Court sets aside tax order, emphasizes prospective application of laws

Victor Cane Industries Versus Commissioner of Taxes, Assam and others

Victor Cane Industries Versus Commissioner of Taxes, Assam and others - [2002] 125 STC 483 (Gau) Issues Involved:
1. Invocation of powers under Section 31(1) of the Assam Sales Tax Act, 1947.
2. Applicability of Section 8(2A) of the Central Sales Tax Act, 1956.
3. Legality of revising completed assessments based on subsequent changes in law.

Detailed Analysis:

Issue 1: Invocation of Powers under Section 31(1) of the Assam Sales Tax Act, 1947

The appellant argued that the condition precedent for invoking the powers under Section 31(1) of the Assam Sales Tax Act, 1947 did not exist, thus the Assistant Commissioner of Taxes could not exercise suo motu powers to revise the already completed assessment. The court noted that the power of revision by the Commissioner can only be invoked if the Commissioner is of the opinion that the order of the assessing authority is erroneous and prejudicial to the interest of the Revenue. The court observed that on the date when the Assistant Commissioner of Taxes passed the order on July 31, 1992, the law laid down by the apex Court in Pine Chemicals Ltd. v. Assessing Authority [1992] 85 STC 432; (1992) 2 SCC 683 was applicable, which stated that the tax on the sale of the product exempt under the State Act is also exempt from tax under the Central Act on the sale in the course of inter-State trade and commerce. Therefore, the order of assessment was not erroneous at the time it was passed.

Issue 2: Applicability of Section 8(2A) of the Central Sales Tax Act, 1956

The appellant contended that under Section 8(2A) of the Central Sales Tax Act, 1956, the sales made by it in the course of inter-State trade and commerce were exempt from the payment of tax. The court noted that Section 8(2A) provides that the tax payable under this Act by a dealer on his turnover shall be nil if the sale or purchase of goods is exempt from tax generally under the sales tax law of the appropriate State. The court referenced its earlier decision in Muli Bash Hasta Silpa Samabaya Society Ltd. v. State of Assam (1992) 1 GLR 46, which held that the exemption under the State law was of a general nature and thus applicable under Section 8(2A) of the Central Sales Tax Act, 1956. The court also noted that the division Bench in Mahavir Coke Industries v. Commissioner of Taxes, Assam [1995] 97 STC 186 had taken a similar view, which was upheld by the Supreme Court.

Issue 3: Legality of Revising Completed Assessments Based on Subsequent Changes in Law

The court examined whether the Assistant Commissioner of Taxes could revise the completed assessments based on the subsequent judgment of the apex Court in Commissioner of Sales Tax v. Pine Chemicals Ltd. [1995] 96 STC 355; (1995) 1 SCC 58, which reversed the earlier judgment. The court cited the division Bench judgment of the Punjab and Haryana High Court in State of Haryana v. Free Wheels (India) Ltd. [1997] 107 STC 332, which held that the legality or propriety of any proceedings or any order has to be examined based on the law existing at the time the order was passed. The court concluded that the orders of assessment could not be said to be erroneous and prejudicial to the interest of the revenue based on the law as it existed at the time of the assessment. The court agreed with the view that law laid down in tax matters should normally be applied prospectively and that reopening assessments based on subsequent changes in law would lead to endless litigation.

Conclusion:

The court allowed the appeal, set aside the judgment of the learned single Judge, and quashed the order of the Assistant Commissioner of Taxes, Tinsukia dated July 31, 1992. The writ petition was allowed, and there was no order as to costs.

Appeal allowed.