2020 (11) TMI 80 - HC - VAT and Sales Tax

Time Limitation for completion of assessment - though the assessees sought the limitation period to be limited to four years as has been prescribed under sub-rules (7) and (8) of Rule 6 of the CST Rules, the decisions thought it fit to refer to the General Sales Tax laws applicable in the State, thus enlarging the period of limitation from that available in the Rules - HELD THAT - Section 9 enables the levy and collection of tax and penalties exercising all or any of the powers conferred on the Department under the General Sales Tax law of the State, which is subject to the other provisions of the CST Act and the Rules framed there under - Under the KGST regime as was applicable till the year 2004-2005, there was a finalization of assessment contemplated after the return is filed. Under the KVAT regime, which came into force from 01.04.2005, on filing of return, there is a self assessment under Section 21, which deems the assessment to have been completed on the receipt of the return. The limitation provided is not from the date of finalization of assessment, but from the closure of the year to which the tax relates. Even a rectification of mistake can only be within three years of the expiry of the year to which the tax relates. In that context, it would not have been the intention of the executive Government to enable an assessment at any time after the return is filed when the rules provide a limitation period of re-opening either for determination of turnover or for revising the rate of tax or even for rectification of a mistake. We would have in that context found the reasonable time to be four years. Rule 6(5) does not provide for a period of limitation and when the General Sales Tax law provided a period of five years for re-opening an assessment which is deemed to be completed under Section 21, the same applies under the CST Act and the Rules. We cannot but observe that though Section 25 of the KVAT Act provides for re-opening of the completed assessment under Section 21, under the CST Rules the limitation provided for reopening of assessment on the ground of escaped assessment is four years. For the year 2005-06 and 2006-07, the notices issued under Section 6(5) were just prior to the close of the 8th year, i.e., respectively on 13.02.2014 and 19.03.2015. For the year 2007-08, notice was issued on 20.03.2015, just prior to the close of the 7th year - Decided in favour of the assessee and against the Department.

Summary

Issues Involved:
1. Limitation for assessments under the Central Sales Tax Act, 1956 (CST Act) and the Central Sales Tax (Kerala) Rules, 1957 (CST Rules).
2. Applicability of the principle of reasonable time for completion of assessments.
3. Interpretation of relevant Supreme Court judgments on limitation and assessment.

Detailed Analysis:

Limitation for Assessments under the CST Act and CST Rules:
The primary issue addressed is the limitation period for assessments under the CST Act and CST Rules. Despite no explicit time frame provided in Rule 6(5) of the CST Rules for completing assessments, the court emphasized that a reasonable period must be inferred based on the statute's nature, rights, liabilities, and other relevant factors.

Applicability of the Principle of Reasonable Time:
The court referred to two Division Bench decisions, Parisons Foods (P) Ltd. v. State of Kerala and CTO v. Fijo Joseph, which concluded that even in the absence of a specified limitation period, assessments should be completed within a reasonable time. This principle was supported by Supreme Court judgments in S.B. Gurbaksh Singh v. Union of India and State of Punjab v. Bhattinda District Co-operative Milk Producers' Union Ltd., which established that the State must complete assessments within a reasonable period even if no limitation is explicitly provided.

Interpretation of Relevant Supreme Court Judgments:
The court analyzed several Supreme Court judgments to determine the correct interpretation of limitation periods for assessments:

1. Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax:
- The Supreme Court held that if a statute requires a return to be filed but does not provide a limitation period for completing assessments, the proceedings commence after the return is submitted and continue until a final order is made.
- The court differentiated between cases where returns were filed and those where they were not, emphasizing that statutory obligations alone do not initiate proceedings without actual notice issuance.

2. S.B. Gurbaksh Singh v. Union of India:
- This case introduced the concept of reasonable time for exercising suo motu revision powers, stating that unreasonable delay could affect the validity of such powers.
- The court highlighted that the principle of reasonable time has been consistently applied in subsequent judgments.

3. Indian Aluminium Cables Limited v. The Excise & Taxation Officer:
- Clarified that the principle of reasonable time applies even in the absence of a statutory limitation period.

4. Bharat Steel Tubes Ltd. v. State of Haryana:
- Reiterated that assessments should be completed within a reasonable period, considering the facts of each case.

5. Ibrahimpatnam Taluk Vyavasaya Coolie Sangham v. K. Suresh Reddy:
- Emphasized that the exercise of suo motu powers should be within a reasonable time, especially in cases involving fraud.

6. Collector v. D. Narsing Rao and Chhedi Lal Yadav v. Hari Kishore Yadav:
- Affirmed that actions must be taken within a reasonable time, even if no specific limitation period is prescribed.

Application to the Present Case:
The court applied the principles derived from these judgments to the present case, concluding that the assessments were vitiated due to "unduly long delay." The notices for the years 2005-06 and 2006-07 were issued just before the close of the 8th year, and for 2007-08, just before the close of the 7th year. The court adopted the five-year period provided under the General Sales Tax law as reasonable, thus finding the notices issued beyond this period to be invalid.

Conclusion:
The court rejected the revisions, affirming that the assessments were barred by limitation due to the unduly long delay in issuing notices. The principle of reasonable time, as judicially recognized, was upheld, and the question of law on limitation under Rule 6(5) was answered in favor of the assessee and against the Department.