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of <h1>Levy of penalty under Assam Value Added Tax Act for missing audit report held time-barred; penalties and assessments quashed</h1> Levy of penalty under the Assam Value Added Tax Act for failure to submit an audit report was contested on limitation grounds; the court found Section 39s ... Levy of penalty u/s 62(3) of the Assam Value Added Tax Act, 2003 - failure on the part of the petitioner company to submit the audit report as required under the provisions of sub-section (2) of Section 62 of the Act of 2003 from the prescribed authority - applicability of time limitation - HELD THAT:- The assessment for the years 2005-2006, 2006-2007 & 2007-2008, having been completed, the provisions of Section 39 of the Act of 2003 mandates that no assessments under the provisions of Section 35 and 36 shall be permissible to be made after the expiry of 5 years from the end of the year to which the assessment relates. Although, the proviso to Section 39 of the Act of 2003 culls out an exception in cases of offence under the Act, for which proceedings for prosecution has been initiated; wherein, it mandates that the period of limitation shall not apply. However, the proviso would have no application to the issue arising in the present proceedings. A perusal of the materials brought on record would reveal that within the period of limitation as mandated under the provisions of Section 39 of the Act of 2003, the respondent authorities had not initiated any audit assessment under the provisions of Section 36 of the Act of 2003, with regard to the returns submitted by the petitioner under the provisions of sub-section (2) of Section 35 of the Act for the years 2005-2006, 2006-2007 and 2007-2008 - In view of the bar existing in the provisions under the provisions of Section 39 to carry out an assessment upon the conclusions after lapse of 5(five) years from the end of the year to which the assessment relates, admittedly in the present case on the date of issuance of the notice dated 07.10.2015, five years in respect of all the 3 (three) assessment years, in question, having lapsed, this Court is of the considered view that it was not open to the respondent authorities to carry out an assessment in the matter on any ground including the ground of non submission of an audit report i.e., the violation of provision of Section 62(2). A perusal of the notice dated 03.10.2015, would go to reveal that what was contemplated, therein was that the returns filed by the petitioner for the period 2005-2006 to 2007-2008 were selected for audit assessment - In terms of the provisions of Section 39 of the Act of 2003, the period of limitation for carrying out audit assessment under the provisions of Section 36 of the Act, i.e. for the years 2005-2006, 2006-2007 and 2007-2008 had lapsed on 31.03.2011, 31.03.2012 and 31.03.2013 respectively. Accordingly, this Court is of the considered view that the audit assessment sought to be made, invoking the provisions of Section 36 of the Act of 2003, vide issuance of the notice dated 03.10.2015, was clearly barred by limitation. Accordingly, the assessment order dated 07.10.2015 issued upon an assessment made under Section 36 of the Act of 2003 r/w Section 9(2) of the CGST Act of 1956, would also mandate an interference from this Court - the Notices of Demand dated 07.10.2015 impugned in the above noted 3 writ petitions imposing upon the petitioner, penalty of Rs. 1,00,000/- for violation of the provisions of Sub-section 2 of Section 62 stands set aside - Further the assessment orders dated 07.10.2015, for the assessment years 2006-2007 as well as 2007-2008 also stand set aside. Petition allowed. Issues: (i) Whether the Notices of Demand dated 07-10-2015 imposing penalty under Section 62(3) of the Assam Value Added Tax Act, 2003 for the years 2005-06 to 2007-08 are maintainable. (ii) Whether the audit assessment and assessment orders dated 07-10-2015 made under Section 36 of the AVAT Act read with Section 9(2) of the Central Sales Tax Act, 1956 for the years 2006-07 and 2007-08 are barred by limitation under Section 39 of the AVAT Act, 2003.Issue (i): Whether the Notices of Demand dated 07-10-2015 imposing penalty under Section 62(3) are maintainable.Analysis: The court examined the show-cause notice mechanism and the timing of the Notices of Demand relative to the five-year limitation prescribed by Section 39. The material on record showed that assessments for the years in question had been completed earlier and that more than five years had elapsed from the end of each relevant year on the date of issuance of the Notices of Demand. The proviso to Section 39 (exception for prosecution) was found inapplicable on the facts.Conclusion: The Notices of Demand dated 07-10-2015 imposing penalty under Section 62(3) are barred by limitation and are set aside. (In favour of Assessee)Issue (ii): Whether the audit assessment and assessment orders dated 07-10-2015 under Section 36 read with Section 9(2) CST Act are barred by limitation.Analysis: The show-cause notice of 03-10-2015 sought to initiate audit assessments under Section 36. The statutory limitation under Section 39 prevents making such assessments after the expiry of five years from the end of the year to which the assessment relates. The limitation periods for the respective years had expired prior to issuance of the audit show-cause and consequent assessment orders. No facts brought on record brought the matter within the proviso to Section 39.Conclusion: The audit assessment and the assessment orders dated 07-10-2015 under Section 36 read with Section 9(2) CST Act are barred by limitation and are set aside. (In favour of Assessee)Final Conclusion: The cumulative effect is that the impugned Notices of Demand and assessment orders issued on 07-10-2015 are quashed as barred by the five-year limitation under Section 39 of the AVAT Act, 2003, and the writ petitions are allowed.Ratio Decidendi: Where the five-year limitation under Section 39 of the AVAT Act, 2003 has elapsed, audit assessments under Section 36 and consequential Notices of Demand or penalties under Section 62(3) cannot be validly imposed unless the proviso (prosecution exception) applies; absent such exception, the assessments and demands are barred by limitation.
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