2021 (4) TMI 1129 - HC - VAT and Sales Tax

Reopening of assessment - applicability of time limitation - Exemption from levy of Entry Tax - agricultural produce - amendment to Entry No.5 brought about on 01.10.2013 - prospective or retrospective - issuance of notice under Section 5(4) of the Karnataka Tax on Entry of Goods Act, 1979 - validity of assessment carried out on the various dates. Whether the amendment to Entry No.5 brought about on 01.10.2013 is prospective or retrospective? - HELD THAT - The notification substituting Sl.No.5 which was issued on 01.10.2013 categorically states that the said notification would come into effect from 02.10.2013. When the amendment itself says so there cannot be any interpretation of the said provision by the respondent officers - the amendment to Entry 5 brought about on 01.10.2013 is prospective in nature and would come into effect only from 02.10.2013. Whether a notice under Section 5(4) of the Karnataka Tax on Entry of Goods Act, 1979 can be treated as issued under Section 6 of the Act? - HELD THAT - In the present case, it is not that the returns have not been filed or the details not furnished. The authorities had called upon the petitioner to provide further details in respect of the declaration furnished and have also issued a proposition notice. Thus, it cannot be said that any notice under Section 6 of the Act had been issued for escaped assessment bringing the case of the petitioner under the fold of Section 6 - Section 6 would not attracted in the present case. At least until the amendment to Entry 5 is made, the respondent officer could not have changed the stand to impose any entry tax on the goods of the petitioner since it is the respondents themselves who had indicated the goods of the petitioner not amenable to such tax. The present issue being one relating to a period prior to coming into force of the amendment, the effect of the amendment is not required to be considered in the present matter. Whether in the present case, a notice issued under Section 5(4) on 02.01.2017 was barred by period of limitation fixed under Section 5(6) of the Act and if so, whether the assessment carried out on the various dates is valid and sustainable? - HELD THAT - In the present case, the assessment for the years 2008-09 to 2012-13 have been sought to be reopened. The reopening of the assessment for the year prior to 2012-13 is beyond the period of 3 years as contemplated under Section 5 (6) of Entry Tax Act and the same would not come within the purview of the said provision and there is no power vested with the authorities to reopen an assessment carried out three years prior to the said date of issuance of notice - all the assessments which have been carried out are bad in law. Petition allowed.

Summary

Issues Involved:
1. Prospective or retrospective application of the amendment to Entry No.5.
2. Validity of treating a notice under Section 5(4) as issued under Section 6 of the Entry Tax Act.
3. Limitation period for issuing a notice under Section 5(4) and the validity of the assessments.
4. Applicability of the clarification issued by the Commissioner of Commercial Taxes to all assessees/dealers.

Detailed Analysis:

1. Prospective or Retrospective Application of the Amendment to Entry No.5:
The amendment to Entry No.5 was brought about on 01.10.2013 and explicitly stated to come into effect from 02.10.2013. The court held that the amendment is prospective in nature, rejecting the respondents' contention that it should date back to the enactment date. The court emphasized that taxation statutes must be clear to allow dealers to plan their business activities accordingly.

2. Validity of Treating a Notice Under Section 5(4) as Issued Under Section 6 of the Act:
Section 5(4) and Section 6 of the Entry Tax Act serve different purposes. Section 5(4) pertains to calling upon the dealer to furnish necessary particulars for assessment, while Section 6 deals with escaped assessments where no assessment was made. The court found that the notice issued under Section 5(4) could not be treated as one under Section 6, as the returns had been filed and details furnished by the petitioners. Thus, Section 6 was not applicable in this case.

3. Limitation Period for Issuing a Notice Under Section 5(4) and Validity of the Assessments:
Section 5(6) specifies a three-year period for assessments. The notice issued on 02.01.2017 could only cover assessments from 03.01.2014 to 02.01.2017. Consequently, reopening assessments for the years 2008-09 to 2012-13 was beyond the three-year limitation period. Therefore, the court held that the assessments were invalid and unsustainable.

4. Applicability of the Clarification Issued by the Commissioner of Commercial Taxes:
The respondents argued that the clarification in the case of Sri. Vittal A. Naik applied to all manufacturers, while the earlier clarification in the case of Ghaichap Zarda did not apply to the petitioners. The court found this contradictory and stated that if one clarification applied to all, so should the other, unless there was a material change in circumstances or law. The court did not address other points raised by the petitioners, leaving them open for future consideration.

Order:
The court allowed the writ petitions, quashing the assessment and rectification orders for the assessment years 2008-09 to 2011-12 in W.P.Nos.202323 and 201286 of 2018, and for the year 2012-13 in W.P.No.44960/2017.