2017 (7) TMI 1316 - HC - VAT and Sales Tax

Court invalidates show cause notice & reassessment order, citing lack of fresh evidence & impermissible circular.

Ambuja Cements Limited Versus State of Chattisgarh and Ors.

Ambuja Cements Limited Versus State of Chattisgarh and Ors. - [2018] 55 G S.T.R. 420 (Chhattisgarh), 2019 (27) G.S.T.L. 666 (Chhattisgarh) Issues Involved:1. Legality of the show cause notice issued under Section 22(1) of the Chhattisgarh Valued Added Tax Act, 2005, read with Section 13 of the Chhattisgarh Entry Tax Act, 1976.2. Validity of the final reassessment order passed during the pendency of the writ petition.3. Legality of the circular dated 16-6-2014 issued by the Commissioner, Commercial Tax, Chhattisgarh, Raipur.4. Maintainability of the writ petition in light of the alternative remedy available under Section 48 of the Act, 2005.Detailed Analysis:1. Legality of the Show Cause Notice:The petitioner, Ambuja Cements Limited, challenged the show cause notice issued for reassessment of entry tax for the years 2007-08, 2008-09, and 2009-10. The notice was based on an amendment to the definition of 'Market Value' in the Chhattisgarh Entry Tax Act, 1976, effective from 1-4-2014. The petitioner argued that the reassessment was initiated merely due to a change in law, which is prospective and cannot be applied retrospectively to reopen concluded assessments. The court held that the reassessment notice was issued based on a circular from the Commissioner, Commercial Tax, which directed reopening of concluded assessments based on the new definition of 'Market Value.' The court found this approach impermissible, as the amendment was prospective and could not constitute a reason to believe for reopening past assessments.2. Validity of the Final Reassessment Order:The final reassessment order was passed during the pendency of the writ petition. The court scrutinized whether the reassessment was justified under Section 22(1) of the Act, 2005. It was observed that the reassessment was initiated based on a change in law and a circular from the Commissioner, without any fresh or additional material. The court emphasized that reassessment cannot be based on a mere change of opinion or error of judgment. It must be supported by new material or reasons. The court concluded that the reassessment was invalid as it was solely based on a prospective amendment and a circular, without any fresh evidence.3. Legality of the Circular Dated 16-6-2014:The circular issued by the Commissioner, Commercial Tax, directed assessing authorities to reopen concluded assessments to include royalty in the calculation of entry tax based on the amended definition of 'Market Value.' The court found that the circular could not be the basis for reopening concluded assessments, as it was based on a prospective amendment. The court reiterated that subsequent changes in law cannot justify reassessment of past periods unless explicitly stated to be retrospective.4. Maintainability of the Writ Petition:The respondents argued that the writ petition was not maintainable due to the availability of an alternative remedy under Section 48 of the Act, 2005. The petitioner countered that the writ petition was maintainable as it raised a jurisdictional issue regarding the reason to believe for reassessment. The court referred to precedents, including the Supreme Court's decisions in Calcutta Discount Co. Ltd. and Gujarat Ambuja Cement Ltd., which allow writ petitions in cases where jurisdictional facts are in question. The court held that the writ petition was maintainable, as it challenged the jurisdictional basis for the reassessment.Conclusion:The court quashed the show cause notice and the consequent reassessment order, finding them based on an impermissible change of opinion due to a prospective amendment. The writ petition was allowed, and the court did not find it necessary to address the petitioner's liability for entry tax on royalty or the legality of the circular separately. The parties were directed to bear their own costs.