1998 (12) TMI 586 - HC - VAT and Sales Tax

Issues Involved:
1. Legality of the seizure of books of accounts under Section 59(4) of the Gujarat Sales Tax Act.
2. Validity of reassessment notices under Section 44 of the Gujarat Sales Tax Act for the periods 1990-91 to 1994-95.
3. Applicability of the Commissioner's determination under Section 62 of the Gujarat Sales Tax Act.
4. Jurisdiction and authority of the Sales Tax Officer in initiating reassessment proceedings based on audit objections.
5. Time-barred reassessment proceedings for the financial years 1990-91 and 1991-92.

Issue-wise Detailed Analysis:

1. Legality of the seizure of books of accounts under Section 59(4) of the Gujarat Sales Tax Act:

The petitioner challenged the seizure of books of accounts under Section 59(4) on the grounds that the conditions for exercising such power did not exist. The court examined the provision, which requires the Commissioner to have "reason to believe" that the dealer has evaded or is attempting to evade tax, and such reasons must be recorded in writing. The court found no act or omission by the petitioner that could be termed as evasion or an attempt to evade tax. The court concluded that the reasons recorded did not disclose the necessary pre-condition for invoking jurisdiction under Section 59(4) and thus quashed the seizure order as ultra vires.

2. Validity of reassessment notices under Section 44 of the Gujarat Sales Tax Act for the periods 1990-91 to 1994-95:

The reassessment notices under Section 44 were challenged on the basis that no reasons were recorded for holding the belief that the turnover had escaped assessment or been under-assessed. The court noted that the requirement of "reason to believe" must have some material nexus with the belief about escapement or under-assessment. The court found that the belief held by the assessing officer was not based on any new material but was influenced by the audit objections and directions from the Deputy Commissioner. The court held that the belief must be of the assessing officer himself and not of any other authority. Consequently, the reassessment notices were quashed.

3. Applicability of the Commissioner's determination under Section 62 of the Gujarat Sales Tax Act:

The petitioner argued that the rate of tax applicable to rubber insertion sheets had been determined by the Commissioner under Section 62 and followed by authorities since 1976 and 1982. The court examined the two orders under Section 62, which classified the rubber insertion sheets as accessories to machinery eligible for a reduced tax rate. The court found that these orders did not depend on any specific inquiry about the special designing or end-use of the articles. The court concluded that the orders under Section 62 were applicable to the petitioner, and the doubt about their applicability was unfounded.

4. Jurisdiction and authority of the Sales Tax Officer in initiating reassessment proceedings based on audit objections:

The court addressed the issue of whether the reassessment proceedings were initiated based on the belief of the assessing officer or influenced by audit objections. The court found that the assessing officer had earlier satisfied himself about the correct levy of tax and had not held any belief about under-assessment. The reassessment proceedings were initiated based on directions from the Deputy Commissioner following audit objections. The court held that the belief must be of the assessing officer and not influenced by an outside agency. The reassessment notices were quashed on this ground.

5. Time-barred reassessment proceedings for the financial years 1990-91 and 1991-92:

The petitioner contended that the reassessment proceedings for the financial years 1990-91 and 1991-92 were barred by time. The court examined Section 44, which allows reassessment within five years unless there is concealment or knowingly furnishing incorrect declarations, extending the period to eight years. The court found no specific reference to concealment or incorrect declarations in the notices. Therefore, the reassessment proceedings for these years were held to be time-barred and without jurisdiction.

Conclusion:

The court allowed the petition, quashing the impugned order under Section 59(4) and the reassessment notices under Section 44 for the assessment periods 1990-91 to 1994-95. The rule was made absolute, and no order as to costs was passed.

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