2024 (6) TMI 292 - HC - VAT and Sales Tax

Motor vehicle entry tax assessment order set aside for exceeding three-year limitation period under Section 8(5)

The Madras HC set aside an assessment order under the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990, finding it barred by ... Challenge to assessment order - failure to file returns and levy of tax and penalty - jurisdiction to pass the order - Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990 - HELD THAT:- From sub-section (5) to Section 8 of the Entry Tax Act, it would be clear that any assessment ought to be made within 3 years from the last date prescribed for filing of returns of the particular period. Rule 3(2) of the Tamil Nadu Tax on Entry of Goods into Local Areas Rules, 2001, provides that if the importer is a dealer in motor vehicles, the importer ought to file its return on a monthly basis on or before 20th of the succeeding month while an importer other than a dealer in motor vehicles, shall file quarterly returns on or before last day of the month immediately succeeding the quarter. The impugned assessment relates to the Assessment Year 2010-11. Thus, the assessment ought to have been made within 3 years from the last date prescribed for filing of returns i.e., 30.06.2014 inasmuch as the respondent is not a dealer in motor vehicles. However, the notice for assessment was issued only on 29.09.2015 and the impugned order of assessment was made on 07.07.2016 which is beyond the period prescribed for original assessment in terms of Section 8(5) of the Entry Tax Act and thus, beyond the limitation stipulated under Section 8(5) of the Entry Tax Act and hence, barred by limitation. The impuged order of assessment being without jurisdiction, is liable to be set aside - appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether an assessing authority can make an assessment under the Entry Tax Act in respect of an importer who has failed to furnish returns where the Act contains no express provision for assessing a non-filer. 2. Whether an assessment framed under Section 8 of the Entry Tax Act in respect of a period for which no return was filed is barred by the three-year limitation in Section 8(5) when the assessment order is passed after the expiry of that period. 3. Incidental: The weight to be given to earlier decisions holding that the Act contains no specific provision to assess non-filers and the effect of those decisions upon the present assessment (considered but not determinative in view of the limitation finding). ISSUE-WISE DETAILED ANALYSIS - Issue 1: Power to assess a non-filer where Act contains no specific provision Legal framework: Section 7 requires every person liable to pay entry tax to file returns. Section 8 provides for assessment on the basis of return and best-judgment assessment where returns are furnished; there is no separate express provision in the Entry Tax Act setting out a bespoke assessment procedure for persons who have failed to furnish returns. Precedent Treatment: Earlier decisions of the High Court had held that although Section 7 requires filing of returns, the Entry Tax Act lacks a specific provision to assess a person who failed to file returns; those decisions were relied upon by the writ court below. Interpretation and reasoning: The lower court reasoned that in the absence of an express statutory provision authorising assessment of an importer who failed to file returns, the assessing authority could not, long after the import, assess by using details elicited after issuing demand notices. The court emphasised the principle that taxation statutes must be given effect according to their plain unambiguous wording and that courts cannot read into a taxing statute powers which are not provided. Ratio vs. Obiter: Although the lower court articulated that an express provision is necessary to enable assessment of non-filers, the appellate court did not rest its decision on this point. Consequently, the observations concerning the necessity of an express provision for assessing non-filers are treated as persuasive reasoning in the lower court's decision but are not adopted as the binding ratio of the appellate decision in this judgment. Conclusion: The appellate court recognised the argument and earlier authorities but declined to decide the question on its merits because the appeal was resolved on the separate ground of limitation. Thus, the question whether assessment of a non-filer is permissible in the absence of an express provision remains not finally determined in this judgment. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Application of Section 8(5) limitation to the impugned assessment Legal framework: Section 8(5) of the Entry Tax Act provides that no order of assessment under the specified sub-sections shall be made after the expiry of three years from the last date prescribed for filing of returns for the particular period; if not made within that period the return, when subsequently filed, is deemed accepted. Interpretation and reasoning: The Court examined Rule 3(2) of the Rules prescribing return periodicity and noted the respondent was not a dealer in motor vehicles and thus was required to file quarterly returns. For the assessment year in question the last date prescribed for filing was identified, and the three-year window for making an assessment under Section 8(5) was calculated. The notice of assessment and the final assessment order were issued and passed after the expiry of that three-year period. The Court held that an assessment under Section 8(3)/(4) made beyond the three-year statutory period is barred by limitation and is therefore without jurisdiction. The Court relied on the settled principle that limitation provisions in taxing statutes are substantive and jurisdictional; an assessment beyond the statutory period cannot be sustained even if equitable considerations favour the State. Precedent Treatment: The Court referenced established law that where statutory time-limits for assessment are mandatory, assessments made beyond those limits are invalid. Prior case law confirming that limitation bars jurisdiction was applied to the facts. Ratio vs. Obiter: The decision that the impugned assessment was time-barred by Section 8(5) constitutes the operative ratio of the judgment and is determinative of the appeal. Conclusion: The impugned assessment, having been made after the three-year limitation period prescribed by Section 8(5), was held to be barred by limitation and therefore without jurisdiction; the assessment was set aside on that ground. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Treatment of earlier authorities and residual points Legal framework and precedent treatment: Earlier High Court decisions on the non-filer assessment issue were considered by the writ court and raised before the appellate Court. The appellate Court noted those decisions but expressly refrained from adjudicating the substantive point because the limitation ground decided the controversy. Interpretation and reasoning: Because the assessment was held invalid for being time-barred, the Court did not examine or rule upon other contentions (including whether the assessing authority could validly rely on post-import information or interstate investigation extracts to make assessment). Statements in earlier decisions on the need for express statutory power to assess non-filers remain persuasive but were not adopted as necessary to the present decision. Ratio vs. Obiter: Observations on the applicability or distinction of earlier authorities are obiter in the present judgment to the extent they go beyond the limitation ruling. Conclusion: The appeal was dismissed on the limitation ground; consequential and related questions were left open for determination in an appropriate case where limitation does not dispose the controversy.