2017 (12) TMI 671 - HC - VAT and Sales Tax

Jurisdiction - power of AO to pass order after almost 11 years from the end of the year which is beyond the period of limitation - Section 9(2) of the Central Sales Tax Act, 1956 read with Rule 5(6) and 5(10) of Central Sales Tax (Pondicherry) Rules, 1967 - power to over look the provision of the Central Sales Tax Act, 1956 and Central Sales Tax (Pondicherry) Rules, 1967 - imposition of the additional tax @ 10% for non-submission of Form C for CST sales - interpretation of statute. Held that - The dealer has to file Form C / Form I / Form F for the concessional rate of tax claimed for the turnover reported and determined as above. Rule 12(7) of the Central Sales Tax Registration and Turnover Rules 1957 mandates filing of the declaration in Form C / F / I as the case may be, to the prescribed authority within three months after the end of the period to which the declaration forms relates. However inspite of several reminders, the dealer has not filed C, F, I Forms for the year 2005-2006 till date for some of the transactions - As per Section 2(k) of the Central Sales Tax Act, 1956, year in relation to a dealer, means the year applicable in relation to him under the general sales tax law of the appropriate State, and where there is no such year applicable, the financial year. Interpretation of statute - Held that - It is well settled that Tax Laws have to be given strict construction and interpretation. Reference can be made to few decisions. - There is no equity in tax, and the principle of strict or literal construction applies in interpreting tax statutes. Hence, on the plain language of the statute, if the assessee is entitled to two benefits, he has to be granted both these benefits - If there are two reasonable interpretation of taxing statutes, the one in favour of the assessee has to be accepted. If initial assessment is permitted to be done, at any time, say in the case on hand, after a decade, after the submission of the returns, for the years 2004-2005 and 2005-2006 and if for any reasons, the whole or part of the turn over is assessed at a rate lower than the rate at which it is assessable then, it would give leverage to the Taxing Authority, to do assessment, as in the case on hand, after 10 years and re-assess upto a further period of another five years, on the whole, 17 years. When a statute mandates re-assessment to be done, within five years, it cannot be contended that assessment can be done at any time. When the assessee is mandated to submit returns, within a prescribed period and the Assessing Officer has to scrutinise the accounts and to conduct any enquiry, if he considers necessary and pass an assessment order, levy tax, if any and collect the same, after the close of the financial years, it cannot be contended that initial assessment can be made at any time. Decided in favor of assessee.

Summary

Issues Involved:
1. Whether the Assessing Officer has the power to pass orders for the years 2004-2005 and 2005-2006 on 06.01.2016, beyond the period of limitation.
2. Applicability of Section 9(2) of the Central Sales Tax Act, 1956 read with Rule 5(6) and 5(10) of Central Sales Tax (Pondicherry) Rules, 1967.
3. Whether the assessing officer can overlook the provisions of the Central Sales Tax Act, 1956 and Central Sales Tax (Pondicherry) Rules, 1967.
4. Legality of imposing additional tax at 10% for non-submission of Form 'C' for CST sales made for the years 2004-2005 and 2005-2006.

Issue-wise Detailed Analysis:

1. Power to Pass Orders Beyond Limitation Period:
The court examined whether the Assessing Officer had the power to pass orders for the years 2004-2005 and 2005-2006 on 06.01.2016, almost 11 years after the end of the relevant years. It was highlighted that the returns for these years were submitted in time, but the assessment orders were passed only in 2016. The court held that assessment cannot be carried forward indefinitely. The expression "after the close of the year" in Rule 5(6) of the Central Sales Tax (Pondicherry) Rules, 1967 implies that assessment should be done immediately after the submission of returns for the relevant year. The court concluded that the orders of assessment for the years 2004-2005 and 2005-2006 were not in conformity with the rules and were liable to be set aside.

2. Applicability of Section 9(2) of the Central Sales Tax Act, 1956:
The court analyzed the applicability of Section 9(2) of the Central Sales Tax Act, 1956, which allows reassessment within five years from the expiry of the year to which the assessment relates. It was clarified that the assessment order dated 06.01.2016 was not a reassessment order but the first assessment order. The court emphasized that the initial assessment should be done immediately after the close of the financial year and not at any indefinite time. Therefore, the provision for reassessment within five years did not apply to the initial assessment in this case.

3. Overlooking Provisions of the Central Sales Tax Act and Rules:
The court examined whether the assessing officer could overlook the provisions of the Central Sales Tax Act, 1956, and the Central Sales Tax (Pondicherry) Rules, 1967. It was noted that the petitioner had submitted returns and 'C' Forms in time, but the assessing officer failed to pass the assessment orders within a reasonable period. The court held that the assessing officer's action of passing the assessment orders after a decade was contrary to the provisions and the intention of the legislature, which mandates timely assessment.

4. Legality of Imposing Additional Tax for Non-submission of Form 'C':
The court scrutinized the imposition of additional tax at 10% for non-submission of Form 'C' for CST sales made for the years 2004-2005 and 2005-2006. It was observed that the petitioner had submitted the 'C' Forms in time, but the assessing officer misplaced them and later imposed additional tax. The court held that the imposition of additional tax was illegal and arbitrary, as the petitioner had complied with the requirement of submitting 'C' Forms within the stipulated time.

Conclusion:
The court allowed the tax case revisions, setting aside the impugned orders. The substantial questions of law were answered in favor of the assessee, emphasizing that the assessment orders passed after a decade were not in conformity with the relevant rules and provisions. No costs were imposed.