1967 (11) TMI 99 - SC - VAT and Sales Tax

Whether the Sales Tax Authority is not competent to issue a notice under sub- section (2) of section 8 after expiry of three years prescribed by section 10? Held that - Appeal allowed. The notice under section 11(2) is only a step in the proceeding for assessment and does not disturb the continuity of the proceeding. Therefore when the Sales Tax Officer issued a notice against the respondent under section 8(2) of the Madhya Bharat Sales Tax Act 1950 a fresh proceeding to assess turnover which has escaped assessment was not commenced and section 10 of the Act was not attracted thereto.

Summary

Issues Involved:

1. Validity of assessment proceedings initiated after the prescribed period.
2. Interpretation of Section 10 of the Madhya Bharat Sales Tax Act, 1950.
3. Applicability of the judgment in Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax.

Issue-wise Detailed Analysis:

1. Validity of Assessment Proceedings Initiated After the Prescribed Period:

The respondent, a public limited company engaged in manufacturing and selling hydrogenated oil, submitted returns of turnover for the four quarters of 1958-59 under the Madhya Bharat Sales Tax Act, 1950. The Act was repealed on April 1, 1959, but the assessment in this case remained governed by its provisions. The Additional Assistant Commissioner of Sales Tax issued a notice on September 17, 1962, to the respondent to show cause why the transactions included in the taxable turnover should not be taxed at the full rate. The respondent contended that since the assessment was not completed within three years from the last day of the year of assessment, as provided by Section 10 of the Madhya Bharat Sales Tax Act, 1950, the Sales Tax Officer had no power to continue the proceeding. The High Court quashed the proceeding for assessment, following its judgment in Malwa Vanaspati & Chemical Co. Ltd. v. The Regional Assistant Commissioner of Sales Tax, Indore, Miscellaneous Petition No. 356 of 1963.

2. Interpretation of Section 10 of the Madhya Bharat Sales Tax Act, 1950:

The Supreme Court examined the relevant provisions of the Madhya Bharat Sales Tax Act, 1950, particularly Sections 7, 8, and 10. Section 7 requires dealers to furnish returns of their turnover, while Section 8 outlines the process for assessing taxable turnover and determining the tax due. Section 10 specifies that if any part of the turnover has escaped assessment, the assessing authority can assess the tax within three years from the end of the relevant year. The High Court had interpreted that if the assessment was not completed within three years, the turnover was deemed to have escaped assessment, and no further steps could be taken under Section 8(2). The Supreme Court, however, clarified that if a return is filed by a dealer, a proceeding for assessment commences, and a notice under Section 8(2) is a step in completing the assessment. The Act does not mandate that the proceeding must be completed within any fixed period.

3. Applicability of the Judgment in Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax:

The respondent's counsel argued that the Supreme Court's decision in Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax, which interpreted the C.P. and Berar Sales Tax Act, 1947, supported their contention. The Supreme Court distinguished Ghanshyamdas's case, noting that it dealt with different provisions and circumstances. In Ghanshyamdas, the Court held that a proceeding for assessment remains pending until a final order is made and that a proceeding commences when a registered dealer files a return or when the Commissioner issues a notice to an unregistered dealer. The Court clarified that in the present case, the proceeding for assessment had already commenced when the respondent filed the return, and the notice under Section 8(2) was merely a step in the ongoing proceeding. Therefore, Section 10's limitation did not apply to the notice issued under Section 8(2).

Conclusion:

The Supreme Court concluded that the High Court erred in quashing the assessment proceeding. The assessment proceeding, having commenced with the filing of the return, could be completed without any time restriction. The issuance of a notice under Section 8(2) did not attract the bar of Section 10. The appeal was allowed, and the order of the High Court was set aside. The petition filed by the respondent was dismissed with costs.

Appeal allowed.