2016 (3) TMI 331 - SC - VAT and Sales Tax

Supreme Court affirms statutory time limits in tax assessments, protecting taxpayer rights and ensuring fairness.

State of Punjab And Others Versus M/s Shreyans Indus Ltd. Etc

The Supreme Court upheld the High Court's judgment that the Commissioner cannot extend the period for passing assessment orders under sub-section (10) of ... Validity of sales tax assessment - Assessing Officer sent notices after the expiry of three years - powers under sub-section (10) of Section 11 of Punjab General Sales Tax Act, 1948 - Held that:- there would be no question of extending the time for assessment when the assessment has already become time barred. A valuable right has also accrued in favour of the assessee when the period of limitation expires. If the Commissioner is permitted to grant the extension even after the expiry of original period of limitation prescribed under the Act, it will give him right to exercise such a power at any time even much after the last date of assessment. In the instant appeals itself, when the last dates of assessment were 30th April, 2004, 30th April, 2005, 30th April, 2006 and 30th April, 2007, order extending the time under Section 11(10) of the Act were passed on August 17, 2007, August 17, 2007, August 17, 2007 and May 25, 2007 respectively. Thus, for the Assessment Year 2000-2001, order of extension is passed more than three years after the last date and for the Assessment Year 2001-2002, it is more than two years after the last date. Such a situation cannot be countenanced as rightly held by the High Court. When the last date of assessment in respect of these Assessment Years expired, it vested a valuable right in the assessee which cannot be lightly taken away. As a consequence, sub-section (11) of Section 10 has to be interpreted in the manner which is equitable to both the parties. Therefore, the only way to interpret the same is that by holding that power to extend the time is to be exercised before the normal period of assessment expires. - Decided against the revenue. Issues Involved:1. Interpretation of sub-section (10) of Section 11 of the Punjab General Sales Tax Act, 1948.2. Validity of notices issued by the Assessing Officer after the expiry of the prescribed three-year period.3. Power of the Commissioner to extend the period for passing the assessment order beyond the normal three-year period.4. Judicial review of the Commissioner's order extending the assessment period.Detailed Analysis:1. Interpretation of sub-section (10) of Section 11 of the Punjab General Sales Tax Act, 1948:The primary issue in these appeals revolves around the interpretation of sub-section (10) of Section 11 of the Punjab General Sales Tax Act, 1948. This provision empowers the Commissioner to extend the period of three years for passing the order of assessment for such further period as deemed fit, provided reasons for the extension are recorded in writing. The High Court of Punjab and Haryana held that once the period of limitation expires, the right to make an assessment gets extinguished, and the Commissioner cannot extend the period of limitation for assessment purposes thereafter. The Supreme Court upheld this interpretation, emphasizing that the extension of time for assessment has the effect of enlarging the period of limitation, which cannot be done after the period has expired.2. Validity of notices issued by the Assessing Officer after the expiry of the prescribed three-year period:The Assessing Officer issued notices to the respondent-assessee in Form ST-XIV after the expiry of the three-year period. The assessee objected, arguing that these notices were time-barred and the assessment proceedings could not continue. The Tribunal initially dismissed the assessee's appeal, holding that the Commissioner had the power to extend the period. However, the High Court reversed this decision, ruling that the notices issued after the expiry of the limitation period were invalid. The Supreme Court agreed with the High Court, stating that once the period of limitation expires, the right to make an assessment gets extinguished, and any notices issued thereafter are invalid.3. Power of the Commissioner to extend the period for passing the assessment order beyond the normal three-year period:The Commissioner extended the time for passing the assessment orders beyond the normal three-year period, citing pending cases as the reason for the extension. The High Court ruled that the Commissioner could not extend the period after the expiry of the three-year limitation. The Supreme Court upheld this view, emphasizing that the power to extend the time must be exercised before the normal period of assessment expires. The Court noted that allowing the Commissioner to extend the period after it has expired would undermine the statutory limitation period and infringe upon the assessee's rights.4. Judicial review of the Commissioner's order extending the assessment period:The Supreme Court highlighted that the Commissioner's order extending the assessment period is subject to judicial review. The requirement for the Commissioner to record reasons in writing ensures that the power to extend the period is exercised for valid reasons and based on material considerations. The Court emphasized that such an order must be justified and not exercised arbitrarily or for extraneous purposes. The Supreme Court found no error in the High Court's judgment, affirming that the Commissioner's power to extend the period must be exercised within the prescribed limitation period.Conclusion:The Supreme Court dismissed the appeals, upholding the High Court's judgment that the power to extend the period for passing the assessment order under sub-section (10) of Section 11 of the Punjab General Sales Tax Act, 1948, must be exercised before the expiry of the normal three-year period. The Court emphasized the importance of adhering to the statutory limitation period to protect the rights of the assessee and ensure fairness in the assessment process.