2023 (8) TMI 786 - HC - VAT / Sales Tax

Writ Petition Against JVAT Re-Assessment Order Is Maintainable; Limitation Period Governed by Sections 40(1) and 40(4)

The HC held that the writ petition challenging the re-assessment order under the JVAT Act was maintainable as limitation is a jurisdictional issue. ... Maintainability of writ petition - availability of alternative remedy - Validity of Re-assessment order - statutory period of limitation prescribed under the JVAT Act not followed - Section 42(3) of the JVAT Act. Existence of alternative remedy - HELD THAT:- It is trite law that existence of alternative remedy is not an absolute bar to the maintainability of writ petition under Article 226 of the Constitution of India. There are circumstances under which writ petition can be entertained namely; breach of fundamental right; violation of principles of natural justice; and excess of jurisdiction or a challenge to vires of a statute or delegated legislation. In the present case, writ petitioner has raised the issue of limitation which is a jurisdictional question and, thus, writ petition is maintainable. Interpretation of statute - Whether Section 42(3) is in itself the substantive provision provided under the JVAT Act for initiation of re-assessment proceeding or it merely enumerates additional circumstances/grounds under which re-assessment proceeding can be initiated under the substantive provision of re-assessment contained under Section 40 of the JVAT Act? - HELD THAT:- The Hon’ble Supreme Court, in Mafatlal Industries [1996 (12) TMI 50 - SUPREME COURT], has clearly laid down that the phrase “levy and collection” indicates that all the steps in making a man liable to pay a tax and exaction of tax from him must be in accordance with law. All steps must be taken according to statutory provisions and no one can be subjected to levy and collection of tax without authority of law. Completion of assessment of an Assessee confers valuable right upon the said assessee and the said assessment proceeding can be subjected to re-assessment strictly in accordance with the statutory provisions contained under the Act - under the scheme of the Act, there is provision for assessment, self-assessment, audit assessment, assessment of dealers not registered, and, specific provisions have also been incorporated for carrying out re-assessment proceedings under Section 40(1) of the JVAT Act. Even earlier, prior to insertion of Section 42(3), the Assessing Authority, could have treated audit objection as an information and could have initiated re-assessment proceeding. However, Section 42(3) provides that when information is received by way of observation/objection from the Comptroller and Auditor General of India, the Assessing Authority has to proceed to re-assess the dealer. Thus, what is dispensed with under Section 42(3) is recording of reasons to believe by the Assessing Authority for initiation of re-assessment proceeding. In the Judgment rendered by Hon’ble Apex Court, in the case of Larsen and Toubro [2017 (3) TMI 1064 - SUPREME COURT], Hon’ble Apex Court, after examining almost all earlier Judgments, although held that an audit objection would be well within the parameters of being construed as information, but at the same time, it was held that merely because audit objection has been raised, the same would not authorize the Assessing Authority to proceed with re-assessment and the Assessing Authority has to record his satisfaction on the audit objection. In the said Judgment, Hon’ble Supreme Court noticed that the Assessing Authority was not agreeing with the audit observation, but, despite the same, proceeded to issue Notice on the ground of direction issued by Audit Party and not on its personal satisfaction and it was clearly held by Hon’ble Apex Court that same was not permissible under law; and the very initiation of re-assessment proceeding was declared as without jurisdiction. It is trite law that a quasi-judicial authority cannot abdicate its jurisdiction on the dictate of an external authority and proceed to pass order on such external dictate. In the present case, it has been argued by learned Advocate General that Section 42(3) mandates the assessing authority to initiate re-assessment proceeding on the dictate of the Audit Party which, on the face of discussions held above, would amount to abdication of jurisdiction of the assessing authority being a quasi-judicial body to external dictates, which would be contrary to the ratio laid down by the Judgment of Hon’ble Apex Court in the case of Indian Eastern Newspaper Society, New Delhi [1979 (8) TMI 1 - SUPREME COURT] and in the case of Larsen and Toubro. Whether Section 42(3) is an independent provision conferring power of re-assessment or is merely as additional ground conferred under the Act upon the assessing authority for carrying out re-assessment proceedings? - HELD THAT:- What has been dispensed with in Section 42(3) is the requirement of recording ‘reasons to believe’ only. It is under the said circumstances, non-obstante clause was not inserted in Section 42(3) extending the period of limitation from the date of receipt of audit objection, and, thus, the period of limitation would be governed by Section 40(1) read with 40(4) of the JVAT Act - If the assessing authority is allowed to initiate repeated re-assessment proceeding against an Assessee merely on the dictate of Audit Party, there would be no finality of assessment and the Assessee would be having domical sword hanging over in it in perpetuity, which is not the scheme of the Act. Since it is already declared that Section 42(3) is to be read with Section 40(4) of JVAT Act and limitation period for carrying out re-assessment proceeding is five years, we are not deliberating further over the said issue. However, it would be appropriate to also refer to the Judgment rendered by Hon’ble Supreme Court in the case of STATE OF PUNJAB VERSUS BHATINDA DISTRICT CO-OP. MILK P. UNION LTD. [2007 (10) TMI 300 - SUPREME COURT] wherein Hon’ble Supreme Court, while examining the provisions contained under the Punjab General Sales Tax Act conferring power of suo-motu revision upon the Commissioner, held that although said Section prescribed no period of limitation but the same would not mean that suo-motu power can be exercised at any time. Hon’ble Supreme Court, in the said Judgment, held that if no period of limitation is prescribed, statutory authority must exercise jurisdiction within reasonable time and the reasonable period would depend upon the nature of the statute, liabilities and other relevant factors. Thus, under the scheme of JVAT Act also, provisions of limitation for carrying out assessment, audit assessment, scrutiny assessment, re-assessment proceedings, etc. have been prescribed to be three years to five years. It is for the said reason also, in our opinion, while incorporating provision of Section 42(3), the Legislature, in its wisdom, had not sought to extend the period of limitation by inserting non-obstante clause. Whether suo-motu extension orders extending the period of limitation passed by Hon’ble Supreme Court would apply to original adjudication proceedings? - HELD THAT:- A bare perusal of the said Circular would reveal that CBIC, in exercise of its power under Section 168A of CGST Act, has issued the said guidelines which was deliberated in 43rd meeting of the GST Council and in the said guidelines, it was clearly noted that the orders of Hon’ble Supreme Court only apply to quasi-judicial and judicial matters relating to petitions/ applications/suits/appeals/all other proceedings and not to original adjudication proceedings. In fact, the Parliament has enacted the ‘Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and, under the said Act, provisions were incorporated extending the period of limitation specifically for passing of adjudication orders. A careful reading of the Judgment of Hon’ble Apex Court in S. Kasi [2020 (6) TMI 727 - SUPREME COURT] would leave no iota of doubt in our mind that the purpose of extending the period of limitation was for the benefit of litigants who have to take remedy in law as per the applicable statute for a right, as the law of limitation bars the remedy but not the right. Thus, in view of the ratio of the Judgment of Hon’ble Apex Court, in the case of S. Kasi read with the amendments carried out by the Parliament and the State Legislature extending the period of limitation by amending Acts, it is opined that the benefit of suo-motu extension orders of Hon’ble Apex Court would not be available to original adjudication proceedings which is to be governed by applicable Statutes including its amendments. The suo-motu orders extending the period of limitation passed by Hon’ble Apex Court is not applicable to original adjudication proceedings and re-assessment proceedings would be governed by provisions of JVAT Act read with the Amendment Act of 2020. Application disposed off. Issues Involved:1. Whether Writ Petition is maintainable in view of availability of alternative remedyRs.2. Whether Section 42(3) of the JVAT Act merely enumerates additional circumstances/grounds on which an Assessee can be subjected to re-assessment, and, re-assessment proceeding is to be guided by substantive provision of re-assessment contained under Section 40 of the JVAT ActRs.3. Whether if Section 42(3) is held as not prescribing any period of limitation for carrying out re-assessment proceedings, said re-assessment proceeding is required to be carried out within the reasonable time and what should be the reasonable time under the scheme of the JVAT ActRs.4. Whether suo-motu extension orders extending the period of limitation passed by Hon'ble Supreme Court would apply to original adjudication proceedingsRs.Summary:Issue No. (i): Maintainability of Writ PetitionThe court held that the writ petition is maintainable as it raises the jurisdictional question of limitation, which is a fundamental issue. Furthermore, it would be futile to direct the petitioner to the alternative remedy of appeal or revision because the highest statutory authority, the Commercial Taxes Tribunal, has already ruled that Section 42(3) of the JVAT Act does not prescribe any period of limitation.Issue Nos. (ii) and (iii): Interpretation of Section 42(3)The court determined that Section 42(3) of the JVAT Act should be read in conjunction with Section 40(4), which prescribes a five-year limitation period for re-assessment proceedings. The court noted that Section 42(3) provides additional grounds for re-assessment but does not extend the limitation period beyond what is prescribed in Section 40(4). The court emphasized that the absence of a non-obstante clause in Section 42(3) indicates that the legislature did not intend to extend the limitation period for re-assessment based on audit objections.Issue No. (iv): Applicability of Suo-Motu Extension OrdersThe court held that the suo-motu extension orders passed by the Hon'ble Supreme Court, which extended the period of limitation due to the COVID-19 pandemic, do not apply to original adjudication proceedings. The court relied on a Circular issued by the CBIC and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, which clarified that the extension orders apply only to judicial and quasi-judicial proceedings and not to original adjudication proceedings.Conclusion:The court allowed the writ petitions, quashing the re-assessment orders dated 08.03.2022, as they were passed beyond the prescribed limitation period. The court emphasized that re-assessment proceedings must be completed within the statutory period of five years as stipulated under Section 40(4) of the JVAT Act.