2007 (12) TMI 421 - HC - VAT and Sales Tax

Validity of notices and assessment order under the Bihar Finance Act, 1981 challenged Held that - Having given anxious consideration to the issues raised by the petitioner as against the entire reassessment proceedings including the impugned notice, assessment order and consequential demand notices, there is no infirmity in the same. Consequently the writ application is devoid of any merit and is fit to be dismissed.

Summary

Issues Involved:
1. Validity of reassessment notices under Section 19 of the Bihar Finance Act, 1981.
2. Compliance with Rule 20 of the Bihar Sales Tax Rules, 1983.
3. Applicability of the rate of sales tax on hybrid maize seeds.

Issue-Wise Detailed Analysis:

1. Validity of Reassessment Notices under Section 19 of the Bihar Finance Act, 1981:

The petitioner challenged the validity of the reassessment notices dated September 5, 2006, and the subsequent assessment and demand notices dated November 20, 2006, for the years 1997-98 to 2001-02. The petitioner argued that the reassessment was based on the judgment in SPIC PHI Seeds Ltd. v. State of Bihar, which was still sub judice before the apex court. The respondents countered that the reassessment was based on the discovery that the petitioner had paid tax at a lower rate (4% instead of 8%) and not solely on the said judgment. The court found that the reassessment was initiated based on the records showing under-assessment, satisfying the conditions under Section 19 of the Act. The reassessment notices were deemed valid as they contained the necessary information and satisfied the statutory requirements.

2. Compliance with Rule 20 of the Bihar Sales Tax Rules, 1983:

The petitioner contended that the reassessment notices were invalid as they were not issued in the prescribed Form XIV as mandated by Rule 20 of the Bihar Sales Tax Rules. The respondents argued that the content of the notices fulfilled the requirements, and the petitioner was not prejudiced by the form of the notice. The court held that the notices, despite not being in the prescribed form, contained all the necessary information and thus did not vitiate the reassessment proceedings. The court cited the principle that procedural technicalities should not invalidate proceedings if the substantive requirements are met and the petitioner had waived any objection by responding to the notices without raising this issue initially.

3. Applicability of the Rate of Sales Tax on Hybrid Maize Seeds:

The petitioner paid sales tax at 4% on hybrid maize seeds, treating them as cereals, while the respondents assessed the tax at 8%. The court referred to its earlier judgments, which held that maize seeds soaked with chemicals for growing crops are not cereals and are taxable at 8%. This issue had been previously litigated and decided against the petitioner, and the court reaffirmed that hybrid maize seeds are taxable at 8%. The reassessment was thus justified based on the correct applicable tax rate.

Conclusion:

The court dismissed the writ application, upholding the validity of the reassessment notices, the compliance with statutory requirements despite the procedural irregularity in the form of the notice, and the applicability of the 8% tax rate on hybrid maize seeds. The reassessment proceedings were found to be lawful, and the petitioner's objections were overruled.