1996 (12) TMI 322 - SC - VAT and Sales Tax

Whether the power of staying assessment proceedings was quasi-judicial in nature? Held that - Appeal allowed. Under the terms of rule 37-A, the Commissioner is required to put in writing the reasons and circumstances that necessitate the stay of proceedings. The stay of assessment proceedings has consequences of a civil nature upon an assessee, which the High Court has, as aforesaid, noted. The more the time that elapses the more difficult it is for the assessee to prove his accounts and claim set-off, exemptions and the like. We take the view that, in the circumstances, the power under rule 37-A may not be exercised by the Commissioner without first giving to the assessee notice to show cause why his assessment proceedings should not be stayed for a stated period. The said order states that notice to show cause why the assessments should not be stayed was given to the appellant. The number of the notice is mentioned and its date is stated to be Nil . The writ petition averred that no such notice had been served upon the appellant. The affidavit in reply to the writ petition did not counter the averment it stated that no hearing was necessary. The High Court proceeded upon the basis that the notice had not been served, and it held that a notice was not required. As set out above, we do not agree.

Summary

Issues:
1. Validity of the order for stay of assessment proceedings.
2. Nature of the power to stay assessment proceedings.
3. Requirement of notice and reasons for stay of assessment proceedings.

Analysis:
1. The appellant, engaged in the business of manufacturing and selling bearings, filed a writ petition to challenge an order passed by the Deputy Commissioner of Sales Tax staying the appellant's assessments for the period 1st September, 1976 to 31st August, 1984. The High Court dismissed the writ petition, leading to the appeal before the Supreme Court.

2. The High Court examined the nature of the power to stay assessment proceedings, determining that it was not quasi-judicial. The court highlighted the historical context of introducing time limits for assessments to prevent delays and ensure efficient tax collection. The court also discussed scenarios where stay of assessments may be necessary, such as during a strike or when legal issues are pending before a higher court.

3. The Supreme Court scrutinized the validity of the order for stay of assessment proceedings under Section 42 of the Gujarat Sales Tax Act and Rule 37-A. The court emphasized that the power to stay assessments should only be exercised in extraordinary circumstances not attributable to assessing authorities' default. The court held that the reasons for stay must be substantial and not merely due to pending assessment proceedings.

4. The Court further emphasized the importance of providing notice to the assessee before staying assessment proceedings. It ruled that the Commissioner must give the assessee an opportunity to show cause why assessments should be stayed, outlining the reasons and circumstances for the stay. Failure to provide such notice violates principles of natural justice.

5. Consequently, the Supreme Court set aside the impugned order for stay of assessments and directed the Commissioner of Sales Tax to issue a notice to the appellant, allowing them to show cause why assessments for the specified period should be stayed. If the notice is not issued within 16 weeks, all sales tax amounts collected for the relevant period must be refunded to the appellant.

6. In conclusion, the Supreme Court allowed the appeal, setting aside the impugned order and assessment orders passed based on it. No costs were awarded in the matter.