2002 (1) TMI 1281 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to notice under section 35 of the Bombay Sales Tax Act, 1959 for reopening assessment for a specific period.

Analysis:
The petitioners, a partnership firm engaged in garment manufacturing and sales, challenged a notice issued under section 35 of the Bombay Sales Tax Act, 1959, to reopen assessment for the period from September 1, 1978, to August 31, 1979. The petitioners had filed returns under the BST Act and the Central Sales Tax Act, and assessments were passed in 1982. The impugned notice sought to reassess deductions of high seas sales allowed under the CST Act, claiming they were wrongly allowed. The petitioners contended that the notice lacked reasons for reopening and was time-barred. They argued that without withdrawal or reassessment of deductions under the CST Act, reopening under the BST Act was improper. The petitioners also highlighted the requirement to preserve books of accounts for 5 years under section 54 of the BST Act, emphasizing potential prejudice due to the delayed notice.

The BST Act allows reopening of assessment within 5 years if sales or purchases were under-assessed, extending to 8 years in case of concealment or inaccurate returns. The notice in question was issued almost eight years after the assessment year, placing the burden on the respondents to prove concealment or inaccurate returns. The notice cited the deduction of high seas sales under the CST Act as the reason for reopening. However, the CST Act assessment, including the disputed deduction, had not been reopened, rendering the BST Act reopening unsustainable. The Court noted that the assessing officer could have initiated proceedings under the CST Act if the deduction was erroneous, but no such action was taken, making the BST Act reopening invalid.

The respondents alleged that during a raid, the petitioners admitted dealings with bogus parties, justifying the reopening. The petitioners denied these allegations, leading the Court to direct the respondents to provide precise reasons for the reassessment. Subsequently, it was revealed that doubts regarding sales before customs frontiers led to the reopening. The Court emphasized that mere change of opinion based on existing records does not warrant reopening under the BST Act, especially when the CST Act assessment was final. As the conditions for reopening were not met, the notice was deemed invalid and quashed.

The Court referenced a Gujarat High Court decision emphasizing that reopening beyond 5 years requires fulfilling specific conditions, not mere suspicion. Reopening based on doubts or conjecture is not permissible under the BST Act. Consequently, the petition was allowed, setting aside the impugned notice. The judgment focused on the failure to meet statutory conditions for reopening, not delving into other arguments presented during the case.