2009 (1) TMI 787 - HC - VAT and Sales Tax

Where on the expiry of time specified in section 74(7) of the Delhi Value Added Tax Act 2004 the Commissioner has not exercised either of the options set out in section 74(7)(a) or 74(7)(b) whether the objection pending before the Commissioner shall be deemed to be allowed? Whether the Tribunal was correct in law in providing a mandatory period of eight months within which the Commissioner has to dispose of the objection pending before him under section 74(7) of the DVAT Act particularly when no such stipulation is provided by the statute? Held that - Although section 74(7) uses the word shall which is usually found in mandatory provisions the absence of a stipulated consequence for non-compliance reveals the true nature of the provision that is it is directory. An objection pending before the Commissioner cannot be deemed to have been accepted simply because of the fact that the time specified in section 74(7) of the Delhi Value Added Tax Act 2004 has expired and the Commissioner has not exercised either of the options set out in section 74(7)(a) or 74(7)(b). The deeming provision of section 74(9) of the said Act would get triggered only if the conditions precedent provided under section 74(8) of the said Act are satisfied. We also hold that the Tribunal erred in law in fixing a mandatory period of eight months within which the Commissioner has to dispose of the objection pending before him under section 74(7) of said Act particularly when no such stipulation is provided by the statute. Consequently both the questions of law are decided in favour of the Revenue/appellant and against the respondents. While this will not alter the outcome in Behl Construction as indicated above it sets right the position in law which the Tribunal had erroneously taken and which was being followed in other cases before the Tribunal. The appeals are allowed and the impugned orders are set aside to the extent indicated above.

Issues Involved:

1. Whether the objection pending before the Commissioner shall be deemed to be allowed if the Commissioner has not exercised either of the options set out in section 74(7)(a) or 74(7)(b) of the Delhi Value Added Tax Act, 2004 within the specified time.
2. Whether the Tribunal was correct in law in providing a mandatory period of eight months for the Commissioner to dispose of the objection pending before him under section 74(7) of the DVAT Act, particularly when no such stipulation is provided by the statute.

Issue-wise Detailed Analysis:

1. Deeming Provision for Pending Objections:

The court examined whether an objection pending before the Commissioner could be deemed to be allowed if the Commissioner fails to act within the time specified in section 74(7) of the Delhi Value Added Tax Act, 2004. The court clarified that the mere passage of the applicable period does not automatically mean that the objections are deemed to have been accepted. The deeming fiction of sub-section (9) gets triggered only if a notice as stipulated in sub-section (8) is given and the period of fifteen days specified therein expires without any decision from the Commissioner. The court emphasized that sub-sections (8) and (9) must be read together, and the legal fiction created by the deeming provision in sub-section (9) can only be raised if the conditions precedent for its application are satisfied, i.e., a notice calling upon the Commissioner to decide within fifteen days is a must.

2. Mandatory Period for Disposal of Objections:

The court addressed whether the Tribunal was correct in fixing a mandatory period of eight months for the Commissioner to dispose of objections under section 74(7). The court held that the Tribunal erred in law by imposing this mandatory period, as no such stipulation is provided by the statute. The court explained that section 74(7) of the said Act prescribes specific time-limits for different scenarios, but these are directory and not mandatory. The applicable periods for deciding objections are three months, five months, six months, or eight months, depending on whether extensions are sought by the Commissioner or the objector. However, if the applicable time-limit expires and no order is passed, the objector must issue a notice under section 74(8) requiring the Commissioner to make a decision within fifteen days. Only if this notice is issued and no decision is made within the stipulated period of fifteen days, the objections would be deemed to have been accepted.

Conclusion:

The court concluded that an objection pending before the Commissioner cannot be deemed to have been accepted simply because the time specified in section 74(7) has expired without the Commissioner exercising either of the options set out in section 74(7)(a) or 74(7)(b). The deeming provision of section 74(9) would get triggered only if the conditions precedent provided under section 74(8) are satisfied. Additionally, the Tribunal's decision to impose an eight-month mandatory period for the Commissioner to dispose of objections was incorrect, as no such stipulation exists in the statute. Both questions of law were decided in favor of the Revenue/appellant and against the respondents. The appeals were allowed, and the impugned orders were set aside to the extent indicated. The parties were left to bear their own costs.

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