Prospective reassessment limits and vagueness in market-price based sales tax provisions were emphasised, with notices lacking independent material quashed.

Amendments treating sales at abnormally low prices as liable to reassessment were explained as prospective only, because they enlarged the basis of assessment and affected vested rights; absent express language or necessary implication, they could not reopen pre-1 July 1985 transactions. The provisions were also treated as vulnerable to vagueness because terms like "prevailing market prices" and "abnormally low" lacked statutory guidelines, so they were read down to operate only when workable legislative criteria exist. Reassessment based solely on comparison with market prices, without independent material showing actual suppression or escapement of turnover, was said to be unsustainable and liable to be quashed.

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Issues: (i) Whether section 2(1)(s)(ii) and section 14-B of the Andhra Pradesh General Sales Tax Act, 1957, inserted by the Amendment Act 18 of 1985, operate retrospectively so as to authorise reassessment of transactions relating to periods prior to 1 July 1985; (ii) whether section 2(1)(s)(ii) and section 14-B are liable to be struck down or read down for vagueness, arbitrariness and absence of guidelines in the concepts of "prevailing market prices" and "abnormally low"; and (iii) whether reassessment notices issued under section 14(4) could be sustained where the sole basis was comparison of the assessee's disclosed sale price with alleged market prices, without material showing actual suppression or escapement of turnover.

Issue (i): Whether section 2(1)(s)(ii) and section 14-B of the Andhra Pradesh General Sales Tax Act, 1957, inserted by the Amendment Act 18 of 1985, operate retrospectively so as to authorise reassessment of transactions relating to periods prior to 1 July 1985.

Analysis: The amendments enlarged the basis of assessment and created a new machinery for treating sales shown at abnormally low prices as liable to reassessment. Such provisions affect substantive rights and vested positions of assessees and are not merely procedural. In the absence of express words or necessary implication making them retrospective, they apply only prospectively. The Government order relied upon by the assessees also reflected the same construction for pre-1 July 1985 assessments.

Conclusion: The provisions are prospective only and cannot be used to reopen assessments or reassess transactions relating to the period prior to 1 July 1985.

Issue (ii): Whether section 2(1)(s)(ii) and section 14-B are liable to be struck down or read down for vagueness, arbitrariness and absence of guidelines in the concepts of "prevailing market prices" and "abnormally low".

Analysis: The statute did not define "prevailing market prices" or "abnormally low", nor did it prescribe any method for determining either concept. The Court held that this left the power exposed to subjective and unequal application by assessing authorities, with serious civil consequences including tax and penalty. Rather than striking the provisions down outright, the Court applied the doctrine of reading down to save them from invalidity, holding that they would operate only when the legislature prescribed workable guidelines and a method for determining the relevant market price and abnormality threshold.

Conclusion: The provisions were read down and were not to be given effect until suitable legislative guidelines were prescribed.

Issue (iii): Whether reassessment notices issued under section 14(4) could be sustained where the sole basis was comparison of the assessee's disclosed sale price with alleged market prices, without material showing actual suppression or escapement of turnover.

Analysis: Reopening under section 14(4) requires information or material dehors the assessment record showing escapement of turnover and a rational nexus between the material and the belief formed by the authority. A mere comparison with other dealers' prices, or a mere suspicion that the assessee sold at a lower price, is insufficient. The notices themselves disclosed that the reassessment was founded only on alleged under-invoicing relative to market prices, and no material was shown to establish that the assessee had collected more than the invoice price. The Court also treated the attempted reopening as impermissible on a mere change of opinion.

Conclusion: The reassessment notices were unsustainable and liable to be quashed.

Final Conclusion: The assessees succeeded; the impugned reassessment notices were set aside and the revenue authorities were restrained from reopening completed assessments on the basis of alleged variation between disclosed prices and prevailing market prices for the relevant pre-1 July 1985 period.

Ratio Decidendi: A substantive taxing amendment that affects vested assessment rights is prospective absent clear legislative intent, and reassessment cannot be founded on vague market-price comparisons unless the statute supplies definite guidelines and the authority has independent material showing actual escapement of turnover.

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