1998 (5) TMI 386 - HC - VAT and Sales Tax

Issues Involved:
1. Scope of application of Section 12(6)(b) of the Karnataka Sales Tax Act, 1957.
2. Validity of assessment proceedings initiated beyond the period contemplated under Section 12(5) of the Act.
3. Requirement of notice to the assessee regarding deferment orders under Section 12(6)(b).
4. Adherence to principles of natural justice in the context of deferment orders.

Detailed Analysis:

1. Scope of Application of Section 12(6)(b) of the Karnataka Sales Tax Act, 1957
Section 12(6)(b) allows for the exclusion of the period during which the assessment has been deferred by the Commissioner for reasons recorded in writing. This provision essentially acts as a proviso to Section 12(5), which stipulates a three-year period for completing assessments. The court examined the scope and ambit of this sub-section, noting that the period of limitation mentioned in Section 12(5) continues to run unless deferred under Section 12(6)(b).

2. Validity of Assessment Proceedings Initiated Beyond the Period Contemplated Under Section 12(5)
The court emphasized that the statutory bar of limitation in Section 12(5) extinguishes the right of the department to assess the assessee after three years from the date of filing the return. The only exceptions are provided under Section 12(6)(a) and (b). The court held that any deferment must be made within the statutory period and communicated to the assessee to be valid.

3. Requirement of Notice to the Assessee Regarding Deferment Orders Under Section 12(6)(b)
The court underscored that a unilateral decision to defer the assessment without notice to the assessee cannot bind the assessee. The court held that for the deferment order to be effective, it must be communicated to the assessee within the three-year period stipulated under Section 12(5). The court cited the principle that any action affecting the rights of a party must be communicated to that party to be valid.

4. Adherence to Principles of Natural Justice in the Context of Deferment Orders
The court reiterated that the principles of natural justice necessitate that any order affecting the rights of an assessee must be made after giving them an opportunity to be heard. The court noted that the requirement to record reasons for deferment indicates that such orders must be based on sound reasons and subject to judicial scrutiny. The court referred to the Supreme Court's observation in Fag Precision Bearings v. Sales Tax Officer, which emphasized that the power to defer assessments should be exercised only in extraordinary circumstances and after giving notice to the assessee.

Case-Specific Judgments:

Writ Petition Nos. 12083-12085 of 1997
The court found that the deferment orders were not communicated to the petitioners within the statutory period, rendering the assessment proceedings barred by limitation.

Writ Petition No. 21319 of 1991
The court quashed the deferment order as it was not communicated within the statutory period and the reasons for deferment were not valid, following the Supreme Court's guidelines.

Writ Petition Nos. 8319-22 of 1997
The court quashed the deferment order as it was made after the expiry of the three-year period and the reasons given were not valid.

Writ Petition Nos. 19503-504 of 1997
- W.P. No. 19503 of 1990: The court upheld the reassessment as it was within the extended period of limitation.
- W.P. No. 19504 of 1990: The court found the deferment order invalid due to insufficient reasons and declared the assessment barred by time.

Conclusion:
The court allowed W.P. Nos. 12083-85 of 1997, W.P. No. 21319 of 1991, W.P. Nos. 8319-22 of 1991, and W.P. 19504 of 1990, quashing the respective deferment orders and assessment proceedings. W.P. No. 19503 of 1990 was dismissed, upholding the reassessment within the extended limitation period. The court emphasized the necessity of adhering to statutory requirements and principles of natural justice in the context of deferment orders under Section 12(6)(b).

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