2001 (2) TMI 991 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of reassessment notices issued under section 12 of the Rajasthan Sales Tax Act, 1954.
2. Whether reassessment can be initiated on mere change of opinion.
3. Inclusion of profit from intermediary products in taxable turnover.
4. Validity of reassessment notice for the period 1988-89 due to limitation.
5. Validity of penalty notice issued under section 16(1)(i) of the Rajasthan Sales Tax Act, 1954.

Detailed Analysis:

1. Validity of reassessment notices issued under section 12 of the Rajasthan Sales Tax Act, 1954:
The assessee challenged the reassessment notices dated December 7, 1994, under section 12 of the Rajasthan Sales Tax Act, 1954, for the assessment years 1988-89, 1989-90, 1990-91, and 1991-92. The reassessment notices were issued on the grounds of reassessing the value of goods involved in the execution of works contracts. The court noted that the validity of these notices would determine the validity of subsequent notices issued after the transfer of the case to another Commercial Tax Officer.

2. Whether reassessment can be initiated on mere change of opinion:
The court examined whether reassessment under section 12 could be initiated based on a mere change of opinion. It was contended that the expression "for any reason" used in section 12 is broader than "reason to believe" used in the Income-tax Act, 1961. However, the court held that mere change of opinion without new material cannot justify reassessment. The court referenced several judgments, including Sales Tax Officer, Ganjam v. Uttareswari Rice Mills and Deputy Commissioner of Agricultural Income-tax and Sales Tax, Quilon v. Dhanalakshmi Vilas Cashew Co., to support its conclusion.

3. Inclusion of profit from intermediary products in taxable turnover:
The court addressed the issue of including the profit from intermediary products, such as "tread rubber," in the taxable turnover. The court noted that the assessing officer's reason for reassessment was linked to the Supreme Court's decision in Gannon Dunkerley v. State of Rajasthan, which clarified the computation of the value of property in goods involved in the execution of works contracts. The court held that this was not a mere change of opinion but a legitimate reason for reassessment.

4. Validity of reassessment notice for the period 1988-89 due to limitation:
The court examined whether the reassessment notice for the period 1988-89 was barred by time. The amendment to section 12(2) of the Rajasthan Sales Tax Act, 1954, reduced the period for reopening assessments from eight years to five years, effective April 1, 1991. The court held that the notice issued on August 31, 1995, for the assessment year 1988-89 was beyond the permissible period and, therefore, invalid.

5. Validity of penalty notice issued under section 16(1)(i) of the Rajasthan Sales Tax Act, 1954:
The court addressed the issue of the penalty notice issued under section 16(1)(i). It held that issuing a penalty notice at the outset of reassessment proceedings, without establishing non-disclosure of material facts by the assessee, was unwarranted. The court emphasized that penalty proceedings could only be initiated if material non-disclosure was identified during the reassessment process.

Conclusion:
The court quashed the reassessment notices for the period 1988-89 as barred by time. It upheld the reassessment notices for subsequent assessment years, subject to the observations regarding the inclusion of inter-State transactions and penalty proceedings. The court allowed the reassessment proceedings to continue without considering the provisions of the Rajasthan Sales Tax Act that were beyond the legislative competence of the State. The penalty notice was deemed premature and unwarranted at this stage. The petition was partly allowed, with no orders as to costs.

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