2007 (7) TMI 573 - HC - VAT and Sales Tax

Reason to believe - treatment to petitioner of either as an importer or as a manufacturer - Opportunity of hearing - Reassessment - period of limitation for passing a fresh order by the Additional Commissioner after the same has been set aside by this Court under Article 226 Held that - From a reading of the definition of the words manufacture and importer as it stood during the relevant period the petitioner cannot treated either as an importer or as a manufacturer because he has not ejected first sale of goods after their import or after its manufacture in the State of Uttar Pradesh. So far as the question that the petitioner is being treated as manufacturer is concerned, we may mention here that the definition of word manufacturer as it stood during the relevant period, various processes mentioned therein should be done by the person concerned, i.e. the dealer either by itself or got done on its behalf. If the process is not being carried out by the dealer he would not be a manufacturer in respect thereof. As the Additional Commissioner has not given any reasons for granting permission/sanction to proposal to reopen the assessment for the assessment year in question and to make the reassessment under the extended period of limitation, the order dated 1st June, 2001 cannot be sustained and is therefore set aside. Consequently all proceedings taken in pursuance of the said order also falls and are set aside. Where proceeding has been set aside by this Court in exercise if powers under Article 226 of the Constitution the period of limitation shall not apply while initiating proceeding thereafter We are therefore of the considered opinion that the period of imitation provided under the first proviso to Sub-section 2 of Section 21 or Sub-sectioni4 of Section 21 would not be attracted in the present case both for passing a fresh order of sanction and reassessment. However, it would not mean that they could be passed at any time at the sweet will of the authorities. They are to be passed within a reasonable period and; what be the reasonable period would depend upon the facts of each case. As already found that Additional Commissioner has not given any reason in his order for granting approval, the order dated 1st June 2001 cannot be sustained and is hereby set side and consequently the notice issued on 4th March, 2002 also cannot be sustained and is hereby set aside. The Additional Commissioner- Respondent No. 1 Is directed to passed fresh order in accordance with law after giving an opportunity of hearing to the petitioner and after recording reasons

Summary

Issues Involved:
1. Quashing of notices dated 4.3.2002.
2. Quashing of the order dated 1.6.2001.
3. Quashing the entire proceedings under Section 21(2) for the assessment year 1994-95.
4. Awarding the cost of the petition to the petitioner.
5. Jurisdiction and validity of the reassessment proceedings.

Issue-wise Detailed Analysis:

1. Quashing of Notices Dated 4.3.2002:
The petitioner challenged the notice dated 4th March 2002 issued under Section 21(2) of the U.P. Trade Tax Act, 1948, on the grounds that it lacked any fresh material to justify the reopening of the assessment and was based on a mere change of opinion. The court noted that the notice was issued based on the decision in the case of Commissioner of Sales Tax, U.P. v. Kabar Khana, Turkmanpur, which held that goods purchased from Kabaries are not exempt and are liable to tax. However, the court found that the notice did not provide sufficient grounds for the reassessment and was issued without proper application of mind. Consequently, the notice dated 4th March 2002 was quashed.

2. Quashing of the Order Dated 1.6.2001:
The petitioner also sought to quash the order dated 1st June 2001, which granted permission for reopening the assessment. The court observed that the order lacked any recorded satisfaction or reasons for reopening the assessment beyond the period of limitation. It was further noted that the Additional Commissioner had granted approval without proper application of mind and without providing any reasons. The court held that the absence of reasons rendered the order invalid. Therefore, the order dated 1st June 2001 was quashed.

3. Quashing the Entire Proceedings Under Section 21(2) for the Assessment Year 1994-95:
The petitioner argued that the entire proceedings under Section 21(2) for the assessment year 1994-95 should be quashed as they were initiated without any fresh material and merely on account of a change of opinion. The court agreed with the petitioner, highlighting that the proceedings were initiated without any new material and were based on a change of opinion, which is not a valid ground for reopening the assessment. Consequently, the entire proceedings under Section 21(2) for the assessment year 1994-95 were quashed.

4. Awarding the Cost of the Petition to the Petitioner:
The petitioner sought the cost of the petition. The court, considering the facts and circumstances of the case, allowed the writ petition but did not award any costs to the petitioner.

5. Jurisdiction and Validity of the Reassessment Proceedings:
The court discussed the jurisdiction and validity of the reassessment proceedings under Section 21(2) of the U.P. Trade Tax Act, 1948. It was observed that the term "manufacturer" as defined in Section 2(ee) of the Act could not be applied retrospectively to the assessment year in question (1994-95). The court referred to the Supreme Court's decision in Jhunjhunwala and Ors. v. State of U.P. and Ors., which held that the definition of "manufacturer" could not be generalized without examining the factual scenario. The court further emphasized the necessity of providing an opportunity of hearing to the assessee before granting approval for reassessment. The absence of reasons in the approval order and the lack of an opportunity for the petitioner to present their case rendered the reassessment proceedings invalid.

Conclusion:
The court allowed the writ petition, quashing the notices dated 4.3.2002, the order dated 1.6.2001, and the entire proceedings under Section 21(2) for the assessment year 1994-95. The court directed the Additional Commissioner to pass a fresh order in accordance with the law after giving an opportunity of hearing to the petitioner and recording reasons. The writ petition was allowed without any order as to costs.