TaxTMI 
TaxTMI 
2022 (11) TMI 1547
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...., V.G. Jimson, M/S Baras Marketing, M/s. Sunitha Sales And Services (P) Ltd, Sujatha Venugopal, Shree Agarsen Steel House, M/S.Victory Press (P) Ltd., The Assistant Commissioner, Governemnt of Kerala, The Commissioner of Commercial Taxes, K.K. Anil Kumar, George Thomas Versus Pushpangadhan P., M/s. Tulsi Developers India (P) Ltd., M/s. Chathamkulam Projects/Developers (P) Ltd., Central Board Of Excise Customs, T.A. Susilkumar, Cee Vee Footwear India (P) Ltd., National Paints Factories India (P) Ltd, N. Ayyappan Nair, M/s. Belma Engineers, Hillwood Furniture (P) Ltd., Mathew Cyriac Proprietor, Chennoth Glassess And Hardwares, The Assistant Commissioner Special Circle,Department Of Commercial Taxes,Thrissur, Hillwood Imports And Exports (P) Ltd, Cee Pee Granites (P) Ltd, Kunnel Engineers And Contractors (P) Ltd, Mothercare Foods, The Assistant Commissioner (Assmt)-III, Thrissur, Manzil Constructions, M/s. Manappuram Finance Ltd., Kalyan Jewellers India Ltd. (Formerly Known As Kalyan Jewellers Salem Private Ltd.), Kerala State Civil Supplies Corporation Limited, M/s. Saj Batteries (P) Ltd., Ajayakumar. C.S, Kancor Ingredients Ltd., M/s. Abb India Ltd., M/s. Veeyemar & Company, M/s C.U....
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....mmon questions of law, are disposed of by this common judgment. W.A. No. 676/2020 has been treated as the lead case for referring to the circumstances and the case of respective parties. The parties are referred to, both for convenience and consistency, as the State and Dealers, respectively. W.A. No. 676/2020 3. The Department of Commercial Taxes, Thrissur, served notice dated 25.02.2017 on M/s. MCP Enterprises, a registered dealer, proposing to reopen and make the best judgment assessment for the Assessment Year 2010-11. The case of the dealer is that as per the applicable law to the return period, the limitation expired by 31.03.2016 and issuing notice dated 25.02.2017, by recourse to the amended Section 42(3) of the VAT Act, is illegal. The amendment does not enable reopening a time-barred assessment. Briefly stated, the notice impugned in the writ petition is beyond the period of limitation applicable for the reassessment of a return under any of the circumstances covered by Section 25 of the VAT Act. 3.1 Further, it is urged that Section 42(3) cannot be pressed into service for reopening an assessment which is barred by time under Section 25(1) of the VAT A....
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.... and policy, has made Section 42(3) effective from 01.04.2005. Therefore, the notices for the reassessment of the return period of 2010-11, though beyond the period of limitation, i.e., five years, is over by fiction 'treated as pending'; the assessment is susceptible to reopening and making best judgment assessment. 4. The learned Single Judge has considered the issues on hand under two heads: namely, (i) the power to amend the VAT Act with retrospective effect, and (ii) examined whether the retrospective operation of amended Section 42(3) would cause the dealer substantial prejudice or deprive the dealer any vested right accrued to the dealer prior to the introduction of the new provision. Briefly stated, on Section 42(3), operating retrospectively and legislative competence has been accepted, and the retrospectivity for reopening or reassessment under the VAT Act has been held to be within a reasonable period. Thus the learned Single Judge construed what constitutes a reasonable period by relying on the judgments in State of Gujarat v. Patel Raghav Natha [AIR 1969 SC 1297]; State of Punjab v. Bhatinda District Cooperative Milk Producers Union Ltd. [(2007) 11 SCC 363]; Directo....
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.... dealer was to furnish to the Sales Tax Officer quarterly returns in the prescribed form within one calendar month from the expiry of the quarter to which the return related. As mentioned above, there is no dispute before us that the returns were filed by the respondents within the prescribed time, that is, they were filed within, one calendar month from the expiry of each of the quarters, which went to make up the period of assessment in question. In Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax, Nagpur, and others; a case under the C.P. and Berar Sales Tax Act, 1947, of which the provisions for filing returns and making assessments were similar to the provisions under the said Bombay Sales Tax Act, 1946, the Supreme Court held that the assessment proceedings started when a return was made or when a notice was issued to a dealer either under section 10(3) or section 11(2) of the C.P. and Berar Sales Tax Act, 1947. The said sections 10(3) and 11(2) dealt with cases of a registered dealer failing to file his returns within the prescribed period and of a dealer who did not get himself registered under that Act, though he had become liable to do so are not relevant, for....
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.... by the reassessing or revising authority nor can such authority in suo motu revision or reassessment proceedings cancel, withdraw or disallow any deduction or exemption allowed to him in his assessment proceedings on the strength of such documents produced in the course of his assessment proceedings or in appeal or revision proceedings arising therefrom. There is no statutory obligation in a dealer to so preserve these documents, and to hold otherwise on the grounds of an implied obligation or as a rule of prudence would run counter to common sense and notions of justice, equity and good conscience." 5.2 It cannot be gainsaid by a dealer that the dealer was under no obligation to preserve the accounts, records, beyond the period prescribed under the VAT Act and the Rules made thereunder. The Supreme Court has held that acceptance of a dealer's contention that the dealer is not bound to produce the books at the time of assessment beyond a certain period of time would result in negating the statutory provision which requires deduction given on production of the documents in support of the claim. [See Ramdas Laxmidas v. Commissioner of Sales Tax [1995 Suppl (3) SCC 673]] 5.3 He....
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....fiction now employed through Act 18/2016 to Section 42(3) of the VAT Act is in head-on collision with the finality given to the filed return by Section 21 read with Sections 22, 24 and 25 of the VAT Act. (d) Sections 20 to 25, either specifically or by a combined reading with the applicable Rule, provide for the very circumstances now covered by Section 42(3) of the VAT Act. Therefore, the period of limitation is different namely, under Section 25(1), the limitation to reopen the assessment is five years/six years, as the case may be, and for the substantially same alleged commissions or omissions, there is no period of limitation. The Counsel illustrate the argument that for the return period of 2005-06, the period of limitation under Section 25(1) of the VAT Act stood expired by 31.03.2011. By referring to Section 42(3), reassessment can be initiated as latest as even date. The tax legislation presupposes certainty in the duties and obligations on the part of the dealer and the State. (e) Rule 58(20) must be read in conjunction with Sections 22, 24 and 25 of the VAT Act. The Rule is not controlling the Act. (f) The amendment to Section 42(3), for all pu....
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....[Commissioner of Income Tax 5 Mumbai v. Essar Teleholdings Limited (2018) 3 SCC 253 Page 95, Para 23] (iv) Retrospectivity must be reasonable and must not be excessive or harsh. Different considerations would arise if by the amendment, even final assessments were sought to be reopened, it cannot revive a power lost by efflux of time [National Agricultural Cooperative Marketing Federation of India Ltd v. Union of India (2003) 5 SCC 23] (v) Importance of time limit in taxation. Assessment should be completed with expedition. Assessee would be required to keep evidences when evidence is necessary. With the lapse of time there is scope for it being lost. Period of limitation in taxation such eventuality cannot be garbles unless timely assessment is completed. [Bharat Steel Tubes Ltd. v. State of Haryana (1988) 3 SCC 478 Page 10, Para 15] (vi) The contention of the State that the assessment is to be treated as pending for the purpose of Section 23 of the KVAT Act Section 42(3) relied upon specifically to content that the assessment is to be treated as pending. Division Bench held that amendment is introduced after the limitation expired. Notices quashed conseq....
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....returns, the assessment of such dealer for the relevant year for the purpose of section 25 shall be treated as pending and the time limit mentioned thereunder shall not be applicable in such cases."; (emphasis supplied) 8. Briefly noted, the argument of the State is that the Legislature is competent to legislate law both prospectively and retrospectively. Through the Finance Act 18/2016, Section 42(3) is made effective from 01.04.2005. There is no reason, firstly, for limiting the retrospective operation to the period under which the dealer is under obligation to maintain the records. Strong reliance is placed on Ghanshyam Das; Ramdas Laxmidas; and Taj Mahal Hotel, Secunderabad by the State. Before referring to a few of the decisions cited by the dealers, which are often quoted or star judgments on the respective points, we would refer to the citations relied on by the State in support of the argument on the three points. (i) Ghanshyam Das v. Regional Assistant Commissioner 9. Ghanshyam Das (supra) is dealing with the statutory scheme of filing returns, keeping and maintenance of records under the Central Provinces and Berar Sales Tax Act and also the respective o....
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....ks of account, duplicates, counterfoils of bills etc. The failure to preserve documents after the period is over, no adverse inference can be drawn against the dealer by the reassessing or revising authority. There is no statutory obligation in a dealer to so preserve these documents and to hold to accounts/books etc., otherwise on the grounds of an implied obligation or as a Rule of prudence would run counter to common sense and notions of justice, equity and good conscience. Ramdas Laxmi Das, we add, from one perspective, confirms the view, i.e., to continue to retain the books etc., for an indefinite period is not reasonable in the judgment under appeal. (iii) Commissioner of Income Tax, Andra Pradesh v. M/s.Taj Mahal Hotel Secunderabad 11. Lastly, the State relied on M/s.Taj Mahal Hotel Secunderabad (supra) for the proposition that Rules are meant only for the purpose of carrying out the provisions of the Act and Rules could not take away what was conferred by the Act or Rules write down the effect of an enactment. The proposition is appreciated and what begs the question in the circumstances of this case is whether the legal fiction introduced by the Legislature to Secti....
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....ch it is assessable. (iv) any deduction has been wrongly made thereon (v) input tax or special rebate has been wrongly availed Fails to declare any sale or purchase inter-State stock transfer.... SECTION 22 Rejection of defective return. Assessment in case of filing of defective return. Fails to declare any sale or purchase inter-State stock transfer.... Principal Commissioner of Income-Tax v. Maruti Suzuki India Ltd is an authority for the proposition that "there is significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted, and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable. 13. It is argued that the Department has the power to reject the defective return and take up assessment in case of filing of defective returns. And so is the case covering broad eventualities, viz. under-assessed, lower rate etc., in Section 25 of the KVAT Act. The counsel to explain the inconsistency or contradiction has given two illustrations on the amendment to section 42(3) of the VAT Act. The Revenu....
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....ris formam imponere debet non praeteritis i.e. a new law ought to regulate what is to follow, not the past, contain a principle of presumption of prospectivity of a statute. 23. Justice G.P. Singh in Principles of Statutory Interpretation (14th Edn. in Chapter 6), while dealing with operation of fiscal statute, elaborates the principles of statutory interpretation in the following words: "Fiscal legislation imposing liability is generally governed by the normal presumption that it is not retrospective and it is a cardinal principle of the tax law that the law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication. The above rule applies to the charging section and other substantive provisions such as a provision imposing penalty and does not apply to machinery or procedural provisions of a taxing Act which are generally retrospective and apply even to pending proceedings. But a procedural provision, as far as possible, will not be so construed as to affect finality of tax assessment or to open up liability which had become barred. Assessment creates a vested right and an assessee cannot be subjected to....
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....etrospectively. The Notes on Clauses show that the legislature is fully aware of three concepts: (i) prospective amendment with effect from a fixed date; (ii) retrospective amendment with effect from a fixed anterior date; and (iii) clarificatory amendments which are retrospective in nature." (emphasis in original) 29. It is also relevant to know as to how the statutory provisions of Section 14-A sub-section (2) and sub-section (3), Rule 8-D was understood by the Income Tax Department itself. After the insertion of sub-section (2) and sub-section (3) in Section 14-A by the Finance Bill, 2006, Circular dated 28-12- 2006 was issued by the Department wherein Para 11.3, following was stated: "11.3. Applicability.-From Assessment Year 2007-2008 onwards." 13.4 A Constitution Bench of the Supreme Court in Nathi Devi v. Radha Devi Gupta [(2005) 2 SCC 271] relied on by the State on the function of a Court in the interpretation of a Statute, held thus: "13. The interpretative function of the court is to discover the true legislative intent. It is trite that in interpreting a statute the court must, if the words are clear, plai....
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....rt must ascertain the intention of the Legislature by directing its attention not merely to the clauses to be construed but to the entire Statute. It must compare the clause with the other parts of the law and the setting in which the clause to be interpreted occurs. In other words, the Court takes note from the Statutes what precedes and what succeeds. 16. Krishan Kumar v. State of Rajasthan [(1991) 4 SCC 258] lays down that through interpretation head on collision of interpreting two provisions must be avoided. It is equally important to ensure that inconsistency is avoided and anomalies or hardships are ironed out through interpretation without either adding to the expression of the Legislature or deleting a word used by choice by the Legislature. 16.1 In Commissioner of Income Tax (Central)-1, New Delhi v. Vatika Township Private Limited [(2015) 1 SCC 1] the view and the dictum laid are apt for consideration in the batch appeals. Paragraphs 28 and 31 read thus: "28. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospec....
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.... 42(3) clauses (i) to (iv) refer to failure to file one or the other obligated return, annexure etc. In interpreting the words, by keeping in perspective the judicial precedents noted above, let us conclude the first stage of interpretation and the permissible meaning given of these clauses. 17.2 The expression 'fails to file' means neglect to file or a mistake, failure, or instance of poor performance to file. It is a simple present tense, and at best, 'fails to file' can be used as a future tense. Under no circumstances, the language as employed in Sub-section (3), the words 'fails to file .....' can not be a past tense. Juxtaposing the said meaning to the words 'fails to file' with legal fiction to treat the assessment as pending is used in the past tense dating back to 01.04.2005, i.e. the date on which the VAT Act has come into operation. 'Treated as pending' is a legislative fiction. 17.3 A few basic elements of fiction are: (i) The chief characteristic of a legal fiction is a deliberate false assumption of fact. (ii) Assumption is made contrary to reality. (iii) Assumption is employed to achieve a lawful result. (iv) Legal fi....
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....f goods and services is in operation, and the returns filed under the KVAT Act will be at large with uncertainty. From the above consideration, we are of the view that the provision under challenge, if read in the manner suggested by the State, would lead to inconsistency and attracts contradiction in terms. With a view to harmonizing the provisions in the Statute, the learned Judge has referred to the requirement of maintaining books for five years as the period for which reassessment could be undertaken. With effect from 01.07.2017, the GST regime is in operation, and the State Legislature, in terms of Section 19 of Constitution Amendment Act 2016 is enabled to repeal or amend the laws inconsistent with the amended articles in the Constitution. Even after the anvil of the GST regime, the uncertainty of reassessment under Section 42(3) of the KVAT Act, in spite of other limitations or timelines are over, continues. This is an uncertain and contradictory state of affairs. The literal construction is leading to situations resulting in more hardship than envisaged at any point of time. The limitation is erased by fiction. So the Court, by construing the fiction in a reasonable way an....