2006 (7) TMI 620 - HC - VAT and Sales Tax

Opportunity of being heard - Notice for reassessment issued u/s 21(2) of U.P. Trade Tax Act - barred by limitation - Eligibility certificate - payment of trade tax - new unit in pursuance of the scheme of exemption notified by the State Government - claim for exemption on both items washing soap and detergent - ex parte order of assessment - HELD THAT - The mere fact that the notice was served on the petitioner on March 30 1993 would not cure the inherent lack of the authority of the assessing authority to issue notice without sanction of the Commissioner or the Additional Commissioner. It is also to be taken note of that it has not been brought on record nor it has been disclosed that on what date the assessing authority has sent its request for approval to the Commissioner i.e. whether he has sent the request before issuance of the notice on March 22 1993 or after issuance of the notice but since the approval admittedly has been granted on March 29 1993 i.e. after issuance of the notice it is hardly relevant as to when such a request has been made by the assessing authority. The assessing authority on one hand has issued the notice u/s 21 without any authority and on the other hand has passed an ex parte order of reassessment though the notice was served only on March 30 1993 upon the petitioner apparently because thereafter the matter would have become barred by limitation after March 31 1993. Claim of the petitioner for exemption on both items washing soap and detergent in view of the eligibility certificate granted u/s 4-A also stands established in view of the fact that the assessing authority in his ex parte assessment on March 31 1993 did not give benefit of such exemption to the detergent cakes holding that the eligibility certificate was confined only to washing soap the benefit of which would not extend to detergent cake whereas the petitioner has brought on record an order passed by the Commissioner u/s 4-A(3) of the Act which shows that the proceedings for cancellation of eligibility certificate were initiated on the same ground but the Commissioner vide his order dated September 7 1994 found that the petitioner was entitled to exemption on both items i.e. washing soap and detergents under the same eligibility certificate. It is therefore established beyond doubt even on merits that the assessment for the years 1984-85 and 1985-86 under the U.P. Sales Tax Act 1948 and Central Sales Tax Act 1956 was rightly made and there was no occasion for issuing notice u/s 21 and the issuance of notice u/s 21 was thus bad besides being without jurisdiction and authority in view of the findings recorded. The subsequent proceedings taken as a result of the aforesaid notice resulting into ex parte order/assessment are also without jurisdiction and cannot be sustained. Thus we quash the impugned order of sanction passed by the Additional Commissioner on March 29 1993 and also the notice issued u/s 21 dated March 22 1993 and consequently also the ex parte assessment order dated March 31 1993 passed on the basis of the aforesaid notice. The writ petition is allowed.

Issues Involved:

1. Validity of the eligibility certificate for tax exemption.
2. Jurisdiction of the assessing authority in issuing notice under Section 21.
3. Requirement of sanction from the Commissioner before issuing notice under Section 21.
4. Compliance with the principles of natural justice in granting sanction.
5. Validity of ex parte reassessment orders.

Issue-wise Detailed Analysis:

1. Validity of the eligibility certificate for tax exemption:

The petitioner, a private limited company, was granted an eligibility certificate on January 18, 1985, for exemption from payment of sales tax (now trade tax) for the assessment years 1984-85 to 1988-89. This certificate was initially canceled but later reinstated by the High Court on June 3, 1989. The court confirmed that the petitioner possessed a valid eligibility certificate, which entitled them to the claimed exemptions.

2. Jurisdiction of the assessing authority in issuing notice under Section 21:

The assessing authority issued a notice under Section 21 of the Sales Tax Act on March 22, 1993, for the assessment years 1984-85 and 1985-86. The petitioner contended that this notice was issued beyond the limitation period and without proper authority. The court found that the notice was indeed issued without the required sanction from the Commissioner, rendering it without jurisdiction and authority.

3. Requirement of sanction from the Commissioner before issuing notice under Section 21:

The limitation period for issuing notice under Section 21 was extended from two years to four years, and further to eight years with the Commissioner's sanction. The court highlighted that the Commissioner must be satisfied, either on his own or based on reasons recorded by the assessing authority, that it is just and expedient to reopen the assessment. The notice in question was issued before obtaining the Commissioner's sanction, which was granted only on March 29, 1993, after the notice had already been issued.

4. Compliance with the principles of natural justice in granting sanction:

The court emphasized that even if the statute does not explicitly provide for it, the principles of natural justice require that the dealer be given an opportunity to be heard before the Commissioner grants sanction for reassessment. The Commissioner did not provide such an opportunity to the petitioner, nor did he record any reasons for his satisfaction in granting the sanction. This failure to comply with natural justice principles rendered the sanction order liable to be quashed.

5. Validity of ex parte reassessment orders:

The ex parte reassessment orders were issued on March 31, 1993, without considering the petitioner's objections and without proper authority, as the notice under Section 21 was issued without the required sanction. Additionally, the court found that the petitioner was entitled to exemption on both "washing soap" and "detergent" under the eligibility certificate, which the assessing authority failed to acknowledge. Consequently, the reassessment orders were deemed without jurisdiction and could not be sustained.

Conclusion:

The court quashed the impugned order of sanction dated March 29, 1993, the notice issued under Section 21 dated March 22, 1993, and the ex parte assessment orders dated March 31, 1993. The writ petition was allowed with costs.

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