the rule under which the notice was issued was ultra vires as it was beyond the substantive provisions of the Act. For this purpose it is necessary to refer to some of the relevant provisions of the Act and the rules. The procedure to be followed and the Dower of assessment of the Assessing Authority is contained in S. 9 of the Act and we need only quote sub-ss. (1) and (2) of that section which read as under: "9 (1) Every dealer whose turnover is ten thousand rupees or more in a year shall submit such return or returns relating to his turnover in such manner and within such periods as may be prescribed. (2)(a) If the assessing authority is satisfied that any return submitted under sub-section (1) is correct and complete, he shall assess the dealer on the basis thereof. (b) If no return is submitted by the dealer under sub-section (1) before the date prescribed or specified in that behalf or if the return submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing authority shall assess the dealer to the best of his judgment. Provided ********** " Section 11 deals with appeals and S. 12 with the power of the Sales tax authorities to pass orders in revision. One of the arguments relating to ultra vires was based on sub-s. (2) of S. 12 of the Act. That sub-section is as follows: "S. 12(1) The Commercial Tax Officer may - (i) . ....... (ii)............ (2) The Deputy Commissioner may- (i) suo motu or (ii) in respect of an order passed or proceeding recorded by the Commercial Tax Officer under sub-section (1) or any other provision of this Act and against which no appeal has been preferred to the Appellate Tribunal under S. 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." Section 12-A provides for appeals to the Appellate Tribunal and S. 12-B for revision to the High Court. Section 19 gives power to the Government to make rules and the relevant provisions of that section are 19(1) and 19(2) (f). They are as under:- "19(1) The State Government may make rules to carry out the purposes of this Act. (2) In particular and without prejudice to the generality of foregoing power such rules may provide for- (f) the assessment to tax under this Act of any turnover which has escaped assessment and the period within which such assessment may be made, not exceeding three years;" Under the rule making power conferred by S. 19 rules have been framed and we are concerned in this appeal with Rr. 17 (1), 17(1A) and 17(3A). They read as under:- "17 (1) If for any reason the whole or any part of the turnover of business of a dealer or licensee has escaped assessment to the tax in any year or if the licence fee has escaped levy in any year, the assessing authority or licensing authority, as the case may be, (subject to the provisions in sub-rule (1-A) may, at any time within three years next succeeding that to which the tax or licence fee relates, determine to the best of his judgment the turnover which has escaped assessment and assess the tax payable in such turnover or levy the licence fee after issuing a notice to the dealer or licencee and after making such enquiry as he considers necessary." "17(1A) Where in respect of the turnover referred to in sub-rule (1) an order has already been passed under S. 11 or 12 the assessing authority shall make a report to the appropriate appellate or revising authority, as the case may be, which shall thereupon after giving the dealer concerned reasonable opportunity of being heard, pass such orders as it deems fit." "17(3A) The powers conferred by sub-rules (1) and (3) on assessing authority or licensing authority may also be exercised by the appellate authority referred to in Section 11; or as the case may be, by the revising authority referred to in Section 12, at any time within a period of three years next succeeding that to which the tax, or as the case may be, the licence fee relates, provided that such authority shall give the dealer concerned a reasonable opportunity of being heard before passing orders under this sub-rule." ;