1996 (4) TMI 473 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of Section 21(7) of the U.P. Sales Tax Act.
2. Limitation period for reassessment under Section 21(7).
3. Applicability of the Supreme Court judgment in S.C. Prashar v. Vasantsen Dwarkadas.

Issue-wise Detailed Analysis:

1. Validity of Section 21(7) of the U.P. Sales Tax Act:

The petitioner argued that Section 21(7) of the U.P. Sales Tax Act is invalid and void as it violates Article 14 of the Constitution. The contention was based on the analogy of the second proviso to sub-section (3) of Section 34 of the Income-tax Act, 1922, which was declared unconstitutional in S.C. Prashar v. Vasantsen Dwarkadas [1963] 49 ITR 1 (SC); AIR 1963 SC 1356. The petitioner claimed that Section 21(7) creates hostile discrimination between two classes of dealers: those assessed under sub-section (1) of Section 21 within four years and those reassessed under sub-section (7) without any limitation period. The court, however, found that the case of S.C. Prashar was misplaced as it did not fully support the petitioner's argument. The majority view in S.C. Prashar was that the second proviso to Section 34(3) was unconstitutional only against third parties or strangers, not against assessees.

2. Limitation Period for Reassessment under Section 21(7):

The petitioner contended that the reassessment proceedings for the assessment year 1979-80 were barred by time and that no turnover for that year had escaped assessment. The court noted that the Assistant Commissioner (Judicial) had observed that the Sales Tax Officer could take proceedings under Section 21(7) for the assessment year 1979-80. The court concluded that the petitioner, being a party in the appeal, could not avail of the rule stated in S.C. Prashar. Therefore, the reassessment notice under Section 21(7) was valid and not barred by limitation.

3. Applicability of the Supreme Court Judgment in S.C. Prashar v. Vasantsen Dwarkadas:

The petitioner relied heavily on the Supreme Court judgment in S.C. Prashar to argue that Section 21(7) of the U.P. Sales Tax Act was unconstitutional. The court analyzed the judgment in detail and found that the majority view did not support the petitioner's contention. The majority held that the second proviso to Section 34(3) was unconstitutional only against third parties, not assessees. Since the petitioner was a party in the appeal, the court held that the rule in S.C. Prashar did not apply.

Conclusion:

The court dismissed the petition, holding that Section 21(7) of the U.P. Sales Tax Act was valid and not violative of Article 14 of the Constitution. The reassessment proceedings for the assessment year 1979-80 were not barred by limitation, and the petitioner could not rely on the judgment in S.C. Prashar. The interim order dated December 19, 1991, was discharged, and the parties were directed to bear their own costs.