1999 (11) TMI 833 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of reassessment notice under Section 44 of the Gujarat Sales Tax Act, 1969.
2. Validity of reassessment notice issued beyond the prescribed period.
3. Effect of retrospective cancellation of licenses on the validity of sales made against Form 17A.
4. Allegations of concealment of sales and furnishing of incorrect declarations by the petitioner.

Issue-wise Detailed Analysis:

1. Jurisdiction of Reassessment Notice under Section 44 of the Gujarat Sales Tax Act, 1969:
The petitioners challenged the reassessment notice dated July 20, 1996, issued under Section 44 of the Gujarat Sales Tax Act, 1969, on the ground that the deductions for sales made against certificates in Form 17A were erroneously allowed in the original assessment. The court examined the statutory provisions, including Sections 2(10), 2(28), 2(14), 2(25), 2(32), 3, 7, 8, 12, 13, 41, and 44 of the Act, and Rule 24(2A) of the Gujarat Sales Tax Rules, 1970. It was noted that Section 44 empowers the Commissioner to reassess turnover if there is reason to believe that any turnover has escaped assessment or has been under-assessed, or if any deduction has been wrongly given. However, the court emphasized that the belief must be that of an honest and reasonable person based on reasonable grounds, not mere suspicion.

2. Validity of Reassessment Notice Issued Beyond the Prescribed Period:
The court observed that sub-clause (a) of Section 44 applies in cases of concealment of sales or knowingly furnishing incorrect declarations, allowing reassessment within eight years. In non-concealment cases, action must be taken within five years. The petitioners contended that the reassessment notice was issued beyond the five-year period, making it time-barred. The court found that the Revenue's vague averments did not justify the longer period of limitation, and there was no evidence of concealment or furnishing of incorrect declarations by the petitioners. The reassessment notice was thus held to be barred by limitation.

3. Effect of Retrospective Cancellation of Licenses on the Validity of Sales Made Against Form 17A:
The petitioners argued that they had disclosed sales against Form 17A, which were verified and accepted in the original assessment. The court referred to the Supreme Court's decision in State of Maharashtra v. Suresh Trading Company, which held that retrospective cancellation of a dealer's registration could not affect transactions made when the registration was valid. The court concluded that the petitioners were entitled to rely on the certificates in Form 17A issued by licensed dealers, and the retrospective cancellation of licenses could not prejudice the petitioners.

4. Allegations of Concealment of Sales and Furnishing of Incorrect Declarations by the Petitioner:
The Revenue alleged that the petitioners had concealed sales and furnished incorrect declarations. However, the court found no evidence to support these allegations. The petitioners had disclosed all material facts, and the original assessment was made after a thorough investigation. The court emphasized that two conditions must be fulfilled for reassessment: (i) reason to believe that turnover has escaped assessment, and (ii) reason to believe that such escapement was due to the assessee's failure to disclose fully and truly all material facts. In this case, these conditions were not met.

Conclusion:
The court held that the reassessment notices issued under Section 44 of the Gujarat Sales Tax Act, 1969, were without jurisdiction, time-barred, and based on unfounded allegations of concealment. The notices were quashed, and the petitions were allowed with costs. The court reiterated that the conditions precedent for issuing reassessment notices were not satisfied, making the notices illegal.