1966 (3) TMI 70 - HC - VAT and Sales Tax

Court quashes time-barred tax notices; penalties invalidated under Bombay Sales Tax Act

The Court held that the Commercial Tax Officer lacked competence to initiate proceedings under the Bombay Sales Tax Act as the notices issued were ... - Issues Involved:1. Competence of the Commercial Tax Officer to commence proceedings under the Bombay Sales Tax Act.2. Applicability of the period of limitation prescribed by section 15 of the Bombay Sales Tax Act to assessments under section 14(6) and (7).Issue-wise Detailed Analysis:1. Competence of the Commercial Tax Officer to commence proceedings under the Bombay Sales Tax Act:The petitioner, Mysore Kirloskar Limited, was issued notices by the Commercial Tax Officer under sections 14(6) and (7) of the Bombay Sales Tax Act in Writ Petition No. 308 of 1964 and sections 14(6), (7), and 15 in Writ Petition No. 309 of 1964. The notices were related to the period between 1st November 1956 and 30th September 1957. The petitioner contended that the proceedings were time-barred as per section 15 of the Bombay Sales Tax Act, which prescribes a five-year limitation period for assessing escaped turnover. The notices issued in 1964 were beyond this period, rendering the proceedings incompetent. The Court agreed, noting that the Commercial Tax Officer's actions were beyond his competence since the period prescribed by section 15 had expired.2. Applicability of the period of limitation prescribed by section 15 of the Bombay Sales Tax Act to assessments under section 14(6) and (7):The Court examined whether the limitation period under section 15 applied to assessments under section 14(6) and (7). Section 14(6) allows for a best judgment assessment of a dealer who failed to apply for registration, while section 14(7) permits the imposition of a penalty for such failure. The Court referred to the Supreme Court's decision in Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax, which clarified that 'escaped assessment' includes turnover not assessed for any reason. The Court also cited the Bombay High Court's decision in Bisesar House v. State of Bombay, which held that the limitation period for assessing escaped turnover under section 11-A of the C. P. and Berar Sales Tax Act (analogous to section 15 of the Bombay Act) applies to assessments under sections 11(3), 11(4), and 11(5) of the same Act. The Court concluded that the limitation period prescribed by section 15 also applies to assessments under section 14(6) of the Bombay Sales Tax Act. Consequently, the notices issued by the Commercial Tax Officer were beyond the limitation period and thus invalid.Conclusion:The Court quashed the notices and the proceedings initiated by the Commercial Tax Officer, ruling that they were beyond his competence due to the expiration of the limitation period prescribed by section 15 of the Bombay Sales Tax Act. The imposition of penalties under section 14(7) was also deemed impossible since the assessment itself was invalid. The writ petitions were allowed, and no costs were awarded.