2017 (7) TMI 1316 - HC - VAT and Sales Tax

Maintainability of application - reopening of assessment - change of opinion - Reassessment and for calculating the entry tax payable by the petitioner Company - HELD THAT - The enunciation of law laid down in the matter of The Commissioner of Income-tax, Gujarat v. M/s. A. Raman and Co. 1967 (7) TMI 2 - SUPREME COURT by Their Lordships of the Supreme Court has further been followed recently in the matter of Jeans Knit Private Ltd. Bangalore v. Deputy Commissioner of Income Tax Bangalore and it has clearly been held that writ petition filed by the assessee challenging the issuance of notice under Section 148 of the Income Tax Act, 1961 and the reasons which were recorded by the Assessing Officer for reopening the assessment is maintainable. In the present case, the concluded assessment has been sought to be reopened on the basis of amendment made in the definition of market value as contained in the Entry Tax Act and thereafter, certain directions have been issued by the Commissioner, Commercial Tax even to reopen the concluded assessment. It is established that reassessment notice was issued by the State Government on the basis of circular issued by the Commercial Tax Officer as the petitioner did not include the royalty aspect for determination of market value on goods for the purpose of payment of entry tax - it is crystal clear that in the instant case, assessment has been made as per law in force and after the definition of market value is amended with effect from 1-4-2014, and on that basis, circular has been issued by the State Government, the proceeding for reassessment of concluded assessment was initiated and it was concluded making reassessment and taking the amended definition of market value into account, and except the circular of the Commissioner directing opening of reassessment even of concluded assessment on the basis of amendment brought into force from 1-4-2014, there is no fresh/additional material brought on record which can be made basis for reopening the concluded assessment by the assessing officer. The assessing authority has sought to reopen the assessment and made reassessment only on the basis of change of opinion and on the basis of the circular issued by the State Government by which the Commissioner, Commercial Tax has directed to take into account the amount of royalty in calculating the entry tax without being any additional/fresh material brought on record. The circular of the State Government is based on change in law in the definition of market value which is only prospective in nature. The SCN issued for reassessment under Section 22 (1) of the Act, 2005 and the final order passed on such reassessment during the pendency of this writ petition, deserve to be quashed - petition allowed.

Issues Involved:
1. Legality of the show cause notice issued under Section 22(1) of the Chhattisgarh Valued Added Tax Act, 2005, read with Section 13 of the Chhattisgarh Entry Tax Act, 1976.
2. Validity of the final reassessment order passed during the pendency of the writ petition.
3. Legality of the circular dated 16-6-2014 issued by the Commissioner, Commercial Tax, Chhattisgarh, Raipur.
4. Maintainability of the writ petition in light of the alternative remedy available under Section 48 of the Act, 2005.

Detailed Analysis:

1. Legality of the Show Cause Notice:
The petitioner, Ambuja Cements Limited, challenged the show cause notice issued for reassessment of entry tax for the years 2007-08, 2008-09, and 2009-10. The notice was based on an amendment to the definition of "Market Value" in the Chhattisgarh Entry Tax Act, 1976, effective from 1-4-2014. The petitioner argued that the reassessment was initiated merely due to a change in law, which is prospective and cannot be applied retrospectively to reopen concluded assessments. The court held that the reassessment notice was issued based on a circular from the Commissioner, Commercial Tax, which directed reopening of concluded assessments based on the new definition of "Market Value." The court found this approach impermissible, as the amendment was prospective and could not constitute a reason to believe for reopening past assessments.

2. Validity of the Final Reassessment Order:
The final reassessment order was passed during the pendency of the writ petition. The court scrutinized whether the reassessment was justified under Section 22(1) of the Act, 2005. It was observed that the reassessment was initiated based on a change in law and a circular from the Commissioner, without any fresh or additional material. The court emphasized that reassessment cannot be based on a mere change of opinion or error of judgment. It must be supported by new material or reasons. The court concluded that the reassessment was invalid as it was solely based on a prospective amendment and a circular, without any fresh evidence.

3. Legality of the Circular Dated 16-6-2014:
The circular issued by the Commissioner, Commercial Tax, directed assessing authorities to reopen concluded assessments to include royalty in the calculation of entry tax based on the amended definition of "Market Value." The court found that the circular could not be the basis for reopening concluded assessments, as it was based on a prospective amendment. The court reiterated that subsequent changes in law cannot justify reassessment of past periods unless explicitly stated to be retrospective.

4. Maintainability of the Writ Petition:
The respondents argued that the writ petition was not maintainable due to the availability of an alternative remedy under Section 48 of the Act, 2005. The petitioner countered that the writ petition was maintainable as it raised a jurisdictional issue regarding the reason to believe for reassessment. The court referred to precedents, including the Supreme Court's decisions in Calcutta Discount Co. Ltd. and Gujarat Ambuja Cement Ltd., which allow writ petitions in cases where jurisdictional facts are in question. The court held that the writ petition was maintainable, as it challenged the jurisdictional basis for the reassessment.

Conclusion:
The court quashed the show cause notice and the consequent reassessment order, finding them based on an impermissible change of opinion due to a prospective amendment. The writ petition was allowed, and the court did not find it necessary to address the petitioner's liability for entry tax on royalty or the legality of the circular separately. The parties were directed to bear their own costs.

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