2015 (9) TMI 1327 - HC - VAT and Sales Tax

Demand and recovery of purchase tax after 5 years - period of limitation - Punjab Value Added Tax Act, 2005 - the respondent /assessee had intentionally withheld the legitimate purchase tax due to be deposited along with the returns - Held that - There is no dispute that prior to the amendment of provisions of section 11 of the PGST Act with effect from March 3, 1998 there was no limitation prescribed for assessing the amount of tax due from the dealer on the basis of returns where the Assessing Officer was satisfied that the returns furnished by the dealer were correct and complete. It is well-settled that law of limitation is a procedural law and operates retrospectively unless it has been provided differently in the amending statute. In other words, unless there is a contrary intention manifested by express or necessary implication of the legislation itself, procedural law is generally retrospective. Once a period of limitation prescribed by law expires, the right to sue or pass an order comes to an end. Resultantly, a vested or an accrued right arises in favour of a party. The assessment year involved herein is 1989-90. The assessment under section 11(3) of the PGST Act was framed on August 29, 2003 which is clearly beyond the period of limitation of three years from the date of amendment and thus not sustainable in the eyes of law. - Decided against the revenue.

Issues Involved:

1. Sustainability of the Tribunal's order.
2. Applicability of the judgment in Shubh Timb Steels Limited v. State of Punjab.
3. Retrospective vs. prospective application of the amendment dated April 20, 1998.
4. Entitlement to relief based on limitation.
5. Legitimacy of withholding purchase tax and its impact on sale prices.

Issue-wise Detailed Analysis:

1. Sustainability of the Tribunal's order:
The court examined whether the Tribunal's order dated March 11, 2013, was legally sustainable. The Tribunal had allowed the appeal of the respondent on the ground that the assessment was framed beyond the prescribed limitation period. The court upheld the Tribunal's decision, stating that the assessment order passed on August 29, 2003, for the year 1989-90 was beyond the three-year limitation period introduced by the amendment effective from March 3, 1998.

2. Applicability of the judgment in Shubh Timb Steels Limited v. State of Punjab:
The appellants argued that the Tribunal erroneously relied on the judgment in Shubh Timb Steels Limited v. State of Punjab. However, the court found that the Tribunal's reliance on this precedent was appropriate, as it dealt with similar issues of limitation and procedural amendments.

3. Retrospective vs. prospective application of the amendment dated April 20, 1998:
The amendment to Section 11 of the PGST Act, effective from March 3, 1998, introduced a three-year limitation period for passing assessment orders. The court clarified that procedural laws, including those prescribing limitation periods, generally operate retrospectively unless explicitly stated otherwise. Thus, the three-year limitation applied to all pending assessments, including those for periods before the amendment's effective date.

4. Entitlement to relief based on limitation:
The court emphasized that once a period of limitation expires, the right to pass an order or sue comes to an end. This creates a vested right in favor of the party against whom the order would be passed. Therefore, any assessment order passed after the expiration of the prescribed limitation period is not legally sustainable. In this case, the assessment for the year 1989-90, framed on August 29, 2003, was beyond the permissible period and thus invalid.

5. Legitimacy of withholding purchase tax and its impact on sale prices:
The appellants contended that the respondent had intentionally withheld purchase tax and incorporated it into the sale prices of their products, thereby profiting unjustly. However, the court focused on the procedural aspect of the limitation period and did not delve into the substantive merits of this argument. The court's decision was based on the procedural lapse of passing the assessment order beyond the prescribed limitation period.

Conclusion:
The court dismissed the appeals, affirming the Tribunal's decision that the assessment orders were time-barred and thus not sustainable. The substantial questions of law were answered in favor of the respondent, emphasizing the retrospective application of procedural amendments and the importance of adhering to prescribed limitation periods in tax assessments.

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