1998 (11) TMI 615 - HC - VAT and Sales Tax

Summary

Issues:
Petitioner's liability to pay tax for collection of royalty, challenge to the order dated November 2, 1988, challenge to the communication order dated November 5, 1988, constitutionality of the second proviso to section 39(1) of the M.P. General Sales Tax Act, 1958.

Analysis:
The petitioner, a partnership firm engaged in royalty collection, challenged the Sales Tax Officer's order determining tax liability from December 11, 1981, issued on November 5, 1988 (annexures K and L), and the constitutionality of the second proviso to section 39(1) of the Act. The respondents contended that challenging these orders before the assessment order is passed is not permissible under the proviso. The petitioner argued that the order making them liable for tax was beyond the 12-month limit under section 4-A, rendering it jurisdictionally flawed. The Commissioner is mandated to determine tax liability within 12 months under section 4-A, failing which assessment proceedings under section 18(6) are initiated. The petitioner's proceedings, initiated in 1985, concluded in 1988, exceeding the time limit. The notice of tax liability dated November 5, 1988, was issued beyond the prescribed time, making it barred by limitation. As the remedy of revision under the proviso to section 39(1) was unavailable, the petitioner approached the Court under articles 226 and 227 of the Constitution.

The Court analyzed section 4-A and section 18(6) of the Act, emphasizing the time-bound nature of determining tax liability and subsequent assessment. The order determining liability must be completed within 12 months, failing which the proceedings stand terminated. The notice issued to the petitioner on November 5, 1988, was found to be time-barred under section 4-A, leading to its quashing. The Court refrained from ruling on the validity of the second proviso to section 39(1) as the primary issue of jurisdictional time limitation was decisive. Consequently, the Court held the respondents' actions as without jurisdiction, quashed the order dated November 5, 1988, and allowed the petition, with no costs imposed.

In conclusion, the Court's judgment favored the petitioner, highlighting the importance of adhering to statutory time limits for determining tax liability and subsequent assessment proceedings. The decision focused on the jurisdictional aspect of time limitation under section 4-A, leading to the quashing of the notice of tax liability issued beyond the prescribed period. The Court's ruling underscored the significance of procedural compliance within the statutory framework, ensuring fairness and legality in tax assessments.