2003 (2) TMI 442 - HC - VAT and Sales Tax

Issues Involved:

1. Validity of notices and orders issued under section 42(1) of the Gujarat Sales Tax Act, 1969, and rule 37-A of the Gujarat Sales Tax Rules, 1970.
2. Whether the assessment periods were time-barred.
3. Entitlement of the petitioner to a refund of sales tax collected and interest on the refund.
4. Compliance with the Supreme Court's judgment in FAG Precision Bearings v. Sales Tax Officer.

Issue-wise Detailed Analysis:

1. Validity of Notices and Orders:

The petitioner challenged the notices dated February 17, 1997, and consequent orders dated March 17, 1997, issued by the Deputy Commissioner of Sales Tax under section 42(1) of the Gujarat Sales Tax Act, 1969, read with rule 37-A of the Gujarat Sales Tax Rules, 1970. The petitioner argued that the reasons given for extending the time for assessment, such as scrutinizing whether transactions were inter-State sales or branch transfers, were not valid grounds. The Court held that the reasons stated in the show-cause notices were not relevant or germane and were contrary to the Supreme Court's judgment in FAG Precision Bearings v. Sales Tax Officer. The Court found that the reasons given in the notices and orders did not meet the criteria of extraordinary circumstances or supervening reasons as required by the Supreme Court's judgment. Consequently, the show-cause notices and the orders extending the time for assessment were set aside.

2. Time-Barred Assessments:

The petitioner contended that the assessment orders for the period September 1, 1976, to December 31, 1984, were time-barred. The Court referred to the historical background and legislative intent behind section 42, which was to prevent assessments from lingering for years, causing difficulties for the assessee and jeopardizing government revenue. The Court noted that the assessment proceedings should be completed within the prescribed time limit unless stayed for valid reasons. The Court held that the extension orders were passed after the period of limitation had expired, making them illegal and invalid. Therefore, the assessment orders for the relevant periods were quashed.

3. Refund and Interest:

The petitioner sought a refund of the sales tax collected and interest on the refund. The Court referred to the Supreme Court's direction that all amounts collected as sales tax for the period September 1, 1976, to March 31, 1984, should be refunded to the petitioner. The Court also considered various judgments that supported the award of interest on refunds when tax is collected without authority of law. The Court granted interest at the rate of 12% per annum from the date of payment till the date of refund. The Court directed the respondents to carry out the refund and interest payment within four months.

4. Compliance with Supreme Court Judgment:

The Court emphasized the need for compliance with the Supreme Court's judgment in FAG Precision Bearings v. Sales Tax Officer. The Supreme Court had set aside the assessment orders and allowed the respondent to issue fresh show-cause notices within 16 weeks, provided they complied with the requirements of natural justice and stated valid reasons. The Court found that the reasons given in the fresh show-cause notices were not in consonance with the Supreme Court's judgment. Therefore, the orders passed pursuant to these notices were also quashed.

Conclusion:

The Court allowed the petitions, set aside the impugned notices and orders, and directed the respondents to refund the sales tax collected along with interest at the rate of 12% per annum from the date of payment till the date of refund. The Court did not express any opinion on the issue of limitation since the primary issue was decided in favor of the petitioner. The petitions were allowed, and the rule was made absolute in each of the petitions.

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