2018 (5) TMI 83 - HC - VAT and Sales Tax

Time limitation - jurisdiction to pass Assessment Order beyond the period of five years from the end of the year of Assessment - Section 32 read with Section 9 (2) of the CST Act - principles of natural justice - Held that - On verification of records placed before the Court, it is manifestly clear that the proposition notice was issued by the prescribed Authority before concluding the assessment in as much as fixing the tax liability - the ground of unjust enrichment has no merit. Limitation - Held that - it is not in dispute that the Constitutional validity of the amendment made to Section 40 of the KVAT Act extending the time limit to conclude the re-assessment has been upheld - This amendment effected by Act No.54 of 2013 with effect from 01.04.2005 retrospectively having been held to be Constitutionally valid - assessments not barred by limitation. Maintenance of records for five years - Held that - it is obligatory on the part of the petitioner to maintain the books of account until the assessment reaches finality. Penalty - Held that - In the absence of any notice issued by the prescribed Authority for levying penalty, imposition of penalty is ab initio void and the same deserves to be quashed - penalty set aside. Appeal allowed in part.

Summary

Issues:
Challenge to order of Appellate Authority under CST Act for Assessment period 2005-06, Jurisdiction of Authorities under KVAT Act for Assessment Order beyond 5 years, Violation of natural justice in re-assessment, Limitation period for re-assessment under CST Act, Maintenance of books of accounts under KVAT Act, Penalty imposition for non-furnishing of C-Form.

Analysis:
1. The petitioner challenged the order of the Appellate Authority under the CST Act for the Assessment period 2005-06, contending that the Authorities under the KVAT Act lacked jurisdiction to pass Assessment Orders beyond five years. The petitioner, a registered dealer under both Acts, filed returns and paid taxes for the relevant period. The re-assessment under KVAT Act and CST Act was contested due to lack of proper notice before enhancing tax liability, invoking principles of natural justice.

2. The petitioner raised four grounds of challenge. Firstly, the absence of a proper proposition notice before increasing tax liability and imposing penalties. Secondly, the contention that re-assessment under CST Act for 2005-06 was time-barred. Thirdly, the requirement to retain books of accounts under Section 32 of KVAT Act until assessment finality. Fourthly, the challenge to penalty imposition for not furnishing C-Form, citing a relevant court judgment for support.

3. The respondents argued that the Writ jurisdiction could not be invoked without exhausting alternative remedies. They contended that the proposition notice was issued before finalizing assessment and that an amendment to Section 40 of KVAT Act extended the time limit for re-assessment, upheld by the Court. They also argued for the maintenance of books of accounts until assessment finality and distinguished the previous court judgment cited by the petitioner.

4. The Court found that the proposition notice was issued before finalizing the assessment, rejecting the violation of natural justice ground. The Court upheld the Constitutional validity of the amendment extending the time limit for re-assessment, dismissing the limitation argument. It also ruled that the petitioner must maintain books of accounts until assessment finality, rejecting the petitioner's contention.

5. The Court held that penalty imposition without proper notice was void and quashed the penalty. Consequently, the Writ petition was partly allowed, confirming the tax and interest levy for 2005-06 while setting aside the penalty imposition. The judgment provided a detailed analysis of each ground raised by the petitioner and the respondents, ensuring a comprehensive examination of the legal issues involved.