2018 (7) TMI 2006 - HC - VAT and Sales Tax

Applicability of time limitation prescribed under section 35 of VAT Act to the proceedings under Section 34(8A) - relevant date for period of limitation - whether the period of limitation would start from the date of knowledge of such evasion during the course of any proceedings under the VAT Act and/or from the date of the original assessment order? - Difference of opinion. HELD THAT - As there is difference of opinion, the matter is required to be referred to the Full Bench. Registry to place the matter before Hon ble the Chief Justice for constituting Full Bench to consider the aforesaid questions.

Summary

Issues:
Challenge to impugned orders under Section 34(8A) of the VAT Act based on limitation period applicability.

Analysis:
The petitioner sought to quash orders raising VAT demands under Section 34(8A) of the VAT Act, claiming the limitation period barred the assessment. The petitioner relied on a Division Bench decision stating Section 35's limitation applies to Section 34(8A). However, the Court disagreed, holding both sections operate independently. Section 34(8A) deals with evasion or incorrect disclosures during proceedings, while Section 35 allows revising assessments for escaped turnover. The Court found no basis to apply Section 35's limitation to Section 34(8A) assessments, as they serve different purposes and operate in distinct scenarios.

The Court noted Section 34(8A) addresses tax evasion situations, distinct from Section 35's provisions for revising assessments. It observed applying Section 35's limitation to Section 34(8A) would alter the statutory scheme. Since Section 34(8A) lacks a specific limitation period, the Court inferred the legislature intended flexibility for authorities to act upon discovering tax evasion during proceedings. Consequently, the Court rejected the Division Bench's view and referred the matter to a Full Bench to determine if Section 35's limitation applies to Section 34(8A) proceedings, and if so, from when the limitation period should commence.

In conclusion, the Court found Section 34(8A) and Section 35 of the VAT Act operate independently, with Section 34(8A) addressing tax evasion during proceedings and Section 35 allowing revising assessments for escaped turnover. The Court disagreed with applying Section 35's limitation to Section 34(8A) assessments, emphasizing the distinct nature and purposes of the two provisions. The matter was referred to a Full Bench to decide on the applicability and commencement of the limitation period under Section 35 to Section 34(8A) proceedings.