WP/7660/2009 of M/s. Laksh Enterprises, Vs The Commercial Tax Officer, on 30 December 2010

1. AIR 1968 SC 8222.55 STC 292 (1983)3.AIR 1997 SC 6284.(2000) 3 SCC 405.(2001) 4 SCC 7136.(2002) 5 SCC 4667.(2006) 4 SCC 3278.[2007] 9 VST 482 (Orissa)9.(2009) 15 SCC 57010.(2010) 9 SCC 53611.[2010] 29 VST 494 (Karn)12.(2007) 13 SCC 673 : (2008) 297 ITR 17613.(1985) 1 SCC 641 : AIR 1986 SC 51514.(2000) 3 SCC 40 : AIR 2000 SC 106915.(2006) 4 SCC 327 : AIR 2006 SC 348016.(2009) 15 SCC 570 : AIR 2009 SC 319417.(1984) 4 SCC 27 : AIR 1984 SC 154318.1995 (2) ALD 234 (DB). AP High Court was reversed in Samatha v State of AndhraPradesh, AIR 1997 SC 3297.19.(2004) 10 SCC 20120.(1926) AC 3721.AIR 1940 PC 12422.AIR 1981 SC 1887 : (1981) 4 SCC 578 (Though this is overturned inJ.K.Synthetics Ltd v CTO (1994) 94 STC 4222 (SC), principle of interpretationremains unchanged)23.AIR 1967 SC 856 (para 4)24.(2003) 2 SCC 101 (para 13)25.AIR 1966 SSC 140426.(2005) 2 SCC 334 (para 8)27.AIR 1985 SC 16728.(1996) 3 SCC 709 : AIR 1996 SC 162729.(2007) 2 SCC 1 : AIR 2007 SC 86130.AIR 1976 SC 2538

THE HON’BLE SRI JUSTICE V.V.S.RAOAND

THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN

WRIT PETITION Nos.855, 6495, 7450, 10453, 13279, 16316, 20198, 24487 and24535 of 2008, 1704, 7660, 7716, 7719, 9652, 9694, 9695, 10207, 11402, 13015,13019, 13147, 13151, 13410, 14289, 14829, 15146, 16062, 16573, 18552, 18598

and 20284 of 2009

30.12.2010

Between:M/s.Sri Balaji Flour Mills

… Petitioner

And

The Commercial Tax Officer-II,Chittoor, Chittoor DistrictAnd others.

... Respondents

THE HON'BLE SRI JUSTICE V.V.S.RAOAND

THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN

WRIT PETITION Nos.855, 6495, 7450, 10453, 13279, 16316, 20198, 24487 and24535 of 2008, 1704, 7660, 7716, 7719, 9652, 9694, 9695, 10207, 11402, 13015,13019, 13147, 13151, 13410, 14289, 14829, 15146, 16062, 16573, 18552, 18598and 20284of 2009

COMMON ORDER:(Per Hon’ble Sri Justice V.V.S.Rao)

In this group of writ petitions, filed by registered VAT dealers fromvarious places in the State of Andhra Pradesh, the challenge is to the validity of Rule 59(1) of Andhra Pradesh Value Added Tax Rules, 2005(VAT Rules) in so far as it confers the power of assessment of ValueAdded Tax, when it appears that the VAT return filed by the dealer isincorrect or incomplete on (i) the Commercial Tax Officer (CTO) or theDeputy Commercial Tax Officer (DCTO) in case of dealers in the territorialjurisdiction of the circle; and (ii) on any officer not below the rank of DCTOof the division as authorized by the Deputy Commissioner of the Division.The challenge is based on the petitioners’ perception that the impugnedrule does not satisfy the statutory essentials and is ultra vires the AndhraPradesh Value Added Tax Act, 2005 (VAT Act). In W.P.Nos.13015 and13019 of 2009, Section 17(3) and (4) are impeached as being ultra viresSection 17(2) of the VAT Act. In addition, the petitioners also impeach theassessment orders in Form VAT 305 for different periods passed by theauthorized authority on various grounds.

FACTS

FACTS

As a first step to resolve the controversy in these cases, we may referto the affidavit accompanying W.P.No.18598 of 2009 to notice thebackground. The petitioner - a firm of contractors and engineers engagedin infrastructure development is a registered VAT dealer on the rolls of thesecond respondent. They filed monthly VAT returns for 2005-2006 and2006-2007. There was, however, audit by the DCTO, Hydernagar, on11.05.2007. By a notice dated 07.06.2008, the first respondent informed ofanother audit. Such audit by the first respondent took place on 21.08.2008.Proposing best of judgment assessment in terms of Rule 59 of the VATRules, a notice dated 15.09.2008 was issued to the petitioner. They filedobjections on 30.10.2008 along with the books of accounts. The earlierassessment was withdrawn. A proposal was made to tax the estimatedturnover at 12.5 % which was the cost of light diesel oil not covered by taxinvoices. There were objections again, inter alia that, as the secondrespondent was the territorial assessing authority under Section 20(1) ofthe VAT Act, the first respondent had no jurisdiction to take upassessment. By assessment order, dated 05.01.2009, the first respondentdemanded a sum of Rs.15,74,663/-.

The petitioner unsuccessfully filed an appeal before the appellateDeputy Commissioner. They then filed an appeal before Sales TaxAppellate Tribunal (STAT). Even while the same was pending, the dealerfiled the instant writ petition seeking invalidation of Rule 59(4) of the VATRules. They contend that, under substantive provision being Section 2(4)of the VAT Act, the Commissioner had authorized the second respondentalone to take up assessment. By reason of authorization to audit underRule 59(1)(7), the first respondent was precluded to take up assessmentfor the period for which assessments stood concluded. Rule 59(4) istherefore, ultra vires Section 2(4). The Government issued the notificationunder Section 3-A of the Act being G.O.Ms.No.1163, dated 14.08.2006. It was clarified therein that, if the officer authorized by Commissioner takesup assessment, the territorial officer shall not assess for that year. It is thecase of the petitioner that the assessment was already made and,therefore, the first respondent acted without jurisdiction. It is alsocontended that, under Section 3-A, all the CTOs have been assigned withterritorial areas for the purpose of assessment. The Commissioner,therefore, has to specifically authorize any other official to take upassessment. Rule 59(4) does not override Section 2(4) and 2(8), and istherefore ultra vires.

The writ petition indeed impugns Rule 59(4). Curiously, theGovernment of Andhra Pradesh which derives rule making power underSection 78 of the VAT Act is not arrayed as a party respondent. Leavingthis aside for a while, we may summarise the position of the respondentsfrom the counter affidavit filed by the first respondent. The writ petition isnot maintainable as the second appeal before STAT is pending, and fornon-joinder of proper and necessary parties. Section 2(4) is a dictionaryclause. It is neither a substantive provision nor does it confers power onthe Commissioner. As authorities created under the statute, they cannotanswer the allegations with regard to vires of Rule 59(4). The counter doesnot seriously dispute other allegations regarding pre and post audit actiontaken by the first respondent leading to the impugned assessment order.SCOPE, SUBMISSIONS AND ISSUES

There is no dispute that all the petitioners filed VAT returns underSection 20(1) for the respective periods in the circle offices under theCTOs. The jurisdictional Deputy Commissioners issued authorization foraudit in Form ADM1B presumably in accordance with the VAT AuditManual of Commercial Taxes. Audit was done after issuing notice of auditin Form VAT 304 by the authorized officer of the Department, namely,Assistant Commissioner or CTO or DCTO, as the case may be. Pursuantto such audit, the petitioners were served with the notice of assessment ofVAT in Form VAT 305A. In some cases, objections were raised.Considering this, the officer authorized to audit passed the assessmentorder also in Form VAT 305. In cases where objections were not filed inresponse to VAT Form 305A, the audit officer made a best Judgmentassessment purportedly under Section 21(3) of the VAT Act. Assailing theassessment orders, mainly on the ground that there is violation ofprinciples of natural justice, the writ petitions are filed. In addition, Rule59(4), as stated supra, is also assailed as being ultra vires Sections 2(4)and (8) of the VAT Act.

M/s.M.V.J.K.Kumar, Shaik Jilani Basha, V.Bhaskar Reddy,G.Narendra Chetty and P.Girish Kumar argued for the petitioners. Thesummary of their arguments is as follows. The impugned assessment byan authority, not designated as the assessing authority under Section 2(4)of the VAT Act, is bad in law and such authority cannot, therefore, levy tax.

Alternatively, if Rule 59(1)(4)(b) and (d) of the VAT Rules are construed asconferring power on the officer who passed the impugned order, the saidRule is ultra vires Section 2(4) of the VAT Act. Section 2(4) of the VAT Actconfers power only on the Commissioner of Commercial Taxes toprescribe and authorize an authority to make an assessment of VAT. TheGovernment could not, therefore, have validly made Rule 59(1)(4) of theVAT Rules in exercise of its powers under Section 78(1) and (2) of theVAT Act. The impugned Rule is in violation of the notification issued by theGovernment under the APGST Act which has been saved under Section80 of the VAT Act. If the DCTO, as authorized by the DeputyCommissioner, audits and assesses the VAT dealer who is within thepecuniary jurisdictional limits of another CTO/Assistant Commissioner, thevery spirit of the purpose of assessment under VAT Act is defeated.Reliance is also placed on the following judicial decisions. MangulalChunilal v Manilal Manganlal[[1]], Sri Balaji Rice Company vCommercial Tax Officer[[2]], K.V.Muthu v Angamuthu Ammal[[3]],KunjBehari Lal Butail v State of H.P.,[[4]],Syndicate Bank v Prabha D.Naik[[5]], Nagrik Upbhokta M.Manch v Union of India[[6]], KeralaSamsthana Chethu Thozhilali Union v State of Kerala[[7]], DashAgency v Sales Tax Officer[[8]], Global Energy Limited v CentralElectricity Regulatory Commission[[9]],Nahalchand LaloochandPrivate Limited v Panchali Cooperative Housing Society Limited[[10]]and R.C.India v State of Karnataka[[11]].

Mr.A.V.Krishna Kaundinya, Special Counsel for CT argued theGovernment’s case as follows. All the definitions in Section 2 are notconclusive. The words in dictionary clause can have meaning if thecontext so requires. Therefore, Section 2(4) which is only a definitionclause, has to be interpreted without ignoring the rule making power of theGovernment under Section 78 read with Section 3-A of the VAT Act. TheGovernment having exercised its power under Section 3-A read withSection 78, the exercise of power by the Commissioner if any cannotoverride the rules. The Rules empower the Deputy Commissioner of theDivision to authorize AC/CTO/DCTO to conduct audit of the accounts ofthe VAT dealer. The impugned orders do not suffer from any illegality. Thepower to audit includes the power to assess and, therefore, the impugnedorders are in accordance with Section 21(3) of the VAT Act. Sections20(1), 21(1) and 21(3) empowered the authority prescribed to receive VATreturn and pass order by taking up best Judgment assessment. Theassessment orders made in accordance with Rule 59(1) are valid. Lastly,he submits that Section 3-A empowers the Government to empower theCommissioner to confer functions of different officers. When the donor ofthe power has exercised power under the Rules, the delegate of the powercannot be permitted to exercise power in a different manner. The paramount owner is not divested of the power even after delegation to thedelegate. The Senior Counsel relies on K.V.Muthu, and the VAT AuditManual of the Department.VALIDITY OF RULE 59(1)

So as to be intra vires the Rules made by delegate should beconfined to the policy guidelines of the Statute (J.K. Industries Limited vUnion of India[[12]]). The question whether the Rules are ultra vires isrequired to be answered with reference to the legislative intent and theexecutive policy in promulgating the Rules. If the legislature has clear bydemarcated the various aspects to be tackled by the delegate, the Courtsscrutiny must go no further. If the legislature is not precise, the Court has tolook to the object, policy and width of the legislative operation in testingwhether the executive has ignored discernible statutory essentials. Ineither event, one should keep in mind that the delegation is a constituentelement of legislative power and the Rules must receive broadinterpretation with reference to the legislative policy. Unless the Rules areex facie contra to the Act, they must receive the Court’s imprimatur.

The twin tests for determining the vires are (a) whether the Rulesconform to the statute (conformation test); and (b) whether the Rules aremanifestly arbitrary and irrational (rationality test). If there is compliancewith these two, any further judicial review is barred. I n Indian Express Newspapers Bombay (Private) Limited v Union of India[[13]], it was heldthat subordinate legislation does not carry the same degree of immunitywhich is enjoyed by a statute and that it can be questioned on any of thegrounds on which plenary legislation may be questioned. In addition itmay also be questioned on the ground that it does not conform to thestatute under which it is made as well as on the ground that it is manifestlyarbitrary and unreasonable. It is also settled that the expression, “forcarrying out the purpose of the Act” is not construed as to bring somethingin the statute which has been excluded by the Act itself (see Kunj BehariLal Butail, Kerala Samsthana Chethu Thozhilali Union a n d GlobalEnergy Ltd).

To be able to succeed on the ground that subordinate legislationlacks statutory essentials, it must be demonstrated that the Rules are not inaccordance with the legislation or it included something which wasexcluded by the Act itself. Vague allegations of general hardship cannotrender the rules ultra vires. One must look to the entire Act to determinethe intention and purpose of the legislation in giving power to the agencyto make rules for the purpose of implementing the Act. Looking to theillustrative subjects in the enabling provision, or the long title of theenactment, itself may not be pivotal nor can it be ignored. The entire Acthas to be churned before coming to the conclusion that it did not empowerthe agency to make such policy which found echo in the Rules.

The ratio decidendi in Maharashtra S.B.O.S. & H.S. Education v Paritosh[[14]], is that the validity of the rule has “to be determined withreference only to the specific provisions contained in the relevant statuteconferring the power to make the rule, regulation, etc., and also the objectand purpose of the Act as can be gathered from the various provisions ofthe enactment. It would be wholly wrong for the court to substitute its ownopinion for that of the legislature or its delegate as to what principle orpolicy would best serve the objects and purposes of the Act, to sit injudgment over the wisdom and effectiveness or otherwise of the policy laiddown by the regulation-making body, and declare a regulation to be ultravires merely on the ground that, in the view of the Court, the impugnedprovisions will not help to serve the object and purpose of the Act.”

As long as the body, entrusted with the task of framing the VATRules or regulations, acts within the scope of the authority conferred on it,in the sense that Rules made by it have a rational nexus with the objectand purpose of the Statute, the court should not concern itself with thewisdom or efficacy of such Rules. It is exclusively within the province ofthe legislature and its delegate to determine, as a matter of policy, how theprovisions of the Statute can best be implemented and that measures,substantive as well as procedural, would have to be incorporated in theVAT Rules or regulations for the achievement of the objects and purposesof the Act. It is not for the Court to examine the merits or demerits of such apolicy because its scrutiny has to be limited to the question as to whetherthe impugned Rules fall within the scope of the donated power. Herein theimpugned Rule is assailed only on the ground that it is ultra vires. For thereasons discussed supra, and some more to follow infra, we cannotcountenance the submission.

At the outset, we may briefly mention about sales tax administrationbefore shift to VAT. This is necessary because, while repealing AndhraPradesh General Sales Tax Act, 1957 (APGST Act) by Section 80(1) of theVAT Act, the legislature has expressed its intention to continue to enforceall notifications, rules and regulations etc., as if those instruments hadbeen made under the VAT Act. There is no gain saying that unless anduntil the rules, regulations, notifications etc., made under the APGST Actare replaced by similar instruments under the VAT Act, they continue togovern. This is not disputed by the parties.

Section 4 of the APGST Act conferred power on the StateGovernment to appoint the Commissioner of Commercial Taxes (theCommissioner) and various other officers in the hierarchy upto the level ofDCTOs and assign functions and empower such officers to performvarious functions. The Commissioner so appointed is empowered toentrust duties to all the officers named therein. The State Government wasalso empowered to authorize any officer to make any assessment in sucharea or areas or the whole of State of Andhra Pradesh as per Section 2(b)of the APGST Act. In exercise of its powers under Section 4, theGovernment of Andhra Pradesh delegated to the Board of Revenue the power to notify the local limits within which Deputy Commissioners, CTOsor DCTOs may perform the functions respectively conferred on them by orunder the said Act. Before doing so, the Government also issuednotification vide G.O.Ms.No.1091, dated 10.06.1957. Under this, theGovernment empowered various officers to exercise various functions likeassessment, audit etc., as may be entrusted to them within the local limits.This G.O., was subsequently amended from time to time by issuing variousnotifications. Indisputably, the broad pattern of such exercise of taxing powers is that the commercial tax officer,who is the head of a circle, is subordinate to the head of the Division,namely Deputy Commissioner. The assessment is made by the CTO or,having regard to pecuniary limits, either by the DCTO or the CTO as thecase may be. If the taxable turnover exceeds certain limit, the AssistantCommissioner is required to assess the sales tax.

Be it also noted that Section 4 of the APGST Act empowered theState Government to appoint a Commissioner, and as manyAdditional/Joint Commissioners of Commercial Taxes, DeputyCommissioners/Additional Deputy Commissioners, AssistantCommissioners, CTOs, DCTOs as are required to perform the functionsconferred on them by the State Government within the specified territorialareas. The power of authorization can also be exercised by any authorityempowered by the State under the said provision. Section 4A clarifies thatthe powers conferred on the officers by the APGST Act, or under theRules, can also be exercised by any of the officer superior to theempowered officers subject to instructions issued by the Commissioner.

Section 2(b) of the APGST Act defines ‘assessing authority’. Itmeans any person authorized by the State Government, or by any otherauthority empowered by them in this behalf, to make any assessment insuch area or areas or the whole of the State of Andhra Pradesh under thesaid Act. The Commissioner, Additional Commissioner, AssistantCommissioner, Appellate Deputy Commissioner, Deputy Commissioner,CTO and DCTO are also defined to mean any person appointed as suchunder Section 4. Section 4, as noticed supra, empowers the Governmentto appoint these officers who shall perform such functions as conferred onthem by the Government or any authority or officer empowered by them.There is no dispute that by reason of the notification issued by theGovernment under Section 4 read with Section 2(b) of the APGST Act, theDeputy Commissioners heading the division and CTOs incharge of Circlesexercised the powers, functions and jurisdiction as conferred by thenotification in such areas in the respective divisions/circles. The situationremains the same even under the VAT Act. For ready reference, we will quote relevant provisionsfrom it.

2. Definitions.- In this Act unless the context otherwiserequires:-

(1) ‘Additional Commissioner’ means any person appointedto be an Additional Commissioner of Commercial Taxesunder Section 3-A;

(2) ‘Appellate Deputy Commissioner’ means any personappointed under Section 3-A to be an Appellate DeputyCommissioner or any other officer not below the rankof Deputy Commissioner authorized by theCommissioner to be an Appellate DeputyCommissioner;

(4) ‘Assessing authority’ means any officer of the CommercialTaxes Department authorized by the Commissioner tomake any assessment in such area or areas or thewhole of the State of Andhra Pradesh;

(5) ‘Assistant Commissioner’ meansany person appointed to bean Assistant Commissioner of Commercial Taxes under Section 3-A;

(8) ‘Commissioner’ means any person appointed by the Government to be the Commissioner of CommercialTaxes under Section 3-A;

(9) ‘Commercial Tax Officer’ means any person appointed to be Commercial Tax Officer under Section 3-A;

(11) ‘Deputy Commercial Tax Officer’ means any person appointed to be a Deputy Commercial Tax Officer under Section 3-A;

(12) ‘Deputy Commissioner’ means any person appointed to be a Deputy Commissioner of Commercial Taxes underSection 3-A;

(18) ‘Government’ meansthe State Government of AndhraPradesh.;

(20) ‘Joint Commissioner’ means any person appointed to be a Joint Commissioner of Commercial Taxes underSection 3-A;

(24) ‘Prescribed’ means prescribed by the Rules made under theAct; Various officers are those appointed under Section 3-A of the VAT

Act. Section 3-A reads as under.

3-A. Appointment of Officers.- The State Government, may,appoint a Commissioner of Commercial Taxes and asmany Additional Commissioners of Commercial Taxes,Joint Commissioners of Commercial Taxes, AppellateDeputy Commissioners of Commercial Taxes, DeputyCommissioners of Commercial Taxes, AssistantCommissioners of Commercial Taxes, Commercial TaxOfficers and Deputy Commercial Tax Officers as theythink fit, for the purpose of performing the functionsrespectively conferred on them by or under the Act. Suchofficers shall perform the said functions within such area orareas or the whole of the State of Andhra Pradesh as theGovernment or any authority or officer empowered bythem in this behalf may assign to them.

After coming into force of the VAT Act, Section 3-A empowered theState Government to appoint different categories of officers who shallperform the functions conferred on them within such area or areas as theGovernment or any authority empowered by them may assign to officers. Inexercise of the power of delegation under Section 3-A, the Government ofAndhra Pradesh issued the notification vide G.O.Ms.No.1163, dated14.08.2006 empowering the Commissioner to empower any officerworking under his control to exercise any powers under the VAT Act withinsuch area or areas or the whole of the State of Andhra Pradesh. This ishowever subject to the condition that where an officer in exercise ofpowers delegated to him by the Commissioner undertakes the assessmentof any dealer, the assessing authority of the area having jurisdiction toassess such dealer shall not exercise such jurisdiction for the relevantperiod.

The VAT Rules made under Section 78 read with Section 2(21) ofthe Act constitute a piece of delegated legislation. The challenge that Rule59(1)(4)(ii)(b) and (d) is ultra vires can only be successful when it is shownon a sustainable basis that the legislature did not empower theGovernment to prescribe and empower (i) the Deputy Commissionerconcerned to authorize CTO/DCTO to take up assessment under Rule25(1) and/or Rule 25(5), in case of dealers in the territorial jurisdiction ofthe circle; and (ii) to empower Deputy Commissioner of the Division toauthorize any officer not below the rank of DCTO of the Division to take upassessment. Needless to mention that the Government, while prescribingRules, cannot overstep the power ignoring a specific bar, if any, in theLegislature itself. Probably to bring the impugned rule in such category, thepetitioners entirely rely on Section 2(4) of the Act which defines “assessingauthority” as any officer of the Department authorized by the Commissionerto make any assessment in such area or areas or the whole of State ofAndhra Pradesh. We are, therefore, required to consider variousprovisions excerpted hereinabove along with Sections 20 and 21 of VATAct which deal with filing of returns respectively.

Scope of Section 3-A read with Section 78 and VAT Act Clauses (1), (2), (5), (8), (9), (11), (12), (18) and (20) define“Additional Commissioner”, “Appellate Deputy Commissioner”, “AssistantCommissioner”, “Commissioner”, “CTO’, “DCTO”, “Deputy Commissioner”,“Government” and “Joint Commissioner” in that order. Except the term“Government”, in all other respects these officers are those who areappointed under Section 3-A of the VAT Act, which is in two parts. The firstpart empowers the Government to appoint all the officers with variousdesignations. The second part confers power on the Government to (a)assign to the officers functions that are to be paramount, or (b) empowerany authority or officer to assign powers and functions to the namedofficers. It is also not disputed that, in exercise of their power under Section 3-A, the Government issued a notification vide G.O.Ms.No.1163, Revenue(CT-II), dated 14.08.2006 empowering the Commissioner to empower anyofficer working under his control to exercise any powers under the VATAct. The notification further clarified that when any officer empowered bythe Commissioner undertakes assessment of any dealer, the assessingauthority of the area having jurisdiction cannot exercise such jurisdictionfor the relevant period.

Section 78 of the VAT Act enables the making of the Rules to carryout the purposes of the Act. As per Section 78(2)(a) and (m), withoutprejudice to the generality of the power, the Rules may provide for allmatters expressly required or allowed by the Act to be prescribed and mayprovide for the duties and powers of the officers appointed for the purposeof enforcing the provisions of the VAT Act. Wherever the plenarylegislation requires something to be done in accordance with the Rulesprescribed, it can be done only as prescribed by the Rules made by theGovernment. The Commissioner except performing the powers andfunctions as may be entrusted to him under Section 3-A or as prescribedby the Rules has no power of making Rules to prescribe authorities toundertake assessment. Therefore, the Commissioner’s power to dosomething under the Act is subordinate to the power of the Governmenteither under Section 3-A or under Section 78(1) and (2) or the Rules madeby them.

Section 20 deals with submission of VAT returns and self-assessments. It has four sub-sections. Sub-sections (1) and (3)(b) refer to“the authority prescribed”. Every dealer registered under Section 17 has tosubmit the VAT returns to the authority prescribed, which shall beaccepted as self-assessment. The same, however, can be scrutinized toverify the correctness of the calculation, application of the correct rate oftax, the input tax credit claimed, and payment of tax. If any mistake isdetected, as a result of such scrutiny, “the authority prescribed” shall issuea notice of demand for any short payment of tax or for recovery of anyexcessive input tax credit claimed. Here, there is no dispute that thoughtheoretically the authority prescribed for registering a VAT dealer, receiveself-assessment returns, rectifying such returns and the authorityprescribed for undertaking assessment could be different, as of now theCTO, having territorial jurisdiction, is the authority prescribed to performthese functions.

Section 21 deals with assessments. It has eight sub-sections. Sub-sections (1), (3), (4), (5) and (6) employ the phrase “the authorityprescribed”. When a VAT dealer or Turnover Tax (TOT) dealer fails to filea return or files the return under Section 20(1), with which the receivingofficer is not satisfied, the prescribed authority shall assess to the best ofhis Judgment within four years from the date of the return or within fouryears of the date of filing of return whichever is later. Rule 25(1) and (5)deal with these two situations, namely, where the VAT return is not filed and where the return appears to the authority prescribed to be incorrect orincomplete. Indisputably, it is only the CTO, or the AssistantCommissioner, as the case may be having territorial jurisdiction whoundertakes the assessment.

Rule 3(a) of VAT Rules defines “authority prescribed” as theauthorities specified in Rule 59, which prescribed various authorities likeDeputy Commissioners, Assistant Commissioners, CTOs, DCTOs andACTOs to exercise powers entrusted to them. These powers have beenenumerated in serial Nos.1 to 19 in a tabular column under Rule 59(1) ofthe VAT Rules. To the extent relevant, it is extracted below.

59. Authority Prescribed – (1) For the purpose ofexercising powers specified in column (1) of the table below. Theauthorities specified in column (2) therein, shall be the authoritiesprescribed:authorities specified in column (2) therein, shall be the authoritiesprescribed:

Reading Sections 3-A and 78(1), 2(a) and (m) of the VAT Act andRule 59(1)(4)(ii)(b) and (d), leads to the conclusion that the Governmentappointed various officers to perform various functions within theirterritorial jurisdiction or in the whole of Andhra Pradesh. The Governmentcan also authorize the Commissioner as well as Additional/JointCommissioners and Deputy Commissioners to entrust powers andfunctions to such officers, say, for instance, for the purpose of assessmentto CTOs and DCTOs. Further, Rule 59(1)(4)(2)(b) and (d) does not in anymanner exceed the delegated power. Therefore, if the DeputyCommissioner authorizes any of the officers to undertake assessmentwithin the territorial jurisdiction or within the division, the same does notvitiate the assessment made by such officer. A VAT dealer cannotcomplain that the assessment having not been made by the CTO, or theAssistant Commissioner having territorial jurisdiction, the assessmentmade by any of the officers authorized by the Deputy Commissioner isillegal. Such an argument would ignore the various provisions of the VATAct and the VAT Rules.Effect of Section 2(4)

As already noticed,clause (4) of Section 2 defines ‘assessingauthority’ as any officer authorized by the Commissioner to make anyassessment. The controversy stems from the petitioner’s plea that in viewof this, Rule 59(1)(4) to the extent of empowering Deputy Commissioner toauthorize other officers is contrary to Section 2(4). For reasons more than one, the submission is wholly misconceived and cannot be countenanced.

As already held by us, the power to appoint officers, the power toprescribe by the Rules providing for duties and functions, the power toassign the functions or the power to empower any authority to assignfunctions to other officers and to make rules is vested in the Government.The appointment of Commissioner is also within the exclusive power ofthe Government. Unless and until by Rules, the authority to register theVAT dealer, to receive the VAT returns and to assess the VAT return isprescribed, the empowerment of the Commissioner under Section 3-A forthe purpose of Section 2(4) would be an empty formality. TheCommissioner so appointed under Section 3-A can only authorize suchauthority prescribed by the Rules to make an assessment. Similar is thecase when the power is assigned to Additional/Joint/DeputyCommissioners. A plain reading of Sections 20(1) and 21(1), (3) and (4)makes it clear that an officer as prescribed by the Rules can alone receiveand assess the returns and not such officer authorized by theCommissioner under Section 2(4). Assuming that there is no authorityprescribed to receive/assess the VAT returns, the power of theCommissioner, if any under Section 2(4), may not be effective.

The meaning of various words, phrases and terms used in a statuteis understood essentially from the dictionary clause of the statute whichdefines these terms. If the words are not defined in the Statement, one hasto look to the General Clauses Act. If it is not possible to do so, then onehas to look to the judicial pronouncements and, thereafter, to thedictionaries (see Samatha Rural Development Society v State ofAndhra Pradesh[[15]]). More often than not difficulty arises inunderstanding the purport of the word or phrase used in the dictionaryclause, due to palpable inconsistent intention of the legislature in enactinga provision. To deal with such situations, the legislative draftsman iscautious to enter a caveat that the meaning of the words in the dictionaryclause would be what it is “unless the context otherwise requires”. JusticeG.P.Singh in his Treatise ‘Principles of Statutory Interpretation’ (11[th] edn.,2008) after reviewing scores of Supreme Court judgments comments asfollows.

When a word has been defined in the interpretation clause, primafacie that definition governs whenever that word is used in thebody of the statute. … But where the context makes the definitiongiven in the interpretation clause inapplicable, a defined word whenused in the body of the statute may have to be given a meaningdifferent from that contained in the interpretation clause; alldefinitions given in an interpretation clause are therefore normallyenacted subject to the qualification – ‘unless there is anythingrepugnant in the subject or context’, or ‘unless the contextotherwise requires’. Even in the absence of an expressqualification to that effect such a qualification is always implied.However, it is incumbent on those who contend that the definitiongiven in the interpretation clause does not apply to a particularfacie that definition governs whenever that word is used in thebody of the statute. … But where the context makes the definitiongiven in the interpretation clause inapplicable, a defined word whenused in the body of the statute may have to be given a meaningdifferent from that contained in the interpretation clause; alldefinitions given in an interpretation clause are therefore normallyenacted subject to the qualification – ‘unless there is anythingrepugnant in the subject or context’, or ‘unless the contextotherwise requires’. Even in the absence of an expressqualification to that effect such a qualification is always implied.However, it is incumbent on those who contend that the definitiongiven in the interpretation clause does not apply to a particular section to show that the context in fact so requires. …Repugnancy of a definition arises only when the definitiondoes not agree with the subject or context; any action not inconformity with the definition will not obviously make itrepugnant to subject or context of the provision containingthe term defined under which such action is purported tohave been taken. When the application of the definition to aterm in a provision containing that term makes it unworkableand otiose, it can be said that the definition is not applicableto that provision because of contrary context.

In K.V.Muthu the question was whether (a) foster son would be “amember of family” in relation to a landlord within the meaning of Section2(6A) of Tamil Nadu Buildings (Lease and Rent Control) Act, 1960. TheAct defined a member of family means his spouse, son, daughter,grandchild or dependant parent. A petition was filed by landlady foreviction of Muthu from a non-residential building for personal occupation,for commencement of business by her foster son. It was opposed on theground that a foster son is not a member of the family and, therefore, theplea of personal occupation is unsustainable. The Rent Controller orderedeviction which was reversed by the appellate authority. Before the HighCourt, the landlady succeeded and a view was taken that ‘foster son’would also be a member of the family. Before the Supreme Court, it wasargued that “the family has to be given the meaning which is commonlyunderstood by an ordinary man and that family would include natural sonsand not foster son”. The appeal was dismissed by the Supreme Courtupholding the eviction observing that in every case, a foster son is nottreated as a member of the family and that it would depend on the factsand circumstances of each case. As a fact it was found that the landlady’sfoster son was brought up by her husband and even there was a bequeathof property in favour of his children leaving life estate to the landlady.Dealing with the question of interpreting the definition clause, the apexCourt held (paras 10 and 11):

Apparently, it appears that the definition is conclusive as the word“means” has been used to specify the members, namely, spouse,son, daughter, grand-child or dependent parent, who wouldconstitute the family. Section 2 of the Act in which various termshave been defined open with the words “in this Act, unless thecontext otherwise requires” which indicates that the definitions, asfor example, that of “Family”, which are indicated to be conclusivemay not be treated to be conclusive if it was otherwise required bythe context. This implies that a definition, like any other wordin a statute, has to be read in the light of the context andscheme of the Act as also the object for which the Act wasmade by the legislature. … While interpreting a definition, ithas to be borne in mind that the interpretation placed on itshould not only be not repugnant to the context, it shouldalso be such as would aid the achievement of the purposewhich is sought to be served by the Act. A construction which would defeat or was likely to defeat the purpose of theAct has to be ignored and not accepted.

As per Section 2(4) of the APGST Act ‘appointing authority’ meansany person authorized by the State Government or by any other authorityempowered by them in this behalf to make any assessment in specifiedareas. Section 14 thereof empowered the assessing authority to undertakeassessment if a return submitted is found to be incorrect. In VAT Act,however, the definition of ‘assessing authority’, as well as the languageused in Section 21(3) and (4), are different. As per Section 21(3) and (4), itis only “authority prescribed” who is competent to undertake assessment ifthe situation so warrants. The ‘authority prescribed’ means the authorityprescribed by the Rules. If the plea of the petitioners is accepted that theassessing authority means only the officer authorized by theCommissioner, it would be repugnant to the context envisaged in Section21(3) and (4). If the legislature intended that the assessing authority, for thepurpose of Sections 21(3) and (4), is the one authorized by theCommissioner it ought to find a place there. It is not so. Indeed theparamount power to assign powers and functions to all of the officersunder the VAT Act vests in the Government. The Commissioner onlyderives powers from delegation made under the second part of Section 3-A. Therefore, Section 2(4) has to be construed without ignoring Section 3-A and/or Section 21. So construed, it is clear that the legislature intendedto confer power on the Government to prescribe various authorities for thepurpose of registration, receipt of returns, assessment etc. When once theofficers are prescribed it is for the Commissioner, by reason of thenotification issued under Section 3-A by G.O.Ms.No.1163, dated 14.08.2006, to assign functions.Even while doing so, the Commissioner cannot exercise power de horsthe Rules which prescribes various officers, their powers and functions insuch area or areas or the whole of State of Andhra Pradesh. Thisconstruction would fit into the context of Chapter V of the VAT Act whichdeals with procedure and administration of tax. To emphasise further,Section 2(4) would be repugnant to Sections 20 and 21 and the Rules if itis construed as suggested. The definition does not agree with variousprovisions in the VAT Act especially Section 3-A. Such interpretationshould be avoided and if necessary Section 2(4) has to be ignored as perthe ratio in K.V.Muthu.

The authorities prescribed by Rules can alone perform duties andfunctions under the Act and the Rules. When the Rules authorize orempower such officers, no authorization is again required under Section2(4). This, however, is subject to the condition that having regard to thelanguage used in Rule 59(1) itself as well as the scheme of the Act, if thefunctions are performed by officers in the respective territorial jurisdiction,there may not be a requirement of further authorization either by the

Commissioner under G.O.Ms.No.1163, dated 14.08.2006 or the Additional/Joint/Deputy Commissioner unless the Rules provide for suchauthorization. But, if any officer is required to perform the functions notassigned or outside the territorial limits – be it division or circle, the Rulesrequire authorization by the designated higher supervisory officer includingthe Commissioner under Section 2(4) read with the notification videG.O.Ms.No.1163 issued under Section 3-A of the VAT Act. This is alsosupported by the particular words used in the provisions.

Section 2(4) uses the word ‘authorise’. The word ‘authorise’ means‘permitted’. (see Ramanath Aiyer, ‘Advanced Law Lexicon’ Book 1,Reprint 2007, p.417). Section 3-A of the VAT Act and Rule 59(1) of theRules in many of its entries employ the word ‘empower’. As per ‘AdvancedLaw Lexicon’ by Ramanath Aiyer, ‘empower’ means ‘to invest legally orformally with power or to authorize … to give official authority or legalpower to …’. The term ‘prescribe’ is used in majority provisions of the VATAct as well as the VAT Rules. Needless to reiterate that as per Section2(24) ‘prescribe’ means ‘prescribed by the Rules’. Sections 20 and 21 andvarious Rules including Rule 59(1), use the term ‘prescribe’. Therefore, ithas to be construed that the authority prescribed means ‘prescribed by theRules’. It is not the authority authorized or empowered by theCommissioner. The suggested construction of Section 2(4), in reading thesubstantive machinery provisions of the VAT Act would amount to ignoringthe clear legislative intention in conferring the power of assessment onlyon the authorities prescribed, as may be authorised or empowered by thenamed supervisory officers.

Sections 3-A, 20 and 21 are machinery provisions of the VAT Act.The strict rule of construction is applied to taxing statute without implying anything (State of West Bengal v Kesoram Industries Limited[[16]]).There is however distinction between charging provisions and machineryprovisions. While construing the machinery sections of taxing statute, onehas to interpret so as to make a statute effective and workable.Commencing from Whitney v IRC[[17]]and Commissioner of Income Taxv Mahaliram Ramjidas[[18]], the decisions are galore. So as not to burdenthis Judgment and order with all its authorities, we need to refer only toA.C.C.Limited v CTO[[19]], “it is the duty of the Court while interpreting themachinery provisions of a taxing statute to give effect to its manifestpurpose having a full view of it. Wherever the intention to impose liability isclear courts ought to have no hesitation in giving what we may call acommon sense interpretation to the machinery sections to that the chargedoes not fall. While observing thus, it was held that, “a distinction has to bemade by court while interpreting the provisions of a taxing statute betweencharging provisions which impose the charge to tax and machineryprovisions which provide the machinery for the quantification of the tax andthe levying and collection of the tax so imposed. While charging provisions are construed strictly, machinery sections are not generally subject to arigorous construction. The courts are expected to construe the machinerysections in such a manner that a charge to tax is not defeated”.

Therefore, we have no hesitation in rejecting the plea that thedefinition of assessing authority in Section 2(4) of the VAT Act plays acrucial role in so far as exercise of the powers by the authority prescribedfor the purpose of Sections 20 and 21 or for that matter any authorityprescribed under the VAT Act. The Commissioner, as defined in Section2(8), derives all or any powers by reason of the delegation under thenotification vide G.O.Ms.No.1163, dated 14.08.2006, published inA.P.Gazette Part I, Extraordinary – 463-A, dated 14.08.2006. Under this,the Government empowered the Commissioner to empower any officerworking under his control to exercise any powers within such area or areasor the whole of State of Andhra Pradesh. This makes it very clear that thepower of the Commissioner under Section 2(4) read with the notification isonly to assign powers and functions to all the authorities prescribed. If anofficer is not an authority prescribed for the purpose of registration of VATdealer, receiving of the VAT returns or undertaking assessments, theCommissioner has no such power under the Act or the Rules madethereunder. Further, the VAT Rules promulgated under Section 78 cameinto force with effect from 01.04.2005. This conclusively shows that theauthorities for various purposes were prescribed under the Rules in thefirst instance and latter the power was delegated to the Commissioner toempower authorities prescribed in his control under Section 3-A. TheCommissioner was entrusted with the power only to adjust and allocatethe work among various officers, and also to have control over taxadministration in various divisions and/or circles. As the head of theDepartment, it is but natural that the Commissioner must have power toregularly conduct checks with regard to VAT administration as well asassessments undertaken. Without there being a proper appointment of theCommissioner, under Section 3-A read with Section 2(8), there would nothave been any exercise of power under Section 2(4) (Ajit Singh v State ofPunjab[[20]]).

The issue can also be viewed from a slightly different angle. If astatute so permits, the authority, entrusted with its enforcement, candelegate the powers. In law when power is delegated under authority ofthe statute, the order of the delegate is treated as an order of the principalor donor or paramount owner (delegator) of the power. Such an order,ordinarily, cannot be even revised or reviewed by the delegator unlesssuch power is conferred by the statute itself (OCL India v State ofOrissa[[21]]). Further, even after delegating its power, the delegator is notdivested or denuded of its power to exercise concurrently along withdelegate nor is he barred from cancelling the delegation. Further morewhen the delegator exercises power, the delegate cannot exercise powerin contravention of the order passed by the delegator (Godavari S.Parulekar v State of Maharashtra[[22]]and Iswar Singh v State of

S.Parulekar v State of Maharashtra[[22]]and Iswar Singh v State of Rajasthan[[23]]). Therefore, even if Section 2(4) defines assessingauthority as an officer authorized by the Commissioner, the latter being adelegate of the power under Section 3-A, the Government is not precludedfrom exercising their statutory powers of making rules under the VAT Act.Exercising such power, the VAT Rules have been made prescribingvarious authorities. Section 75 of the VAT Act clarifies that the powersconferred by the Act and the Rules on any officers appointed underSection 3-A may also be exercised by any of the officers superior to theofficers so empowered subject to any instructions by the Commissioners.Therefore, we do not find any infirmity in Rule 59(1)(4)(ii)(b) and (d) of theVAT Rules. It is perfectly legal for the Government to make a Rule toempower the Deputy Commissioner concerned to authorize theCTO/DCTO within the territorial jurisdiction, or within the Division, toundertake assessment either under Rule 25(1) (unilateral assessment) or25(5) (assessment when the return is incorrect or incomplete) of the VATRules. Such rule is not ultra vires the provisions of the VAT Act. Section78(1) generally, and Section 78(2)(a) and (m) specifically, confer power onthe Government to provide for the duties and powers of officers appointedfor the purpose of enforcing the provisions of the Act. The impugned Rulesare intended to effectively enforce the provisions of the Act and cannot beinvalidated on the ground that it is ultra vires.

VALIDITY OF IMPUGNED ASSESSMENT ORDERS

This issue requires us to deal with the audit and investigative powersof various authorities and consequences therefrom. It was suggested thatthere is no specific power of audit of the accounts of a VAT dealer. Thesubmission, however, cannot be accepted. The VAT Act nowhere refers toaudit. Does it mean that the accounts of a dealer cannot be audited orinvestigated or enquired into? The submission is unsustainable. Preenacting history of the legislation; the Provisions of the Act and the Rulesauthorize and permit audit as per the procedure incorporated therein.

Black’s Law Dictionary (sixth edition) defines ‘Audit’ as ‘systematicinspection of accounting records involving analysis, tests andconfirmations … hearing and investigation before an auditor … a formal orofficial examination or authentication of accounts …’.

Ramanath Aiyer’s ‘Advanced Law Lexicon’ (Book 1, 2007 Reprint)gives the following definitions of audit.

A systemic checking of account books, bills, vouchers and otherrelevant records in conformity with the norms set by anorganization, whether business, social or charitable. Thecorrectness of accounts and relevant reports is deemed to beauthentic only after the completion of the audit.As a verb; to draw up or present an account; to make an officialinvestigation and examination of accounts and vouchers.As a noun; an examination of accounts in genera; a formal orofficial examination and authentication of accounts; setting of accounts; the process of auditing accounts; the hearing andinvestigation had before an auditor.

Thus any systematic examination of the accounts of a VAT dealer isaudit, which may or may not lead to assessment or revised assessment.Chapter VI of the Act deals with ‘Records and Investigation Powers’(Sections 41 to 44) and Chapter XI of the VAT Rules (Rules 52 to 54)prescribe the procedure for ‘Search, Seizure, Confiscation andAcquisition’. A perusal of these would show that an officer not below therank of DCTO has the power of entry, inspection, search and seizure andconfiscation with full and free access to any premises, place, goods,books, records, powers and any electronically stored data at any timeduring business hours. If residential accommodation, not being shop-cum-residence, is to be searched, prior authorization by the DeputyCommissioner having jurisdiction over the area is required. The power toinspect and search also includes the power to break open any box orreceptacle in which any goods, accounts, registers or other documents ofthe dealer may be contained. Under sub-section (4) of Section 43, theinspecting officer may seal any box, godown or building etc., for a periodnot exceeding twenty-four hours and search any person on suspicion thatsuch person has secreted any goods or accounts. Rule 52 of the VATRules mandates that an officer duly authorized under Section 43 toconduct search of any shop or office of the VAT dealer shall, as far aspossible, follow the procedure prescribed by the Code of CriminalProcedure, 1973. Rule 53 contains the procedure for seizure andconfiscation of the goods.

A perusal of Section 43 and Rules 52 and 53 would show that VATaudit is a part of tax administration. Indeed, the Empowered Committee ofState Finance Ministers under the Chairman of Sri Asim Kumar Das Guptain “the White Paper on State Level VAT’ emphasized the importance ofaudit in paragraph 2.13.

Audit

2.13 Correctness of self-assessment will be checked through asystem of Departmental Audit. A certain percentage of the dealerswill be taken up for audit every year on a scientific basis. If,however, evasion is detected on audit, the concerned dealer maybe taken up for audit for previous periods. This Audit Wing willremain delinked from tax collection wing to remove any bias. Theaudit team will conduct its work in a time bound manner and auditwill be completed within six months. The audit report will betransparently sent to the dealer also.

Simultaneously, a cross-checking, computerized system is beingworked out on the basis of coordination between the taxauthorities of the State Governments and the authorities of theState Governments and the authorities of Central Excise andIncome Tax to compare constantly the tax returns and set-offdocuments of VAT system of the States and those of CentralExcise and Income tax. This comprehensive cross-checkingsystem will help reduce tax evasion and also lead to significant growth of tax revenue. At the same time, by protectingtransparently the interest of tax-complying dealers against theunfair practices of tax-evaders, the system will also bring in moreequal competition in the sphere of trade and industry.

The VAT Audit is expected to be transparent and time bound.Inconvenience to the VAT dealers is kept to the minimum by strictsupervisory controls. The prior authorization by the Deputy Commissioneris required. The power of audit is conferred by the Rules on the Assistantcommissioner or CTO or specially empowered DCTO working in theVigilance and Enforcement Department. Even if the books of accounts areseized, they can only be kept with the officers for a period of one monthand, when the business are seized, they cannot be retained for more thantwenty four hours. All these are the safeguards for a VAT dealer who has arecord of satisfactory tax compliance. The audit provisions, in a way, act asa deterrent only in respect of those VAT dealers who file incorrect returnsor claim set-off which they are not entitled to. It is nobody’s case that theofficers of the Commercial Tax Department take up audit of every VATdealer and resort to re-assessments based on such audit regularly. Audit istaken up only when the Deputy Commissioner authorizes, when there is asuspicion of unsatisfactory VAT compliance.

The Government of Andhra Pradesh issued guidelines for tax officersconducting audit. Compiled as VAT Audit Manual, these guidelines arereferable to Section 76 of the VAT Act which confers power to removedifficulties on the Government. The preface to Audit Manual brings out theextent, purpose and scope of VAT audit. It is apt to quote the same.

Audit is one of the four important pillars of VATAdministration, the other three being Registration, Returnsand Refunds. The Inspection system under APGST Act, 1957is replaced by the system of Audit under VAT Regime. Theword ‘Audit’ encompasses both the functionalities ofAssessment and Inspection. In the context of self-assessmentsystem under VAT, the function of Audit acquires paramountimportance. The Audit under VAT shall not be confused withthe internal audit or AG Audit. The Audit functionality issignificant in bridging the gap between the tax due and thetax declared by the assessee. Effective control of the tax isparamount if revenue receipts are to be maximized.

This Audit Manual is a guide for tax officers conductingaudit of dealers. The manual outlines the policy, general rules andprocedures to be followed. It provides a framework for planning,preparation, conducting audit and post-audit action. It isparticularly important in that it sets out a different and moreprofessional approach to audit. The manual describes many of thestandard techniques used to check or assess the correctness of adealer’s liability to VAT. This manual seeks to becomprehensive and it covers most of the recognized riskareas and the means of detecting errors and underreportedVAT.

Officers conducting audits need a sound understanding of

VAT Law and audits should not be seen as routine activity. Inorder to be effective communicators and accurate gatherers andinterpreters of relevant information, auditors must be courteousbut firm in their approach without being rude or arrogant. Theseskills can help prevent a hostile environment. Most dealers willaccept a professional approach and will often voluntarily explainhow their business operates. Many dealers will also accept thatthey make errors that must be corrected. Audit officers mustnevertheless be alert to the possibility of evasion. However, it isextremely important not to treat all taxpayers as if they aretrying to evade tax.

This manual is a reference book for officers who areconducting audits of dealers. Not everything in the manual will beapplicable to all dealers, in fact it is doubtful if everything includedin the manual will be applicable to any one dealer. The mainchapters – Audit Planning, conduct of Audit visits, post audit actionetc – will apply to all but the guidance should be used selectively.Officers are encouraged to use their own judgment. Routine auditdoes not cover investigation of potential fraud or suspectedcriminal evasion neither does it cover search and seizure.These functions require officers with specialist skills.

The Audit Manual contains nine Chapters, namely, Introduction,Officers, Powers and Responsibilities, Types of Audit, Audit Planning,Conduct of Audit Visits, Refund Audits, Post Audit Action, FraudInvestigation and Management Information. In addition, there are AppendixI to Appendix XVI. Appendix I prescribes 18 forms used in VAT audit. FormADM 1B is “AUTHORISATION OF AUDIT PROGRAM”. The same readsas under.

FORM ADM 1BGOVERNMENT OF ANDHRA PRADESHCOMMERCIAL TAXES DEPARTMENT

AUTHORISATION OF AUDIT PROGRAM

Date:

01. Name and designation of the audit officer :

02. Period of audit program :

03. The officer _______________ is hereby authorized to auditthe following VAT dealers during the period of audit program Sl.Name of theTINNo.VAT dealer The audit officer is instructed to follow the guidelines issued in theAudit Manual for the conduct of audit, time limits for each audit,procedure of reporting and the post audit action. The non-completion of audit of any dealer should be notified to theundersigned on Form ADM 1C.

Deputy Commissioner/AC (VAT Manager)

ToThe Audit Officer,_________________.

Chapter IV of the Audit Manual deals with audit planning. Inter alia itspeaks of the structured approach to audit, audit organization and staffing,selection of general audit visits, criteria for specification selection ofgeneral audit visits etc. Paragraph 4.9 enumerates the role of officers,namely, the Joint Commissioner, Deputy Commissioner, AC (Audit/VATManager), CTO and DCTO. It is necessary to quote paragraphs 4.9.2, 4.9.3, 4.9.4 and 4.10.

4.9.2 Role of the Deputy Commissioner:

a) Arrange for the computerized selection of thegeneral audits based on the parameters in this chapter. Heshould ensure that the VAT audit program meets the target ofachieving at least one audit visit to each VAT dealer in a two-year cycle.

b) Ensure that the audit program is completed by deployingaudit officers between circle offices to meet the computer-generated workload.

c) Review audit results achieved and the reasons forthe under-declaration to focus audit activity to maximizerevenue collection.

d) Once every quarter, select one completed audit visiteach by AC (LTU) and AC (VM) where no under/over declarationwas established for scrutiny as defined in paragraph 7.3 of thismanual.

e) Visit each circle office not less than once per quarterand select one completed audit visit by CTO where no under/overdeclaration was established for scrutiny as defined in Para 7.3 ofthis manual.

f) Oversee and control the quality of the audits undertaken,and monitor the revenue results achieved, and check visit reportsto the visiting officer program (Form VAT 309)

g) Hold quarterly meetings with all audit staffing the divisionto exchange audit information with a view to improving thetargeting high risk VAT dealers to maximize revenue collectionand to improve audit officers audit techniques based on theexperiences of audit colleagues.

4.9.3 Role of the AC (LTU) or present AC (Int):

a) Plan an annual audit program for the dealers allocated tothe LTU based on the available audit staff.

b) Ensure the program is completed and review theresults achieved to monitor under-declarations and maximizerevenue collection.

c) Visit all dealers allocated to the LTU at least once ineach year.d) Allocation of audit cases to circles (not <3) as allotted byDeputy Commissioner.e) Authorisation of audit assessments proposed by theCTO’s.f) Investigation of cases entrusted by Deputy Commissioner.

4.9.4 Role of the AC (VAT Manager) or present AC (Audit):

a) Allocation of audit cases to circles (not <3) as allotted byDeputy Commissioner.

b) Authorisation of audit assessments proposed bythe CTO’s.

c) Audit of cases entrusted by Deputy Commissioner.

d) Inter-state investigation relating to dealer of the Division.e) Inter-departmental co-ordination with the other revenueearning departments and exchange of information.

4.10 Control of audit cases:

a) Any case not completed in the audit quarter should becarried forward in priority order to the next month or, alternativelyreported with the reason for the inability to complete the audit.b) The allocation of audit cases should be recorded on acomputerized listing in divisional and circle offices with the date ofallocation, the date of audit, and the date of finalization.

c) The authority of the AC (VM) should be obtained on Form ADM 1C before an audit case is accepted for non-completion.

d) The D.C should monitor the allocation, completionand standard of all audits.

e) Any case where specific audit is done, care must betaken not to include the case in the next general audit program.

f) Due to the selection criterion, some top VAT dealers in acircle may be selected in more than two quarters for general auditby the computer. The authority in charge of audit program shouldrestrict the general audit visits in such cases to maximum one peryear. This restriction will not be applicable to cases in the LargeTax Payer Unit.

The Commissioner, Commercial Taxes issued VAT auditinstructions vide Circular Ref.No.BII(2)/122/2006, dated 19.06.2006. Whilereminding that the Deputy Commissioners are the controlling andsupervisory officers of their divisions, the Commissioner directed them toensure that the powers under Section 43 read with Section 21 of the VATAct are exercised by the field officers by taking up adequate andqualitative audits. Indicating the strategy for general audits, the circularenumerates the following steps for conducting general audits.

(i) The CTO/AC shall select the cases fit for audit based onsound, rational lines, and shall furnish notification of list of VATdealers selected for audit in VAT Form ADM – IA to the DeputyCommissioner (CT) concerned, who shall maintain a record atdivisional level. Any difficulty to generate the list of dealersselected for audit through VATIS, shall be promptly notify toCentral Computer Wing through [REDACTED] emails.(ii) The Deputy Commissioners/AssistantCommissioners concerned shall issue Audit Visitsauthorization in Form ADM-I B.

(iii) Thereafter Notification of advisory/Audit visit to theseVAT dealers shall be issued in VAT 304. Wherever 304 cannot beserved in advance, it should be generated through VATIS and retained by Officer conducting audit. This should be produced ifasked by dealer at the time of audit. This ensures avoidance ofmultiple audits by different officers for the same dealer and alsoprevents unauthorized audits unless VAT 304 is generatedthrough VATIS, then any VAT-305 demand raised, cannot beentered/processed through VATIS. The Deputy Commissionersare authorized to issue specific audit orders without issuing Form304 for purpose of effectiveness. However, before issue of 305-Anotice, in all such cases Form 304 has to be generated.

(iv) In case if the audit as authorized in Form 304 cannotbe completed for valid reasons the authorization for non-completion of audit in Form ADM-I C is required to be issued.

(v) The notice of assessment of Value Added Tax inForm 305A shall be issued wherever necessary.

(vi) Then the assessment of Value Added Tax shall bedone in VAT 305.

(vii) The show cause notice and assessment orders (305Aand 305) must be speaking order with findings in detail.

(viii) Penalty proceedings may have to be issuedseparately.

(ix) In the event of finding of under-declaration of ValueAdded Tax or over declaration of Value Added Tax, the Notice inVAT 307 and VAT 308 respectively shall be issued.

(x) All Deputy Commissioners are requested to send audits conducted in each fortnight in the proforma ofAnnexure-II. The Deputy Commissioners are requested tosend detailed compliance/action taken through specialreports besides in the Annexure-II. Performance andprogress of audits will be reviewed monthly by theCommissioner of Commercial Taxes.

The audit establishment is organized in accordance with the AuditManual. The officers, in the hierarchy from DCTO to Joint Commissioner,are assigned specific roles. The Assistant Commissioner and DeputyCommissioners are empowered to authorize audit. Indeed, as referred tosupra, Section 43(2) mandates such authorization by the DeputyCommissioner when audit is conducted at the residential accommodationof the dealer. Be that as it is, no officer mentioned in Rule 59(1)(7) can takeup audit without authorization. The petitioners contend that the AuditManual is a compendium of departmental instructions, being non-statutory, they are not binding. They also argued that when once self-assessment is accepted under Section 20(2), Section 43 does not enableany audit. The submission is misconceived. We have already consideredthis aspect. We hold that Section 43 empowers audit though the word isnot specifically used therein. Rule 59(1)(7) lays down various authoritiesprescribed to conduct audit with prior authorisation. As the Audit Manualand the Circular issued by the Commissioner referred to by theCommissioner are not inconsistent with Section 43 or Rule 59(1)(7), theofficers are bound to follow the instructions therein. The petitioners cannothave any grievance if inspection and search is conducted as part of audit in accordance with the Audit Manual.

It is nextly contended by the petitioners that authorization of audit bythe Deputy Commissioner and/or the Assistant Commissioner by itselfcannot be treated as authorization for undertaking assessment under Rule59(1)(4)(ii)(b) and (d) of the VAT Act. Per contra, Special Counsel arguesthat the power to audit includes the power to assess. He relies on Section21(3) of the VAT Act and Rule 25(5) of the VAT Rules. We are afraid weare not persuaded with the Government submission. The assessment ofVAT payable by a registered dealer can be (a) deemed assessment basedon the self-assessment return filed under Section 20(1) read with 20(2); (b)assessment under Section 21(1) when the dealer fails to file return; (c)assessment under Section 21(3) when self-assessment return is notsatisfactory; (d) assessment under Section 21(4) pursuant to a detailedscrutiny of the accounts of any dealer within a period of four years from theend of the period for which assessment is to be made; (e) assessment under Section 21(5) when thereis willful evasion of tax committed by a dealer within a period of six yearsof the date of filing of return; and (f) assessment under Section 32(1)(which is in fact re-assessment) when an assessment already made isfound to be prejudicial to the interests of the revenue. In addition, therecould also be a fresh re-assessment under Section 37 within a period ofthree years from the date of receipt of the order of appellate/revisionalauthority.

Of all these, the assessment of the category in the above paragraph(d), may be considered as one pursuant to an audit. As audit cannot betaken up without prior authorization of the Deputy Commissionerconcerned as per Rule 59(1)(7), necessarily there ought to be a furtherauthorization to undertake assessment. Although under Section 21(4) theauthority prescribed can take up assessment, reading Section 43 of theVAT Act and Rule 59(1)(4)(ii)(b) and (d) and 59(7) of the VAT Rules, theonly conclusion would be that, unless and until there is a separateauthorization to undertake assessment, an officer authorized to audit theaccounts of a VAT dealer cannot undertake assessment. If the rule makingauthority had intended that the same officer, who is authorized to audit, canalso undertake assessment either under Rule 25(1) or Rule 25(5), therewould not have been any necessity to separately mention about ‘authorityprescribed’ for the purpose of assessment and for the purpose of audit, asseen from Rule 59(1)(4) for the purpose of assessment and Rule 59(1)(7)for the purpose of audit. Therefore, assessment without authorization ofthe higher official as specified in Rule 59(1)(4)(ii)(b) and (d) would becertainly one without authority or jurisdiction and would contravene notonly Section 21(4) but also Rule 59(1).

The above view is also supported by the guidelines in Chapter VII

(Post Audit Action) in Audit Manual, which inter alia provides as under.Action by audit officer 7.2 a) The audit officer should complete his visit report on FormVAT 301A/B, update Form VAT 300 and prepare Forms VAT 311from his workbook not later than the first officer day following thedate of the visit.

b) The officer should review the work completed on thevisit and ensure that all the appropriate action has beencompleted.

c) Any uncertainities should be resolved with the VATdealer, and any issues not settled on the visit should be decidedby reference to the DC/AC(VM)/CTO and the decision conveyedto the VAT dealer on Form VAT 312 within 10 days of the visit andrecorded on Form VAT 301A/B.

d) Where an under-declaration or over-declaration hasbeen identified, the amount of tax must be calculated and thereasons for the under/over declaration stated.

e) The next higher authority should authorize theassessment/notice before the assessment/over paymentforms are issued by the audit officer.

f) to k) omitted.

The VAT Audit Instructions issued by the Commissioner vide circulardated 19.06.2006 also clarify that after completion of authorization, thenotice of assessment of VAT in Form 305A shall be issued “wherevernecessary”. This indicates that authorization of audit and completion ofaudit need not necessarily lead to an assessment unless the next higherauthority authorises such assessment as per paragraph 7.2(e) of ChapterVII quoted above. Indeed, as rightly pointed out by the counsel forpetitioners, Section 43 is a self-contained provision dealing withinspection, search, seizure and confiscation, and does not contemplateany audit related assessment in every case. Therefore, we are convincedthat authorization of audit under Rule 59(1)(7) does not have the effect ofauthorizing or empowering the officers mentioned in Rule 59(1)(4)(ii)(b)and (d) to undertake assessment.

MISCELLANEOUS SUBMISSIONS

M/s.V.Bhaskar Reddy, Narendra Chetty, Girish Kumar and ShiakJeelani Basha also raised various other submissions, which we will dealwith one after the other.

(i) In the absence of any specific authorization under Section3-A of the VAT Act to the authorities who pass impugned orders, the self-assessment returns filed by the petitioners should be treated asconclusive, and no further assessment can be allowed. This submission iswholly misconceived. A plain reading of sub-sections (2) and (3) of Section 20 makes it clear that deemedacceptance of a self-assessment return is subject to Section 21(3), whichis assessment to the best of judgment within four years when the return isfound to be incorrect. We have already considered this aspect and hold that in every case of self-assessment, even if the assessment is taken upunder any of the categories as discussed herein supra, the same cannotbe amenable to any sustainable criticism.

(ii) Rule 59(1)(4)(vii) was inserted by notification videG.O.Ms.No.503, dated 01.05.2009. As per this, even if the originalassessment order is not passed by them, in case of remand by theappellate/revisional authorities under Sections 31 to 35 of the VAT Act, theassessing authority would be the Assistant Commissioner, CTO or DCTOhaving territorial jurisdiction. The petitioners would contend that theimpugned Rule 59(1)(4)(ii)(b) and (d) is contrary to this new clause. Thissubmission is also misconceived. In our considered opinion, the same isintended to facilitate completion of post appeal/revision remandedassessment within the statutory period of three years as contemplatedunder Section 37. For instance, if the original assessment order ispursuant to audit passed by an authorized officer, other than the regularterritorial authority prescribed, insisting upon post remand assessmentalso by such officer would be difficult because usually the officerauthorized for audit would be an officer other than the territorial officer. Ifthe same officer is required to undertake assessment, the time frame ofthree years under Section 37 would not be sufficient. It may be mentionedthat any assessment consequent to proceedings under Sections 31 to 35has to be completed within three years. The submission is therefore notaccepted.

(iii) The impugned rule is ultra vires Section 32. Mr.GirishKumar, counsel in W.P.Nos.11402 and 18552 of 2009 did not pursue thesubmission seriously. After considering the point, we are convinced thatthe impugned Rule does not in any manner goes against the suo moturevision jurisdiction. Section 32 confers suo motu revisional powers on theAdditional/Joint/Deputy/Assistant Commissioner to call for and examinethe record of any order passed or proceedings recorded by any authority, ifsuch order is prejudicial to the interest of the revenue. The same does notbar the exercise of such power even in the case of an assessment orderpassed pursuant to the VAT audit.

(iv) The impugned assessment proceedings are contrary toSection 67(4) of the VAT Act. This submission is raised by Mr.ShaikJeelani Basha in W.P.Nos.16316 of 2008, 7660, 7716, 7719 and 9652 of2009. Section 67 deals with the Authority for Clarification and AdvanceRulings (AAR, for brevity). Section 67(4) is to the effect that the order ofAAR shall be binding on the applicant who had sought clarification, inrespect of the goods or transaction in relation to which a clarification wassought and on all the officers other than the Commissioner. A DivisionBench of this Court recently considered the ambit and scope of Section67(4)(ii) and held that the ruling of AAR is binding in respect of the goodsor transaction in relation to which clarification was sought (see unreportedJudgment in M/s.Tirupati Chemicals v Deputy Commercial Tax Officer, in W.P.Nos.1582 and 2119 of 2010, dated 25.11.2010).

in W.P.Nos.1582 and 2119 of 2010, dated 25.11.2010).

(v) In W.P.Nos.13015 and 13019, it is urged that Section 17(3)and (4) are ultra vires. The challenge is not seriously pursued.Nevertheless, we are not impressed with the submission. Sub-section (3)of Section 17 requires every dealer whose turnover in the twelvepreceding months exceeds Rs.40 lakhs to be registered as a VAT dealerand as per sub-section (4), every dealer whose taxable turnover during theperiod from 01.01.2004 to 31.12.2004 is more than Rs.40 lakhs shall beregistered as a VAT dealer. These are assailed as being ultra viresSection 17(2) which requires a dealer to be registered as a VAT dealerbefore commencement of business if the estimated taxable turnover isgoing to be more than Rs.40 lakhs. One fails to understand as to how sub-sections (3) and (4) are ultra vires sub-section (2). It is settled rule ofinterpretation that all the sub-sections in a Section have to be readharmoniously. Such a reading of three sub-sections (2), (3) and (4) ofSection 17 would show that they operate in different situations and aremutually exclusive though there is some overlapping between Sections17(3) and (4). They should not be confused with one another nor wouldsuch confusion in the mind of the dealer render them ultra vires. Thesubmission is wholly unsustainable.

(vi) In W.P.No.1704 of 2009, the petitioner’s counsel Mr.V.Bhaskar Reddy contends that the assessment of the VAT for the periodfrom April, 2005 to March, 2006, is unsustainable for the reason that theassessment for the said period was already completed by the assessingauthority. The assessing authority does not demur nor the Special Counselseriously countered this argument. It is the case of the petitioner that theDCTO inspected the business premises on 28.06.2006, conducted auditand issued sequential assessment order in Form VAT 305, dated22.01.2007. Curiously, it is alleged, the CTO again issued audit advice inForm VAT 304 and conducted the audit on 16.07.2008, which wasfollowed by another notice in Form 305A, dated 29.09.2008. Thisultimately resulted in the order dated 16.12.2008 impugned in the writpetition. The case of the petitioner is not rebutted. Therefore, we have tonecessarily hold that the assessment for the period from April, 2005 toMarch, 2006, subject to Section 32, is unsustainable.MAINTAINABILITY OF WRIT PETITIONS

Before we consider the relief to be granted in these matters, we feelcompelled to make a few observations with regard to the way manycounsel, who regularly appear in tax matters, file cases assailing a statuteor a statutory provision or the rule or the rules. We are convinced that moreoften than not the petitioners follow the rules of procedures more in breach.The glaring lapse is not impleading proper parties/authority. Equallyglaring aspect is not indicating the grounds in support of the challenge tothe validity of an Act, or a Rule. We are also convinced that the lapsesmight be due to inadvertence in drafting the petitions or may also be due to ignorance about fundamentals of administrative law and constitutional law.With a hope that at least in future the aggrieved persons would be morecautious in filing writ petition of such nature, we venture to clarify belowsome relevant aspects, though not intended to be exhaustive.

In India, the power of judicial review is exercised by the SupremeCourt and the High Courts. The latter derives such power under Articles226 and 227 of Constitution of India. Secondly, judicial review is availablein different areas and fields. These are (i) judicial review of ConstitutionalAmendments; (ii) judicial review of the Act made by the Parliament or StateLegislature; (iii) judicial review of delegated legislation i.e., testing thevires of the Rules made by the delegated legislative authority; (iv) judicialreview of the orders passed by the statutory tribunals established by orunder an Act of the Parliament or State Legislature; (v) judicial review oforders passed by quasi-judicial authorities exercising jurisdictionindependently under the powers granted by an Act of the Parliament orState Legislature; and (vi) judicial review of administrative orders oraction/inaction leading to infringement of rights and/or failure indischarging of duties. Thirdly, the relief sought and the parties againstwhom such relief is sought differ from case to case depending on the areaof judicial review.

When an Act or the Rules are challenged, the common mistakenoticed by us is a writ of certiorari is sought to quash the Act or the Rules.This is improper and impermissible. Judicial wing being a co-equal organof the State is not empowered to quash the Act or the Rules which areessentially legislative functions. The proper relief that is to be sought is awrit of Mandamus declaring the impugned Act or the Rules as ultra viresthe Constitution or the Act, as the case may be. A writ of Certiorari in suchan event would not be the proper remedy (see Prabodh Verma v State ofU.P.,[[24]]).

If an assessment order of a taxing authority or an order passed by thestatutory tribunal is challenged in a writ petition, the proper relief could beeither a writ of Certiorari or a writ of Mandamus, depending on the groundsurged in support of the petition. If a quasi-judicial tribunal or assessingauthority is sought to be precluded from exercising the power purportedlyvested under the Statute, the proper remedy is a writ of Prohibition on theground that such authority suffers from inherent lack of jurisdiction.

That brings us to ‘necessary and proper’ parties. When an Act ofParliament or State Legislature is challenged as ultra vires theConstitution, a petition should be drafted keeping in view Article 13 of theConstitution. The probable grounds that may be urged are that theParliament and/or said Legislature lacks legislative competency or that theimpugned Act is violative of any of the fundamental rights in Part III of theConstitution or the impugned Act violates the basic structure of theConstitution of India or the impugned Act of the Legislature isunconstitutional otherwise. (see State of A.P., v McDowell and Company[[25]]and I.R.Coelho v State of Tamil Nadu[[26]]).

When an Act of Parliament is challenged as ultra vires theConstitution on any of the possible grounds noticed supra, the Union ofIndia represented by the concerned Secretary to Government of India shallinvariably be a necessary party. Even when a suit is filed, the Union ofIndia and the State of A.P., as the case may be, shall be made parties.This is the requirement of Section 79 and Order XXVII of the Code of CivilProcedure, 1908 (CPC) (State of Kerala v G.M., Southern Railway[[27]]).Further Order XXVIIA of CPC requires a notice to the Attorney General orthe Advocate General, as the case may be, when a question as is referredto any Article 132(1) read with Article 147 of the Constitution of India isinvolved. In every writ petition when the validity of a statute is challenged,notice shall be given to the Government Pleader concerned, and to theauthority which issued the statutory instrument like the Rules or theRegulations or the Notifications. Whenever Rules are challenged, OrderXXVIIA, Rule 1(A) requires arraying of the Government of the State as aparty respondent. If a State is not impleaded as a party to a writ petitionchallenging an Act and/or if the Government of the State represented bySecretary to Government is not impleaded in a writ petition when the Rulesare challenged, the writ petition would not be maintainable. In appropriatecases, the Court can suo motu add the Central Government or the StateGovernment, as the case may be, as a party to the writ petition (see Rule 2of Order XXVIII of CPC).

It is curious that in eleven cases being W.P.Nos.6495, 10453, 13279,16316, 24487 and 24535 of 2008 and W.P.Nos.1704, 14289, 16062,18598 and 20284 of 2009, the Government of Andhra Pradesh is not madea party. Only the assessing officer is arrayed as a party respondent. In fourcases being W.P.Nos.20198 of 2008 and 9652, 9694 and 9695 of 2009,the Principal Secretary to the Government is impleaded. One fails tounderstand as to how the Principal Secretary can be equated to the Stateas defined under Article 12 of the Constitution. These cases ought not tohave been numbered by the Registry. They ought to have been rejected inlimine. Be that as it is, as these matters are being heard along with otherwrit petitions, where the challenge is to the impugned Rule in question, weleave the matters there with a hope that there would be better and propercompliance with the practice of rules in constitutional litigation.Relief (a)In the result, in the analysis and for the reasons as above,we reject the relief to declare Rule 59(1)(4)(ii)(b) and (d) of the VAT Rulesas ultra vires. We also declare that sub-sections (3) and (4) of Section 17do not suffer from any constitutional infirmity and are valid. We also rejectall other prayers for declaring the impugned rule and impugnedassessment orders as ultra vires or invalidexcept to the extent indicated in(b) and (c) below; (b) In view of our holding that the authorisation to audit under Section 43 read with Rule 59(1)(7) by itself does not enable audit officer toundertake assessment, we set aside all the assessment orders andconsequential orders, if any under Section 53 of the VAT Act, in all the writpetitions;

Conclusion

(c) All the impugned assessment orders shall stand remitted tothe respective audit officers who shall submit audit reports ascontemplated under Chapter VII of the VAT Audit Manual for appropriatePost Audit Action. If the competent controlling and/or supervising authoritylike Deputy Commissioner issues separate orders authorizingassessment, it shall be open to such authorizing officer or authorityprescribed, as the case may be, to undertake assessment in accordancewith law;(d) W.P.No.1704 of 2009 is disposed of setting aside theassessment order, dated 16.12.2008 for the period from April, 2005 toMarch, 2006. This is, however, subject to the power and jurisdiction of therevisional authority under Section 32(1) of the VAT Act; and (e) We direct the parties to bear their own costs.

All the writ petitions shall stand disposed of in terms of the reliefgranted as above.

_______________

(V.V.S.RAO, J)

.12.2010

______________________________(RAMESH RANGANATHAN, J)

Note: LR copy be marked. (By order) Pln

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[14](1984) 4 SCC 27 : AIR 1984 SC 1543[15]1995 (2) ALD 234 (DB). AP High Court was reversed in Samatha v State of AndhraPradesh, AIR 1997 SC 3297.[16](2004) 10 SCC 201[17](1926) AC 37[18]AIR 1940 PC 124[19]AIR 1981 SC 1887 : (1981) 4 SCC 578 (Though this is overturned in J.K.SyntheticsLtd v CTO (1994) 94 STC 4222 (SC), principle of interpretation remains unchanged)[20]AIR 1967 SC 856 (para 4)[21](2003) 2 SCC 101 (para 13)[22]AIR 1966 SSC 1404[23](2005) 2 SCC 334 (para 8)[24]AIR 1985 SC 167[25](1996) 3 SCC 709 : AIR 1996 SC 1627[26](2007) 2 SCC 1 : AIR 2007 SC 861[27]AIR 1976 SC 2538