2007 (5) TMI 213 - SC - VAT and Sales Tax

Legality of a notice issued by the Deputy Commissioner of Commercial Taxes, Kollam, vis-a-vis the provisions of the Kar Vivad Samadhan Scheme, 1998 framed under the Finance (No. 2) Act, 1998 Held that - Once it is found that a statutory authority had the jurisdiction to reopen a proceeding or set aside the order of the assessing authority, only the higher authorities can interfere therewith. Only because the appellant had taken recourse to the Scheme, the same, in our opinion, would not attract either sub-section (3) of section 90 of the Scheme or section 91 thereof so as to cover a subject which is within the exclusive domain of the State Legislature. In that sense, the said Scheme must be read as limited to those laws which Parliament has the legislative competence to enact and not to those which fall within the exclusive legislative field of a State, save and except where expressly so stated or inferred by necessary implication. A Legislature is presumed to enact a law only within its domain of field of legislation. If the contention that the provisions of the Scheme would also apply to tax laws created by the State is accepted, it being beyond the legislative competence, would amount to a colourable piece of legislation. This appeal, thus, being devoid of any merit, is dismissed with the aforementioned observations.

Summary

Issues Involved:
1. Legality of the notice issued by the Deputy Commissioner of Commercial Taxes.
2. Applicability of the Kar Vivad Samadhan Scheme, 1998, to state sales tax laws.
3. Jurisdiction of the Deputy Commissioner in exercising suo motu revisional power.

Detailed Analysis:

1. Legality of the Notice Issued by the Deputy Commissioner of Commercial Taxes:
The appellant, engaged in the manufacture and sale of insulated electrical cable, was subjected to assessment proceedings for the years 1995-96 and 1996-97 under the Kerala General Sales Tax Act, 1963. Following an inspection that revealed unaccounted production and sales, the appellant invoked the Kar Vivad Samadhan Scheme, 1998, which led to the setting aside of the earlier assessment order by an order dated January 14, 2003. Subsequent appeals and re-examinations resulted in the setting aside of the 1996-97 assessment and a directive for reassessment for 1995-96. The appellant's appeals against these orders were dismissed by the Tribunal and the High Court.

2. Applicability of the Kar Vivad Samadhan Scheme, 1998, to State Sales Tax Laws:
The primary contention was whether sub-section (3) of section 90 of the Scheme, which states that no matter covered by an order under the Scheme shall be reopened under any other law, applies to state sales tax laws. The court held that the Scheme's provisions extend only to enactments made by Parliament, as per Article 246 of the Constitution of India. The legislative field for sales tax is exclusively within the domain of the State Legislature (entry 54, List II of the Seventh Schedule). The court concluded that the Scheme cannot be extended to state sales tax assessments unless expressly stated or necessarily implied. The appellant's reliance on Article 286(3) and Article 366(29A) was deemed misplaced as the Scheme is not referable to these provisions.

3. Jurisdiction of the Deputy Commissioner in Exercising Suo Motu Revisional Power:
The appellant argued that the Deputy Commissioner's exercise of suo motu revisional power was without jurisdiction. The court referred to section 35 of the Kerala General Sales Tax Act, which allows the Deputy Commissioner to revise any order prejudicial to revenue within four years, provided no appeal is pending and the person affected is given a reasonable opportunity to be heard. The court found no reason to question the Deputy Commissioner's jurisdiction, emphasizing that the appellant could present all contentions and relevant materials before the assessing authority during reassessment. The court also noted that the Tribunal had left the matter open to the assessing authority, ensuring that the appellant could argue the legality of the earlier assessment orders.

Conclusion:
The appeal was dismissed, affirming that the Kar Vivad Samadhan Scheme, 1998, does not apply to state sales tax laws and upholding the jurisdiction of the Deputy Commissioner to exercise suo motu revisional power. The court ensured that the appellant could raise all contentions and present relevant materials during reassessment, maintaining an open and fair reconsideration of the case. No order as to costs was made.