2019 (7) TMI 468 - HC - VAT and Sales Tax

Court rules against Deputy Commissioner's attempt to reassess turnover for past years, quashes notices.

The court held that the Deputy Commissioner could not use section 34(8A) to reassess the turnover for the years 2011-12 and 2012-13 as the assessments had ... Special assessment / Audit Assessment u/s 34(8A) of the VAT Act - Assessment of turnover - Interpretation of statute - non-obstante clause present or not - A.Y. 2012-13 - HELD THAT:- The provision of sub-section (8A) of Section 34 of the VAT Act cannot be understood or interpreted as enabling or empowering the Assessing Officer to correct an error, which might have been committed in the course of passing the audit assessment order - the powers under sub-section (8A) of Section 34 of the VAT Act would be available when a certain claim or a transaction has not been subjected to audit assessment under sub-section (2) of Section 34 of the VAT Act. It is also clear that to invoke the provision of sub-section (8A) of Section 34 of the VAT Act, some proceedings must be pending. On the date of issuance of the impugned notices, no proceedings were pending under the VAT Act. If such proceedings are permitted, it would amount to permit the Assessing Officers to sit in a appeal over his own orders. In such circumstances, the respondent could not have invoked the provisions of subsection (8A) of Section 34 of the VAT Act and issued the impugned show cause notices. The impugned notice seeking to carry out assessment of turnover of the petitioner under section 34(8A) of the Gujarat Value Added Tax Act, 2003 for the A.Y. 2012-13 and A.Y. 2011-12, respectively, are quashed and set aside - petition allowed - decided in favor of petitioner. Issues Involved:1. Legality of the notice issued under section 34(8A) of the Gujarat Value Added Tax Act, 2003.2. Jurisdiction of the Deputy Commissioner to reclassify the turnover under a different tax entry.3. Applicability of the non-obstante clause in section 34(8A) of the VAT Act.4. Finality of the previous assessment orders.Detailed Analysis:1. Legality of the notice issued under section 34(8A) of the Gujarat Value Added Tax Act, 2003:The petitioner challenged the notices dated 04/05.09.2018 and 05.09.2018 issued by the Deputy Commissioner of State Tax, Gandhinagar, which sought to reassess the turnover for the years 2012-13 and 2011-12 under section 34(8A) of the VAT Act. The petitioner argued that the notices were without jurisdiction, bad, and illegal because the assessments for those years had already been completed and attained finality.2. Jurisdiction of the Deputy Commissioner to reclassify the turnover under a different tax entry:The petitioner contended that the Assessing Officer had already assessed the turnover of Stainless Steel wires at the rate of 4%+1% additional tax under Entry No.85 of Schedule II to the VAT Act, and this assessment was not challenged or revised within the stipulated time. The impugned notices proposed to reclassify the turnover under residuary Entry No.87, attracting a higher tax rate of 12.5%+2.5% additional tax. The petitioner argued that the Deputy Commissioner did not have the jurisdiction to change the classification by invoking section 34(8A) of the VAT Act.3. Applicability of the non-obstante clause in section 34(8A) of the VAT Act:The respondent, represented by Ms. Maithili Mehta, argued that section 34(8A) contains a non-obstante clause, allowing the Deputy Commissioner to initiate assessment independently of whether the initial assessment was pending or not. The respondent relied on the decision in M/s. Samay Sales, which supported the view that the non-obstante clause empowered the Deputy Commissioner to issue the impugned notices.4. Finality of the previous assessment orders:The court noted that the assessments for the years 2011-12 and 2012-13 were completed, and the orders had attained finality as they were not challenged within the stipulated time. The court held that section 34(8A) could not be invoked to reassess or correct an error in a finalized audit assessment. The provision under section 34(8A) is meant for cases where a certain claim or transaction has not been subjected to audit assessment and some proceedings must be pending to invoke this provision.Conclusion:The court concluded that the Deputy Commissioner could not invoke section 34(8A) to reassess the turnover for the years 2011-12 and 2012-13 as the assessments for these years had attained finality and no proceedings were pending. The court quashed and set aside the impugned notices dated 04/05.09.2018 and 05.09.2018. The petitions were allowed, and the notices were discharged with no order as to costs.