2010 (3) TMI 1009 - HC - VAT and Sales Tax

Whether the petitioner s industrial unit was eligible to avail of the incentives of deferred payment of sales tax? Held that - As the petitioner s unit started its actual commercial production and sale of finished products only from January 20, 2000, as certified by the Director of Industries, Orissa, there was no scope for the assessing officer to interpret the same and hold otherwise, while disallowing the incentive of deferment of sales tax. The original orders of assessment for the years 2000-01 to 2003-04, granting deferment of sales tax having stood confirmed in appeals, reassessment was not permissible in law. An assessment order gets merged with the appellate order by operation of the doctrine of merger. If the assessing officer initiates proceeding under section 12(8) of the CST (O) Rules in respect of an assessment which has merged with the appellate order, it would be without jurisdiction.

Issues Involved:
1. Eligibility for deferred payment of sales tax under the Industrial Policy Resolution, 1992 (IPR 1992).
2. Validity of reassessment orders disallowing the benefit of deferred payment of sales tax.
3. Authority of the assessing officer to reopen the assessment based on a change of opinion.

Detailed Analysis:

1. Eligibility for Deferred Payment of Sales Tax under IPR 1992:

The petitioner-company set up a ferro alloys plant and was eligible for sales tax deferment under the IPR 1992, which provided incentives for new industrial units, including deferment of sales tax. The State Government issued notifications under the Orissa Sales Tax Act (OST Act) and the Central Sales Tax Act (CST Act) to operationalize these incentives. The petitioner was granted certificates by the Director of Industries, Orissa, indicating the start of commercial production on January 20, 2000. The eligibility certificate confirmed the deferment of sales tax for five years from this date.

2. Validity of Reassessment Orders Disallowing the Benefit of Deferred Payment of Sales Tax:

The Sales Tax Officer initially allowed the deferment of sales tax in the original assessment orders for the years 2000-01 to 2003-04. However, upon reassessment, the officer disallowed the deferment, arguing that the period should have started from October 1, 1997, the date when the petitioner began production as a conversion agent for TISCO Ltd. The court held that the Director of Industries, Orissa, was the competent authority to certify the eligibility for sales tax deferment. The Director's certification that the petitioner started its own commercial production on January 20, 2000, should be respected. The court emphasized that the IPR 1992 aimed to provide substantial incentives for industrial growth, and a narrow interpretation of "commercial production" would defeat this purpose.

3. Authority of the Assessing Officer to Reopen the Assessment Based on a Change of Opinion:

The court examined whether the reassessment was permissible under Rule 12(8) of the CST (O) Rules, which allows reassessment if turnover has escaped assessment or if there has been under-assessment. The court found no concealment of turnover or discovery of new material facts. The original assessments, which allowed deferment, were confirmed by the appellate authority. Therefore, reopening the assessments based on a mere change of opinion was not permissible. The court cited precedents, including decisions from the Supreme Court and other High Courts, which held that reassessment based on a change of opinion is not allowed. The doctrine of merger also applied, meaning the original assessment orders had merged with the appellate orders, rendering reassessment without jurisdiction.

Conclusion:

The court quashed the reassessment orders for the years 2000-01 to 2003-04, reaffirming the eligibility of the petitioner for deferred payment of sales tax from January 20, 2000, as certified by the Director of Industries, Orissa. The writ petitions were allowed, and no costs were awarded.

← Previous Next →