2018 (2) TMI 523 - HC - VAT and Sales Tax

Jurisdiction - power to revise the order of appellate authority - Whether the Additional Commissioner of Commercial Taxes was justified in invoking the powers under Section 64 (1) of the KVAT Act to revise the order of the Appellate Authority passed under Section 62 of the Act? - Held that - the Addl. Commissioner is empowered to call for and to examine the record of any order passed or proceeding recorded under this Act and on such examination if it is found that any order passed by any Officer who is not above the rank of a Joint Commissioner, revision powers can be exercised provided such order is erroneous in so far as it is prejudicial to the interest of the Revenue. Time limitation - Whether the re-assessment proceedings initiated by the prescribed authority under the Act are barred by limitation as provided under Section 40 of the Act? - Held that - it can be held that amendment to Section 40 has retrospective effect with effect from 01.04.2005 enhancing the period of limitation provided under Section 40 of the Act - the proviso to Section 40 have been amended with effect from 01.04.2012 by Act No.17/2012 and subsequently by Act No.54/2013 retrospective effect was given with effect from 01.04.2005 and the constitutional validity of the same having been upheld, the arguments of the learned counsel that the reassessment proceedings are barred by limitation is wholly untenable. Whether the reassessment proceedings initiated by the prescribed authority are barred by Section 32 of the Act? - Held that - it is not only until the expiration of 5 years the books of accounts are required to be kept and maintained but also for such other period as may be prescribed or until the assessment reaches finality whichever is later. The phrase until the assessment reaches finality has to be read in conjunction with Sections 39 and 40 of the Act - it is clear that assessment also includes reassessment. The prescribed limitation for assessment/reassessment is in terms of Section 40. The limitation period being enlarged by the amendment carried out under Section 40 of the Act, the same shall have a bearing on Section 32. In the present case, the period of limitation as per the Amendment Act No.54/2013 is eight years with effect from 01.04.2005 i.e., 30.04.2013, the date of finality of the assessment, which would be the date of expiry of limitation to reassess the deemed assessments made under Section 38 of the Act for the assessment year 2005-2006. Reassessment proceedings were initiated by issuing notice dated 16.02.2013 and the reassessment order was passed on 22.04.2013 well within the period of limitation even as per Section 32 of the Act. The revisional order passed by the Addl. Commissioner of Commercial Taxes is justifiable - appeal dismissed.

Summary

Issues Involved:
1. Justification of the Additional Commissioner of Commercial Taxes invoking powers under Section 64(1) of the KVAT Act.
2. Whether the re-assessment proceedings are barred by limitation as provided under Section 40 of the KVAT Act.
3. Whether the reassessment proceedings are barred by Section 32 of the KVAT Act.

Detailed Analysis:

1. Justification of the Additional Commissioner of Commercial Taxes invoking powers under Section 64(1) of the KVAT Act:

Section 64(1) of the KVAT Act empowers the Additional Commissioner to call for and examine the record of any order passed under the Act if it is erroneous and prejudicial to the interest of the Revenue. The essential factors, 'erroneous' and 'prejudicial to the interest of Revenue,' must coexist for the revision. The Appellate Authority had held that the reassessment proceedings were barred by limitation. However, the Additional Commissioner found the order erroneous and prejudicial to the Revenue's interest, justifying the invocation of revisional powers under Section 64(1).

2. Whether the re-assessment proceedings are barred by limitation as provided under Section 40 of the KVAT Act:

Section 40 of the KVAT Act has undergone several amendments, extending the period of limitation for reassessment. Initially, the period was five years, which was later amended to eight years for assessments ending on 31st March 2007. This extension was given retrospective effect from 01.04.2005. The constitutional validity of this retrospective amendment was upheld by the court in the case of Ciftech Solutions Private Limited. The court referred to the judgment of the Hon'ble Apex Court in the case of Jyoti Traders, which held that explicit provisions of law must operate fully, even retrospectively. Thus, the reassessment proceedings initiated within the extended period of limitation are valid.

3. Whether the reassessment proceedings are barred by Section 32 of the KVAT Act:

Section 32 mandates that dealers must retain books of accounts for five years or until the assessment reaches finality, whichever is later. The term 'assessment' includes reassessment as per Section 2(5) of the Act. Given the extended limitation period under Section 40, the retention period also extends until the reassessment reaches finality. In this case, the reassessment notice was issued within the extended limitation period, making the proceedings valid under Section 32.

Conclusion:

The court found that the reassessment proceedings were initiated within the extended period of limitation prescribed by the retrospective amendments to Section 40. The Additional Commissioner was justified in invoking revisional powers under Section 64(1) due to the erroneous and prejudicial nature of the Appellate Authority's order. The reassessment proceedings were also not barred by Section 32, as the retention period for books of accounts extends until the reassessment reaches finality. Consequently, the appeals were dismissed, upholding the revisional order passed by the Additional Commissioner of Commercial Taxes.