2019 (8) TMI 34 - HC - VAT and Sales Tax

Scope of amendment - Whether the Chhattisgarh Entry Tax (Amendment) Act, 2014 which was made effective from April 1, 2014 defining to the word market value will have a prospective effect or whether such amendment can be used retrospectively to reopen assessments already made, in exercise of power under sub-section (1) of section 22 of the Act, 2005? HELD THAT - The court is informed that after the amendment, compliance by these companies are being made in terms of the new meaning having been given to the word market value under section 2(fff) of the Amendment Act, 2014, but to allow the assessing authorities to reopen past assessments on a new definition prospective in nature would be doing violence to law, as in our opinion, the amendment of 2014 in no manner can form the reason to believe which can permit the assessing authority to exercise power under section 22(1) of the Act, 2005. The amendment of 2014 is unworkable unless the State notifies the market value of such goods which has been done only on July 1, 2014. We therefore repel the argument made on behalf of the State that the definition so given to the word market value is only clarificatory and that by itself can be used as the basis for reopening the assessments which have attained finality prior to the amendment dated April 1, 2014. Appeal dismissed.

Summary

Issues Involved:
1. Whether the Chhattisgarh Entry Tax (Amendment) Act, 2014, defining "market value," has a prospective or retrospective effect.
2. Whether the amendment can be used as a basis for reopening assessments already concluded under Section 22(1) of the Chhattisgarh Value Added Tax Act, 2005.
3. The validity of the notices issued by the Commissioner, Commercial Taxes, for reassessment based on the amendment.

Issue-Wise Detailed Analysis:

1. Prospective or Retrospective Effect of the Amendment:
The primary issue was whether the Chhattisgarh Entry Tax (Amendment) Act, 2014, which defined "market value," should be applied prospectively or retrospectively. The court concluded that the amendment, effective from April 1, 2014, was prospective in nature. The amendment could not be applied retrospectively to reopen assessments already concluded. This conclusion was based on the principle that a substantive amendment, which changes the definition of a term, cannot be applied to past assessments unless explicitly stated.

2. Basis for Reopening Assessments:
The court examined whether the amendment could be used to reopen assessments under Section 22(1) of the Chhattisgarh Value Added Tax Act, 2005. The provision under Section 22(1) allows reassessment if there is "reason to believe" that there has been underassessment or escaped assessment. The court cited multiple precedents, including decisions from the Supreme Court, to assert that a mere change in opinion or a subsequent amendment cannot constitute "reason to believe." The court emphasized that the "reason to believe" must have a rational connection with the material on record at the time of the original assessment, not based on subsequent changes in law.

3. Validity of Notices for Reassessment:
The court scrutinized the notices issued by the Commissioner, Commercial Taxes, for reassessment based on the amendment. The notices were issued following a communication dated June 16, 2014, which directed reopening of assessments due to the new definition of "market value." The court held that the amendment, being prospective, could not form the basis for reopening past assessments. The court also noted that the amendment would be unworkable unless the State notified the market value of goods, which was done only on July 1, 2014. Therefore, the court found the notices for reassessment invalid and quashed them.

Conclusion:
The court dismissed the appeals filed by the State of Chhattisgarh, upholding the decisions of the single judges. The court affirmed that the amendment defining "market value" was prospective and could not be used to reopen past assessments. The court also reinforced the principle that reassessment requires a valid "reason to believe," which cannot be based on a mere change in opinion or subsequent amendments. The judgments in favor of Ambuja Cement Limited and Ultra Tech Cement Limited were thus maintained, and the reassessment notices were quashed.