2018 (12) TMI 420 - HC - VAT and Sales Tax

Time Limit for Assessments Under Rule 6(5) of CST Rules: Five-Year Rule Upheld

The Court held that assessments under Rule 6(5) of the CST Rules must be completed within a reasonable period, set at five years. Notices issued beyond ... Limitation for completion of assessment under Section 6(5) of the Central Sales Tax Rules, 1957 - the challenge is against the issuance of notice and completion of assessments beyond the four year period as provided under sub-rule (7) & (8) of Rule 6 of the CST Rules - Held that:- Reliance is placed on sub-clause (iii) to contend that the CST assessment has to be treated as pending for the purpose of Section 23 and the time limit mentioned therein shall not be applicable in such cases. We have to notice that the amendments have been brought in after the limitation expired in certain cases, which is before us for consideration - In any event, we have to emphasise that the provision brought in is for extension of period for the purpose of Section 25, which speaks of an assessment of escaped turnover and not the initial completion of assessment. We are of the opinion that the provision would have no application to the present set of cases. The cases in which notices alone were issued and completion of assessment has not been effected, wherever it has been upheld, necessarily the assessee would be entitled to file objections within 30 days from the date of receipt of the certified copy of this judgment and the Assessing Officer would complete the proceedings in accordance with law, leaving open the remedy of the assessee to file statutory appeals as against the quantum, but not against the question of limitation. It is made clear that the assessment orders wherever they have been upheld, have been upheld only on the question of limitation. Issues Involved:1. Limitation under Section 6(5) of the Central Sales Tax Rules, 1957.2. Applicability of the limitation period from the Kerala Value Added Tax Act, 2003.3. Reasonableness of the period for completion of assessment.4. Impact of amendments to the Kerala Value Added Tax Act on the limitation period.5. Validity of notices and assessment orders issued beyond the prescribed period.Detailed Analysis:1. Limitation under Section 6(5) of the Central Sales Tax Rules, 1957:The primary issue revolves around the absence of a specific limitation period under Rule 6(5) of the CST Rules for completing assessments. The State contended that no limitation period was provided, thus assessments could be completed without a time constraint. However, the learned Single Judge ruled that assessments must be completed within a reasonable time, deemed to be four years, aligning with the period prescribed under Rule 6(7).2. Applicability of the limitation period from the Kerala Value Added Tax Act, 2003:The State argued that the limitation period under the KVAT Act should not apply to assessments under the CST Act. The Division Bench in Parisons Foods (P) Ltd. v. State of Kerala held that the limitation periods under sub-rules (7) or (8) of Rule 6 could not be adopted for sub-rule (5). The KVAT Act provides for a deemed completion of assessment if returns are filed correctly, with a five-year limitation for escaped turnover assessments under Section 25.3. Reasonableness of the period for completion of assessment:The Court considered the nature of the statute, rights, and liabilities involved to determine a reasonable period for assessment completion. It was concluded that a five-year period for initiating proceedings, as provided under the KVAT Act for escaped turnover, was reasonable for completing assessments under Rule 6(5) of the CST Rules.4. Impact of amendments to the Kerala Value Added Tax Act on the limitation period:The amendments to Section 42 of the KVAT Act, which extended the period for completion of assessments, were argued to affect the CST assessments. However, the Court found these amendments inapplicable to the initial completion of assessments under Rule 6(5), as they were intended for escaped turnover assessments under Section 25.5. Validity of notices and assessment orders issued beyond the prescribed period:The Court examined individual cases to determine if notices were issued within the reasonable five-year period. Several writ appeals were allowed or rejected based on whether the notices were issued within this period. For example, W.A. No.1211 of 2017 was rejected as the notice was issued beyond the five-year period, while W.A. No.1215 of 2017 was allowed as the notice was within the period.Conclusion:The Court upheld the principle that assessments under Rule 6(5) of the CST Rules must be completed within a reasonable period, determined to be five years. Notices issued beyond this period were deemed invalid. The judgment clarified that amendments to the KVAT Act extending assessment periods did not apply to initial assessments under the CST Act. The detailed examination of individual cases ensured that the principle of reasonable limitation was consistently applied.