2024 (8) TMI 519 - HC - VAT and Sales Tax

Tax assessments cannot be reopened based on subsequent Supreme Court judgments changing legal interpretation

The HC held that tax assessments cannot be reopened based on subsequent SC judgments that change legal interpretation. The petitioner had originally ... Reopening the assessment based on subsequent judgment on the ground that in the judgment of Mohd. Ikram Khan the transaction in question was held to be amenable to tax - HELD THAT:- It is clear that at the time when the original assessment order was passed, it was duly considered by the Assessing Authority that the petitioner had replaced the spare parts of the vehicle during the period of warranty and such replacement of spare parts during the aforesaid period, the assessee was not liable to tax and consequently granted the exemption. This legal ground was clearly reversed by the Supreme Court in the facts of the present case and the transaction where the revisionist had been given a credit note from the manufacturer for replacing spare parts during the period of warranty came within the ambit of sale and amenable to tax. The question herein as to whether the said assessment could have been reopened in light of the aforesaid judgment. This aspect of the matter has been duly considered by this Court in the case of M/S SAMSUNG INDIA ELECTRONICS PVT. LTD. VERSUS STATE OF U.P. AND 2 OTHERS [2016 (12) TMI 630 - ALLAHABAD HIGH COURT] has held 'a subsequent judgment cannot be used to reopen assessments or disturb past assessments which have been concluded.' The reopening of proceedings of completed assessment in question is rendered bad and colourable exercise of power and without jurisdiction. It is also clear that once the assessment has become final, it should not be reopened on the basis of subsequent judgment of the Supreme Court. This Court is of the view that further reassessment have been initiated on the basis of subsequent judgment of the Apex Court which cannot be used to reopen assessment or disturbed to pass assessment which have been concluded. The department cannot be authorized to reopen assessment, which stood closed on the basis of law as and it stood at the relevant time. The writ petition is allowed. Issues:Reopening of assessment based on subsequent judgment in tax case.Analysis:The revisionist, an authorized dealer of Vikram Three Wheelers, had paid tax on purchases during the Assessment year 1999-2000. Subsequently, a notice was received invoking Section 21(2) of the Trade Tax Act to show cause for reopening the assessment based on the fabrication and mounting of bodies on Three Wheeler Chassis. The Additional Commissioner approved a fresh assessment, including taxing spare parts replaced during warranty based on a Supreme Court judgment. Appeals to the first appellate authority and Commercial Tax Tribunal were rejected, upholding the second assessment order.The revisionist challenged the reopening of assessment under Section 21(2), arguing that it lacked a rational basis and the judgment invoked was not applicable retrospectively. The revisionist cited the Rathi Industries case to support their argument. The Standing Counsel opposed, citing the Mohd. Ekram Khan case where the Supreme Court held that replacing spare parts during warranty constituted a sale liable for tax under the U.P. Trade Tax Act.The Court considered whether the assessment could be reopened based on the subsequent judgment in the Mohd. Ekram Khan case. Referring to the M/s Samsung India Electronics case, the Court held that assessments should not be disturbed based on subsequent judgments. Citing the Simplex Concrete Piles case, the Court reiterated that once the limitation period for reopening assessments had expired, the Department could not reopen based on subsequent legal positions. Consequently, the Court found the reassessment initiated based on the Supreme Court judgment to be improper and without jurisdiction, setting aside the impugned order dated 20.09.2012.