2018 (3) TMI 1611 - HC - VAT and Sales Tax

Duty Entitlement Passbook Scheme (DEPB benefits) - Levy of Sales Tax - whether upon transfer of DEPB, the transaction would invite Sales-tax? - Jurisdiction - powers of Revisional Authority u/s 67 of the Act - the petitioner had already approached the High Court challenging notices issued by the Revisional Authority - Section 41AA by the Gujarat Sales Tax Second Amendment Act, 2001. Held that - The provision was in the nature of a general amnesty. The State Legislature having noted that despite efforts made for simplification of assessments there are large number of pending disputes which had clogged the system, introduced a one-time amnesty scheme. The scheme was peculiar on two counts viz., unlike the settlement schemes under the Income-tax Act, 1961 or the Customs or Central Excise Act, it is not an ongoing scheme and covered only the assessments which were pending and which related to AY 1999-2000 and earlier years. Thus, this was a one-time scheme. Secondly, unlike in case of other settlement proceedings in the above referred Acts, there was little element of examination of the declaration made by an assessee desirous of availing benefit of the scheme. Once the assessee applying for such a scheme fulfilled the eligibility conditions and paid the additional taxes, his assessment would be deemed to have been completed. The competent authority thereafter had no jurisdiction to question the declaration made by the assessee which would be in the realm of scrutiny assessment envisaged under subsection 3 of Section 41 of the Act. Quite apart from the plain language used in Section 41AA, for more emphasis, sub-section 1 of Section 41 was made notwithstanding anything contained in sub-sections 2 and 3 of Section 41AA. Further, even in the proviso granting benefit to one who availed the scheme, the Legislature has consciously provided that the same would be available irrespective of the fact whether notice under sub-section 3 of section 41 was issued or not. In other words, even if the scrutiny assessment under sub-section 3 of Section 41 had commenced, the dealer could make a declaration under Section 41AA and if fulfilled other conditions, the benefit flowing from such scheme would floss. Section 67 of the Act undoubtedly gives wide powers to the revisional authority, who on his own motion or on an application made to him, can call for and examine the record of any order passed by an authority appointed under Section 27 and can pass such order, as he thinks just and proper. This would however not imply that the revisional authority could do what the original authority could not. Whatsoever wide his powers may be, the same would be co-terminus with that of the original authority. The Revisional authority under section 67 of the Act would have power to test the legality and correctness of the action or order of the competent authority in accepting a declaration made under Section 41AA of the Act. If the order is contrary to the requirements of Section 41AA of the Act, the Revisional authority could certainly correct the same, nevertheless in the present case; as observed, the Revisional authority exceeded its jurisdiction and rejected the declarations on the grounds which were otherwise not permissible. The impugned judgment of the Tribunal is set-aside - Revisional orders also stand quashed - petition disposed off.

Issues Involved:
1. Nature and taxability of DEPB benefits.
2. Validity of the petitioner's declarations under Section 41AA of the Gujarat Sales Tax Act.
3. Jurisdiction of the revisional authority to assess the petitioner's returns post acceptance of declarations under Section 41AA.
4. Imposition of penalty by the revisional authority.

Issue-wise Detailed Analysis:

1. Nature and Taxability of DEPB Benefits:
The petitioner, a partnership firm dealing in textiles, received benefits under the Duty Entitlement Passbook Scheme (DEPB) for exports. The core dispute was whether the transfer of DEPB benefits constituted a sale of goods liable to sales tax. The petitioner contended that there was a serious dispute about the nature of DEPB benefits and whether their transfer attracted sales tax.

2. Validity of the Petitioner's Declarations Under Section 41AA:
The petitioner applied for benefits under Section 41AA for assessment years 1994-95 to 1999-2000. This section, inserted by the Gujarat Sales Tax [Second Amendment] Act, 2001, allowed eligible assessees to have their returns accepted without scrutiny if they paid an additional tax. The petitioner fulfilled the conditions and paid the required additional tax, but the assessing authority neither accepted nor rejected the declaration formally. Later, the Deputy Commissioner of Sales Tax issued notices and assessed tax, interest, and penalties, arguing that the petitioner had misled the department by not disclosing the sale of DEPB benefits.

The Tribunal upheld the revisional authority's decision, noting that the petitioner had concealed material facts about the seizure of documents and spot inspections, thus violating the basic condition under Section 41AA(3).

3. Jurisdiction of the Revisional Authority:
The petitioner argued that once the declaration under Section 41AA was accepted, it was not open to revision, and the revisional authority could not upset the competent authority's decision. The Tribunal dismissed this argument, but the High Court found that the revisional authority exceeded its jurisdiction. The High Court noted that the revisional authority could only correct actions contrary to Section 41AA's requirements and could not reject declarations based on subsequent developments like search operations.

4. Imposition of Penalty:
The petitioner contended that the revisional authority could not impose penalties when no such proceedings were initiated by the competent authority. The High Court did not make a final determination on this issue due to its conclusions on other aspects but noted that penalty proceedings are distinct from assessment proceedings.

Conclusion:
The High Court set aside the Tribunal's judgment and quashed the revisional orders, determining that the revisional authority had overstepped its jurisdiction by rejecting the petitioner's declarations under Section 41AA on impermissible grounds. The Court emphasized that the revisional authority could not travel beyond the statutory mandate of Section 41AA and deny the benefits of the amnesty scheme based on subsequent developments. The petitions were disposed of, and the High Court did not find it necessary to decide on the imposition of penalties.

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