2011 (12) TMI 463 - HC - VAT and Sales Tax

Court invalidates retrospective application of amended tax law, setting aside assessment orders for 1974-75 and 1975-76

The court held that the respondent's exercise of suo motu power of revision lacked legal basis. The amended Section 34 of the Tamil Nadu General Sales Tax ... Suo motu power of revision - levy of tax by the assessing officer on circulation sales - Held that:- On the facts and circumstances of the present case, it is not in dispute that the assessment proceedings were initiated under the un-amended section 34 of the Act and the final order has also been passed by the Appellate Assistant Commissioner on April 27, 1977 itself. Though under section 34(2) of the Act the limitation for passing any further orders has been made as five years, as it has been elicited above, while applying that, the expiry of five years period, as per unamended section 34, is admittedly on April 27, 1982. While so, the amendment of section 34(2), which has come into effect from November 1, 2000, can never be made applicable to the case of the petitioner. The effect of the proviso in which event would be that the saving of the period from the date of judgment of the High Court till the date of judgment by the Supreme Court, i.e., from March 3, 1971 to October 4, 1996, would apply only in cases where assessment has not been completed. The assessment process if completed, there is no purpose in contending that the proviso would still be made applicable so as to reopen the case. No hesitation to hold that the orders of the respondent impugned in these writ petitions have no legal basis. Accordingly, the writ petitions stand allowed and the impugned orders are set aside Issues Involved:1. Suo motu power of revision by the respondent.2. Applicability of amended Section 34 of the Tamil Nadu General Sales Tax Act.3. Period of limitation for passing orders.4. Retrospective application of amendments.5. Validity of show-cause notice issued after the Supreme Court judgment.Issue-wise Detailed Analysis:1. Suo motu power of revision by the respondent:The writ petitions were filed by the assessee challenging the respondent's order, which was passed in exercise of its suo motu power of revision. The respondent revised the earlier order of the Appellate Assistant Commissioner for the assessment years 1974-75 and 1975-76, imposing tax on the turnover related to circulation sales.2. Applicability of amended Section 34 of the Tamil Nadu General Sales Tax Act:The original Section 34(2) of the Tamil Nadu General Sales Tax Act had a limitation period of five years for passing orders, which expired on April 27, 1982. However, an amendment (Act 22 of 1982) effective from November 1, 1982, introduced a proviso that excluded the period between the High Court judgment and the Supreme Court judgment from the limitation period. The amendment also changed the authority from the Board of Revenue to the Joint Commissioner of Commercial Taxes and included the phrase 'prejudicial to the interests of revenue.'3. Period of limitation for passing orders:The original section provided a five-year limitation period, which expired on April 27, 1982. The amendment allowed the exclusion of the period between the High Court's adverse decision and the Supreme Court's final decision. The show-cause notice was issued on June 3, 1997, after the Supreme Court judgment on October 4, 1996.4. Retrospective application of amendments:The court held that the amendment, which came into effect on November 1, 1982, could not apply retrospectively to cases where the limitation period had already expired. The assessment process was completed before the amendment, and thus, the proviso could not be used to reopen the case. The court cited several precedents, including Ramanathan Chettiar v. Kandappa Gounder and K. M. Sharma v. Income-tax Officer, to support the principle that subsequent amendments cannot revive barred rights or be applied to completed cases.5. Validity of show-cause notice issued after the Supreme Court judgment:The show-cause notice issued on June 3, 1997, was deemed invalid as the amendment could not apply retrospectively to the assessee's case. The court emphasized that the amendment aimed to protect revenue interests but could not affect cases where the assessment was already completed.Conclusion:The court concluded that the orders passed by the respondent lacked legal basis due to the inapplicability of the amended Section 34 to the completed assessments. Consequently, the writ petitions were allowed, and the impugned orders were set aside.