2025 (9) TMI 993 - SCH - VAT / Sales Tax

Appeal allowed; reassessments for 2003-06 held time-barred as Section 21 can't revive assessments invalid under Section 19.

M/s. Shiv Steels Versus The State Of Assam & Ors.

The SC allowed the appellant's appeal, set aside the High Court's common judgment and held the reassessments for assessment years 2003-04, 2004-05 and ... Dismissal of petition filed by the appellant by which the Order of reassessment passed under the provisions of the Assam General Sales Tax Act, 1993 - earlier assessments for the three years held to be time-barred - limitation governed by Section 21 of the Act, 1993 - assessment years 2003-2004, 2004-2005 and 2005-2006 - HELD THAT:- Here is a case wherein the assessments undertaken for the three years were already held to be invalid because of being time barred, in view of Section 19 of the Act. Later, by virtue of obtaining sanction from the Commissioner, the revenue could not have taken recourse to Section 21 of the Act to say that the reassessment within four years is permissible with prior sanction from the Commissioner. Section 21 would apply only in cases where no assessment has been made under any of the provisions of the Act within the time limits specified in Section 19. The interpretation of the two provisions of the Act at the end of the High Court is completely incorrect. In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of law. If the revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter. The present appeal, along with the two connected appeals stands allowed and the common judgment and order passed by the High Court is hereby set aside. ISSUES PRESENTED AND CONSIDERED 1. Whether Section 21 of the Assam General Sales Tax Act, 1993 can be invoked to validate reassessments within four years after the limitation period where earlier assessments for the same years were held invalid as time-barred under Section 19. 2. Proper construction and interplay of Section 19 (time limits for completion of assessment and re-assessments) and Section 21 (assessment where no assessment has been made within time limits) of the Act. 3. The applicable canon of construction in fiscal statutes - whether taxation by implication or analogy is permissible when the statutory text does not strictly support revenue action. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of Section 21 where earlier assessments were held time-barred under Section 19 Legal framework: Section 19 prescribes outer time limits for assessment and reassessment (generally three years, with certain exceptions), and Section 21 provides that where no assessment has been made within the time limits of Section 19, an assessment may nevertheless be made within four years from the expiry of the limitation period provided prior sanction of the Commissioner is obtained. Precedent Treatment: No earlier judicial authorities were cited or applied to alter the statutory meaning; the Court assessed the provisions on their text. Interpretation and reasoning: Section 21 is expressly conditioned on the factual state that 'no assessment has been made' within the Section 19 time limits. Where an assessment was in fact made (even if subsequently held invalid as time-barred), the factual precondition of Section 21-i.e., that no assessment has been made within the limitation period-does not obtain. The Court held that the revenue cannot use Section 21 to validate a reassessment in cases where assessments were earlier made and later found to be time-barred; Section 21 applies only to situations where no assessment at all was made within the statutory period. The High Court's contrary view - that quashing of an earlier time-barred assessment is immaterial once sanction under Section 21 is obtained - was rejected as a misreading of the statutory text. Ratio vs. Obiter: Ratio - Section 21 does not permit reassessment in cases where an earlier assessment was made within the limitation period but was held invalid as time-barred; Section 21 applies only where no assessment was made within the time limits of Section 19. The observations rejecting the High Court's alternative remedies (e.g., giving hearing on ex parte assessments) are ancillary but directed to the factual posture and are consequential to the ratio. Conclusions: The Court concluded that Section 21 could not be invoked to validate the revenue's reassessments in the present factual matrix where earlier assessments had been held time-barred; the High Court's contrary conclusion was set aside. Issue 2 - Construction and interplay of Sections 19 and 21 Legal framework: Sections 19 and 21 must be read together. Section 19 sets the normal limitation periods and exceptions; Section 21 is an overriding but conditional provision allowing assessments within four years after the limitation period only where no assessment has been made within Section 19 limits and with prior Commissioner's sanction. Precedent Treatment: The decision treats the two provisions by their plain language without invoking external aids or prior appellate authorities to alter their ordinary meaning. Interpretation and reasoning: The Court applied plain-text construction: the proviso in Section 21 narrows its scope by the express condition that it applies where 'no assessment has been made' within Section 19's limits. The Court emphasized that the Legislature's choice of words creates a specific factual prerequisite; it rejected an interpretation that would allow Section 21 to be used whenever a sanction is later obtained irrespective of whether an assessment had earlier been made. The Court further noted that if the section were read otherwise, it would permit the revenue to sidestep the clear limits of Section 19 by obtaining after-the-fact sanction, contrary to the statute's structure. Ratio vs. Obiter: Ratio - The statutory interplay mandates that Section 21 is not available where an assessment was already made within Section 19's period (even if subsequently invalidated as time-barred); the plain language controls. Observations about the non-delegation proviso in Section 21 and exclusions for stayed proceedings under Section 19's Explanation are interpretative aids but not the central holding. Conclusions: The Court held that the correct construction requires strict application of Section 19's time limits and confines Section 21 to cases where no assessment was made within those limits; the High Court's interpretation was erroneous and therefore set aside. Issue 3 - Principle of strict construction in fiscal statutes and limits on taxation by implication Legal framework: Canon that fiscal statutes are to be construed strictly in favor of the taxpayer; imposition of tax must rest within the strict letter of the law; revenue cannot impose tax by inference or analogy where statutory text does not permit. Precedent Treatment: The Court reiterated the established canon for construing taxing statutes (no specific precedents cited in the judgment extract), applying it to the statutory text before it. Interpretation and reasoning: The Court emphasized that if the case does not fall within the four corners of the taxing provision, the revenue cannot be allowed to tax by probing legislative intent or employing analogies. Applying this canon, the Court concluded that the present situation did not fall within Section 21 because the statutory precondition ('no assessment has been made') was not satisfied; consequently tax reassessment could not be validated by resort to implication or legislative purpose. Ratio vs. Obiter: Ratio - The strict-construction principle underpins the holding that Section 21 cannot be used beyond its plain terms; remarks about general canons of fiscal construction are authoritative as applied to the disposition. Conclusions: The Court held that strict textual adherence is required; absent clear statutory coverage, reassessment could not be sustained by implication or analogy. Outcome The common judgment and order of the High Court was set aside; the assessment action based on Section 21 in the facts of the case could not be upheld where earlier assessments had been held time-barred under Section 19. Pending applications were disposed of accordingly.