2008 (10) TMI 352 - SC - VAT and Sales Tax

Revisional authority exceeded powers by substituting assessment orders under U.P. Sales Tax Act

The court held that the revisional authority exceeded its powers under Section 10B of the U.P. Sales Tax Act, 1948, by unlawfully substituting original ... Whether the order passed by the Commissioner of Trade Tax, U.P. under section 10B of the U.P. Sales Tax Act, 1948 was within the period of limitation ? Held that:- If the revisional authority was of the view that the order dated May 29, 2003 was not legal, then that order would have been varied if it was found that order lacked legality or propriety. The expression 'with respect thereof' makes the position clear that for testing the legality or propriety of the order (in the instant case the order dated May 29, 2003) if any order was to be passed that had to be passed with respect thereof. Such an order does not empower the revisional authority to make an order of assessment. As noted above, what the revisional authority has done is to substitute the original orders of assessment in the garb of testing the legality and/or propriety of the order cancelling the notices. Such a course is not countenanced and has no legal basis. Therefore, the High Court was not justified in interfering with the order of the Tribunal. The impugned orders of the High Court are set aside and the appeals are allowed but without any order as to costs. Issues Involved:1. Scope and ambit of Section 10B of the U.P. Sales Tax Act, 1948.2. Limitation period for issuing notices under Section 10B.3. Legality of the revisional order passed by the Commissioner.4. Effect of the order dropping reassessment proceedings.5. Interpretation of relevant provisions including Sections 7, 10B, 21, and 22 of the Act.Issue-wise Detailed Analysis:1. Scope and Ambit of Section 10B of the U.P. Sales Tax Act, 1948:The primary issue revolves around the scope and ambit of Section 10B of the Act, particularly in the context of Section 21. Section 10B allows the Commissioner or an authorized officer to revise orders passed by subordinate officers to ensure their legality or propriety. The court emphasized that the revisional authority's power is limited to examining the legality or propriety of the specific order in question and does not extend to making new assessment orders. The revisional authority can only pass orders 'with respect thereof' and cannot substitute original assessment orders under the guise of revision.2. Limitation Period for Issuing Notices under Section 10B:The court examined the limitation period for issuing notices under Section 10B(3)(c), which states that no order shall be passed after the expiration of four years from the date of the order in question. In this case, notices were issued on January 31, 2006, and February 8, 2006, to revise the order dated May 29, 2003. The court concluded that the notices were issued within the permissible period and, therefore, were not time-barred.3. Legality of the Revisional Order Passed by the Commissioner:The court scrutinized the legality of the revisional order passed by the Commissioner. It was argued that the revisional authority, while purporting to revise the order dated May 29, 2003, effectively substituted the original assessment orders. The court held that such a substitution was beyond the scope of Section 10B, which only allows for the revision of the legality or propriety of the specific order in question. The revisional authority's action of making new assessment orders was deemed unlawful.4. Effect of the Order Dropping Reassessment Proceedings:The effect of the order dropping reassessment proceedings was also a significant issue. The court referred to the case of Kundan Lal Srikishan, Mathura (U.P.) v. Commissioner of Sales Tax, U.P., where it was held that the original order of assessment becomes inoperative upon the initiation of reassessment proceedings. However, Explanation III to Section 21(1) clarifies that the original assessment order remains effective until varied by a new order of assessment or reassessment. In this case, since the original orders were not varied, they continued to be operative and effective.5. Interpretation of Relevant Provisions Including Sections 7, 10B, 21, and 22 of the Act:The court provided an in-depth interpretation of Sections 7, 10B, 21, and 22 of the Act. Section 7 deals with the determination of turnover and assessment of tax, while Section 21 pertains to the assessment of tax on turnover not assessed during the year. Section 22 allows for the rectification of mistakes. The court highlighted that the maximum period for making assessment or reassessment under Section 21 is four years from the end of the assessment year in question. The court also emphasized that Section 10B does not empower the revisional authority to make new assessment orders but only to revise the legality or propriety of existing orders.Conclusion:The court concluded that the High Court erred in interfering with the Tribunal's order. The revisional authority's action of substituting original assessment orders was beyond its scope under Section 10B. Consequently, the appeals were allowed, and the High Court's orders were set aside. The judgment reiterated the limited scope of the revisional authority's power under Section 10B and the importance of adhering to statutory limitations. The appeals were allowed without any order as to costs.