2013 (12) TMI 159 - HC - VAT and Sales Tax

Validity of Show cause notice Re-assessment of escaped assessment - Denial of adjustment of sales tax on purchase of paddy Held that - S/s Gaya Deen Kailash Chand vs. State of UP & others 2013 (3) TMI 425 - ALLAHABAD HIGH COURT - If the grounds are relevant and have a nexus with the formation of opinion regarding escaped assessment, the assessing authority would be clothed with jurisdiction to take action under the section - Whether the grounds are adequate or not is not a matter which would be gone into by the High Court or Supreme Court, for the sufficiency of the grounds which induced the assessing authority to act is not a justiciable issue - What can be challenged is the existence of the belief but not the sufficiency or reasons for the belief - At the same time, the belief must be held in good faith and should not be a mere pretence. M/s Aryaverth Chawal Udyog & Others Versus State of U.P. & Others 2008 (5) TMI 602 - ALLAHABAD HIGH COURT - Initiation of re-assessment cannot be held to be invalid - There was no good ground to entertain the challenge inasmuch as the circular is only by way of clarification and does not take away the jurisdiction of assessing authority of re-assessment - No writ can be issued to prohibit a person to correct a legal mistake - A writ jurisdiction is meant for doing justice and not to perpetuate injustice or technicalities - the show cause notices proposing re-assessment of the escaped turnover issued under Section 21 (2) of the U.P. Trade Tax Act are valid Decided against Petitioner.

Issues Involved:
1. Legality of notices issued under Section 21(2) of the UP Trade Tax Act.
2. Jurisdiction of the Commissioner of Trade Tax to issue the circular dated 29.3.2007.
3. Validity of re-opening assessments based on the circular.
4. Interpretation and application of Section 15(c) of the Central Sales Tax Act.

Detailed Analysis:

1. Legality of Notices Issued under Section 21(2) of the UP Trade Tax Act:

The petitioners challenged the notices issued under Section 21(2) by the Additional Commissioner (Grade-1), Commercial Tax, for re-opening trade tax assessments. These notices were based on the premise that there was no provision under the UP Trade Tax Act for giving the benefit of Section 8(2A) of the Central Sales Tax to rice manufacturers for adjusting state tax paid on paddy in the Central Sales Tax. The court found that the initiation of proceedings under Section 21(1) of the Act on account of change of opinion is not permissible. The notices lacked fresh material and were based solely on a change of opinion, which is not a valid ground for re-assessment under Section 21(1).

2. Jurisdiction of the Commissioner of Trade Tax to Issue the Circular Dated 29.3.2007:

The petitioners argued that the Commissioner of Trade Tax had no jurisdiction to issue the circular influencing the assessing authorities' powers. The court upheld that the Commissioner had no authority to issue such circulars, as it amounted to interference in the judicial functions of subordinate officers. However, the court also noted that the circular was merely clarificatory and did not constitute material for re-opening cases.

3. Validity of Re-opening Assessments Based on the Circular:

The court examined the validity of re-opening assessments based on the circular dated 29.3.2007. It was highlighted that the circular clarified that the judgment of the Andhra Pradesh High Court in Aitha Narasaiah & Co. was not applicable due to different statutory setups. The court in S/s Gaya Deen Kailash Chand vs. State of UP & others found that the circular did not interfere with the quasi-judicial functions of the authorities but rather provided guidance on the correct exposition of law. Thus, the re-assessment notices based on the circular were held valid.

4. Interpretation and Application of Section 15(c) of the Central Sales Tax Act:

The court referred to the judgment in M/s Aryaverth Chawal Udyog and others vs. State of UP, where it was held that Section 15(c) provides for the reduction of tax leviable on the turnover of rice under the UP Trade Tax Act with the tax levied on paddy. However, it does not allow for the reduction of tax under the Central Act by the tax paid on paddy under the State law. The court reiterated this interpretation and upheld the principle that the adjustment of state tax paid on paddy against central sales tax on rice is impermissible.

Conclusion:

The court dismissed all the writ petitions, holding that the show cause notices proposing re-assessment of the escaped turnover issued under Section 21(2) of the UP Trade Tax Act were valid. The circular dated 29.3.2007 was deemed clarificatory and did not interfere with the judicial functions of the assessing authorities. The re-assessment notices were based on a correct interpretation of the law, and the petitioners' arguments were found to lack substance.

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