Strict time limits for sales tax assessment: delayed reassessment cannot justify higher-rate demand for missing Form C declarations.

The Madras HC construed the Central Sales Tax Act, 1956 and the Pondicherry Rules to require assessment soon after the close of the relevant year, holding that the statutory language did not allow an initial assessment to be deferred indefinitely. It further held that the five-year reassessment power could not be used to justify completing the first assessment nearly a decade later. On Form C declarations, the Court accepted that concessional tax treatment depends on proper statutory production, but ruled that the revenue could not keep the matter pending without limit and then apply the higher rate after such delay. The assessment orders were set aside.

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Issues: Whether the assessment orders passed nearly a decade after the relevant assessment years were valid in law, and whether the demand to levy tax at the higher rate for want of Form C declarations could be sustained.

Analysis: The statutory scheme under the Central Sales Tax Act, 1956 and the Pondicherry Rules required the assessing authority, after the close of the year, to scrutinise the returns and complete assessment for the preceding year. The Court construed Rule 5(6) of the Central Sales Tax (Pondicherry) Rules, 1967 in its plain and literal sense and held that the expression did not permit assessment to be deferred indefinitely. It also noted that the power of reassessment within five years under Rule 5(10) could not be used to justify an initial assessment after a decade. On the question of Form C declarations, the Court accepted that concessional rate under Section 8 depended on proper production of statutory forms, but held that the revenue could not keep the assessment pending for an unrestricted period and later impose the higher rate after such delay.

Conclusion: The assessment orders for the relevant years were held unsustainable and were set aside. The revisions were allowed, and the substantial questions of law were answered in favour of the assessee.

Ratio Decidendi: In tax matters, where the statute requires assessment after the close of the year, that mandate must be given strict and literal effect, and the assessing authority cannot treat an initial assessment as open-ended in time.

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