2024 (5) TMI 1145 - HC - VAT and Sales Tax

PTO cannot invoke Section 5 powers for reassessment after issuing P-7 certificates confirming return correctness under Rule 15

The HC upheld the tribunal's decision that PTO can invoke Section 5 powers only when dealer returns are found incorrect or incomplete under Rule 15. The ... Invocation of Section 5 by Petrol Taxation Officer (PTO) - Provisions for Escaped Assessments - Requirement of Monthly vs. Annual Assessments. Whether on the facts and circumstances of the case, the tribunal is right in law in holding that provisions of section 5 of the act can only be invoked by petrol taxation officer when he is not satisfied with the correctness and completeness of the return filed by Dealer pursuant to rule 15?- HELD THAT:- The provisions of the Act / Rules have to be applied strictly taking into account the intention of the legislature. Section 5 “power to determine certain questions” clearly states that any question as to whether a tax or penalty is recoverable under this Act, the person from whom it is due and the amount recoverable shall be determined by the PTO for the area where the sale takes place. Rule 15 of the Act of 2005, states that every dealer shall deposit the amount of tax due and to furnish monthly returns of sales in the prescribed forms within the specified period. Rule 15(d) states that on receipt of the return, the PTO may examine the account books and other records of the dealer and such other enquiries, as he may consider necessary for the purpose of satisfaction that the return is correct and complete and the amount of tax and any other sum payable under the act has been paid, if the officer is satisfied in respect of the correctness and return and the dealer having paid the amount of tax on any other sum payable under the Act, he shall issue a certificate in form P-7. The conjoint reading of Section 5 and Rule 15 of the Act of 2005 clearly specifies that section 5 will be made applicable only if the return filed by an assessee before the PTO is held not to be complete and correct. PTO can exercise his powers under section 5, read with rule 15-D. Section 5 will not be invoked in cases where complete and correct return is filed and P-7 is issued pursuant to Rule 15. This question has been answered in affirmation. Whether the act and the rules do not contain any specific provision for taking action by the Petrol Taxation Officer in the cases of escaped assessments? - HELD THAT:- Admittedly, there is no specific provision for taking action by PTO in cases of Escaped assessments, whereas under section 7 (11) of the GST, there is a clear provision for reassessment, if the assessing authority has reasons to believe that by reasons of omission or failure on the part of a dealer to make a return under sub section (1) or sub section (3) for any year, to the Assessing Authority or to disclose fully and truly all material facts necessary for his assessment - There is no provision of escaped assessment in the Act of 2005. In the instant case PTO, upon perusal of the assessment record has invoked the power vested in him under section 5 of the Act of 2005 after the report was made by the internal audit party that too after a gap of three years. After receiving the return from the dealer, the PTO had already assessed the completeness and correctness of the return and had issued a certificate. PTO had not taken any action in terms of section 7 (11) of the GST - In absence of any specific provision with respect to escaped assessments, the tribunal was right in law in holding that the act and rules do not contain any specific provision for taking action by the PTO in cases of escaped assessments. this question has also been answered in affirmation. Whether on facts and circumstances of the case tribunal is right in law holding that the act and the rules provide only for filing of monthly returns and therefore assessment are only required to be made month wise and any annual assessment made shall not be deemed to be an assessment under the act/rules? - HELD THAT:- Once the final assessments were made by the competent authority on monthly assessments as per the Act and Rules applicable, it was not open to the PTO to reassess after three years of filing the return. This question is also answered in affirmative. The Reference made by the Tribunal is answered in affirmation and disposed of accordingly. Issues Involved:1. Invocation of Section 5 by the Petrol Taxation Officer (PTO) for incomplete or incorrect returns.2. Absence of specific provision for escaped assessments.3. Requirement of monthly versus annual assessments.Summary:Issue 1: Invocation of Section 5 by PTO for incomplete or incorrect returnsThe Tribunal held that Section 5 of the Jammu and Kashmir Motor Spirit and Diesel Oil (Taxation of Sales) Act, 2005 can only be invoked by the PTO when he is not satisfied with the correctness and completeness of the return filed by a dealer pursuant to Rule 15. The Tribunal emphasized that Section 5 and Rule 15 clearly state that the PTO can exercise his powers under Section 5 only if the return filed is incomplete or incorrect. If the return is complete and correct, and a certificate (Form P-7) is issued, Section 5 cannot be invoked.Issue 2: Absence of specific provision for escaped assessmentsThe Tribunal noted that there is no specific provision in the Act of 2005 for taking action in cases of escaped assessments, unlike Section 7(11) of the GST Act, which provides clear guidelines for reassessment in such cases. The PTO had invoked Section 5 after an internal audit revealed that turnover had escaped assessment, but this was done three years after the initial assessment. The Tribunal concluded that without a specific provision like Section 7(11) of the GST Act, the PTO could not take action for escaped assessments under the Act of 2005.Issue 3: Requirement of monthly versus annual assessmentsThe Tribunal held that the Act of 2005 and its Rules only provide for the filing of monthly returns and assessments, not annual assessments. Rule 15 and Rule 16 specify the procedure for monthly returns and assessments, and there is no provision for annual assessments. The Tribunal concluded that any annual assessment made would not be deemed valid under the Act/Rules. The PTO's reassessment after three years was not permissible as the final assessments were already made on a monthly basis as per the Act and Rules.Conclusion:The Tribunal's reference was answered in the affirmative, confirming that:1. Section 5 can only be invoked for incomplete or incorrect returns.2. There is no specific provision for escaped assessments in the Act of 2005.3. Assessments are required to be made on a monthly basis, and annual assessments are not valid under the Act/Rules.