2016 (12) TMI 1737 - HC - VAT and Sales Tax

Time Limitation - Validity of assessment order and assessment notice - Rule 6(5) of the CST Rules - issuance of bogus C forms - Whether there is any limitation for issuing a notice under Rule 6(5) of the Central Sales Tax Rules (Kerala) 1957 and completing the assessment under the CST Act? Held that - There is no dispute about the fact that there is no separate return to be filed under the CST Act. Return filed under the KVAT Act itself is a valid return for CST Act also. The statute does not provide for a period of limitation. Though such a question is pending before the Division Bench when a contention is raised it has to be decided. As matters stand now there cannot be any dispute regarding the right of assessee to treat the assessments as completed within a reasonable time - If we look at the statutory provision under Rule 6(5) once a return is filed the officer is bound to complete the assessment after the close of the year. If no action is taken for completing the assessment within a reasonable period the assessee can treat the assessment as completed. Thereafter the only procedure that is available to reopen the assessment on ground of escaped turnover is under Rule 6(7). A procedure under Rule 6(5) cannot be adopted at any point of time. It has to be done within a reasonable time or atleast before the time stipulated in Rule 6(7) - Even going by the statutory provision under Rule 6(5) the assessment has to be completed within a reasonable time which shall not be later than the period prescribed under Rule 6(7). Rule 6(5) clearly provides that for taking action in respect of incorrect or incomplete returns enquiry has to be conducted by the assessing authority after giving the dealer an opportunity to prove the correctness and completeness of the return submitted by him. It is after issuing such a notice that the assessing authority shall proceed to determine the turnover to the best of his judgment. This process has to be initiated within the specified time. If after issuing notice there is delay in completing the assessment the proviso in terms of Finance Act 2010 and subsequent Finance Acts may render assistance to the State. Petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Whether the assessments made by the assessing authorities under the Central Sales Tax Act, 1956 (CST Act) are barred by limitation.

Issue-wise Detailed Analysis:

1. Limitation for Issuing Notices and Completing Assessments:
The primary issue is whether the assessments made under the CST Act are barred by limitation. The petitioners argue that the notices and assessments are beyond the permissible time limits.

2. Relevant Provisions and Rules:
The court examined the relevant provisions under the CST Act and the related rules. Section 6 is the charging provision, and Section 9 pertains to the levy and collection of tax. Rule 6(5) of the CST Rules mandates that after the close of the year, the assessing authority must scrutinize the accounts and complete the assessment. Rule 6(7) allows for the determination of escaped turnover within four years from the expiry of the year to which the tax relates.

3. Self-Assessment and Time Limits:
The court noted that under the Kerala Value Added Tax (KVAT) Act, self-assessment is deemed to be completed upon filing the return, subject to the right of the assessing officer to reopen it if found incorrect or incomplete. The same principle applies to CST assessments. The court emphasized that actions under Rule 6(5) must be initiated within a reasonable time, ideally within the period specified under Rule 6(7).

4. Judicial Precedents:
The court referred to several judgments, including:
- Parisons Foods (P) Ltd. v. State of Kerala: Held that the limitation under Rule 6(7) does not apply to assessments under Rule 6(5).
- Malabar Gold Ornament Makers (P) Ltd. v. Asst. Commissioner: Held that notices issued beyond the period of limitation are invalid.
- Abdul Majeed P.A v. State of Kerala: Emphasized the four-year limitation for revising CST assessments.

5. Reasonable Time for Completing Assessments:
The court cited the Supreme Court's decision in State of Punjab v. Bhatinda District Coop. Milk Producers Union Ltd., which held that statutory authorities must exercise their jurisdiction within a reasonable period, generally not exceeding five years.

6. Amendments and Extensions:
The State argued that amendments to the KGST Act in the Finance Act, 2010, and subsequent Finance Acts extended the time for completing assessments. The court, however, held that these amendments do not assist the State in finalizing assessments under Rule 6(5) if the initial notice was not issued within the specified time.

Conclusion:
The court concluded that the assessments must be completed within a reasonable time, not later than the period prescribed under Rule 6(7). Since the notices in the present cases were issued beyond the permissible period, the court allowed the writ petitions and set aside the impugned notices and assessment orders.