TaxTMI 
TaxTMI 
2008 (3) TMI 11
X X X X Extracts X X X X
X X X X Extracts X X X X
....in an official order. This is perhaps what makes the stage show enacted by the State in this litigation a little distasteful and unpalatable if not sordid and tragic. 2. To make matter worse, if we were to include the initiation of contempt proceedings, this is the fifth time that the Petitioner has had to approach this Court for relief that was due to it as far back as in April, 2003 such is the irony of this litigation, which has twice reached the Supreme Court already. 3. Add to this the fact that when we requested learned counsel for the parties to let us know the expenses incurred by their clients so that meaningful costs could be awarded to the successful party, as laid down by the Supreme Court, we were shocked to learn that this litigation alone (not to mention the earlier forays in this Court or the Supreme Court) has cost the parties almost half a crore of rupees " so much for access to inexpensive and affordable justice! 4. With this preface, it is necessary to consider the challenge mounted by the Petitioner which is to: (a) &nbs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rejected the refund application. But what is worse, he made interpolations and manipulations in the order dated 14^th August, 2003. The Assessing Officer also did not communicate the order dated 14^th August, 2003 to the Petitioner. Instead, on 4^th September, 2003 a notice was issued to the Petitioner seeking to reopen the assessment in respect of the assessment year 2001-2002. The reassessment proceedings continued and culminated in an order of reassessment dated 15^th January, 2004 The first writ petition: 8. Feeling aggrieved by the rejection of its refund application preferred under Section 30(1) of the DST Act (by the order dated 14^th August, 2003) as well as the order of reassessment dated 15^th January, 2004, the Petitioner filed in this Court WP (c) No.869 of 2004 (the first writ petition). In that writ petition, which was decided on 28^th July, 2004 the following conclusions were arrived at by the Division Bench: (1) The order dated 14^th August, 2003 passed by the Assessing Officer was the following:- "Dealer is asked to file the present addresses of sub-contractor and sal....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 10. Section 46 of the DST Act is of some importance and this reads as follows: "46. Revision of orders prejudicial to revenue: The Commissioner may call for and examine the record of any proceeding under this Act and if he considers that any order passed therein by any person appointed under sub-section (2) of section 9 to assist him, is erroneous in so far as it is prejudicial to the interests of revenue, he may, after giving the dealer an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment and penalty (if any) imposed or cancelling the assessment and penalty (if any) imposed and directing a fresh assessment. Provided that a final order under this section shall be made before the expiry of five years from the date of the order sought to be revised." 11. Feeling aggrieved by the failure of the Commissioner to comply with the mandamus issued by this Court in the matter of refund, and instead, attempting to revise the assessment or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the date on which such thing was done or action was taken, and all arrears of tax and other amounts due at the commencement of this Act may be recovered as if they had accrued under this Act." 15. Secondly (and this is important in so far as the Petitioner is concerned) no power of revision was conferred upon the Commissioner of Value Added Tax under the DVAT Act. The revisionary power, which earlier existed under the DST Act, was not saved under the DVAT Act. It came into existence under the DVAT Act only by an amendment brought into force with effect from 16^th November, 2005 by the inclusion of Section 74A in the DVAT Act. In other words, the power of revision conferred upon the Commissioner under the DST Act was omitted under the DVAT Act and conferred on the Commissioner only on 16^th November, 2005. 16. Given this factual background, it is necessary at this stage to pause and take stock of the facts as they existed on 1^st April, 2005 when the DVAT Act came into force. The important facts are: 1. The Works Contract Act and the DST Act were repealed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dated 18^th November, 2005 the learned Judges expressed different opinions. One of the learned Judges (T.S. Thakur, J) was of the view that the contempt petition merited dismissal and that the amount deposited by the Revenue pursuant to the orders of this Court passed on 20^th September, 2004 shall stand refunded to the Revenue. The other learned Judge (Badar Durrez Ahmed, J) was of the opinion that the Commissioner had committed contempt of Court by showing complete and thorough disrespect to the orders passed by this Court and had deliberately and intentionally and by a device thwarted the opinion of this Court dated 20^th July, 2004 However, the learned Judge was of the view that since contempt proceedings involve penal consequences and T.S. Thakur, J did not find the Commissioner in contempt, it would be appropriate to give him the benefit of doubt and not haul him up for contempt of Court. Accordingly, the contempt petition was dismissed. The second and third writ petitions: 19. On 16^th January, 2006, an office order was issued by which the Commissioner transferred the jurisdiction concerning the assessment of the Petitioner to the Sp....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the revision proceedings may go on before the appropriate authority but no final order shall be passed thereon and that the Petitioner should cooperate with the proceedings. 24. As mentioned above, the second writ petition which was argued for admission on 20^th February, 2006, was decided by a Division Bench of this Court on 15^th September, 2006. T.S. Thakur, J upheld the validity of the notice dated 12^th August, 2004 whereby the refund application of the Petitioner was rejected by the Commissioner and a direction was given to the Zonal Assistant Commissioner to revise the assessment order dated 31^st March, 2003 and thereafter decide the refund application of the Petitioner. On the other hand, B.N. Chaturvedi, J concluded that the order dated 12^th August, 2004 deserved to be quashed, which he did. It was directed by the learned Judge that the Revenue should pass appropriate orders on the refund application filed by the Petitioner in conformity with the orders dated 20^th July, 2004 passed by this Court in the first writ petition. Liberty was granted to the Revenue to pass appropriate orders in regard to revision of the assessment order, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The order passed on 12^th August, 2004 to initiate reassessment proceedings against the Petitioner stood quashed in the second writ petition. 4. While the order dated 12^th August, 2004 was quashed in the second writ petition, liberty was given to the Respondents to pass appropriate orders in respect of the assessment order dated 31^st March, 2003 in accordance with law. 5. The Works Contract Act and the DST Act were repealed with effect from 31^st March, 2005 and the DVAT Act was brought into force on 1^st April, 2005. 6. The DVAT Act did not confer any power of revision on the Commissioner of DVAT till 16^th November, 2005 when Section 74A was inserted in the DVAT Act. 7. The third writ petition challenging the show cause notice dated 21^st February, 2006 issued by the Joint Commissioner, Special Zone on the ground of lack of jurisdiction was heard for admission on 3^rd April, 2006 and judgment reserved. The Joint Commissioner was permitted to go ahead with the proceedings but w....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... DEPTT. OF TRADE and TAXES (POLICY BRANCH) VYAPAR BHAWAN, I.P. ESTATE, NEW DELHI No.VATO/Policy-III/2005-06/34 Dated: 19-04-2007 ORDER In supersession of order No. LSC/Tr. Appeal and Rev./ 2006-07/1110-1114 dated 24-8-2006 and in exercise of the powers conferred upon me under section 11 of Delhi Sales Tax Act, 1975 read with Section 106 of DVAT Act, 2004, I, Archna Arora, Commissioner, Value Added Tax, Department of Trade and Taxes, do hereby transfer the jurisdiction in respect of M/s International Metro Civil Contractors for the assessment year 2001-02 onwards, under Delhi Sales Tax on Works Contract Act, 1999 and Central Sales Tax Act, 1956, from Assistant Commissioner Zone-I to Deputy Commissioner, Special Zone. This order shall come into force with immediate effect. sd/- (ARCHNA ARORA) Commissioner, Value Added Tax" 31. The second event that occurred was that a notice dated 7^th February, 2007 was served upon the Petitioner requiring it to appear before the Deputy Commissioner (Special Zone) on 19^th February, 2007 along with all relevant records and to show cause why the assessment order dated 31^st March, 2003 be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e writ petition was admitted for final hearing and the interim order passed on 10^th August, 2007 was confirmed. 38. Thereafter, on 4^th January, 2008 an early hearing application filed by the Respondents was taken up for consideration and dismissed. Against the order rejecting early hearing, the Respondents preferred Special Leave Petition (C) No. .... /2008 [CC 2612-2613/2008] in which the following order was passed on 22^nd February, 2008: "Heard. Delay condoned. We request the High Court to dispose of the writ petition as early as practicable preferably by 15^th March, 2008 so that the apprehension of the petitioner that the proceedings may get barred by time can be avoided. Let parties appear before the Chief Justice of the High Court with a copy of our order so that an appropriate Bench can be fixed and a firm date of hearing can also be fixed. The special leave petitions are accordingly disposed of." This is how the fourth writ petition was listed before us for expeditious disposal. 39. We heard learned counsel for the parties from 27^th to 29^th February, 2008 and then again f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; Both the preliminary objections are only stated to be rejected. The question of a challenge to the jurisdiction of the Revenue could arise only when the show cause notice was issued and not earlier. There is no question of the Petitioner being estopped or barred by the principles of res judicata from challenging a show cause notice that was not in existence earlier. There is also nothing that prevents the Petitioner from challenging the show cause notice dated 18^th July, 2007 on all available grounds, including jurisdictional ones. For the record, we may only note that learned counsel for the Revenue relied upon M.P. Raghavan Nair v. State Insurance Officer, AIR 1971 Kerala 175, State of Uttar Pradesh v. Nawab Hussain, (1977) 2 SCC 806 and State of Punjab v. Varinder Kumar, (2005) 12 SCC 806. 44. In so far as the second preliminary objection is concerned, that this Court permitted the Revenue to act in accordance with law cannot, by any stretch of imagination, be construed to mean tacit acceptance of the legitimacy of the actions of the Revenue. This goes without saying. 45. &....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... after the DVAT Act came into force. 48. Quite clearly, therefore, no steps were initiated by the Revenue on or before 31^st March, 2005 to revise the assessment order dated 31^st March, 2003. What is the impact of this" 49. In Gajraj Singh v. State Transport Appellate Tribunal, (1997) 1 SCC 650 the issue of inchoate rights is discussed just before paragraph 30 of the Report under the heading Effect upon inchoate rights. It was said: "Rights of action which are dependent upon a statute, and which are still inchoate and not reduced to possession or perfected by final judgment, are lost by the repeal of the statute from which they stem. This rule of construction is simply a restatement of the common law principle of construction that the repeal of a statute operates to divest all rights accruing under the repealed statute and all proceedings not concluded prior to the repeal, since inchoate rights are by definition not vested rights such as to escape the common law rule of effacement. The inchoate rights are but an incident to the statute and fall with its repeal." 50. &nb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ending on 1^st April, 2005. 55. What existed, if at all, was a direction given by the Commissioner to the concerned Assistant Commissioner to revise the assessment order and that direction had not even been implemented by that officer. Moreover, that direction was stayed before it could be implemented and to make matters worse for the Revenue, the order dated 12^th August, 2004 was eventually struck down by this Court in the second writ petition. Therefore, even if the Commissioner had any right to revise the assessment order, neither he, nor his delegate ever exercised that right (assuming it to be a right) till 1^st April, 2005. The effect of this is that the "right" stood extinguished when the DST Act and the Works Contract Act were repealed. 56. This leads us to the second question, namely, whether the revisionary proceedings (if they were initiated) were saved by the DVAT Act. To answer this, we need to look at two "sub-issues". Firstly, we need to interpret Section 106 of the DVAT Act and consider the case law on the subject. It may be recalled that Section 106(2) of the DVAT Act saves the previous ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....done, or action that may be taken, under the previous Ordinance and the rules framed thereunder, while the first portion of section 58(3) relates to the legal consequences resulting under the Ordinance or the rules from certain facts or from completed acts or things done thereunder. Without attempting to be meticulously accurate, it may be stated in general terms, that the scheme underlying section 58(3) appears to be that every matter to which the new Act applies has to be treated as arising, and to be dealt with, under the new law except in so far as certain consequences have already ensued or acts have been completed prior thereto, to which it is the old law that will apply. In this view of section 58, the application of the appellant for confirmation pending on the date when Central Act XXXI of 1950 came into force had to be dealt with and disposed of under this Act and the order of confirmation passed in 1952 would clearly be subject to the revisional power of the Custodian General under section 27 of the said Act." 60. The need for such a long quotation is to emphasize what the Supreme Court held, namely, that the first portion of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ile it was an existing law. Legal fiction is one which is not an actual reality and which the law recognizes and court accepts as a reality. Therefore in case of legal fiction the court believes something to exist which in reality does not exist. It is nothing but a presumption of the existence of the state of affairs which is actuality is non-existent. The effect of such a legal fiction is that a position which otherwise would not obtain is deemed to obtain under the circumstances." 65. Applying the law laid down by the Supreme Court, it must be held that by virtue of Section 106(2) of the DVAT Act since the previous operation of the DST Act and the Works Contract Act was saved, the assessment order being a transaction past and closed under those statutes, was also saved. As far as Section 106(3) of the DVAT Act is concerned, the deeming provision only means that an order passed under the repealed statute would have to be dealt with as if the repealing Act was in force on that day and the powers and jurisdiction of the authorities under the repealing Act must also be deemed to have been in force on the date when that order was passed. But, it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....part of Section 106(2) of the DVAT Act. 69. In Hari Shankar v. Rao Girdhari Lal Chowdhury, AIR 1963 SC 698 the Supreme Court held in paragraph 7 of the Report: "The distinction between an appeal and a revision is a real one. A right of appeal carries with it a right of rehearing on law as well as fact, unless the statute conferring the right of appeal limits the rehearing in some way as, we find, has been done is second appeals arising under the Code of Civil Procedure. The power to hear a revision is generally given to a superior Courts so that it may satisfy itself that a particular case has been decided according to law. Under Section 115 of the Code of Civil Procedure, the High Court's powers are limited to see whether in a case decided, there has been an assumption of jurisdiction where none existed, or a refusal of jurisdiction where it did, or there has been material irregularity or illegality in the exercise of that jurisdiction. The right there is confined to jurisdiction and jurisdiction alone. In other acts, the power is not so limited, and the High Court is enabled to call for the record of a case to satisfy itse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ision, the Supreme Court was dealing with the power of revision. It was noted, in paragraph 13 and 14 of the Report that the right of appeal is a substantive right, but there is no substantive right in making an application for revision. Section 115 of the Code of Civil Procedure is essentially a source of power to supervise a subordinate Court and it does not confer any right on a litigant to have an erroneous order corrected. "The scope for making a revision under Section 115 is not linked with a substantive right." In paragraph 33 of the Report, it was categorically stated: "Section 6 of the General Clauses Act has no application because there is no substantive vested right available to a party seeking revision under Section 115 of the Code [of Civil Procedure]." 72. All the above decisions were considered by the Punjab and Haryana High Court in Hindustan Construction Co. Ltd. v. State of Haryana, [2005] 14 STC 119. Additionally, in that decision, a contention was raised that Shiv Shakti concerned itself only with the scope of revisionary powers under Section 115 of the Code of Civil Procedure, but that contention was rejected. Eve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ger revive or survive. If analogous provision in the Repealed Act does not find place in the Act, the rights accrued or acquired thereunder would not continue under the Act unless fresh rights are acquired under the Act." 76. Kolhapur Canesugar Works Ltd. v. Union of India, (2000) 2 SCC 536 is far more categorical. In paragraph 34 of the Report, it is held: "It is our considered view that " the court is to look to the provision in the rule which has been introduced after omission of the previous rule to determine whether pending proceedings will continue or lapse. If there is a provision therein that pending proceedings shall continue and be disposed of under the old rule as if the rule has not been deleted or omitted then such proceedings will continue"" In the absence of any such provision in the statute or in the rule the pending proceedings would lapse on the rule under which the notice was issued or proceedings were initiated being deleted/omitted." Similarly, in paragraph 37 of the Report, it is held: "In a case where a particular provision in a statute is omitted and in its place another provision dealing with the same co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owever, contended that the taxable event is when the Petitioner incurs a liability. Reliance was placed on Tata Iron and Steel Co. Ltd. v. State of Bihar, AIR 1958 SC 452 and The Kedarnath Jute Manufacturing Co. Ltd. v. The Commissioner of Income Tax, (1972) 3 SCC 252 and T.K. Khadar Mohiuddin v. State of Andhra Pradesh, [1968] 21 STC 45. It was submitted that since the Petitioner had incurred a liability to pay tax, all subsequent actions taken by the Revenue to recover the tax are permissible and survive. We do not think this is correct for two reasons. The question of the liability of the Petitioner to pay tax had come to an end on the passing of the assessment order, which gave it an entitlement to a refund. The liability of the Petitioner to tax would have arisen (if at all) only after the revision of the assessment order - until then the Revenue was liable for a refund. The liability of the Petitioner could have arisen only if the assessment order was validly revised, and not otherwise or until then. 80. Secondly, the submission of learned counsel seeks to give future operation to a previous law " which is clearly not permissible. Sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nbsp; The consequence of this is that the repeal of the DST Act and the Works Contract Act coupled with the omission of the revisionary power of the Commissioner under the new enactment, that is, the DVAT Act completely obliterated or effaced that power such that it did not survive after 1^st April, 2005. There is nothing in the DVAT Act to suggest that the power was intended to survive or be acted upon. 84. It is true that a fresh power of revision was conferred on the Commissioner by an amendment brought about to the DVAT Act on 16^th November, 2005 when Section 74A was inserted in that Act but this did not resuscitate or resurrect the long-dead revisionary power conferred on the Commissioner under Section 46 of the DST Act. It had no retrospective effect. 85. What is the consequence of all this as on 1^st April, 2005" There were no pending proceedings for revision of the assessment order. The power of revision earlier available with the Commissioner had suffered a legal death. The natural consequence of this is that all the delegated powers conferred by the Commissioner in relation to the e....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., 2007. He was aware that the revisionary power had been delegated to the Assistant Commissioner by the order dated 19^th September, 1994. The show cause notice dated 21^st February, 2006 was issued by the Joint Commissioner while the hearing was being conducted by him as the Deputy Commissioner. It is for this reason that he stated in his order dated 15^th June, 2007 that there was "scope for some confusion/ambiguity about the jurisdiction of the then Joint Commr. Special Zone/Joint Commr. V who initiated the proceedings on 21.2.2006 and also of the Deputy Commissioner (Special Zone) before 19.4.2007." This was quite an understatement and under these circumstances, the Deputy Commissioner "withdrew" the show cause notice dated 21^st February, 2006 issued by an officer superior to him and issued a fresh show cause notice dated 18^th July, 2007 without reserving any right to do so and without having the power to do so. The Revenue created a chakravyuh and found itself trapped in it. 90. This being so, we have no option but to allow the writ petition and quash both the orders dated 19^th April, 2007 and the show cause notice dated 18^th July, 20....