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2024 (1) TMI 241 - DELHI HIGH COURT VAT and Sales Tax

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Petitioner's VAT Refund Delayed by Technical Issues; Court Orders Resolution in Two Weeks with Interest Granted.
The court addressed the petitioner's request for a refund under the Delhi Value Added Tax Act. The Appellate Tribunal had set aside the Objection Hearing Authority's order, yet the petitioner faced technical issues filing Form DVAT-21. The respondents acknowledged the error in processing the refund and assured the court it would be resolved within two weeks. The court disposed of the petition, directing the respondents to process the refund within the specified timeframe and to grant the petitioner any admissible interest according to the law.

2024 (1) TMI 713 - MADRAS HIGH COURT VAT and Sales Tax

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Issues: (i) Whether the assessment orders for the assessment years 2009-10 to 2011-12 were liable to be quashed for want of clarity and proper correlation of the turnover between the CST and TNVAT regimes, leading to a remand for fresh assessment; (ii) Whether the subsidy amount appropriated towards the alleged tax liability was liable to be refunded, subject to the outcome of the remand proceedings.

Issue (i): Whether the assessment orders for the assessment years 2009-10 to 2011-12 were liable to be quashed for want of clarity and proper correlation of the turnover between the CST and TNVAT regimes, leading to a remand for fresh assessment.

Analysis: The impugned assessments arose from alleged variance between the figures in the annual performance report and the returns filed under the Central Sales Tax regime. The assessment had to distinguish between export turnover, inter-State stock transfers, and intra-State sales, because the tax consequences differed under the Central Sales Tax Act and the Tamil Nadu Value Added Tax Act. The order found that exports are zero-rated and are not taxable under the TNVAT framework, that inter-State sales are similarly outside the TNVAT levy, and that where export exemption is denied or inter-State movement is not proved, the proper machinery for assessment under the TNVAT Act must be invoked. The impugned orders were found to lack a clear tabulation and intelligible explanation of how the demand was worked out, rendering them arbitrary and unintelligible.

Conclusion: The assessment orders were quashed and the matters were remitted to the assessing authority for fresh orders after hearing the petitioner.

Issue (ii): Whether the subsidy amount appropriated towards the alleged tax liability was liable to be refunded, subject to the outcome of the remand proceedings.

Analysis: The amount appropriated under the governmental order had been earmarked against the disputed tax demand. The order recognised that the petitioner had ceased operations in the State and directed that the amount should be returned if the petitioner ultimately succeeds in the remand proceedings. The relief was therefore linked to the result of the fresh assessment and not granted as an unconditional refund.

Conclusion: The refund direction was made conditional on the petitioner succeeding in the remand proceedings.

Final Conclusion: The main tax assessments were set aside and sent back for fresh determination, while the monetary relief relating to the appropriated subsidy was made contingent on the outcome of the reassessment.

Ratio Decidendi: A tax assessment that fails to clearly and coherently correlate the taxable turnover with the applicable statutory regime is liable to be quashed and remitted for fresh adjudication, especially where the demand depends on distinguishing between exports, inter-State transactions, and local sales.

Clear turnover correlation is essential in CST and TNVAT assessments; unclear demand computation led to quashing and remand.
Assessments for the relevant years were held unsustainable because the turnover computation did not clearly correlate sales under the CST and TNVAT regimes. The document notes that export turnover is zero-rated, inter-State sales fall outside TNVAT levy, and disputed transactions must be assessed under the proper statutory machinery only after a clear, intelligible tabulation of demand. Because the assessment orders lacked coherent reasoning and worked figures, they were quashed and remitted for fresh determination after hearing the assessee. The subsidy amount appropriated against the disputed demand was directed to be returned only if the assessee succeeds in the remand proceedings, making the refund contingent on the reassessment outcome.

Quashing of assessment orders - remand for fresh assessment - interplay between the Central Sales Tax Act and the Tamil Nadu Value Added Tax Act - exports as zero-rated transactions - requirement of intelligible and cogent assessment reasons - refund of appropriated subsidy subject to outcome of de novo proceedingsQuashing of assessment orders - requirement of intelligible and cogent assessment reasons - Impugned assessment orders dated 12.12.2014 for the assessment years 2009-10 to 2011-12 are liable to be quashed. - HELD THAT: - The Court found that the assessing officer did not carry out a cogent exercise to separate and explain the tax consequences under the CST Act and the TNVAT Act when exemption for exports was denied or inter state sales were not substantiated. The impugned orders lack clear tabulation and explanation as to when demands should properly have been raised under the TNVAT Act rather than the CST Act, rendering the orders unintelligible and arbitrary. For these reasons the orders dated 12.12.2014 cannot stand and must be set aside. [Paras 32, 33, 34, 35, 37]Assessment orders dated 12.12.2014 for 2009-10 to 2011-12 are quashed.Remand for fresh assessment - interplay between the Central Sales Tax Act and the Tamil Nadu Value Added Tax Act - Matter is remitted to the assessing authority to pass fresh, de novo assessment orders after hearing the petitioner. - HELD THAT: - Given the failure of the impugned orders to address, in a clear and reasoned manner, the consequences of denial of export exemption and unproven inter state transfers (which may necessitate assessment under the TNVAT Act), the Court directed that fresh orders be passed. The remand requires the 3rd respondent to hear the petitioner and to reassess the turnover categorisation and the appropriate statutory regime to be applied, ensuring proper tabulation and explanation in the fresh assessment. [Paras 34, 37]The cases are remitted to the 3rd respondent to pass fresh orders after hearing the petitioner within six months.Exports as zero-rated transactions - interplay between the Central Sales Tax Act and the Tamil Nadu Value Added Tax Act - Denial of export exemption under the CST Act affects liability under the TNVAT Act and, where exports or inter state sales are not established, demands should be considered under the TNVAT Act by following the statutory machinery of that Act. - HELD THAT: - The Court explained that exports are zero rated under the TNVAT Act and that inter state sales form part of CST turnover; if exemption for exports is not proved or inter state sale is not substantiated, the appropriate consequence is assessment under the TNVAT Act. Demands on such turnover cannot be validly made under the CST Act without proper notice and application of the TNVAT Act provisions. The assessing officer must therefore determine correctly the character of sales and proceed under the correct enactment in the fresh assessment. [Paras 24, 25, 31, 32, 33]If export exemption is denied or inter state sales are not proved, assessment and demands should be made under the TNVAT Act by invoking its machinery.Refund of appropriated subsidy subject to outcome of de novo proceedings - The subsidy amount appropriated by G.O. (MS) No. 32 is ordered to be refunded subject to the petitioner succeeding in the remand proceedings. - HELD THAT: - The Court noted that the petitioner had exited operations in the State and that the subsidy sum appropriated to meet the tax demands can be refunded if the petitioner succeeds in the fresh proceedings ordered on remand. The refund is therefore conditional upon the ultimate outcome of the de novo assessment; if the petitioner prevails, the amount appropriated shall be refunded with interest as provided under the Acts. [Paras 38, 39]The appropriated amount shall be refunded with interest if the petitioner succeeds in the remand proceedings; W.P. No. 30371 of 2019 is disposed accordingly.Final Conclusion: Impugned assessment orders dated 12.12.2014 for assessment years 2009-10 to 2011-12 are quashed and remitted to the assessing authority for fresh, reasoned assessment after hearing the petitioner within six months; the subsidy appropriated by the Government Order is to be refunded with interest if the petitioner succeeds in the remand proceedings; W.P. Nos. 764 766 of 2015 are allowed and W.P. No. 30371 of 2019 is disposed of accordingly.

2024 (1) TMI 712 - TELANGANA HIGH COURT VAT and Sales Tax

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Issues: (i) Whether the circular issued on 08.01.2005 could be applied to earlier assessment years to deny the assessee the benefit of purchasing cement against G Forms at a concessional rate and to sustain penalty. (ii) Whether the assessee's purchase of cement against G Forms for manufacture of cement pipes, which were later used in works contracts, attracted penalty under Section 5B(2) read with Section 7-A(2) of the Andhra Pradesh General Sales Tax Act, 1957.

Issue (i): Whether the circular issued on 08.01.2005 could be applied to earlier assessment years to deny the assessee the benefit of purchasing cement against G Forms at a concessional rate and to sustain penalty.

Analysis: The record showed that the assessee had been acting under an earlier clarification permitting the use of G Forms, and the later circular of 08.01.2005 did not contain any express retrospective mandate. The legal position applied was that a circular may bind the department, but it cannot be given retrospective effect in the absence of clear language to that effect. The benefit available under the earlier regime therefore could not be taken away for prior years merely on the strength of the later circular.

Conclusion: In favour of the assessee. The later circular could not be applied retrospectively to deny the concessional treatment for the earlier periods.

Issue (ii): Whether the assessee's purchase of cement against G Forms for manufacture of cement pipes, which were later used in works contracts, attracted penalty under Section 5B(2) read with Section 7-A(2) of the Andhra Pradesh General Sales Tax Act, 1957.

Analysis: The assessee had manufacturing units and purchased cement for use as raw material in the manufacture of cement pipes. The Tribunal's factual finding was that the assessee did not sell the cement contrary to the declaration; rather, the cement was used in the manufacture of finished goods, and the pipes were then treated as goods transferred in the course of works contracts. On that basis, the statutory conditions for penalty were not satisfied. The penalty provision was held to operate only where the dealer either had no manufacturing unit or sold the goods contrary to the declaration made in the G Form.

Conclusion: In favour of the assessee. The ingredients for levy of penalty were not made out and the assessee was not liable under Section 5B(2) read with Section 7-A(2) of the Andhra Pradesh General Sales Tax Act, 1957.

Final Conclusion: The Tribunal's order setting aside the penalty and restoring the appellate order was sustained, and the revision was rejected.

Ratio Decidendi: A later circular cannot be retrospectively applied to withdraw a concession for earlier years absent express retrospective effect, and penalty for misuse of G Forms under the relevant sales tax provision lies only when the dealer lacks a manufacturing unit or sells the purchased goods contrary to the declaration.

Retrospective circulars cannot withdraw earlier G Form concessions, and penalty fails absent misuse of declared goods.
A later circular cannot be applied retrospectively to withdraw a concession already available under an earlier clarification unless it clearly says so, so the assessee retained the benefit of purchasing cement against G Forms for prior assessment years. Penalty under Section 5B(2) read with Section 7-A(2) of the Andhra Pradesh General Sales Tax Act, 1957 was also unwarranted because the cement was used as raw material in a manufacturing unit to produce cement pipes, and there was no sale of the purchased goods contrary to the G Form declaration. The Tribunal's setting aside of the penalty was sustained.

Deemed sale of finished goods incorporated in works contracts - penalty under Section 5B(2) read with Section 7-A(2) of the APGST Act, 1957 - eligibility for concessional rate of tax on purchase of cement under the proviso to G.O.Ms.No.496 (manufacturers of finished goods) - use of Form G by contractors and applicability of departmental circulars - retrospective application of departmental circularsDeemed sale of finished goods incorporated in works contracts - penalty under Section 5B(2) read with Section 7-A(2) of the APGST Act, 1957 - eligibility for concessional rate of tax on purchase of cement under the proviso to G.O.Ms.No.496 (manufacturers of finished goods) - use of Form G by contractors and applicability of departmental circulars - retrospective application of departmental circulars - Whether the Tribunal was correct in holding that no penalty under Section 5B(2) read with Section 7-A(2) was leviable where cement purchased on Form G was used to manufacture cement pipes that were treated as finished goods and subsequently incorporated in works contracts (deemed sale) and whether the departmental circular could be applied retrospectively to deny concessional purchase. - HELD THAT: - The Tribunal found, and this Court agreed, that the assessee was a manufacturer of finished goods (cement pipes) and had purchased cement against Form G for manufacture of those finished goods. The Tribunal held that (i) clause (2) of Section 5B(2) applies where a dealer who purchased on Form G sells the goods contrary to the declaration, which was not the case here because cement itself was not sold; (ii) the cement pipes manufactured are finished goods and some were sold in interstate trade, establishing their character as marketable finished goods; (iii) when such finished goods are incorporated in execution of works contracts they are to be treated as goods deemed to have been sold under Section 5F, and consequently there was no sale of cement purchased on Form G to trigger penalty; and (iv) the departmental circular of 08.01.2005 could not be applied retrospectively to prior assessment years, and prior to G.O.Ms.No.496 dated 17.07.2001 contractors were eligible to use Form G by virtue of the earlier clarification dated 23.10.1998. The Tribunal's factual findings on these points were supported by earlier authority and by the proviso to G.O.Ms.No.496 which preserves concessional purchase for manufacturers who use cement as raw material to produce finished goods for sale. The High Court held that these findings were neither perverse nor contrary to law and thus declined to interfere with the Tribunal's order setting aside the penalty and restoring the appellate order. [Paras 11, 12, 13, 14, 15]The Tribunal's conclusion that penalty under Section 5B(2) read with Section 7-A(2) was not attracted and that the assessee was entitled to concessional purchase treatment for cement used to manufacture cement pipes (which when incorporated in works contracts constitute deemed sale under Section 5F) is upheld; the Revenue's revisions are dismissed.Final Conclusion: The three Tax Revision Cases filed by the Revenue are dismissed; the Tribunal's order setting aside the penalty and restoring the Appellate Deputy Commissioner's order is upheld; no order as to costs.

2024 (1) TMI 298 - SC Order VAT and Sales Tax

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SC Dismisses Petitions; No Grounds for Interference Under Article 136, All Pending Applications Disposed.
The SC dismissed the special leave petitions, finding no grounds for interference under Article 136 of the Indian Constitution. All pending applications were disposed of accordingly.

2024 (1) TMI 297 - HIMACHAL PRADESH HIGH COURT VAT / Sales Tax

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Issues: (i) Whether the Check Post Officer could examine the nature of the sale transaction and impose penalty when the dispute related to taxability of the transaction; (ii) whether the genuineness of Form C and Form E-1 could be doubted by the Himachal Pradesh authorities; (iii) whether the earlier assessment accepting the returns and raising no demand could support the penalty.

Issue (i): Whether the Check Post Officer could examine the nature of the sale transaction and impose penalty when the dispute related to taxability of the transaction.

Analysis: The governing principle is that powers at the check post must have a reasonable nexus with an attempt to evade tax. Where the dealer produces the relevant documents and raises a bona fide plea that the transaction is not taxable, and there is no mis-declaration or concealment, the check post authority cannot travel beyond examination of the accompanying documents and undertake a merits-based determination of taxability. The transaction here was claimed as an inter-State sale covered by Section 6(2) of the Central Sales Tax Act, 1956, and the record showed production of the relevant contractual and transport documents.

Conclusion: The Check Post Officer had no authority to decide the nature of the sale transaction and impose penalty on this basis.

Issue (ii): Whether the genuineness of Form C and Form E-1 could be doubted by the Himachal Pradesh authorities.

Analysis: Form C and Form E-1 are statutory documents linked to inter-State sales under the Central Sales Tax regime. Once such forms are issued and authenticated in the selling State, the receiving State's authorities cannot invalidate them on a unilateral view that they are not genuine, especially when the forms were produced along with the transaction documents. The finding of misuse of these forms was therefore not sustainable.

Conclusion: The Himachal Pradesh authorities could not doubt or invalidate the genuineness of Form C and Form E-1 in the manner done.

Issue (iii): Whether the earlier assessment accepting the returns and raising no demand could support the penalty.

Analysis: The assessment for the relevant year accepted the returns and did not levy tax on the disputed transaction. In that setting, the subsequent allegation of evasion at the barrier lacked support, because the assessment record did not disclose any taxable turnover or demand concerning the very transaction questioned at the check post.

Conclusion: The earlier assessment weakened and could not sustain the penalty order.

Final Conclusion: The penalty orders were unsustainable, and the assessee was entitled to refund of the penalty with interest.

Ratio Decidendi: When a dealer produces the relevant documents and raises a bona fide dispute on taxability, without mis-declaration or concealment, a check post authority cannot adjudicate the sale's tax character or impose penalty beyond its limited jurisdiction.

Check post powers are limited: penalty cannot rest on deciding taxability when documents are produced and liability is bona fide disputed.
A check post authority cannot decide the taxability of an inter-State sale or impose penalty where the dealer produces supporting documents, raises a bona fide dispute on liability, and there is no mis-declaration or concealment. Form C and Form E-1, once issued and authenticated in the selling State and produced with the transaction papers, could not be doubted or invalidated unilaterally by the receiving State authorities. An earlier assessment accepting the returns and raising no demand on the same transaction also weakened the allegation of evasion. The penalty orders were therefore unsustainable and refund with interest was indicated.

Power of check-post/Barrier officer to inspect and penalise for attempted tax evasion - scope of check-post officer to examine nature of sale transaction - inter-State sale in transit and transfer of documents of title - effect of prior assessment accepting returns on subsequent check-post penalty - genuineness and inviolability of statutory Form-C and Form E-1 issued by another StatePower of check-post/Barrier officer to inspect and penalise for attempted tax evasion - scope of check-post officer to examine nature of sale transaction - Whether the ETO at the Barrier/Check Post could examine the nature of the sale transaction and impose penalty for alleged attempt to evade VAT - HELD THAT: - The Court held that the check-post officer's jurisdiction is limited to examining the documents accompanying the goods and to acting where there is a reasonable nexus with an attempt at evasion. Where the assessee produces relevant documents and raises a bona fide plea against taxability without mis-declaration or concealment, the Check Post officer should not adjudicate the substantive question of tax liability or impose penalty. Applying these principles to the facts, the Court found that the petitioner produced documents and raised a bona fide contention that the transaction was an inter-State sale in transit; therefore the ETO exceeded jurisdiction by examining the nature of the sale and imposing penalty at the Barrier. [Paras 41, 53]ETO at the Barrier/Check Post acted beyond its limited jurisdiction and could not lawfully impose the penalty on the disputed transaction.Effect of prior assessment accepting returns on subsequent check-post penalty - finality of assessment acceptance for the tax period - Whether the impugned order was perverse for failing to consider that the Assessing Authority had accepted the returns in the assessment order for Assessment Year 2006-07 and raised no tax demand - HELD THAT: - The Court noted that the Assessing Authority passed an assessment order for 2006-07 accepting the petitioner's returns and raising no demand, and that there was no discussion in that order about inter-State sale or evasion. Once the Assessing Authority accepted the returns and made no demand, it was not open to the ETO at the Check Post to allege evasion and impose penalty in respect of the same transaction. The Tribunal and lower authorities' failure to give effect to the assessment acceptance rendered the impugned orders perverse. [Paras 46, 48, 53]Impugned order is perverse for not considering the assessment order which accepted the returns and raised no tax on the disputed transaction.Genuineness and inviolability of statutory Form-C and Form E-1 issued by another State - onus on selling State to ensure genuineness of Forms - Whether the Excise & Taxation Authorities in Himachal Pradesh could doubt or invalidate the genuineness of Form-C and Form E-1 issued and authenticated by other States in respect of the transaction - HELD THAT: - The Court observed that sale against Form-C and Form E-1 is exempt from CST and that Form-C must be furnished to and authenticated by the prescribed authority of the seller's State. The onus to ensure legitimacy of the Form lies with the State from where goods are being sold. Consequently, the Himachal authorities had no right to invalidate or question Forms C and E-1 that were furnished and authenticated by other States. The Tribunal's finding doubting genuineness was held to be unwarranted, perverse and contrary to law. [Paras 42, 43, 44, 45, 53]Excise & Taxation Authorities in Himachal Pradesh could not lawfully doubt or invalidate the statutory Forms C and E-1 issued by other States; the findings to the contrary cannot be sustained.Final Conclusion: Civil Revision allowed. The findings of attempted tax evasion and the penalty imposed are set aside; respondents directed to refund the penalty with interest at 6% per annum from the date of collection until repayment. No costs.

2024 (1) TMI 242 - SC Order VAT and Sales Tax

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Delay Condonation and refusal to interfere led to dismissal of the special leave petition
Delay was condoned, but the Supreme Court declined to interfere and dismissed the special leave petition. The pending application was disposed of accordingly.

2024 (1) TMI 330 - BOMBAY HIGH COURT VAT and Sales Tax

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Deputy Commissioner's CST refund rejection overturned for violating natural justice principles due to inadequate reasoning
The Bombay HC held that the Deputy Commissioner of State Tax's rejection of the petitioner's CST refund claim violated principles of natural justice due to inadequate reasoning. The court found that the refund application raised substantive grounds requiring detailed consideration, but the authority provided insufficient reasons for rejection. The HC directed the Assessing Officer to reconsider the refund claim de novo and pass appropriate assessment orders with adequate reasoning in accordance with law. The petition was disposed of with directions for fresh adjudication.

Refund of tax deposited during search - duty to furnish reasoned order when rejecting refund claim - de novo consideration on remand - right to personal hearing with advance notice - obligation to furnish list of relied judicial authorities before hearingDuty to furnish reasoned order when rejecting refund claim - refund of tax deposited during search - de novo consideration on remand - right to personal hearing with advance notice - obligation to furnish list of relied judicial authorities before hearing - Whether the Deputy Commissioner properly adjudicated the petitioner's refund claim and, if not, what relief should follow. - HELD THAT: - The Court found that the impugned assessment orders reject the petitioner's refund claim by stating, in brief, that the working of tax liability resulted in dues and hence refund is not payable, without engaging with the substantive grounds raised in the petitioner's refund application dated 20 June, 2017. Such meagre reasons are inadequate and do not amount to appropriate adjudication as required by law. In view of the prior directions of this Court and the specific submissions placed before the authority, the appropriate course is to set aside the impugned orders and require the Assessing Officer/Deputy Commissioner of State Tax to reconsider the matter de novo. The de novo consideration must address all submissions of the petitioner, furnish adequate reasons for the conclusion reached on the refund claim, afford the petitioner a personal hearing with at least seven days' notice, and, where the authority intends to rely on any judicial pronouncement, provide a list of such authorities with the hearing notice so the petitioner may deal with them. The Court directed that, after the personal hearing, the petitioner may file written submissions within three working days if desired, and that the reassessment and reasoned order be completed within three months from presentation of this order to the officer. The Court expressly kept all contentions of the parties open and did not adjudicate the merits. [Paras 8, 9, 10]Impugned assessment orders quashed and set aside; matter remanded for de novo consideration with directions to afford personal hearing, provide list of relied authorities with notice, consider all submissions and pass a reasoned order within three months; all contentions left open.Final Conclusion: The High Court set aside the impugned assessment orders for inadequate reasoning on the petitioner's refund claim, remanded the matter for de novo consideration by the Deputy Commissioner of State Tax with directions to afford personal hearing (with advance notice and list of relied authorities), to consider all submissions and to pass a reasoned order within three months; all parties' contentions remain open.

2024 (1) TMI 240 - DELHI HIGH COURT VAT / Sales Tax

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Issues Involved:
1. Classification of the bi-monthly publication "Amagram."
2. Classification of the coconut oil sold by the appellant.

Summary:

Classification of Amagram:
The appellant argued that "Amagram" is a periodical under Entry No. 5 of the First Schedule of the DVAT Act, thus exempt from tax. The Revenue contended it is a catalogue under Entry No. 52 of the Third Schedule, subject to tax. The Tribunal upheld the Revenue's classification, finding "Amagram" to be a catalogue containing product lists, despite its periodic publication and additional content like training schedules and distributor achievements. The court noted that the dictionary definitions and legislative intent suggest that "periodicals" in Entry No. 5 are serious or academic publications, not catalogues. The court cited precedents emphasizing a restricted interpretation of "books" and "periodicals" for tax exemption purposes. Ultimately, the court held that "Amagram" is rightly classified as a catalogue under Entry No. 52 of the Third Schedule, favoring the Revenue.

Classification of Coconut Oil:
The appellant claimed that the coconut oil, being 100% pure and edible, should be classified under Entry No. 25 of the Third Schedule as "Edible Oils and Oil cake," attracting 5% tax. The Revenue argued it should be classified as a residuary item under Section 4(1)(e) of the DVAT Act, attracting 12.5% tax, as it is marketed and sold primarily for cosmetic purposes. The Tribunal upheld the Revenue's classification, noting that the product is sold in small containers, advertised for hair care, and not typically used as a cooking medium. The court applied the "popular intention test" and "common parlance test," concluding that the product is perceived and used as a hair oil, despite being edible. Thus, the court held that the coconut oil is rightly classified under the residuary entry, favoring the Revenue.

Conclusion:
The appeal was disposed of with both issues decided in favor of the Revenue, affirming the Tribunal's classifications of "Amagram" as a catalogue and the coconut oil under the residuary entry.

Dealer product catalogue and small-pack coconut oil marketed as hair-care classified taxable; periodical and edible-oil exemptions denied.
Whether the appellant's "periodical" was exempt as a periodical under Entry 5 of the First Schedule or taxable as a catalogue under Entry 52 of the Third Schedule of the DVAT Act was determined by applying a restricted, popular-meaning construction of exemption entries; since the publication was essentially a product catalogue for dealers, it did not qualify as a periodical for reading purposes, and it was held taxable under Entry 52 in favour of the Revenue. Whether coconut oil sold by the appellant was "edible oil" under Entry 25 of the Third Schedule was decided on functional and market identity; as it was sold in small packs, displayed and marketed as hair-care and purchased for hair application, it was held not covered by Entry 25, and the Revenue's classification was upheld; the appeal was dismissed.

Classification of periodicals versus catalogues for exemption - restricted interpretation of exemption entries - catalogue as printed material - dominant intention / common parlance test for classification - classification under residuary entry - strict construction of exemption in taxing statutesClassification of periodicals versus catalogues for exemption - catalogue as printed material - restricted interpretation of exemption entries - strict construction of exemption in taxing statutes - The bi-monthly publication 'Amagram' is not entitled to exemption as a periodical under Entry No. 5 of the First Schedule and is to be classified as a catalogue/printed material under Entry No. 52 of the Third Schedule. - HELD THAT: - Although 'Amagram' is published periodically, the Court held that the term 'periodical' in the exempt entry must be given a restricted meaning and does not cover catalogues or promotional brochures circulated periodically. The Court relied on dictionary meanings and precedents distinguishing books/periodicals meant for reading or dissemination of general knowledge from printed material used for promotion or advertising. Circular No. 2 dated 26.04.2005 specifically includes catalogues within the scope of printed material under Entry No. 52. The appellant, as claimant of exemption, failed to establish that 'Amagram' squarely falls within the exempt category; any ambiguity in exemption provisions is to be resolved against the assessee in favour of the Revenue. [Paras 46, 55, 56, 58, 59]Amagram is a catalogue/printed material taxable under Entry No. 52 of the Third Schedule and not an exempt periodical under Entry No. 5 of the First Schedule.Dominant intention / common parlance test for classification - classification under residuary entry - popular/commercial usage in classification - The coconut oil sold by the appellant, although edible by composition, is to be classified under the residuary entry (taxable at the higher rate) because it is marketed, packaged and purchased predominantly for cosmetic/hair-care use. - HELD THAT: - The Court accepted that the product is 100% coconut oil by composition but applied the dominant intention/common parlance test: classification depends on how the product is marketed, packaged and used by consumers. Admitted website material and marketing placed the product in the hair-care category, sold in small packings and promoted for topical application. Precedents support treating products according to their ordinary commercial perception and consumer approach. The appellant failed to show that the edible-usage predominates such that the specific edible-oil entry should apply; accordingly the product is rightly treated under the residual classification. [Paras 66, 67, 71, 72, 73]The coconut oil is not to be classified under Entry No. 25 as edible oil for the appellant's sales but is taxable under the residuary entry as held in favour of the Revenue.Final Conclusion: Both questions of law are answered in favour of the Revenue: 'Amagram' is a catalogue/printed material taxable under Entry No. 52 of the Third Schedule and the coconut oil sold by the appellant, in light of its marketing and ordinary commercial use, is correctly classified under the residuary entry rather than as an edible oil under Entry No. 25. The appeal is disposed of accordingly.

2024 (1) TMI 132 - PUNJAB AND HARYANA HIGH COURT VAT and Sales Tax

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Regular bail on settled custody principles: senior citizen status, prolonged detention, and filed challan justified release.
Personal liberty was treated as a constitutional safeguard, and pre-trial detention was said to be justified only where necessary to secure attendance, prevent tampering with evidence, or address a real risk of absconding. Applying those settled bail principles under Section 439 CrPC, the HC noted that the petitioner was a senior citizen, had remained in custody since 22.08.2023, and that the challan had already been filed. On that basis, and without expressing any view on the merits, the Court found no sufficient reason to continue custody and held the petitioner entitled to regular bail.

2024 (1) TMI 177 - RAJASTHAN HIGH COURT VAT / Sales Tax

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Issues: (i) Whether the EPC arrangement between the parties was a composite and indivisible works contract or three independent contracts; (ii) Whether the goods supplied under the contract constituted inter-State sales under the Central Sales Tax Act, 1956 or intra-State sales taxable under the Rajasthan Value Added Tax Act, 2003; (iii) Whether the penalty deletion and the direction of remand could be sustained.

Issue (i): Whether the EPC arrangement between the parties was a composite and indivisible works contract or three independent contracts.

Analysis: The contract documentation showed a single NIT, a unified bid, lump-sum consideration, cross-fall breach clauses, common contractual obligations, common performance and warranty conditions, and payment structure linked to the entire project. The separation into three contracts was only for convenience of payment. The contractual terms and the overall intent of the parties demonstrated that the contractor was engaged to erect and deliver a complete power project on a turnkey basis.

Conclusion: The arrangement was a composite and indivisible EPC works contract and not three independent contracts.

Issue (ii): Whether the goods supplied under the contract constituted inter-State sales under the Central Sales Tax Act, 1956 or intra-State sales taxable under the Rajasthan Value Added Tax Act, 2003.

Analysis: For a works contract, the tax character of the goods depends on the time and manner in which property in the goods passes. The relevant statutory framework and the contract terms showed that the goods were future goods appropriated to the contract only in Rajasthan, and that MDCC or pre-dispatch documentation did not amount to transfer of title. The goods were used in erection of the thermal power project and were not sold as independent chattels. On that basis, the transaction fell within the State taxing power rather than within the inter-State sale provisions of the Central Sales Tax Act, 1956.

Conclusion: The disputed transactions were intra-State sales taxable under the Rajasthan Value Added Tax Act, 2003 and not inter-State sales under the Central Sales Tax Act, 1956.

Issue (iii): Whether the penalty deletion and the direction of remand could be sustained.

Analysis: The dispute on penalty arose from interpretation of the taxing provisions and the transaction involved a State instrumentality. In that setting, the penalty deletion was justified. However, the remand directions travelled beyond the pleadings, issues framed, and reliefs sought, and therefore lacked foundation in the adjudicatory record.

Conclusion: The deletion of penalty was upheld, but the direction of remand was set aside.

Final Conclusion: The taxability findings of the tax board were substantially affirmed, while the remand portion of its order was struck down and the remaining parts of the order were maintained.

Ratio Decidendi: In a turnkey EPC works contract, the character of the transaction for sales tax purposes depends on the contract as a whole and on when property in the goods is actually appropriated and transferred; where such appropriation occurs only within the State, the goods are taxable as intra-State sales and not as inter-State sales.

Turnkey EPC works contract taxed as intra-State sale where goods were appropriated within Rajasthan and title passed only on site.
A turnkey EPC arrangement was treated as a composite and indivisible works contract because the contract documents showed a single tender, unified bid, lump-sum consideration, common obligations, and payment linked to the entire project; the split into three parts was only for payment convenience. For sales tax purposes, the goods were future goods appropriated to the contract only in Rajasthan, so title did not pass through pre-dispatch documentation and the transaction was taxable as an intra-State sale under the Rajasthan Value Added Tax Act, 2003, not as an inter-State sale under the Central Sales Tax Act, 1956. Penalty deletion was upheld, while the remand direction was set aside as beyond the pleadings and issues.

Composite and indivisible works contract - deemed sale in execution of works contract - inter state sale under Section 3 of the CST Act - place/time of transfer of property in goods under the Sale of Goods Act - Article 366(29A)(b) - sale involved in execution of works contract - estoppel against law where tax paid under wrong statute - penalty under Section 61 of RVAT Act for colourable device - remand beyond scope of pleadingsComposite and indivisible works contract - deemed sale in execution of works contract - The contracts awarded for the EPC project constitute one composite and indivisible turnkey works contract. - HELD THAT: - After examining the contract terms (single NIT/unified bid, lump sum pricing for entire scope, cross fall breach clause, provisions for final handing over, liquidated damages, warranty, insurance, completion criteria and TDS on composite contract value) and applying settled precedents on ascertaining parties' intention, the court agreed with the RTB that the three formally separate contracts were in substance a single EPC turnkey works contract. The court concluded the break up was for convenience of payment and did not alter the composite nature of the contract. [Paras 11, 12, 13]Affirmed that the contracts are a single composite and indivisible works contract.Place/time of transfer of property in goods under the Sale of Goods Act - inter state sale under Section 3 of the CST Act - Article 366(29A)(b) - sale involved in execution of works contract - The sales of goods used in execution of the EPC works contract are intra state 'deemed sales' taxable under the RVAT Act and not inter state sales under Section 3 of the CST Act. - HELD THAT: - Applying the Sale of Goods Act rules on when property in specific or future goods passes, and having found the contract to be a turnkey works contract with transfer of the complete unit upon final handing over, the court held that the goods were appropriated and became subject of the contract only in Rajasthan. Pre dispatch inspections and issuance of MDCC did not effect transfer of title. Consequently the 'deemed sale' arising in execution of the works contract took place inside Rajasthan and falls within Article 366(29A)(b) and the RVAT charging provisions; the prior characterization as inter state sale did not alter this legal conclusion. [Paras 15, 16, 17]Held the transactions to be intra state deemed sales taxable under RVAT.Estoppel against law where tax paid under wrong statute - Payment or assessment of tax earlier under the CST Act or Entry Tax Act does not estop the State from asserting RVAT liability when the true nature of the transaction attracts state tax. - HELD THAT: - The court observed that compliance or earlier payment under a different statute cannot create an estoppel against the law; where the nature of the transaction attracts RVAT, liability cannot be avoided merely because C Forms, VAT 47, or entry tax were issued or collected. The court relied on the principle that statutory liabilities must be determined according to the applicable law and past payments under another enactment do not absolve legal liability under the correct enactment. [Paras 18]Rejected estoppel; earlier CST/entry tax assessments do not preclude RVAT liability.Penalty under Section 61 of RVAT Act for colourable device - The RTB correctly set aside the penalty imposed under Section 61 of the RVAT Act. - HELD THAT: - The court considered the nature of the dispute to be one of pure statutory interpretation with disputed findings below and noted that one party to the transactions was a State entity. Given the interpretative character of the controversy and the disturbed factual findings, the court agreed with the RTB's exercise in setting aside penalty and declined to interfere with that aspect of the order. [Paras 20]Penalty set aside - affirmed in favour of the assessee.Remand beyond scope of pleadings - The RTB's directions to remand the matter for assessment with respect to 'goods of special importance' were set aside as being beyond the scope of pleadings and not sought by parties. - HELD THAT: - The court found the remand direction went beyond issues framed and pleaded before the authorities and RTB; no claim or argument on that specific relief had been advanced, and hence the remand was inappropriate. Relying on authority restricting orders remitting matters on points not raised, the court annulled the remand directions while maintaining the other parts of the RTB order. [Paras 21, 24]Remand directions set aside; rest of RTB order maintained.Final Conclusion: The RTB's finding that the three contracts form one composite turnkey works contract and that the sales of goods in execution thereof are intra state 'deemed sales' taxable under the RVAT Act is affirmed; the RTB's setting aside of penalty is upheld; however the RTB's direction to remand for consideration of concessional rate on 'goods of special importance' is set aside as beyond the scope of pleadings. STRs 217-219/2020 are decided for the Revenue; STRs 155-157/2020 are answered for the Revenue on questions 1-3 and for the assessee on question 4 (penalty).

2023 (12) TMI 997 - BOMBAY HIGH COURT VAT and Sales Tax

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Pre-deposit regime challenge under Maharashtra VAT law: petitioners directed to pursue appellate remedy with limited interim protection.
The Bombay High Court dealt with a challenge to the amended pre-deposit regime under the Maharashtra Value Added Tax Act, 2002, in relation to Sections 26(6A), 26(6B) and 26(6C). Noting that the legal position on the retrospective amendment and pre-deposit requirement had already been settled by the Supreme Court, and that the petitioners intended to pursue the statutory appellate remedy, the Court permitted recourse to the appellate authority or tribunal. It also granted only limited interim protection to enable filing of appeals, while keeping all contentions open and expressing no view on the merits.

Pre-deposit requirement - retrospective curative amendment - legislative competence post-GST - applicability of amendments irrespective of period - stay of recovery on filing of appealPre-deposit requirement - retrospective curative amendment - legislative competence post-GST - Validity of the amendments introducing mandatory pre-deposit to Section 26(6A)-(6C) of the Maharashtra VAT Act and their retrospective application - HELD THAT: - The petitions challenged the constitutional validity of the pre-deposit regime introduced by sub-sections (6A), (6B) and (6C) of Section 26 of the Maharashtra Value Added Tax Act, 2002 as amended w.e.f. 15.04.2017 and clarified by subsequent ordinance/legislation to apply retrospectively. This Court noted the intervening full bench decision of this Court and the subsequent decision of the Supreme Court in The State of Telangana & Ors. v. Tirumala Constructions, which held that amendments of the kind seeking to revive or make applicable pre-deposit requirements for periods after the GST regime commenced lacked legislative competence and therefore could not survive. In view of the Supreme Court's conclusion that the Maharashtra amendment insofar as it required pre-deposit was void for want of competence after the GST enactment, the substantive challenge to the pre-deposit requirement is conclusively resolved by that higher authority and binds this Court.The pre-deposit requirement introduced by the impugned amendments is settled by the Supreme Court's decision and cannot be sustained; the substantive constitutional challenge is thereby closed in accordance with that precedent.Stay of recovery on filing of appeal - Interim relief permitting filing of appeals and protection from recovery steps for a limited period - HELD THAT: - Having recorded the finality of the legal position on the pre-deposit issue as determined by the Supreme Court, the Court permitted petitioners who had not yet filed appeals to approach the Appellate Authority/Tribunal. Petitioners were directed to file their appeals along with applications for condonation of delay and for waiver of pre-deposit within four weeks. The Court directed that if such appeals and applications were filed within the stipulated period, the Appellate Authority/Tribunal shall consider them according to law. Pending that, the department was directed not to take further steps in respect of any demand notices for that four week period. The order expressly preserved all contentions of the parties and clarified that the limited protection granted was not an expression on merits.Petitioners may file appeals with requisite applications within four weeks; the department shall not take further recovery steps for that four week period; all contentions remain open for adjudication by the appellate forums.Final Conclusion: The Court disposed the petitions in light of the Supreme Court's ruling that the impugned pre-deposit amendments could not be sustained, permitted petitioners four weeks to file appeals with applications for condonation and waiver of pre-deposit, directed temporary protection against recovery for that period, and left all substantive contentions open for determination by the Appellate Authority/Tribunal.

2024 (2) TMI 292 - MADRAS HIGH COURT VAT and Sales Tax

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Order Overturned: Natural Justice Violated as Petitioner Denied Opportunity to Respond; Case Remitted for Fair Hearing.
The HC set aside the impugned order dated 25.05.2023 due to a violation of natural justice principles, as the petitioner was not given adequate opportunity to file a reply or attend a personal hearing. The matter was remitted to the respondent, requiring the petitioner to file a reply within 21 days. The respondent must ensure sufficient opportunities for the petitioner. The writ petition was disposed of with no costs, and the connected miscellaneous petition was closed.

Natural justice - service of notice - personal hearing - opportunity to file reply - setting aside order and remandNatural justice - service of notice - personal hearing - opportunity to file reply - Impugned order passed without physical service of notices and without affording the petitioner an opportunity to file a reply or personal hearing - HELD THAT: - The Court found that notices dated 24.12.2021, 24.03.2023 and 15.05.2023 and the assessment order dated 25.05.2023 were uploaded on the respondents' web portal but were not physically served on the petitioner, resulting in the petitioner being unaware of those communications. Given the absence of a filed reply and the lack of any personal hearing, the Court held that passing an order under such circumstances violated the principles of natural justice. For these reasons the impugned order could not be sustained and was liable to be set aside. [Paras 6, 7]Impugned order set aside for violation of natural justice; matter remitted for fresh consideration after affording opportunity to file reply and for personal hearing.Setting aside order and remand - opportunity to file reply - personal hearing - Remand directions and timeline for fresh adjudication - HELD THAT: - While setting aside the assessment order, the Court remitted the matter to the respondents for fresh disposal. The petitioner was directed to file a reply to the show cause notice dated 24.03.2023 within 21 days from receipt of the order, and the respondents were directed to dispose of the matter after providing sufficient opportunities to the petitioner, including a personal hearing. The respondents undertook to comply if the Court directed so. [Paras 8]Matter remitted to respondents; petitioner to file reply within 21 days and respondents to provide adequate opportunity for hearing before final disposal.Final Conclusion: Impugned order dated 25.05.2023 set aside for breach of natural justice; matter remitted to respondents with directions to permit the petitioner to file a reply within 21 days and to afford sufficient opportunity, including personal hearing, before deciding the matter afresh.

2023 (12) TMI 1205 - PUNJAB AND HARYANA HIGH COURT VAT and Sales Tax

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Regular bail in alleged bogus VAT refund matter followed completed investigation, documentary evidence, delayed FIR, and co-accused parity.
Regular bail was granted in allegations of bogus VAT refunds supported by forged documents because the prosecution rested mainly on documentary evidence, investigation was complete, and the charge-sheet had been filed. The unexplained delay in initiating criminal proceedings, the likelihood of a prolonged trial, absence of any apprehension that the accused would abscond, and parity with a co-accused already on bail supported release. The accused were directed to furnish the requisite bonds and sureties.

Regular bail - economic offences involving bogus refund of input tax credit - special statute displacing general criminal law (generalia specialibus non derogant) - delay in prosecution / unexplained delay - cases predominantly dependent on documentary evidence - investigation concluded and challan presented - custodial detention pending trial and liberty interestRegular bail - delay in prosecution / unexplained delay - cases predominantly dependent on documentary evidence - investigation concluded and challan presented - custodial detention pending trial and liberty interest - Grant of regular bail to the petitioners in FIR concerning bogus refund of input tax credit - HELD THAT: - The Court noted that the alleged loss to the State in respect of Assessment Year 2011-12 had been finalised in revision at least by 11.11.2014, whereas the police were informed only on 11.12.2019 and the FIR lodged on 24.10.2020, resulting in an unexplained delay of several years. The matter is largely documentary in character; investigation is complete and challan has been presented while charges are yet to be framed. Co-accused (the then Dy. Excise and Taxation Officer) has already been admitted to bail. Petitioners have been in custody for substantial periods (over six and seven months respectively) and there is no apprehension by the State that they will abscond. In these circumstances the Court held that continuing detention would serve no purpose and, without adjudicating the merits, admitted the petitioners to regular bail on furnishing requisite bail and surety bonds to the satisfaction of the trial Court/Duty Magistrate, subject to usual conditions. [Paras 10, 11, 12, 13]Petitioners admitted to regular bail on furnishing requisite bail bonds and surety to the satisfaction of the trial Court/Duty Magistrate, subject to usual terms and conditions.Economic offences involving bogus refund of input tax credit - special statute displacing general criminal law (generalia specialibus non derogant) - applicability of IPC vis-a -vis special VAT statute - Applicability of IPC offences vis-a -vis the specialised Value Added Tax regime not finally decided - HELD THAT: - The Court referred to precedents holding that a special VAT statute may provide a complete code and operate to exclude general penal provisions (principle of generalia specialibus non derogant), but observed that those authorities did not disclose the precise factual matrix necessary to determine whether the present allegations of bogus refund based on forged/fabricated documents fall within the scope of the special statute alone. Given the absence of comparable factual findings in those decisions, the Court treated the question as debatable and refrained from finally determining whether the IPC is attracted in the present case. [Paras 8, 9]Left open; the Court did not decide the question whether offences under the IPC are attracted and treated the applicability as debatable.Final Conclusion: In light of the unexplained delay in prosecution, the documentary nature of the case, completed investigation with challan presented, absence of any apprehension of absconding and the period of custodial detention already endured, the petitioners are admitted to regular bail on furnishing requisite bail bonds and sureties to the satisfaction of the trial Court/Duty Magistrate, subject to usual conditions; the Court made no adjudication on the merits or on the question whether the IPC is attracted in view of the specialised VAT regime.

2024 (7) TMI 993 - KARNATAKA HIGH COURT VAT / Sales Tax

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Input tax credit under the Karnataka VAT Act cannot be denied for delay where no limitation period is prescribed.
Input tax credit under Section 10(3) of the Karnataka Value Added Tax Act, 2003 cannot be denied merely because the claim was made belatedly, as no express limitation period is prescribed and no time bar can be implied from the statutory scheme. The court accepted that input tax credit is a substantive and indefeasible entitlement, and that procedural requirements governing returns cannot defeat genuine credit claims where the invoices and entitlement are otherwise verifiable. A claim will not fail only because the invoices relate to a different tax period. The revision petition was not entertained.

2024 (1) TMI 441 - KARNATAKA HIGH COURT VAT and Sales Tax

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Discriminatory tax amendment under composition scheme violates Article 14 and cannot stand.
Section 15(5)(e) of the Karnataka Value Added Tax Act, 2003, as inserted by the Finance Act, 2007, was analysed as an additional levy on works-contract dealers under the composition scheme when purchases were made from unregistered dealers. The provision treated intra-State purchases differently from similar purchases from outside the State, creating unequal treatment between similarly situated assessees and undermining the object of encouraging purchases from registered dealers. On that basis, the amendment was held unsustainable and unconstitutional as violative of Article 14.

Composition of tax scheme - Tax on purchases from unregistered dealers - Discrimination contrary to Article 14 - Encouragement of interstate purchases as unintended consequence - Ultra viresComposition of tax scheme - Tax on purchases from unregistered dealers - Discrimination contrary to Article 14 - Encouragement of interstate purchases as unintended consequence - Section 15(5)(e) of the KVAT Act is ultra vires the Constitution because it effects an impermissible discrimination. - HELD THAT: - The assessees had opted for the composition scheme. The impugned amendment imposed tax on purchases from unregistered dealers in addition to composition tax, while purchases from outside the State were not similarly taxed. The State conceded the differential treatment. The Court found that the stated objective - to encourage purchases from registered dealers and induce URDs to register - would be frustrated because the amendment makes intrastate purchases more costly and thereby encourages purchases from outside the State. The State possessed machinery to identify and register URDs. Having regard to the admitted discrimination and the adverse effect on the welfare of the State's economy, the amendment is discriminatory and unsustainable as violative of equality under Article 14, and therefore ultra vires. [Paras 18, 19, 20, 21, 22]Section 15(5)(e) is discriminatory and declared ultra vires the Constitution.Interference with appellate order - Grant of relief - The Single Judge's order requires interference and the assessees' appeals must be allowed. - HELD THAT: - Because the amendment was held ultra vires for the reasons given, the Court found it necessary to interfere with the Single Judge's order. The appeals filed by the assessees were allowed and the corresponding writ petitions were allowed; the State's appeals were dismissed. [Paras 24, 25]Assessees' appeals allowed; corresponding writ petitions allowed; State's appeals dismissed.Final Conclusion: The Court declared the impugned provision ultra vires for being discriminatory and allowed the assessees' appeals while dismissing the State's appeals; no costs.

2023 (12) TMI 838 - BOMBAY HIGH COURT VAT / Sales Tax

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Contract of service, not sale of software, where bug fixing and maintenance only restored existing ERP functionality.
An agreement for bug fixing, maintenance and support of ERP software was held to be a contract of service rather than a sale of software under the Maharashtra Value Added Tax Act, 2002. The work was limited to providing manpower and maintenance on the client's servers, with remuneration calculated per person per month, and did not involve transfer of ready-made or marketable software. Because all work products and materials became the client's exclusive property from inception, and no independent ownership or right of sale arose, the arrangement merely restored existing software functionality and did not create a new commercial commodity. The authorities were therefore wrong to treat the transaction as exigible sale.

Contract of service - sale as defined under Section 2(24) of the MVAT Act - repair and maintenance versus development/enhancement/customization of software - works made for hire / ownership of deliverables - marketability and transferability of software as "goods" - construction of agreement by ordinary rules of contract interpretation Contract of service - sale as defined under Section 2(24) of the MVAT Act - construction of agreement by ordinary rules of contract interpretation - The agreement dated 1 January 2006 between the appellant and QAD is a contract of service and not a contract of sale of software within the meaning of the MVAT Act. - HELD THAT: - On a plain reading of the agreement as a whole the appellant was engaged to provide manpower to render maintenance and support services for the QAD MFG/PRO ERP located on QAD's servers in the USA. The remuneration was fixed on a per-person-per-month basis and was payable irrespective of whether specific bugs arose, indicating a service contract rather than consideration for transfer of goods. Clause 4 (Ownership of Work) demonstrates that intellectual property and any materials or deliverables belong to QAD from inception and, where necessary, are deemed assigned to QAD; this clause operates as a contractual protection of QAD's proprietary rights and does not convert the service arrangement into a sale. The Court accepted the principle that goods must be marketable and capable of transfer; here the embedded or corrective lines of code were not proprietary, marketable commodities capable of independent transfer and did not result in a distinct saleable product. Applying ordinary rules of construction to the contractual language, the pith and substance of the agreement is service provision, not a transaction falling within Section 2(24) of the MVAT Act. [Paras 14, 16, 18, 20, 21] Agreement is a contract for service simpliciter and not a sale under Section 2(24) of the MVAT Act. Repair and maintenance versus development/enhancement/customization of software - marketability and transferability of software as "goods" - The activities performed by the appellant-bug-fixing, troubleshooting and maintenance-constituted repair and maintenance services and did not amount to development, enhancement or customization that would create a saleable software product. - HELD THAT: - The Court distinguished cases where a contractor developed new or modified software that was embedded on a medium and sold (e.g., where source code was shared and a distinct product emerged). Here the appellant worked on QAD's servers remotely to restore the software's intended functionality; the source code remained controlled by QAD and any code inserted for bug fixes did not produce an independently marketable or transferable software module or new version. The contractual remuneration structure and the nature of the work (routine trouble-shooting and maintenance to restore intended operation) supported classification as services rather than software development leading to sale. [Paras 4, 5, 8, 18, 20] Bug-fixing and maintenance performed under the agreement are services, not development/enhancement/customization giving rise to saleable software. Works made for hire / ownership of deliverables - construction of agreement by ordinary rules of contract interpretation - repair and maintenance versus development/enhancement/customization of software - The Tribunal's reliance on precedents such as Mastek was misplaced and the Court accepted the applicability of principles in Sasken and IBM decisions that support treating contracts where the contractor surrenders any rights and merely provides manpower-based services as service contracts. - HELD THAT: - The Court found that Mastek involved facts where source code was shared and a distinct product was developed and sold, making it distinguishable. By contrast, judgments like Sasken and IBM recognise that where technicians' inputs do not produce a marketable commodity and ownership vests with the client from inception, the contract is for service. Clause 4 in the present agreement shows QAD's exclusive ownership and the agreement contemplates deliverables limited to reports, logs and remedial actions rather than creation and transfer of a new sellable software. The Tribunal failed to appreciate these distinctions and misapplied authorities that were factually different. [Paras 11, 15, 17, 19] Reliance on Mastek was erroneous; principles in Sasken/IBM-type decisions apply and support treating the contract as one for services. Final Conclusion: The High Court set aside the Tribunal's order and answered the questions of law in favour of the appellant, holding that the January 1, 2006 agreement with QAD is a contract for services (repair/maintenance and bug-fixing) and not a contract of sale of software under the MVAT Act; the Tribunal's reliance on inapposite precedents was misplaced.

2024 (5) TMI 1145 - JAMMU AND KASHMIR AND LADAKH HIGH COURT VAT and Sales Tax

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Issues: (i) Whether Section 5 of the Jammu and Kashmir Motor Spirit and Diesel Oil (Taxation of Sales) Act, 2005 can be invoked only when the Petrol Taxation Officer is not satisfied with the correctness and completeness of the return filed under Rule 15; (ii) Whether the Act and the Rules contain any specific provision for action in cases of escaped assessments; (iii) Whether the Act and the Rules provide only for monthly returns and monthly assessments, so that an annual reassessment made under the Act is not sustainable.

Issue (i): Whether Section 5 of the Jammu and Kashmir Motor Spirit and Diesel Oil (Taxation of Sales) Act, 2005 can be invoked only when the Petrol Taxation Officer is not satisfied with the correctness and completeness of the return filed under Rule 15.

Analysis: Section 5 empowers the Petrol Taxation Officer to determine whether tax is recoverable, from whom it is due, and the amount recoverable. Rule 15 requires monthly returns and authorises scrutiny of the return and records to satisfy the officer that the return is correct and complete. The two provisions, read together, confine the exercise of power under Section 5 to cases where the return is found not to be correct or complete and a certificate in Form P-7 is not issued on acceptance of the return.

Conclusion: The issue was answered in favour of the assessee and against the revenue.

Issue (ii): Whether the Act and the Rules contain any specific provision for action in cases of escaped assessments.

Analysis: The statutory scheme of the 2005 Act and the Rules was found to contain no express provision analogous to the escaped-assessment provision in Section 7(11) of the Jammu and Kashmir General Sales Tax Act, 1962. In fiscal legislation, liability cannot be created by implication, analogy, or assumed powers, and a special provision cannot be imported into a self-contained enactment by reference unless the statute plainly so provides.

Conclusion: The issue was answered in favour of the assessee and against the revenue.

Issue (iii): Whether the Act and the Rules provide only for monthly returns and monthly assessments, so that an annual reassessment made under the Act is not sustainable.

Analysis: Rule 15 and Rule 16 contemplate monthly returns and assessments on receipt or non-receipt of such returns. The Act does not prescribe annual assessments for the relevant regime, and the assessment having been completed on monthly basis could not be reopened after three years in the absence of a supporting provision. Section 23 was noticed as a review provision, but it did not justify the reassessment made in the facts of the case.

Conclusion: The issue was answered in favour of the assessee and against the revenue.

Final Conclusion: The reference was disposed of by upholding the Tribunal's view that reassessment in the manner attempted was not permissible under the 2005 Act and Rules.

Ratio Decidendi: A taxing authority can act only within the express statutory power conferred by the fiscal enactment, and in the absence of a provision for escaped assessment or reassessment, such power cannot be assumed by implication or imported from another statute.

Express statutory power in tax law limits reassessment; monthly return scheme barred implied escaped-assessment powers.
Section 5 of the Jammu and Kashmir Motor Spirit and Diesel Oil (Taxation of Sales) Act, 2005 was read with Rule 15 as confining assessment power to cases where the monthly return is not found correct and complete, so acceptance of the return and issuance of Form P-7 are prerequisites. The Act and Rules were found to contain no express escaped-assessment provision, and such taxing power could not be implied or borrowed from another statute. Monthly returns and monthly assessments were treated as the scheme of the Act, so an annual reassessment made after completion of monthly assessment was not sustainable. The Tribunal's view was upheld.

Power to determine certain questions - Correctness and completeness of return - Conjoint reading of Section 5 and Rule 15 - Escaped assessment - Monthly returns and month-wise assessment - Limitation on reassessment after issuance of certificate P-7 - Strict construction of fiscal statutesPower to determine certain questions - Correctness and completeness of return - Conjoint reading of Section 5 and Rule 15 - Strict construction of fiscal statutes - Section 5 of the Jammu and Kashmir Motor Spirit and Diesel Oil (Taxation of Sales) Act, 2005 is invocable by the Petrol Taxation Officer only where, upon examination under Rule 15, the return filed is not found to be correct and complete. - HELD THAT: - Section 5 confers on the Petrol Taxation Officer power to determine whether tax or penalty is recoverable, from whom and the amount. Rule 15(d) authorises the PTO, on receipt of the monthly return, to examine books and records and make enquiries to satisfy himself as to the correctness and completeness of the return and, if satisfied, to issue certificate in Form P-7. The court accepted the proposition that, read conjointly, Section 5 operates in the situation where the PTO is not satisfied with the correctness or completeness of a return filed under Rule 15. Applying the established rule that fiscal statutes must be construed by their plain language, the court held that Section 5 will not be used to reopen assessments where a complete and correct return has been filed and a P-7 certificate issued; the PTO's power under Section 5 is triggered by lack of satisfaction as to return correctness/ completeness. [Paras 15]Affirmed that Section 5 is applicable only when the PTO is not satisfied with the correctness or completeness of the return filed under Rule 15.Escaped assessment - Generalia specialibus non derogant - Strict construction of fiscal statutes - The Act of 2005 and its Rules contain no specific provision for reassessment in cases of escaped assessments analogous to Section 7(11) of the Jammu and Kashmir General Sales Tax Act, 1962; accordingly the PTO cannot invoke Section 5 of the Act of 2005 to cover escaped-assessment proceedings. - HELD THAT: - Section 7(11) of the General Sales Tax Act expressly provides for assessment or reassessment where turnover has escaped assessment; no corresponding provision exists in the Act of 2005. The court applied the rule generalia specialibus non derogant and the principle that taxing statutes are to be construed according to their plain words. In absence of a specific escaped-assessment clause in the Act of 2005, the Tribunal was correct to hold that the PTO could not rely on Section 5 of the Act of 2005 to effect reassessment for escaped turnover. The PTO in this case had invoked Section 5 after an internal audit report and after a gap of three years, but had not proceeded under Section 7(11) of the General Sales Tax Act. [Paras 17, 18]Affirmed that there is no provision for escaped-assessment in the Act of 2005 and Section 5 cannot be used to effect reassessment for escaped turnover in place of the specific provision in the General Sales Tax Act.Monthly returns and month-wise assessment - Limitation on reassessment after issuance of certificate P-7 - Strict construction of fiscal statutes - The Act of 2005 and Rules prescribe filing of monthly returns and month-wise assessments only; there is no provision for annual assessment under that scheme, and once final monthly assessments were made and P-7 issued, reassessment after a lapse of three years was impermissible. - HELD THAT: - Rules 15 and 16 contemplate monthly returns (Form P-4), tax payment and month-wise assessment procedures, with Rule 15(d) and Rule 16 prescribing actions on receipt or non-receipt of monthly returns. The Act and Rules do not provide for annual returns or annual assessments. Given the absence of a statutory mechanism permitting reopening of finalised monthly assessments, and having regard to the limitation principles applied in fiscal contexts, the PTO was not entitled to reassess after three years of the assessment which had culminated in issuance of P-7. The court relied on the need to apply limitation and the settled construction that taxing provisions cannot be extended by implication. [Paras 20, 21]Affirmed that only month-wise assessments are provided under the Act of 2005/Rules and that reassessment after three years of final monthly assessment (certified by P-7) was not permissible.Final Conclusion: The reference is answered in the affirmative: Section 5 of the Act of 2005 applies only where the PTO is not satisfied as to the correctness or completeness of a return filed under Rule 15; the Act of 2005 contains no provision for escaped assessments akin to Section 7(11) of the General Sales Tax Act and Section 5 cannot be employed to effect such reassessments; the Act and Rules prescribe only monthly returns and month-wise assessments, and reassessment after three years following issuance of the final certificate (P-7) was impermissible. The reference is disposed accordingly.

2024 (1) TMI 296 - RAJASTHAN HIGH COURT VAT / Sales Tax

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Issues: (i) Whether memory cards were classifiable as IT products under Entry 10 or Entry 3 of Part A of Schedule IV to the Rajasthan Value Added Tax Act, 2003, or liable to be taxed under the residuary entry; (ii) whether the reassessment and consequent demand could be sustained merely on a change of opinion and reliance on the Commissioner's determination order.

Issue (i): Whether memory cards were classifiable as IT products under Entry 10 or Entry 3 of Part A of Schedule IV to the Rajasthan Value Added Tax Act, 2003, or liable to be taxed under the residuary entry.

Analysis: Entry 65 of Schedule IV provided concessional tax for IT products in Part A. Entry 10 covered prepared unrecorded media for sound recording or similar recording of other phenomena, including CD and DVD, while Entry 3 covered computer systems and peripherals and allied items. The Court held that memory cards were media capable of recording and storing data and were not shown by the Revenue, through any cogent or technical material, to fall outside the specific entries. The later notification of 08.03.2016, which specifically inserted memory cards, supported the view that they were within the IT-product category, though the amendment itself was prospective. The Court also treated the entry as inclusive and not exhaustive.

Conclusion: Memory cards were held to fall within the specific IT-product entries and not the residuary entry, in favour of the assessee.

Issue (ii): Whether the reassessment and consequent demand could be sustained merely on a change of opinion and reliance on the Commissioner's determination order.

Analysis: The assessee had consistently classified the goods under the concessional entry and the classification had been accepted for years. The Court held that a long-accepted classification could not be displaced merely on personal opinion or a departmental determination order, especially when no independent evidence or expert material supported the change. It further held that quasi-judicial authorities were not bound by departmental determinations and that reassessment on a mere change of opinion was impermissible on the facts of the case.

Conclusion: The reassessment and the consequential levy of additional tax and interest were not sustainable, in favour of the assessee.

Final Conclusion: The common issue of classification was answered for the assessee, and the impugned orders were set aside, resulting in allowance of all the revisions.

Ratio Decidendi: In classification disputes under a taxing statute, a specific concessional entry must prevail over a residuary entry, and a long-accepted classification cannot be reopened merely on the basis of a departmental opinion without cogent supporting evidence.

Specific concessional classification for memory cards prevails over residuary taxation, barring reassessment based solely on departmental opinion.
Memory cards are treated as IT products falling within specific concessional entries for recording media or computer peripherals, rather than a residuary tax entry, where they are capable of recording and storing data and no cogent technical evidence excludes them. A later prospective insertion specifically naming memory cards may support their IT-product character without retrospectively altering the entry. A classification consistently accepted over time cannot be reopened solely because of a departmental determination or change of opinion. Reassessment requires independent supporting material; quasi-judicial authorities are not bound by departmental determinations. Consequently, reassessment-based additional tax and interest demands were unsustainable.

Classification of goods under competing specific and residuary tariff entries - Burden on revenue to prove classification in residuary entry - Specific entry prevailing over general/residuary entry - Interpretation of inclusive/illustrative entries - Reassessment not permissible merely on change of opinion - Determination order is not binding on appellate/quasi judicial bodies - Prospective operation of statutory amendment and its evidentiary significance - Benefit of doubt to taxpayer in case of ambiguity in taxing statute Classification of goods under competing specific and residuary tariff entries - Burden on revenue to prove classification in residuary entry - Specific entry prevailing over general/residuary entry - Interpretation of inclusive/illustrative entries - Benefit of doubt to taxpayer in case of ambiguity in taxing statute - Memory cards are classifiable as I.T. products under the specific entries in Part A of Schedule IV to the RVAT Act and could not be shifted to the residuary entry merely on the basis of the Commissioner's determination. - HELD THAT: - The Court found that the revenue failed to discharge the onus of showing that memory cards do not fall within the specific entries (Entry 10 and alternatively Entry 3 of Part A, Schedule IV) and therefore were wrongly taxed under the residuary head. The determination relied upon is a bare opinion without cogent or expert evidence; long standing classification accepted in returns and prior assessments cannot be upset merely by such opinion. Entry 10 is inclusive/illustrative (CD/DVD are examples) and memory cards, being media capable of recording sound and other phenomena, fall within the scope of 'prepared unrecorded media'. Where ambiguity exists between a specific and a general entry, the interpretation favourable to the taxpayer must be adopted. Applying these principles, the levy of additional tax and interest based on classification under the residuary entry was unsustainable. [Paras 11, 12, 13] Levy of tax treating memory cards as residuary goods set aside; memory cards are to be treated under the specific IT product entries in Part A of Schedule IV. Determination order is not binding on appellate/quasi judicial bodies - Prospective operation of statutory amendment and its evidentiary significance - The determination order dated 15.09.2015 could not be treated as conclusive or binding upon the Appellate Authority and the Tax Board, and the subsequent amendment (notification dated 08.03.2016) while prospective, evidences that memory cards are I.T. products. - HELD THAT: - The Court held that departmental determinations or circulars are not binding on adjudicatory/quasi judicial authorities exercising judicial functions; reliance on the Commissioner's determination as determinative was therefore impermissible. Although the 08.03.2016 notification expressly inserting data storage devices (including memory cards) into Entry 10 was prospective in operation, it demonstrates that the State considered memory cards to be I.T. products; this supports classifying memory cards under the specific entries rather than the residuary head. [Paras 10, 12] The authorities' reliance on the Commissioner's determination was misplaced; the 2016 amendment, though prospective, corroborates that memory cards are I.T. products. Reassessment not permissible merely on change of opinion - Reassessment of past classification after a long period cannot be sustained where it rests solely on a change of opinion without supporting evidence. - HELD THAT: - The Court reiterated the settled principle that tax reassessment or reclassification cannot be undertaken merely on a later change of departmental opinion, particularly where the assessee had consistently classified the goods, filed returns, and earlier assessments were accepted. The Commissioner's after the fact opinion without corroborative material or expert evidence does not justify reopening/levying additional tax. The Court relied on established precedents and held that disturbing long accepted classification requires cogent proof which was lacking here. [Paras 9, 11, 12] Reassessment and levy founded solely on change of opinion quashed. Final Conclusion: All STRs allowed; the orders of the Tax Board and the authorities below are quashed and set aside, with the result that memory cards are to be treated under the specific IT product entries of Part A, Schedule IV to the RVAT Act and not under the residuary entry.

2024 (5) TMI 1144 - JAMMU AND KASHMIR AND LADAKH HIGH COURT VAT and Sales Tax

AI TextQuick Glance (AI)Headnote

Invoice-wise penalty under VAT law: each defective tax invoice is a separate default, not one combined breach.
The Jammu & Kashmir Value Added Tax Act, 2005 treats sale invoices as transaction-specific, so the obligation under section 59 and Rule 63 applies separately to each sale. A defective or false invoice falls within the default described in section 69(1)(k), and the penalty under section 69(1)(xi) is linked to each such default with reference to the tax payable on that individual transaction, subject to the minimum penalty. On that scheme, multiple improper invoices detected on the same day are not merged into one default; each defective invoice is assessed separately for penalty purposes.

Default under clause (k) of section 69 (failure to issue or issue false tax/retail invoice) - Penalty under clause (xi) of section 69 (penalty equal to ten times the tax payable on each default or Rs. 10,000 whichever is higher) - Tax invoice as the unit of default and liability - Single event (same-day discovery) versus multiple individual defaultsDefault under clause (k) of section 69 (failure to issue or issue false tax/retail invoice) - Penalty under clause (xi) of section 69 (penalty equal to ten times the tax payable on each default or Rs. 10,000 whichever is higher) - Tax invoice as the unit of default and liability - Single event (same-day discovery) versus multiple individual defaults - Whether issuance of 35 improper retail invoices on the same day constitutes a single default attracting a single penalty, or whether each tax/retail invoice constitutes a separate default for which penalty is to be imposed individually. - HELD THAT: - The Court held that the statutory default contemplated by clause (k) of sub section (1) of section 69 is related to a particular tax invoice (i.e. a particular sale transaction) and not to the day on which multiple invoices are discovered. A retail invoice corresponds to an individual sale transaction and, if it is defective, sham, false or not issued, it generates a separate default capable of attracting liability under clause (xi) of section 69(1). The text and legislative intent of the VAT Act, 2005 demonstrate that tax is determined transaction-wise; the penalty provision is a deterrent and applies to each invoice-specific default because aggregating defaults merely on the basis of discovery on the same day is not supported by the statute. The SSTAT was therefore incorrect in treating 35 objectionable invoices discovered on a single inspection as one single default; each invoice must be examined for tax payable and, if found to be default ridden, be visited with penalty as provided in clause (xi). The reference is answered accordingly and returned to SSTAT and the authorities for such further action as may be necessary consistent with this legal conclusion. [Paras 13, 20, 21, 22, 24]Each tax/retail invoice that is found to be in default under clause (k) of section 69(1) constitutes an individual default and is liable to penalty under clause (xi) of section 69(1); discovery of multiple such invoices on the same day does not convert them into a single default.Final Conclusion: Reference answered: each defective tax/retail invoice is a separate default attracting penalty as prescribed in clause (xi) of section 69(1); the SSTAT's approach of treating 35 invoices found on the same day as a single default was incorrect and the matter is to be proceeded with accordingly.

2024 (2) TMI 1076 - ALLAHABAD HIGH COURT VAT and Sales Tax

AI TextQuick Glance (AI)Headnote

Issues: (i) whether the annual return filed by the assessee gave rise to a deemed assessment under the statutory scheme, so as to negate the premise of a case of no assessment; (ii) whether reassessment proceedings could validly be initiated in the absence of objective material and recorded reasons to believe that turnover had escaped assessment; and (iii) whether the earlier order quashing the regular assessment for the relevant year barred the impugned reassessment.

Issue (i): whether the annual return filed by the assessee gave rise to a deemed assessment under the statutory scheme, so as to negate the premise of a case of no assessment

Analysis: The statutory scheme created a deeming fiction whereby the annual return itself operated as an assessment order, and the disclosed facts and figures formed part of that deemed assessment. Once the assessee had filed the annual return within the prescribed time, and no fresh regular assessment was made within the permissible period, the doctrine of deemed assessment revived and became absolute on expiry of the limitation for regular assessment. The premise that there was no assessment at all was therefore contrary to the statutory framework.

Conclusion: The existence of a deemed assessment was affirmed, and the contention that the assessee had suffered a case of no assessment was rejected.

Issue (ii): whether reassessment proceedings could validly be initiated in the absence of objective material and recorded reasons to believe that turnover had escaped assessment

Analysis: Reassessment could be assumed only on the basis of objective material giving rise to a genuine reason to believe that turnover had escaped assessment, and such belief had to be recorded by the assessing authority. The record disclosed no material suggesting falsity, suppression, excess claim, incomplete return, or under-assessment. The assessing authority proceeded only on the assumption that because no regular assessment subsisted, the entire turnover had escaped assessment. That approach was held to be perverse. The higher authority's permission was also treated as a mechanical exercise because it was not founded on recorded reasons or relevant material.

Conclusion: The jurisdictional basis for reassessment was absent, and the reassessment proceedings were held to be without jurisdiction.

Issue (iii): whether the earlier order quashing the regular assessment for the relevant year barred the impugned reassessment

Analysis: The earlier writ order had specifically quashed the regular assessment for the relevant assessment year, while liberty was granted only in relation to the separate assessment year dealt with in the same judgment. The later attempt to rely on that order as if it had left room for a fresh proceeding for the relevant year was inconsistent with its clear terms. However, the decisive ground in the present matter remained the absence of jurisdictional facts and recorded reasons to believe.

Conclusion: The earlier order did not save the impugned reassessment, and the challenge to the reassessment succeeded in any event.

Final Conclusion: The reassessment proceedings were annulled for want of jurisdiction, the permission granted for reopening was also invalid, and the assessee succeeded in the writ petition.

Ratio Decidendi: Where the statute deems the filed annual return to be an assessment, reassessment can be initiated only on the basis of objective material and recorded reasons to believe that turnover escaped assessment; absent such material and reasons, the proceedings are a nullity.

Deemed assessment and recorded reasons to believe: reassessment fails without objective material showing turnover escaped assessment.
Where the statutory scheme treats a filed annual return as a deemed assessment, the premise of a case of no assessment fails once the return is filed and regular assessment is not made within limitation. Reassessment can then be initiated only on objective material and recorded reasons to believe that turnover escaped assessment; a mechanical assumption that all turnover escaped because no regular assessment survived is insufficient. The analysis also notes that an earlier writ order quashing the regular assessment for the relevant year did not preserve a valid basis for fresh reassessment. On that reasoning, the reassessment and reopening permission were treated as invalid for want of jurisdiction.

Deemed assessment under Section 27 - self-assessment and deemed assessment arising from annual return - reason to believe for reassessment - requirement of cogent material and recorded reasons before reopening assessment - power of higher authority to grant permission for reassessment on satisfaction - limitation to reassess and extended period under Section 29 - rectification under Section 31 and setting aside under Section 32 - quashing of assessment for lapse of limitationDeemed assessment under Section 27 - self-assessment and deemed assessment arising from annual return - Legal effect of Section 27 and whether the annual return filed by the assessee constituted a deemed assessment for A.Y. 2012-2013. - HELD THAT: - The Court held that Section 27 creates a deeming fiction: an annual return filed in the prescribed time constitutes a deemed assessment order and the facts and figures disclosed therein form part of that assessment. Although a subsequent conscious assessment order will replace the deeming fiction while it subsists, recall of such conscious assessment restores the deemed assessment. In the present facts the petitioner filed the annual return within the extended filing date and, after the specific assessment dated 04.01.2016 was recalled on 01.02.2016, the deemed assessment revived and became absolute on expiry of the period for making a fresh assessment (30.09.2016). Consequently, the assessing authority could not treat the case as one of 'no assessment' after that date. [Paras 35, 36, 37, 38, 39]The annual return filed for A.Y. 2012-2013 constituted a deemed assessment under Section 27 and, upon lapse of the period to make a regular assessment, that deemed assessment became conclusive.Reason to believe for reassessment - requirement of cogent material and recorded reasons before reopening assessment - power of higher authority to grant permission for reassessment on satisfaction - limitation to reassess and extended period under Section 29 - Whether the assessing authority and the Additional Commissioner validly assumed jurisdiction to reopen/reassess the petitioner for A.Y. 2012-2013 in the extended period of limitation. - HELD THAT: - The Court reiterated that jurisdiction to reassess under the Act depends on a valid 'reason to believe' supported by cogent, objective material and that such reason must be recorded. The higher authority (Additional Commissioner) may grant permission to reopen only upon being satisfied (on the basis of the assessing authority's recorded reasons or its own reasons), and those reasons must be disclosed to the dealer. In the present case the assessing authority did not point to any material showing falsity, suppression or incorrectness in the annual return, nor did it record any reason to believe that turnover had escaped assessment. The Additional Commissioner granted permission mechanically without proper consideration of recorded reasons or material. As a result, jurisdiction to reassess never arose and the reassessment proceedings were without jurisdiction. [Paras 49, 50, 51, 52, 53]Reassessment in the extended period was invalid: no cogent material or recorded reasons were produced to form a 'reason to believe', and the Additional Commissioner's permission was granted without the requisite satisfaction.Rectification under Section 31 and setting aside under Section 32 - quashing of assessment for lapse of limitation - Effect of the coordinate bench's order that quashed the assessment for A.Y. 2012-2013 and whether that order permitted reassessment. - HELD THAT: - The Court examined the coordinate bench's order dated 28.08.2019 which quashed the assessment order for A.Y. 2012-2013 (while taking a different view for A.Y. 2013-2014). The coordinate bench's quashing meant nothing survived for reconsideration in respect of A.Y. 2012-2013. Although a technical distinction exists between regular assessment and reassessment proceedings, that distinction did not validate initiation of reassessment here because the jurisdictional fact (recorded reasons and material to form a reason to believe) was absent. Further, the assessing authority's subsequent rectification did not cure the lack of jurisdiction to initiate reassessment in the extended period. [Paras 54, 55, 56, 57, 58]The coordinate bench's quashing of the A.Y. 2012-2013 assessment did not sustain a lawful reassessment in absence of jurisdictional material; accordingly the permission and reassessment were nullities.Final Conclusion: The order dated 30.01.2021 as modified on 08.02.2021 granting permission to reassess and the reassessment order dated 17.03.2021 for A.Y. 2012-2013 (U.P. and Central) are quashed; the writ petition is allowed and the reassessment proceedings are declared without jurisdiction.

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