2021 (3) TMI 960 - HC - VAT / Sales Tax

Initiation of proceedings of reassessment - pendency of proceedings under the Act do not exist - applicability of Section 34 (8A) of the VAT Act - HELD THAT - The issue involved in the present petition is squarely covered by the decision of this Court rendered in the case of DHANANI IMP. EXP. PVT. LTD. AND 1 VERSUS STATE OF GUJARAT AND 1 2016 (7) TMI 1150 - GUJARAT HIGH COURT , wherein, the identical question of law similar to the facts of the present case was dealt with and finally the impugned order passed under Section 34 (8A) of the Act was quashed and set aside. The assessment for the year 2011-12 became final by passing the order dated 30.03.2015 in Form 304 of the VAT Act. It is an undisputed fact that, no any proceedings either under Section 35 or Section 75 of the VAT Act were pending at the time of issuing the show-cause notice dated 11.10.2019. Thus, after more than 7 years, on the basis of objection of audit para, the authority concerned had initiated the proceedings of reassessment by invoking the provision of Section 34 (8A) of the VAT Act. The pre-condition for invoking the provision of Section 34 (8A) of the Act is that, there must be a pendency of proceedings under the Act, which does not fulfill in the present case. The case of the writ applicants does not fall under Section 34 (8A) of the Act and the action of the authority is in excess of jurisdiction - Application allowed.

Summary

Issues Involved:

1. Legality and validity of the impugned order dated 28.11.2019 under Section 34(8A) of the Gujarat Value Added Tax Act, 2003.
2. Whether the respondent authority had the jurisdiction to invoke Section 34(8A) of the VAT Act.
3. Applicability of the decision in Dhanani Imp. Exp. Pvt. Ltd. vs. State of Gujarat to the present case.

Issue-wise Detailed Analysis:

1. Legality and Validity of the Impugned Order:

The writ applicants challenged the legality and validity of the impugned order dated 28.11.2019 passed under Section 34(8A) of the Gujarat Value Added Tax Act, 2003. The applicants argued that the impugned order was illegal, without jurisdiction, unreasonable, and arbitrary. They contended that there was no basis for the respondent authority to invoke the provisions of Section 34(8A) as it can only be invoked when any proceedings with respect to the subject matter of the show-cause notice are pending. The original assessment proceedings had attained finality without any pending challenges, thus the respondent No.2 could not have reopened the assessment proceedings by invoking Section 34(8A). The recalculation of the credit amount under Section 34(8A) was deemed without jurisdiction.

2. Jurisdiction to Invoke Section 34(8A):

The applicants argued that the respondent No.2 had no jurisdiction to invoke Section 34(8A) of the VAT Act as no proceedings were pending at the time of issuance of the show-cause notice. The original assessment for the year 2011-12 had been finalized on 30.05.2015, and the assessment order had been completed without any scrutiny proceedings as provided under Section 35 (turnover escaping assessment) and Section 75 (revision of the VAT Act). The respondent No.2 issued a notice on 17.09.2019, more than seven years after the relevant assessment period, and subsequently issued a show cause notice on 11.10.2019, claiming that the company had evaded tax and claimed excess input tax credit. The applicants contended that the action of the respondent was in excess of jurisdiction and contrary to the provisions of the VAT Act.

3. Applicability of Dhanani Imp. Exp. Pvt. Ltd. vs. State of Gujarat:

The applicants relied on the decision in Dhanani Imp. Exp. Pvt. Ltd. vs. State of Gujarat, where it was held that the pendency of proceedings is a sine qua non for exercising power under Section 34(8A) of the Act. The court in Dhanani Imp. Exp. Pvt. Ltd. observed that the original assessment was completed and became time-barred, and no proceedings for assessment were pending. The court emphasized that the provision of Section 34(8A) could not be applied retroactively to periods before its enactment and that the pendency of proceedings is necessary for invoking Section 34(8A). In the present case, the court noted that the assessment for the year 2011-12 had become final by 30.03.2015, and no proceedings under Section 35 or Section 75 were pending at the time of issuing the show-cause notice. Thus, the court concluded that the case of the writ applicants did not fall under Section 34(8A) of the Act, and the action of the authority was in excess of jurisdiction.

Conclusion:

The court found that the impugned order dated 28.11.2019 passed by the respondent No.2 was without jurisdiction and contrary to the provisions of the VAT Act. The pre-condition for invoking Section 34(8A) was not fulfilled as there were no pending proceedings under the Act. Consequently, the impugned order was quashed and set aside, and the writ application was allowed.