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IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 7TH DAY OF DECEMBER, 2017
PRESENT
THE HON’BLE MRS. JUSTICE S.SUJATHA
AND
THE HON’BLE Dr. JUSTICE H. B. PRABHAKARA SASTRY
STA No.100018/2014 C/w. S.T.A. Nos. 100014/2014,
100015/2014, 100016/2014, 100017/2014, 100020/2014, 100021/2014, 100022/2014 & 100019/2014
IN STA No.100018/2014 :
BETWEEN:
M/S. PUSHKAR DRESS MANUFACTURERS, NO.19, WARD NO.3, JAIN CLOTH MARKET, BELLARY. … APPELLANT (BY SRI. NARAYAN G. RASALKAR, ADV.) AND:
THE STATE OF KARNATAKA REP BY THE ADDL. COMMISSIONER OF COMMERCIAL TAXES (ZONE)-3, VTK.1 BANGALORE 560 009. … RESPONDENT (BY SRI. M. KUMAR, AGA)
THIS APPEAL IS FILED UNDER SECTION 66(1) OF THE KVAT ACT, 2003 AGAINST THE ORDER DATED 17.06.2014 PASSED IN ZAC O3/DVG/SMR.44/13-14 ON THE FILE OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, ZONE-3, BANGALORE SETTING ASIDE THE APPEAL ORDER BEARING NO.CST AP 19, 20 & 21/13-14 DATED 9.10.2013 PASSED BY FAA AND RESTORING
R
2
THE ASSESSMENT ORDER DATED 22.04.2013, PASSED UNDER SECTION 9(2) OF THE CST ACT, 1956. IN STA No.100014/2014
BETWEEN:
M/S. ZEE LINE CREATIONS, 32/2, 5TH WARD, GOWLER HATTI, BELLARY-583101 REP. BY ITS PROPRIETOR M.RAMESH S/O M. SHATRUGNA RAO, BELLARY. … APPELLANT (BY SRI.NARAYAN G.RASALKAR, ADV.) AND:
THE STATE OF KARNATAKA REP BY THE PRINCIPAL SECRETARY, DEPARTMENT OF FINANCE VIDHANA SOUDHA, BENGALURU-560 009. … RESPONDENT (BY SRI. M. KUMAR, AGA)
THIS APPEAL IS FILED UNDER SECTION 66(1) OF THE KVAT ACT, 2003 AGAINST THE ORDER DATED 18.06.2014 PASSED IN ZAC O3/DVG/SMR.48/13-14 ON THE FILE OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, ZONE-3, BANGALORE SETTING ASIDE THE APPEAL ORDER BEARING NO.CST AP 13, 14 & 15/13-14 DATED 10.10.2013 PASSED BY FAA AND RESTORING THE ASSESSMENT ORDER DATED 22.04.2013, PASSED UNDER SECTION 9(2) OF THE CST ACT, 1956.
IN STA No.100015/2014
BETWEEN:
M/S. P.L. WEAR, 104, KALLAMMA STREET, REP. BY ITS PROPRIETOR, MORIDEVI W/O LALITKUMAR, AGE:40 YEARS, BELLARY-583101. … APPELLANT (BY SRI. NARAYAN G. RASALKAR, ADV.)
3
AND:
THE STATE OF KARNATAKA REP BY THE ADDL. COMMISSIONER OF COMMERCIAL TAXES (ZONE)-3, VTK.1, GANDHINAGAR, BANGALORE 560 009. … RESPONDENT (BY SRI. M. KUMAR, AGA)
THIS APPEAL IS FILED UNDER SECTION 66(1) OF THE KVAT ACT, 2003 AGAINST THE ORDER DATED 19.06.2014 PASSED IN ZAC O3/DVG/SMR.43/13-14 ON THE FILE OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, ZONE-3, BANGALORE, APPEAL IS HEREBY ALLOWED.
IN STA No.100016/2014
BETWEEN:
M/S. RAJKURPA GARMENTS, POPPULA BAZAR, BELLARY-583101, REP. BY ITS PROPRIETOR, BHAWRARAM S/O JAYAROOPRAM, AGE:38 YEARS, DIST:BELLARY. … APPELLANT (BY SRI. NARAYAN G. RASALKAR, ADV.) AND:
THE STATE OF KARNATAKA REP BY THE ADDL. COMMISSIONER OF COMMERCIAL TAXES (ZONE)-3, VTK.1 GANDHINAGAR, BANGALORE 560 009. … RESPONDENT (BY SRI. M. KUMAR, AGA)
THIS APPEAL IS FILED UNDER SECTION 66(1) OF THE KVAT ACT, 2003 AGAINST THE ORDER DATED 18.06.2014 PASSED IN ZAC O3/DVG/SMR.50/13-14 ON THE FILE OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, ZONE-3, BANGALORE SETTING ASIDE THE APPEAL ORDER BEARING NO.CST AP 43, 44 & 45/13-14 DATED 06.09.2013 PASSED BY FAA AND RESTORING
4
THE ASSESSMENT ORDER DATED 22.04.2013, PASSED UNDER SECTION 9(2) OF THE CST ACT, 1956.
IN STA No.100017/2014
BETWEEN:
M/S. PAVAN ENTERPRISES, NO.90/1, 2ND FLOOR, UTTARKAR COMPLEX, BRAHMIN STREET, BELLARY. REP. BY ITS AUTHORISED SIGNATORY AMBARAM S/O UMARAMJI CHOWDHARY, BELLARY. … APPELLANT (BY SRI. NARAYAN G. RASALKAR, ADV.) AND:
THE STATE OF KARNATAKA REP ITS PRINCIPAL SECRETARY, DEPARTMENT OF FINANCE, VIDHANA SOUDHA, BENGALURU-560001. … RESPONDENT (BY SRI. M. KUMAR, AGA)
THIS APPEAL IS FILED UNDER SECTION 66(1) OF THE KVAT ACT, 2003 AGAINST THE ORDER DATED 17.06.2014 PASSED IN ZAC O3/DVG/SMR.45/13-14 ON THE FILE OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, ZONE-3, BANGALORE SETTING ASIDE THE APPEAL ORDER BEARING NO.CST AP 37, 38 & 39/13-14 DATED 10.10.2013 PASSED BY FAA AND RESTORING THE ASSESSMENT ORDER DATED 20.04.2013, PASSED UNDER SECTION 9(2) OF THE CST ACT, 1956.
IN STA No.100020/2014
BETWEEN:
M/S. POOJA INTERNATIONAL, NO.1, WARD NO.2, FIRST FLOOR, CHOUDHARY MARKET, GOWLERAHATTI, BELLARY. REP. BY ITS PROPRIETOR, CHAMPARAM S/O RATNARAMAJI.
5
BELLARY. … APPELLANT (BY SRI. NARAYAN G. RASALKAR, ADV.) AND:
THE STATE OF KARNATAKA REP BY THE ADDL. COMMISSIONER OF COMMERCIAL TAXES (ZONE)-3, VTK.1 GANDHINAGAR, BANGALORE 560 009. … RESPONDENT (BY SRI. M. KUMAR, AGA)
THIS APPEAL IS FILED UNDER SECTION 66(1) OF THE KVAT ACT, 2003 AGAINST THE ORDER DATED 17.06.2014 PASSED IN ZAC O3/DVG/SMR.46/13-14 ON THE FILE OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, ZONE-3, BANGALORE SETTING ASIDE THE APPEAL ORDER BEARING NO.CST AP 40, 41 & 42/13-14 DATED 10.10.2013 PASSED BY FAA AND RESTORING THE ASSESSMENT ORDER DATED 22.01.2013, PASSED UNDER SECTION 9(2) OF THE CST ACT, 1956.
IN STA No.100021/2014
BETWEEN:
M/S. SUNDER CREATIONS, 29 B/5, TANK BUND ROAD, MANIYAR LANE, BELLARY. REP. BY PROPRIETOR S. SUNITHA BAI W/O S. SATISH KUMAR. … APPELLANT
(BY SRI. NARAYAN G. RASALKAR, ADV.)
AND:
THE STATE OF KARNATAKA, REP BY PRINCIPAL SECRETARY, TO DEPT. OF FINANCE, VIDHANA SOUDHA, BANGALORE 560 009. … RESPONDENT (BY SRI. M. KUMAR, AGA)
6
THIS APPEAL IS FILED UNDER SECTION 66(1) OF THE KVAT ACT, 2003 AGAINST THE ORDER DATED 19.06.2014 PASSED IN ZAC O3/DVG/SMR.47/13-14 ON THE FILE OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, ZONE-3, BANGALORE SETTING ASIDE THE APPEAL ORDER BEARING NO.CST AP 31, 32 & 33/13-14 DATED 9.10.2013 PASSED BY FAA AND RESTORING THE ASSESSMENT ORDER DATED 22.04.2013, PASSED UNDER SECTION 9(2) OF THE CST ACT, 1956.
IN STA No.100022/2014
BETWEEN:
M/S. MASCO GARMENTS, NO.6, WARD NO.8, GOPI CHANNAPPA STREET, BELLARY-583101. REP. BY ITS PROPRIETOR BHOMARAM S/O KOLARARAOJI CHOWDHARY. … APPELLANT (BY SRI. NARAYAN G. RASALKAR, ADV.)
AND:
THE STATE OF KARNATAKA REP BY THE ADDL. COMMISSIONER OF COMMERCIAL TAXES (ZONE)-3, VTK.1 BANGALORE 560 009. …RESPONDENT
(BY SRI. M. KUMAR, AGA)
THIS APPEAL IS FILED UNDER SECTION 66(1) OF THE KVAT ACT, 2003 AGAINST THE ORDER DATED 18.06.2014 PASSED IN ZAC O3/DVG/SMR.49/13-14 ON THE FILE OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, ZONE-3, BANGALORE SETTING ASIDE THE APPEAL ORDER BEARING NO.CST AP 47/13-14 DATED 10.10.2013 PASSED BY FAA AND RESTORING THE ASSESSMENT ORDER DATED 24.04.2013, PASSED UNDER SECTION 9(2) OF THE CST ACT, 1956.
IN STA No.100019/2014
BETWEEN:
M/S. MAHAVEER COTTON JEANS, D.NO.35, KASAI STREET, BEHIND HRG BUILDING, NEAR JAIN MARKET, BELLARY-583101. … APPELLANT
(BY SRI. NARAYAN G. RASALKAR, ADV.)
7
AND:
THE STATE OF KARNATAKA REP BY THE SECRETARY TO GOVERNMENT, FINANCE DEPARTMENT, VIDHANA SOUDHA, BANGALORE 560 001. … RESPONDENT (BY SRI. M. KUMAR, AGA)
THIS APPEAL IS FILED UNDER SECTION 66(1) OF THE KVAT ACT, 2003 AGAINST THE ORDER DATED 20.06.2014 PASSED IN ZAC O3/DVG/SMR.51/13-14 ON THE FILE OF THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, ZONE-3, BANGALORE SETTING ASIDE THE APPEAL ORDER BEARING NO.CST AP 23, 24 & 25/13-14 DATED 9.10.2013 PASSED BY FAA AND RESTORING THE ASSESSMENT ORDER DATED 22.04.2013, PASSED UNDER SECTION 9(2) OF THE CST ACT, 1956.
THESE APPEALS COMING ON FOR ADMISSION, THE SAME
HAVING BEEN HEARD AND RESERVED ON 22.11.2017, THIS DAY, S.SUJATHA J., DELIVERED THE FOLLOWING:
JUDGMENT
Since common issues are involved in these matters,
the same are heard together and disposed of by this
common judgment.
2. These appeals arise against the order passed by the
Addl. Commissioner for Commercial Taxes, Zone-III,
Bengaluru, whereby the orders of the First Appellate
Authority is set aside restoring the re-assessment order
8
passed by the prescribed Authority for the assessment
period 2005-2006.
3. In all these cases, re-assessment orders were passed
under Section 9 (2) of the CST Act, read with Section 36(1)
and 72(2) of the Karnataka Value Added Tax Act, 2003 (for
short ‘the KVAT Act’) for the tax periods April, 2005 to
March, 2006, levying Central Sales Tax at 10%, penalty
and interest, in the absence of statutory forms furnished
by the assessees. Being aggrieved, the assessees preferred
appeal before the Joint Commissioner of Commercial
Taxes (Appeals), Davanagere Division, Davanagere, (First
Appellate Authority - for short ‘FAA’) who allowed the
appeals on the issue of limitation.
4. The Addl. Commissioner of Commercial Taxes
exercising the powers under Section 64 (1) of the KVAT
Act, initiated revision proceedings to revise the order of the
FAA as it was erroneous and prejudicial to the interest of
9
the Revenue. After issuance of notice and hearing the
assessees, revisional order was passed setting aside the
order of the FAA and restoring the re-assessment order of
the Assessing Authority. Being aggrieved, the assessees
are in appeal.
5. The learned counsel Shri Narayan G.Rasalkar,
appearing for the appellant would contend that the order
of the FAA was neither erroneous nor prejudicial to the
interest of the Revenue, since the order of re-assessment
was passed beyond the period of limitation under Section
40 of the KVAT Act, as it stood prior to 31.03.2011
relating to the assessment period 2005-2006. Inviting the
attention of this Court to Section 32 of the KVAT Act, the
learned counsel submitted that the assessees are liable to
maintain the books of accounts only for five years. Any
order passed subsequent to the period mentioned in
Section 32 of the Act to keep the books of accounts, is
arbitrary and illegal. The revisional authority overlooking
10
these aspects exercised the power under Section 64 of the
KVAT Act to revise the order of FAA who had verified the
provisions of Sections 40 and 32 of the KVAT Act, in the
right perspective while allowing the appeal. The order of
the FAA being justifiable, there was no occasion for the
Addl. Commissioner to revise the said order, the same
being not erroneous nor prejudicial to the interest of the
Revenue, the FAA has followed the provisions of the Act as
it stood during the relevant period. The impugned
reassessment proceedings were initiated by the prescribed
authority by issuing notice in VAT 275, without
jurisdiction. The assessment period 2005-2006 being the
first year of the KVAT coming into force, there was
confusion in the minds of the assessees as well as the
authorities. Filing of returns manually, was the cause for
the initiation of re-assessment proceedings.
Reassessment proceedings cannot be initiated casually,
the reasons for reassessment and additional information
not showing the correct tax liability in particular month by
11
way of evidence has to be disclosed with tax proposition.
No such reasons or material was disclosed in the
reassessment notices. The reason being incomplete and
summoning the accounts cannot be the basis for the
initiation of reassessment proceedings. The authority
ought to have called for the original assessment
records/returns/C-forms filed from Local VAT Officer who
has concluded the deemed assessments.
6. The learned counsel further submitted that during
the pendency of the proceedings, the constitutional
validity of the amendments made to Section 40 of the
KVAT Act extending the time limit to pass the
reassessment for the assessment year prior to 2006-2007
to eight years was challenged before this Court in series of
writ petitions. This Court in case of CIFTECH
SOLUTIONS PRIVATE LIMITED, VS. STATE OF
KARNATAKA [2015 (83) KLJ 270 (HC)], upheld the
constitutional validity of the amendment and permitted
12
the petitioners to file appeals in regard to their
contentions afresh. It is before the amendment was
brought into existence, their right in the form of
preventing the authorities to take up reassessment,
expired as per the provisions of Section 40. Section 40 as
existed during relevant period if considered, despite
upholding the validity of amendment made to the
provisions of Section 40, the ‘right’ of the appellant
seeking ‘right of limitation’ does not get extinguished by
the amendment. Notwithstanding the bar of limitation, a
base for upholding the impugned reassessment for 2005-
2006 by the authorities, still barred by the provisions of
Section 32 of the KVAT Act, would preclude the
authorities to proceed with the reassessment demanding
the production of books of accounts whose retention
period as prescribed has already expired. Section 32 of
the KVAT Act is not amended in co-extensive with
amendment to Section 40.
13
7. In support of his contentions, learned counsel placed
reliance on the following judgments:
i) COMMERCIAL TAXES OFFICER VS.
ZORASTER & CO., (1993 (89) STC 462),
ii) MAHAVEER DRUG HOUSE VS. ASSISTANT
COMMISSIONER OF COMMERCIAL TAXES,
ASSESSMENTS-II, (1991 (82) STC 388).
8. Learned Additional Government Advocate
supporting the impugned order submitted that notice
under Section 9 of CST Act read with Section 38(2) of the
KVAT Act was issued to reassess the assessees for the tax
periods in question to which the assessee did not respond.
On receipt of the original file from the office of the
Assessing Authority, LVO, it was noticed that dealer had
filed original C-Forms only to certain extent and rest of the
turnover effected towards the interstate sales were not
covered by C-Forms. Accordingly, the said transaction
was subjected to tax at 10% against which the assessees
14
preferred appeals before the FAA primarily, on the ground
of limitation. The FAA holding that re-assessment made
was barred by limitation, allowed the appeals. In view of
amendment brought to Section 40 (1) of the KVAT Act by
Act No.54/2013 with effect from 01.04.2005 and the
constitutional validity of the said amendment being
upheld by this Court in the case of Ciftech Solutions
supra, the order of the Appellate Court is erroneous and
prejudicial to the interest of the Revenue. Thus, the Addl.
Commissioner was justified in invoking the revisional
powers under Section 64 (1) of the Act.
9. Heard the leaned counsel appearing for the parties
and perused the material on record.
10. The points that arise for consideration in these
appeals are:
i) Whether the Additional Commissioner of
Commercial Taxes was justified in invoking the
powers under Section 64 (1) of the KVAT Act to
15
revise the order of the Appellate Authority
passed under Section 62 of the Act?
ii) Whether the re-assessment proceedings
initiated by the prescribed authority under the
Act are barred by limitation as provided under
Section 40 of the Act?
iii) Whether the reassessment proceedings
initiated by the prescribed authority are barred
by Section 32 of the Act?
11. Section 64(1) of the Act reads thus:
“(1) The Additional Commissioner may on his
own motion call for and examine the record of any
order passed or proceeding recorded under this Act
and if he considers that any order passed therein by
any officer, who is not above the rank of a Joint
Commissioner, is erroneous in so far as it is
prejudicial to the interest of the revenue, he may, if
necessary, stay the operation of such order for such
period as he deems fit and after giving the person
concerned 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
16
enhancing or modifying the assessment, or canceling
the assessment or directing a fresh assessment.
12. This provision contemplates that the Addl.
Commissioner is empowered to call for and to examine the
record of any order passed or proceeding recorded under
this Act and on such examination if it is found that any
order passed by any Officer who is not above the rank of a
Joint Commissioner, revision powers can be exercised
provided such order is erroneous in so far as it is
prejudicial to the interest of the Revenue. That means,
the essential factors viz., ‘erroneous’ and ‘prejudicial to the
interest of Revenue’ should co-exist in an
order/proceeding to take up for revision. It is apparent
that the Appellate Authority was of the view that
reassessment proceedings initiated by the prescribed
authority is barred by limitation.
13. Section 40 of the KVAT Act has undergone several
changes by way of amendments as under:
17
“Sec.40. Period of limitation for assessment.-
(1) An assessment under Section 38 or re-
assessment under Section 39 of an amount of tax due
for any prescribed tax period shall not be made after the
following time limits.-
(a) Four years after the end of the prescribed tax
period; or
(b) three years after evidence of facts, sufficient in
the opinion of the prescribed authority to justify
making of the reassessment, comes to its
knowledge.
whichever is later:
Provided that an assessment or
reassessment relating to any tax period ending
31st day of March, 2007 shall be made within a
period of five years after the end of the prescribed
tax period.
(2) If any tax is, not paid by a dealer who has
failed to get registered though liable to do so or
fraudulently evaded attracting punishment under
Section 79, an assessment or re-assessment may
be made as if in sub-section(1) reference to four
years was a reference to eight years.
(3) xxxx xxxx xxxx”
In the parent Act, the period of limitation for
finalization of original assessment, both deemed and
18
scrutiny was five years from the end of the tax period, as
per the provisions of Sec.40(1)(a) of the KVAT Act, 2003.
By Act No.12 of 2011, the words “four years” was
substituted w.e.f. 01.04.2011. At the same time, the
proviso to Sub Sec. 1 of Sec. 40 of the KVAT Act, 2003,
was inserted by Act No.12 of 2011 w.e.f., 01.04.2011
which read as under :
“Provided that an assessment or
reassessment relating to any tax period ending
31st day of March, 2007 shall be made within a
period of five years after the end of the
prescribed tax period.”
From the above insertion of the proviso w.e.f.
01.04.2011, it is obvious that any assessment or re-
assessment relating to any tax period ending 31.03.2007
shall be made within a period of five years. By virtue of
insertion of this proviso, it is obvious that the period of
limitation for concluding assessment or reassessment for
19
any tax period prior to 31.03.2007 gets extended by the
time prescribed therein.
14. This provision is further amended by Karnataka Act,
No.17/2012 as under:
“(1) An assessment under Section 38 or re-
assessment under Section 39 of an amount of tax due
for any prescribed tax period shall not be made after five
years after the end of the prescribed tax period.
Provided that an assessment or reassessment
relating to any tax period upto the period ending 31st
day of Mrach, 2007 shall be made within a period of
eight years after the end of the prescribed tax period:
Provided further that an assessment or reassessment
relating to any tax period commencing from the 1st day
of April, 2007 upto the period ending 31st day of March,
2012 shall be made within a period of seven years after
the end of the prescribed tax period.
(2) Notwithstanding anything contained in sub-section
(1), if any tax is, not paid by a dealer who has failed to
get registered though liable to do so or fraudulently
evaded attracting punishment under Section 79, an
assessment or reassessment may be made within eight
years from the end of the prescribed tax period:
Provided that an assessment or reassessment
relating to any tax period upto the period ending 31st
day of March, 2007 shall be made under this sub-
20
section within a period of ten years after the end of the
prescribed tax period.”
By virtue of this amendment, an assessment or
reassessment relating to any tax period upto the period
ending 31.03.2007 shall be made within a period of ten
years, after the end of the prescribed tax period. By
Karnataka Act No.54/2013, this Section is further
amended retrospectively with effect from the first day of
April, 2005, and the same reads thus:.
“(1) An assessment under Section 38 or
reassessment under Section 39 of an amount of tax
due for any prescribed tax period shall not be made
after five years after the end of the prescribed tax
period:
Provided that an assessment or reassessment
relating to any tax period upto the period ending 31st
day of March, 2007 shall be made within a period of
eight years after the end of the prescribed tax period:
Provided further than an assessment or
reassessment relating to any tax period commencing
from the 1st day of April, 2007 upto the period ending
31st day of March, 2012 shall be made within a period
of seven years after the end of the prescribed tax
period.
21
(2) Notwithstanding anything contained in sub-
section (1), if any tax is, not paid by a dealer who has
failed to get registered though liable to do so or
fraudulently evaded attracting punishment under
Section 79, an assessment or reassessment may be
made within eight years from the end of the prescribed
tax period:
Provided that an assessment or reassessment
relating to any tax period upto the period ending 31st
day of March, 2007 shall be made under this sub-
section within a period of ten years after the end of the
prescribed tax period.”
15. The constitutional validity of this provision was
challenged before this Court and the same has been
upheld in the case of Ciftech Solutions supra. Hence,
without any hesitation, it can be held that amendment to
Section 40 has retrospective effect with effect from
01.04.2005 enhancing the period of limitation provided
under Section 40 of the Act.
16. The contention of the assessee that a completed
assessment cannot be reopened after the prescribed
period by virtue of the said period having been enlarged by
22
amending the law requires to be negated in the light of the
judgment of the Hon’ble Apex Court in the case of
ADDITIONAL COMMISSIONER (LEGAL) AND ANOTHER
VS. JYOTI TRADERS AND ANOTHER (1997 (47) KLJ
107 (SC) wherein the Hon’ble Apex Court has held, when
the provision of law is explicit, it has to operate fully and
there could not be any limits to its operation and if the
language expressly so states or clearly implies,
retrospectively must be given to the provision. It is apt to
refer to the factual context of the case. Under sub-section
(1) of Section 21 of the Uttar Pradesh Trade Tax, 1948
before its amendment, the Assessing Authority may, after
issuing notice to the dealer and making such inquiry as it
may consider necessary, had the power to assess or
reassess the dealer according to law. Sub-section (2)
provided that except as otherwise provided in the said
section no order for any assessment year shall be made
after the expiry of 4 years from the end of such year.
However, after the amendment, a proviso was added to
23
sub-section (2) under which Commissioner of Sales Tax
authorizes the Assessing Authority to make assessment or
reassessment before the expiration of 8 years from the end
of such year notwithstanding that such assessment or
reassessment may involve the change of opinion. The
proviso came into force with effect from 19.02.1991. In
that context it was held that, it was immaterial if a period
for assessment or reassessment under sub-section (2) of
Section 21 before the addition of the said proviso had
expired. It was the completion of assessment or
reassessment under Section 21 which was to be done
before the expiration of eight years of that particular
assessment year. It was held that sub section (2) of
Section 21 of the Act does not put any embargo on the
Commissioner of Sales Tax not to reopen the assessment
if period, as prescribed earlier, had expired before the
proviso came into operation. Earlier the
assessment/reassessment could have been completed
within four years of that particular assessment year and
24
now by the amendment adding proviso to Section 21(2) of
the Act it is eight years. The only safeguard being that it is
after satisfaction of the Commissioner of Sales Tax. The
proviso is operative from 19-2-1991 and a bare reading of
the proviso shows that the operation of this proviso relates
and encompasses back to previous eight assessment
years.
17. In the present set of facts, the proviso to Section 40
have been amended with effect from 01.04.2012 by Act
No.17/2012 and subsequently by Act No.54/2013
retrospective effect was given with effect from 01.04.2005
and the constitutional validity of the same having been
upheld, the arguments of the learned counsel that the
reassessment proceedings are barred by limitation is
wholly untenable.
18. As regards the contentions of the learned counsel
with reference to Section 32 of the Act, it is apt to refer to
the said provision which reads thus:
25
“32. Period of retention of accounts.-
(1) Every dealer required under this Act to keep
and maintain books of account or other records
including tax invoices relating to his purchases and
sales shall retain them until the expiration of five years
after the end of the year to which they relate or for such
other period as may be prescribed or until the
assessment reaches finality, whichever is later.
(2) Where such dealer is a party to an appeal or
revision under this Act, he shall retain, until the appeal
or revision and any appeal therefrom is finally disposed
of, every record and accounting document that pertains
to the subject matter of the appeal or revision.”
(emphasis supplied)
19. The said provision directs every dealer to keep and
maintain books of accounts or other records including tax
invoices relating to his purchases and sales until the
expiration of five years after the end of the year to which
they relate or for such other period as may be prescribed
and the most relevant herein is, until the assessment
reaches finality, whichever is later. Thus, it is not only
until the expiration of 5 years the books of accounts are
required to be kept and maintained but also for such
other period as may be prescribed or until the assessment
26
reaches finality whichever is later. The phrase “until the
assessment reaches finality” has to be read in conjunction
with Sections 39 and 40 of the Act. The word
“assessment” is defined under Section 2 (5) of the Act
which reads thus:
“(5) ‘Assessment’ means an assessment made or deemed to have been made under this Act and includes a re-assessment.”
20. Thus, it is clear that assessment also includes
reassessment. The prescribed limitation for
assessment/reassessment is in terms of Section 40. The
limitation period being enlarged by the amendment carried
out under Section 40 of the Act, the same shall have a
bearing on Section 32.
21. In the present case, the period of limitation as per
the Amendment Act No.54/2013 is eight years with effect
from 01.04.2005 i.e., 30.04.2013, the date of finality of the
assessment, which would be the date of expiry of
limitation to reassess the deemed assessments made
under Section 38 of the Act for the assessment year 2005-
27
2006. Reassessment proceedings were initiated by issuing
notice dated 16.02.2013 and the reassessment order was
passed on 22.04.2013 well within the period of limitation
even as per Section 32 of the Act.
22. The Scheme of the Act is that the assessee/dealer
has to file the monthly returns as per Section 35 (1) of the
Act accompanied by the payment of tax and as per Section
38 (1) of the Act, every dealer shall be deemed to have
been assessed to tax based on the return filed by the
assessee under Section 35 except in cases where the
Commissioner may notify the dealer of any requirement of
production of accounts before the prescribed authority in
support of a return filed for any period and such authority
shall proceed to assess such dealer. Section 39 of the Act
provides for reassessment of tax where the prescribed
authority has grounds to believe that any return furnished
which is deemed as assessed or any assessment issued
under Section 38 understates the correct tax liability of
the dealer, it may, based on any information available,
28
reassess to the best of its judgment, the additional tax
payable and also impose penalty under sub section (2) or
sub section (5) of Section 72 and demand of payment of
any interest and shall make the demand under the
provisions of the Act applicable for the assessment under
the Central Sales Tax Act in terms of Section 9 (2) of the
CST Act.
23. It is the contention of the learned counsel for the
appellants that the notice issued under the KVAT Act with
Section 9(2) of the CST Act does not disclose the
information, is misconceived. The notice specifies that the
assessees had effected interstate transaction and
submitted C-Forms only to certain extent and for the
remaining transaction to which no C-forms were
submitted, reassessment proceedings were initiated to levy
tax at 10% as per the CST Act. This information was
collected after securing the files from the original
Assessing Authority. All along the appellants challenged
the reassessment order only on the ground of limitation.
29
The possibility of filing of C-Forms before the appellate
authority was not availed. Now, the attack made by the
learned counsel for the appellants on the re-assessment
order, being contrary to the provisions of the KVAT Act
cannot be accepted.
24. In the case of Mahaveer Drug House supra, on
which the relevance was placed by the learned counsel for
the appellants, it was a case where limitation under old
law expired before commencement of amended provision.
But, in the present case, the period of limitation is
enlarged with retrospective effect i.e., 01.04.2005. Hence,
the said judgment is not applicable to the facts of the
present case.
25. In the case of Zoraster & Co., supra, Rajasthan
High Court has held that retrospective amendment
extending period of limitation for reopening assessments
from four to eight years will not apply where limitation
expired before amendment. But, in the light of the
judgment of the Hon’ble Apex Court in Jyoti Traders
30
supra, this judgment would not be of any assistance to the
appellants. Moreover, the constitutional validity of the
retrospective amendment has been upheld w.e.f.
01.04.2005, which has reached finality.
26. Viewed from any angle, the revisional order passed
by the Addl. Commissioner of Commercial Taxes is
justifiable and does not call for any interference by this
Court.
Appeals stand dismissed.
Sd/-
JUDGE
Sd/- JUDGE
Jm/-