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2015 (8) TMI 1389 - HC - VAT and Sales TaxValidity of reassessment orders - legality and ultra vires of second provisos to sub-section (1) of Section 40 of the Karnataka Value Added Tax Act, 2003 substituted by Act No.54/2013 with effect from 01.04.2005 - time limitation - benefit of deemed assessment u/s 38 - Whether Section 40 of the Act suffers from the vice of constitutional validity on any ground whatsoever and as such, the consequential re- assessment orders passed by the jurisdictional assessing Officers are liable to be set aside or quashed? Held that - when the impugned provisions are examined, it would be clear that the State Legislature while amending Section 40 of the Act repealed the earlier amendment made to Section 40 of the Act with effect from 01.04.2011 and substituted the new provision of law namely Act No.17 of 2012 in its place. By virtue of such substitution, the period of limitation of five years for assessment made under Section 38 or reassessment made under Section 39 stood enhanced to eight years relating to any tax period upto the period ending 31st March, 2007 and for the period commencing from 01.04.2007 to the period ending 31st March, 2012, it was enhanced to seven years. Same has been impugned on the ground that it enables the prescribed authority to reopen the assessment already concluded and which had attained finality and which could not have been reopened or reassessed in view of the bar of limitation contained in the unamended provision and as such, there cannot be retrospective operation of the said provision. Law of limitation is intended to give certainty and finality to legal proceedings. It is well settled that no statute shall be construed to have a retrospective operation until its language is such that would require such a conclusion. The exception to this Rule is enactments dealing with procedure. The law of limitation being a procedural law, is retrospective in operation in the sense that it will also apply to proceedings pending at the time of enactment as also to proceedings commenced thereafter. However, where the right to such action is barred under the law of limitation in force before the new provision came into operation and a vested right has accrued to another, the new provision cannot revive the barred right or take away the accrued vested right. Any assessment or re-assessment proceedings relating to the period 31st March, 2007 if commenced, shall be concluded within a period of eight years after the end of prescribed tax period. Viewed from the angle of retrospective operation also, it requires to be held that in the instant case, the provisos to sub-section (1) of Section 40 having been amended with effect from 01.04.2012 by Act No.17/2012 and subsequently, by Act No.54/2013 sub-sections (1) and (2) of Section 40 having been held as deemed to have come into effect from 01.04.2005 itself, it has to be necessarily held that assessment/re-assessment proceedings initiated cannot be held as initiated within time prescribed under Section 40. Petition dismissed - decided against petitioner.
Issues Involved:
1. Constitutional validity of the first and second provisos to sub-section (1) of Section 40 of the Karnataka Value Added Tax Act, 2003. 2. Legislative competence of the State to amend Section 40 retrospectively. 3. Jurisdiction of re-assessment orders passed under the amended Section 40. 4. Applicability of the amended Section 40 to assessments that had already attained finality. 5. Interpretation of the term "substitution" in legislative amendments. Detailed Analysis: Issue 1: Constitutional Validity of the Provisos to Section 40(1) The petitioners argued that the first and second provisos to sub-section (1) of Section 40 of the Karnataka Value Added Tax Act, 2003, substituted by Act No.54/2013 with effect from 01.04.2005, are beyond legislative competence and thus, illegal, invalid, and ultra vires of the Constitution of India. They contended that these amendments retrospectively extended the period of limitation for assessments, thereby reviving time-barred assessments, which is unconstitutional. Issue 2: Legislative Competence to Amend Retrospectively The petitioners claimed that the State Legislature lacked the competence to enact retrospective amendments that alter the period of limitation for assessments, arguing that such amendments cannot revive assessments that had already become final or time-barred under the unamended law. They cited several judgments to support their contention that retrospective amendments affecting substantive rights or imposing new liabilities cannot be presumed unless explicitly stated by the statute. Issue 3: Jurisdiction of Re-assessment Orders The petitioners contended that the re-assessment orders passed under the amended Section 40 were without jurisdiction, as the limitation period for such assessments had already expired under the unamended law. They argued that the deemed assessment under Section 38 should benefit the assessee, and any re-assessment beyond the prescribed limitation period is without authority. Issue 4: Applicability to Final Assessments The petitioners argued that the retrospective amendment to Section 40 cannot be applied to assessments that had already attained finality due to the expiry of the limitation period under the unamended law. They contended that such retrospective application is unconstitutional and violates the principle of legal certainty and finality. Issue 5: Interpretation of "Substitution" The court analyzed the term "substitution" used in the legislative amendments and concluded that it implies the repeal of the earlier provision and its replacement with the new provision. The court cited the Supreme Court's judgment in Zile Singh vs. State of Haryana, which held that substitution results in the repeal of the earlier provision and the introduction of a new provision in its place. Court's Findings: 1. Constitutional Validity and Legislative Competence: The court held that the State Legislature has the power to legislate both prospectively and retrospectively unless expressly prohibited by the Act. The amendments to Section 40 were within the legislative competence of the State, and the retrospective effect was intended to extend the limitation period for assessments. 2. Jurisdiction of Re-assessment Orders: The court found that the re-assessment orders passed under the amended Section 40 were valid and within jurisdiction. It held that the amendments extended the limitation period for assessments, allowing the authorities to re-open and conclude assessments within the extended period. 3. Applicability to Final Assessments: The court held that the retrospective amendment to Section 40 applied to assessments that had already attained finality under the unamended law. It concluded that the legislative intent was clear in extending the limitation period, and the amended provision must be given full effect. 4. Interpretation of "Substitution": The court agreed with the petitioners that "substitution" implies the repeal of the earlier provision and its replacement with the new provision. However, it held that the retrospective substitution of Section 40 was valid and extended the limitation period for assessments. Conclusion: The writ petitions were dismissed, and the court upheld the validity and retrospective application of the amendments to Section 40 of the Karnataka Value Added Tax Act, 2003. The court directed that the dismissal would not preclude the petitioners from challenging the assessment/re-assessment orders before the jurisdictional appellate authority in accordance with the law. If appeals are filed within eight weeks, the appellate authority should not insist on an application for condonation of delay. No order as to costs was made.
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