2009 (7) TMI 1174 - HC - VAT and Sales Tax

Extension of limitation period deemed invalid under Punjab VAT Act; Vested rights protected; Petroleum products exempt

Bharat Petroleum Corporation Ltd. Versus State of Punjab and another

The court held that the extension of the limitation period from three years to five years for assessments under the repealed PGST Act by the Punjab VAT ... Whether after repeal of the PGST Act, 1948 with effect from April 1, 2005 by the repealing section 92(1) of the Punjab VAT Act, any amendment was valid for extending the period of limitation from three years to five years by promulgation of section 11CC by Punjab Act 10 of 2005 which came into force with effect from May 12, 2005? Whether the rights vested in the assessee acquired on April 30, 2005 would extinguish by an amendment made by Act No. 10 of 2005 with effect from May 12, 2005 although the amendment has not been given retrospective effect or could the time-barred assessment be re-opened on the basis of statutory extension of time? Held that:- On the basis of legislative intendment discernible from the amendments either by the 2005 Ordinance or by the Punjab Act No. 10 of 2005, the principles applicable to re-opening of time-barred assessments, which are explicit from various precedents no doubt is left that the questions of law deserve to be answered in favour of the appellant-Corporation and against the Revenue. Accordingly, appeals are allowed. The assessment orders and consequential demands are also quashed. Issues Involved:1. Validity of extending the period of limitation for assessments from three years to five years by the Punjab VAT Act, 2005 after the repeal of the PGST Act, 1948.2. Whether vested rights of the assessee extinguish by an amendment not given retrospective effect.3. Applicability of section 11CC to the appellant dealing in petroleum products.4. Legality of additional tax demand and penalties imposed after the extended period of limitation.Issue-wise Detailed Analysis:1. Validity of Extending the Period of Limitation:The court examined whether the extension of the limitation period from three years to five years for assessments under the PGST Act was valid after the Act was repealed by the Punjab VAT Act, 2005. The court noted that the PGST Act was repealed effective April 1, 2005, and the extension of the limitation period was introduced by section 11CC of the Punjab VAT Act, which came into force on May 12, 2005. The court held that the period of limitation could not be extended after it had expired, citing the Supreme Court's judgment in S.S. Gadgil v. Lal and Co. [1964] 53 ITR 231, which established that an expired limitation period cannot be revived by a subsequent amendment.2. Extinguishment of Vested Rights:The court addressed whether the rights vested in the assessee, which had become time-barred, could be extinguished by a subsequent amendment. The court concluded that the amendment made by Act No. 10 of 2005, effective from May 12, 2005, could not retrospectively extend the period of limitation for assessments that had already become time-barred on April 30, 2004, and April 30, 2005, for the assessment years 2000-01 and 2001-02, respectively. The court emphasized that the legislative intent did not indicate a retrospective effect, thereby protecting the vested rights of the assessee.3. Applicability of Section 11CC:The court analyzed whether section 11CC, which extended the limitation period to five years, applied to the appellant dealing in petroleum products. The court noted that section 11CC was specifically intended to address the assessment of milk plant owners due to the invalidation of the milk cess by the Supreme Court in Cepham Milk Specialities Ltd. [2004] 137 STC 163. The court concluded that the extension of the limitation period under section 11CC was not applicable to the appellant, as it was confined to the assessment of milk plant owners.4. Legality of Additional Tax Demand and Penalties:The court examined the legality of the additional tax demand and penalties imposed on the appellant after the extended period of limitation. The court found that the assessments for the years 2000-01 and 2001-02 were finalized on February 27, 2006, and July 10, 2006, respectively, which were beyond the original three-year limitation period. The court held that the assessments were time-barred and could not be revived by the subsequent amendment extending the limitation period to five years. Consequently, the additional tax demand and penalties were quashed.Conclusion:The court answered the questions of law in favor of the appellant and against the Revenue. The appeals were allowed, and the assessment orders and consequential demands were quashed. The appellant was awarded costs assessed at Rs. 25,000 in each appeal. The court emphasized the importance of legislative clarity and the protection of vested rights in the context of tax assessments and limitation periods.