2014 (4) TMI 1187 - HC - VAT and Sales Tax

Validity of SCN - reassessment proceedings - Rate of entry tax - leaf springs for motor vehicles - whether tax to be levied at 1% or 1.5%? - Held that - Only show cause notice has been issued to the petitioner. The petitioner is at liberty to file detailed reply before the authority and he can raise all the contentions before the authority. Show cause notice is within the jurisdiction of the authority - in accordance with Section 21 (1) (a) of the Act of 2002, the authority has a power to initiate re-assessment proceedings, if an assessee is under assessed - the authority initiated the proceedings of re-assessment because the petitioner was under assessed. No case is made out for quashment of SCN and re-assessment proceedings - petition dismissed.

Summary

Issues:
Challenge to show cause notice and initiation of re-assessment proceedings under Section 21 of Madhya Pradesh VAT Act, 2002.

Analysis:
The petitioner, a company manufacturing leaf springs for motor vehicles, challenged a show cause notice dated 9.12.2011 and the initiation of re-assessment proceedings under the Madhya Pradesh VAT Act, 2002. The notice sought to impose additional entry tax of Rs. 45,82,645 against the petitioner, alleging a discrepancy in the tax rate. Another notice questioned the classification of leaf springs as parts of motor vehicles for taxation purposes. The petitioner argued against the re-assessment, claiming that the earlier assessment at 4% tax rate should stand, and initiating re-assessment based on a change of opinion was unjustified.

Legal Provision:
Section 21 of the Act of 2002 allows for assessment/reassessment under specific circumstances, including under-assessment or escaped assessment. The authority can initiate re-assessment if an assessee has been under-assessed, as per Section 21(1)(a) of the Act.

Court's Opinion:
The court opined that deciding the petitioner's contentions at this stage was premature since only a show cause notice had been issued. The petitioner was advised to respond to the notice and present all arguments before the authority. The court noted that the authority had the power to initiate re-assessment proceedings if the petitioner was under-assessed, which seemed to be the case based on the show cause notice. The petitioner had already paid tax at the 12.5% rate on the product in question. Consequently, the court found no grounds for quashing the notice or the re-assessment proceedings.

Judgment and Directions:
Both writ petitions were disposed of with the directive for the petitioner to reply to the show cause notice within two weeks. The authority was instructed to make a decision in accordance with the law after considering the petitioner's response. No punitive action was to be taken against the petitioner for two weeks. The court clarified that it had not expressed any opinion on the case's merits. The writ petitions were concluded without any cost orders.