2017 (2) TMI 130 - HC - VAT and Sales Tax

Validity of re-assessment of tax u/s 18 of the Assam General Sales Tax Act, 1993 - Time limitation - Held that - equitable considerations have no place in deciding a tax liability and before a person is brought within the ambit of tax, it must be shown that the charging section applies to that person without any ambiguity and in clear terms. It is also provided that if two interpretations are possible, the judicial interpretation can t lean in favor of the Revenue. When the Revenue feels that assessment was erroneous, the recovery of tax may be permissible through re-assessment u/s 18 of the AGST Act and here it is clear enough that the process of re-assessment was started beyond the limitation period of eight years of the original assessments. Therefore the re-assessment exercise is legally impermissible even for a situation of wrongful assessment at a lower rate - we find merit in the challenge of the assessee to the order of re-assessment and accordingly the impugned exercise and the orders for recovery of additional tax plus interest are found to be unsustainable in law - petition disposed off - decided in favor of assessee.

Issues:
Challenge to re-assessment of tax under Section 18 of the AGST Act beyond the limitation period.

Analysis:
The Revision Petitions were filed challenging the re-assessment of tax under Section 18 of the Assam General Sales Tax Act, 1993, beyond the limitation period. The primary contention was that the re-assessment was done beyond the period of limitation and therefore not tenable in law. The transactions in question related to the assessment years 2001-02 and 2002-03.

The petitioner argued that the assessment for the concerned years was completed within the limitation period, and the show-cause notices issued later were beyond the 8-year limitation period for re-assessment under the AGST Act. The petitioner claimed entitlement to the benefit of a concessional tax rate of 4% based on a government notification of 2003, and contended that the re-assessment at a higher rate of tax was impermissible.

The Revenue contended that the notification of 2003, providing for a concessional rate of 4%, applied prospectively from the date of notification. The Revenue argued that the assessment at the lower rate resulted in taxable turnover escaping assessment, justifying the re-assessment of tax for the relevant assessment years.

The High Court clarified that the right of the State to recover tax is enforceable only if such right did not stand extinguished by law. The show-cause notice for re-assessment was issued based on a Division Bench decision, proposing to levy tax at 13.2% for the transactions in the assessment years 2001-02 and 2002-03.

Despite the petitioner's contentions that the re-assessment was beyond the limitation period, tax was re-assessed at the higher rate of 13.2%. The appellate authority upheld the re-assessment, citing the legal position clarified by the High Court in a previous judgment.

The Board of Revenue dismissed the appeals, holding that the original assessment at the concessional rate of 4% was incorrect, and the Government was entitled to recover the additional tax that escaped assessment. The imposition of interest on the additional tax was also deemed justified in the re-assessment proceeding.

The Court emphasized that equitable considerations have no place in deciding tax liability and that a person must clearly fall within the ambit of the charging section without ambiguity for tax to be levied. The Court held that if tax escaped assessment due to an erroneous order and re-assessment is time-barred, recovery of the escaped tax cannot be made through re-assessment.

Ultimately, the Court found merit in the challenge to the re-assessment order, ruling that the re-assessment exercise and the orders for recovery of additional tax plus interest were unsustainable in law and thus quashed.

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