2005 (3) TMI 729 - HC - VAT and Sales Tax

Reassessment Orders Quashed: Insufficient Grounds for Reassessment Based on Opinion Change; Tax Exemption for Tyres Upheld.

The HC quashed the reassessment orders dated February 25, 2005, under Section 21(2) of the U.P. Trade Tax Act, citing insufficient grounds for ... Sale of tyres and tubes used in 'cart'—as animal driven vehicle (ADV) - exemption from trade tax - Powers u/s 21(2) - reassessment proceedings - HELD THAT:- We find that the words 'tyre, tube and pneumatic tyre' in the notification tend to give rise to ambiguity and is otherwise redundant. The notification dated January 30, 1982 with the use of these words could be stretched to mean that only a 'cart' which had 'tyre/tube or pneumatic tyres' was entitled for exemption. Converse of it meant a 'cart' which had wheels other than tyre/tube, pneumatic tyre and even though used as an agricultural implement otherwise as is commonly used in India by agricultural community as part of conventional agricultural implements was excluded from exemptions. Apparently this could not be the intention and that too visibly for no good reason pointed out before us. To interpret the notification in a manner which would certainly run contrary to the prima facie object and intention to grant exemption to tyre and tube used as part of agricultural implement (i.e., 'cart'), cannot be accepted. Moreover, we find no apparent or reasonable ground, with reference to the object and purpose, for creating a distinction between a 'cart' which has wheel (with tyre, tube pneumatic tyre) and one which does not have such tyre-tube, when referred to an 'agricultural implement'. We, therefore, hold that the exemption granted to the petitioner in respect of tyre and tube, which is undoubtedly a 'part' of 'cart' used as agricultural implement, on alleged pretext of change of opinion by the assessing authority, does not justify reassessment and no case is made, in the facts of instant cases, to warrant exercise of reassessment by the respondents u/s 21 of the Act. In the result, the impugned orders dated February 25, 2005/ annexure 10 in W.P. (assessment year 1998-99), annexure 4 in W.P.(assessment year 1999-2000), annexure 4 in W.P. No. 457 of 2005 (assessment year 2001-02) and consequent notices are set aside. Writ petitions stand allowed. Issues Involved:1. Validity of reassessment orders under Section 21(2) of the U.P. Trade Tax Act.2. Interpretation of notifications regarding tax exemptions on tyres and tubes used in animal-driven vehicles (ADV).Issue-wise Detailed Analysis:1. Validity of Reassessment Orders under Section 21(2) of the U.P. Trade Tax Act:The petitioner challenged the reassessment orders dated February 25, 2005, issued by the Additional Commissioner, Trade Tax, under Section 21(2) of the U.P. Trade Tax Act, 1948. The court noted that the Additional Commissioner must record 'good and relevant reason' to justify reassessment. The mere mention of a 'possibility of change of opinion' without cogent reasons is insufficient and shows non-application of mind, leading to arbitrary exercise of power.Section 21(1) stipulates that the assessing authority must have 'reason to believe' that part of the turnover has escaped assessment or been under-assessed. This requires issuing a notice to the dealer and making necessary inquiries. Section 21(2) allows reassessment beyond the typical two-year period if the Commissioner, based on reasons recorded by the assessing authority, is satisfied that it is 'just and expedient' to do so.The court emphasized that reassessment should not be based on mere change of opinion but must be supported by valid grounds such as new material or evidence that escaped notice. The impugned orders lacked such reasons, merely stating the possibility of a change of opinion, which is not a sufficient ground under law.The court referenced several precedents, including Palco Lining Company v. State of U.P. and Ratan Industries (Pvt.) Limited v. Additional Commissioner of Trade Tax, which held that reassessment on mere change of opinion is not permissible. The court concluded that the impugned orders did not meet the requirements of Section 21(2) and were liable to be quashed.2. Interpretation of Notifications Regarding Tax Exemptions on Tyres and Tubes Used in Animal-Driven Vehicles (ADV):The petitioner argued that tyres and tubes used in ADVs were exempt from trade tax based on relevant notifications. The court examined the notifications dated January 30, 1982, January 31, 1985, and June 30, 1986. The petitioner contended that the term 'cart' in these notifications included its 'parts, accessories, and attachments,' which should cover tyres and tubes.The court noted that the deletion of specific references to 'tyre/tube and pneumatic tyre' in later notifications did not necessarily indicate an intention to exclude these items from exemption. Deletion of redundant or ambiguous terms can occur without changing the substantive meaning. The court highlighted that a 'cart' inherently includes wheels, which may have tyres and tubes, and these should be considered parts of the cart.The court referred to the definition of 'cart' and emphasized that the term must be read in the context of the entire notification. The court rejected the respondents' argument that the deletion indicated an intent to exclude tyres and tubes from exemption. Instead, it held that the notifications should be interpreted to include tyres and tubes as part of the exempted agricultural implement 'cart.'The court supported its interpretation with precedents, including Government of Tamil Nadu v. Pv. Enter. Rep. By SCM Jamuludeen and Goodyear India Ltd. v. State of Haryana, which emphasized that statutory provisions should be interpreted to avoid defeating the manifest object of the legislation.In conclusion, the court found that the exemption granted to the petitioner for tyres and tubes used in ADVs was proper and justified. The reassessment orders based on a change of opinion were not warranted, and the impugned orders were set aside.Judgment:The impugned orders dated February 25, 2005, and the consequent notices were quashed. The writ petitions were allowed, with no order as to costs.