Supreme Court invalidates notices under Section 7(2) for exceeding time limit

SUPDT. OF TAXES DHUBRI Versus ONKARMAL NATHMAL TRUST

SUPDT. OF TAXES DHUBRI Versus ONKARMAL NATHMAL TRUST - 1975 AIR 2065, 1975 (0) Suppl. SCR 365, 1976 (1) SCC 766 Issues Involved
1. Validity of notices of demand under the Assam Taxation (on Goods carried by Road or on Inland Waterways) Act, 1961 (New Act).
2. Application of the Limitation Act to the New Act.
3. Impact of injunctions and stay orders on the issuance of notices.
4. Interpretation of Section 7(2) and Section 9(4) of the New Act.
5. Waiver and estoppel in the context of statutory requirements.

Detailed Analysis

1. Validity of Notices of Demand under the New Act
The primary issue was the validity of notices issued under the New Act. The Assam Taxation (on Goods carried by Road or on Inland Waterways) Act, 1954 (Old Act) was declared ultra vires. The New Act was enacted with retrospective effect from 24 April 1954 to 1 March 1962. Notices under Section 7(2) of the New Act were issued beyond the prescribed two-year period, leading to their challenge.

2. Application of the Limitation Act to the New Act
The High Court held that the Limitation Act does not apply to the New Act. Section 7(2) of the New Act imposes a two-year period for the issuance of notices. The High Court ruled that the notices were barred by limitation as they were issued beyond two years from the expiry of the return period.

3. Impact of Injunctions and Stay Orders on the Issuance of Notices
The State contended that the stay orders and injunctions prevented it from issuing notices within the prescribed period. The High Court's injunctions, in place from 10 August 1961 to 1 August 1963, were argued to have made it impossible to issue notices. The Supreme Court rejected this argument, stating that the State did not take timely steps to modify the injunctions or obtain appropriate orders to protect its interests.

4. Interpretation of Section 7(2) and Section 9(4) of the New Act
Section 7(2): Requires the Commissioner to serve notice within two years of the expiry of the return period. The Supreme Court upheld that this two-year period is a jurisdictional requirement, not merely a procedural one.

Section 9(4): Deals with best judgment assessment if a producer or dealer fails to make a return or comply with a notice. The Court held that Section 9(4) requires a prior notice under Section 7(2) within the stipulated period. Without such notice, the Commissioner cannot proceed with assessment.

5. Waiver and Estoppel in the Context of Statutory Requirements
The Solicitor General argued that by obtaining injunctions, the respondents waived their right to insist on notices within the prescribed period. The Supreme Court disagreed, emphasizing that waiver cannot confer jurisdiction where none exists. The Court held that the respondents did not waive their rights by seeking injunctions, as they were exercising their legal rights to challenge the statute.

Conclusion
The Supreme Court dismissed the appeals, holding that the notices issued under Section 7(2) of the New Act were invalid as they were issued beyond the prescribed two-year period. The Court emphasized that statutory requirements for notice periods are jurisdictional and cannot be waived or extended by the courts. The State's failure to act diligently and seek timely modification of injunctions contributed to the invalidity of the notices. The appeals were dismissed with no order as to costs.