Binding advance ruling and limitation under VAT law: reassessment upheld in principle, but time-barred notices quashed for earlier years.

A binding advance ruling under the Tamil Nadu Value Added Tax Act rendered the assessee's monthly returns incorrect because the assessee was not entitled to claim the stated exemption and was liable to tax on imported textile fabric. On that basis, assessment under Section 22(4) was justified in principle. On limitation, the court held that proceedings for the earlier assessment years were time-barred, so the impugned orders and notices for those years were quashed, while the proceedings for the later year survived because limitation was extended during the Covid-19 period.

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Issues: (i) Whether the monthly returns filed by the assessee were incorrect in view of the binding advance ruling under the Tamil Nadu Value Added Tax Act, 2006, thereby justifying assessment under Section 22(4); (ii) Whether the impugned assessment orders and notices were barred by limitation for the assessment years 2011-2012, 2012-2013 and 2013-2014.

Issue (i): Whether the monthly returns filed by the assessee were incorrect in view of the binding advance ruling under the Tamil Nadu Value Added Tax Act, 2006, thereby justifying assessment under Section 22(4).

Analysis: The advance ruling under Section 48-A of the Tamil Nadu Value Added Tax Act, 2006 had already concluded that the assessee was not entitled to claim exemption under Entry 10 of Part-A of IV Schedule and was liable to pay tax on the imported textile fabric under Entry 11 of the II Schedule. The ruling was binding on both the assessee and the department, and in the absence of any challenge to that ruling, the returns filed by the assessee were contrary to the clarified legal position. The Court also held that once the returns were incorrect, the Assessing Officer was entitled to proceed under Section 22(4) after completion of the year.

Conclusion: The returns were treated as incorrect, and invocation of Section 22(4) was upheld in principle against the assessee.

Issue (ii): Whether the impugned assessment orders and notices were barred by limitation for the assessment years 2011-2012, 2012-2013 and 2013-2014.

Analysis: The Court held that if the returns had been correct, the reopening period under Section 27 would have expired on 31.10.2018, 31.10.2019 and 31.10.2020 respectively. It further held that the limitation relevant to the assessment years 2011-2012 and 2012-2013 had expired, whereas the proceedings for 2013-2014 were protected by the extension of limitation during the Covid-19 period. On that basis, the impugned orders and notices for the first two years were liable to be quashed, but the challenge for 2013-2014 did not succeed.

Conclusion: The challenge succeeded for assessment years 2011-2012 and 2012-2013, and failed for assessment year 2013-2014.

Final Conclusion: The writ petitions were allowed in part, with the impugned proceedings set aside for two assessment years and sustained for the remaining assessment year.

Ratio Decidendi: A binding advance ruling under Section 48-A governs the parties, and where reassessment is otherwise time-barred, proceedings cannot be sustained for assessment years whose limitation has already expired.

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