2004 (1) TMI 657 - HC - VAT and Sales Tax

Reassessment Notices Quashed: Illegal to Initiate on Mere Opinion Change Without New Evidence Under Trade Tax Act.

Ratan Industries (Pvt.) Limited Versus Additional Commissioner, Trade Tax and another

The HC quashed the reassessment notices dated January 16, 2003, for the assessment years 1996-97 to 1999-2000, under the U.P. Trade Tax Act, 1948, ruling ... Challenged the validity of reassessment proceedings initiated by notice dated January 16, 2003 u/s 21 of the U.P. Trade Tax Act, 1948 for the assessment years 1996-97 to 1999-2000 both under the U.P. Trade Tax Act, 1948 and Central Sales Tax Act, 1956 - HELD THAT:- It is a well-settled principle of law that the question which has been examined in detail in the original assessment proceedings and thereafter the assessment order has passed, then the said assessment order cannot be reopened u/s 21 of the Act on mere change of opinion. A perusal of the original assessment order dated March 30, 1999 for the assessment year 1996-97 clearly shows that in the assessment proceedings, the question of diameter of the hubs manufactured by the petitioner being 340 mm (340 mm for one side and 160 mm on the other side) as well as the weight of each hub being 20 to 21 kg. per piece was very much the subjectmatter of investigation vide the original assessment order dated March 30, 1999 (annexure 1 to the petition). However, the assessing authority after considering the STO (S.I.B.) report, as well as the circular of the Commissioner, Trade Tax, U.P., Lucknow, dated February 26, 1992 including the decision of the Government dated February 17, 1992 has held that these hubs are normally used in animal driven vehicle and even if it can be used in other vehicles, still it is entitled for examination under the Notification No. 7038 dated January 31, 1985, as clarified by the State Government itself. Thus the initiation of reassessment proceedings u/s 21 on the ground of diameter of hubs being 312 mm to 320 mm on the basis of the report of I.I.T., Kanpur, is in our opinion illegal and invalid, as it is based on mere change of opinion, and not on the basis of any fresh and cogent material. Admittedly, the hubs manufactured by the petitioner do not have ISI mark or specification. Hence in our opinion the said report is not very relevant. The Constitution Bench of the Supreme Court in Calcutta Discount Co. Ltd. v. Income-tax Officer [1960 (11) TMI 8 - SUPREME COURT] and a division Bench decision of this court in Harbans Lal Malhotra v. Assistant Commissioner, Sales Tax, [1994 (7) TMI 335 - ALLAHABAD HIGH COURT], the proceedings u/s 21 on mere change of opinion was quashed. In view of the above we are of the opinion that the impugned notice dated January 16, 2003 and initiation of reassessment proceedings for the assessment years 1996-1997 to 1999-2000 both under the U.P. Sales Tax Act and Central Sales Tax Act are illegal and they are hereby quashed. Petition is allowed. Issues Involved:1. Validity of reassessment proceedings initiated u/s 21 of the U.P. Trade Tax Act, 1948.2. Examination of the use and classification of 'animal driven vehicle hubs' for tax exemption purposes.3. Legality of reopening assessment based on new information or change of opinion.Summary:1. Validity of Reassessment Proceedings:The writ petition challenges the reassessment proceedings initiated by notice dated January 16, 2003, u/s 21 of the U.P. Trade Tax Act, 1948, for the assessment years 1996-97 to 1999-2000. The court held that reassessment proceedings cannot be initiated on mere change of opinion. The original assessment orders had already considered the size, weight, and use of the hubs, and the reassessment notice was based on the same grounds previously adjudicated.2. Examination of Use and Classification of Hubs:The petitioner claimed tax exemption for 'animal driven vehicle hubs' u/s 4 of the U.P. Trade Tax Act, 1948. The original assessment orders, supported by expert reports and verification from the Central Excise Department, concluded that the hubs, despite their size and weight, were used for animal driven vehicles and were thus exempt from tax. The reassessment notice cited a report from I.I.T., Kanpur, which suggested the hubs could be used for tractor trolleys due to their larger diameter and superior quality. However, the court found that the I.I.T. report did not conclusively state that the hubs could not be used for animal driven vehicles.3. Legality of Reopening Assessment:The court emphasized that reassessment u/s 21 requires fresh and cogent material, not just a change of opinion. The original assessment had already considered the relevant factors, including the diameter and weight of the hubs. The court cited precedents, including Commissioner of Sales Tax v. Indra Industries and Simplex Castings Ltd. v. Commissioner of Customs, Vishakhapatnam, affirming that departmental circulars are binding and reassessment cannot be based on a mere change of opinion.Conclusion:The court quashed the reassessment notices dated January 16, 2003, for the assessment years 1996-97 to 1999-2000, deeming them illegal. The petition was allowed with no order as to costs.