1978 (1) TMI 176 - SC - VAT and Sales Tax

Invalidity of Assessment Orders Due to Procedural Defects

The Supreme Court upheld the High Court's decision that assessment orders dated June 19, 1969, were invalid due to the absence of required notices and the ... Validity of assessment in absence of mandatory notice - return filed without payment of tax - filing of return beyond statutory period - treatment of defective returns as returns - representation/stance of revenue and change of plea - exercise of discretionary jurisdiction under Article 136Validity of assessment in absence of mandatory notice - representation/stance of revenue and change of plea - exercise of discretionary jurisdiction under Article 136 - Whether the assessment orders dated June 19, 1969 could be sustained where no notice under Section 7(2) had been issued and the Revenue had earlier treated the returns as invalid - HELD THAT: - The Court noted that it was common ground that no notice under Section 7(2) of the Act was issued within two years of the expiry of the return period. Prior authority was held to require such a notice before proceedings under Section 9(4) could be validly taken. More importantly, the Revenue had admitted before the High Court that the returns filed were invalid and that the assessments were not proceeded on the basis of those returns. Having regard to that admission and the discretionary character of interference under Article 136, the Court refused to permit the State to adopt a contrary stance in these appeals by contending that the assessments were based on valid returns. In the exercise of its discretion the Court declined to allow the belated change of front by the Revenue and therefore did not uphold the assessments. [Paras 9, 10]Appeals dismissed; the Court would not permit the State to contend before this Court that assessments were based on valid returns when it had treated them as invalid below, and therefore the assessments could not be sustained.Final Conclusion: The appeals are dismissed. The Supreme Court declined to permit the State to change its earlier position that the returns were invalid and, exercising its discretionary jurisdiction under Article 136, refused to sustain the assessment orders; the Court expressly refrained from deciding whether a return without payment of tax or filed late is a return under Section 7(1). Issues Involved:1. Validity of the Assam Taxation (On Goods Carried by Road or on Inland Water-ways) Act, 1961.2. Validity of the assessment orders dated June 19, 1969.3. Requirement of payment of tax before submitting a return under Section 7(1) of the Act.4. Necessity of issuing a notice under Section 7(2) or Section 11 of the Act for initiating assessment proceedings.Detailed Analysis:1. Validity of the Assam Taxation (On Goods Carried by Road or on Inland Water-ways) Act, 1961:The Assam Taxation (On Goods Carried by Road or on Inland Water-ways) Act, 1961 was enacted by the Assam Legislature with the sanction of the President, following the invalidation of the 1954 Act by the Supreme Court due to non-compliance with Article 304 of the Constitution. The 1961 Act was intended to validate the tax imposed under the 1954 Act. The Supreme Court had previously upheld the validity of the 1961 Act in a judgment dated April 1, 1968, reversing the Assam High Court's decision that had declared the Act ultra vires.2. Validity of the Assessment Orders Dated June 19, 1969:The respondent company submitted returns for the quarters ending September 30, 1960, and December 31, 1960, without paying the required tax. The High Court held that the returns were invalid as they were either filed without the necessary tax payment or beyond the prescribed period. Consequently, the assessment orders dated June 19, 1969, were deemed beyond the competence of the authorities due to the absence of notices under Sections 7(2) and 11 of the Act.3. Requirement of Payment of Tax Before Submitting a Return Under Section 7(1) of the Act:Section 7(1) of the Act requires the return to be furnished in a prescribed form and to a prescribed authority. Section 20(2) mandates that the tax due must be paid before submitting the return. The High Court concluded that failure to pay the tax rendered the return non-est, meaning no further proceedings could be taken on such a defective return. The appellant argued that a return should be considered valid even if it was defective due to non-payment of tax or delayed submission, and the assessee would merely be liable to penalties under Section 13.4. Necessity of Issuing a Notice Under Section 7(2) or Section 11 of the Act for Initiating Assessment Proceedings:The High Court found that no notice under Section 7(2) or Section 11 was served on the respondent within two years from the expiry of the return period, making the assessment proceedings time-barred. The appellant contended that since the returns were submitted voluntarily, albeit defective, it was not necessary to issue a notice under Section 7(2). However, the Supreme Court had previously held that issuing a notice under Section 7(2) is mandatory before proceeding under Section 9(4).Conclusion:The Supreme Court dismissed the appeals, upholding the High Court's decision that the assessment orders dated June 19, 1969, were invalid due to the absence of required notices and the non-est nature of the returns. The Court refrained from deciding whether a return submitted without tax payment could be considered valid, noting that the tax authorities had treated the returns as invalid during the proceedings. The exercise of power under Article 136 of the Constitution was deemed discretionary, and the Court declined to interfere with the High Court's judgment.