2021 (11) TMI 691 - HC - VAT and Sales Tax

Validity of re-assessment order - enlargement of time limitation with prospective effect or not - Section 39(1) of KVAT Act - HELD THAT - The order of re-assessment which was passed on 27.03.2013 for the Assessment Year 2005-06 is barred by limitation. It is pertinent to note that under the unamended provision, a vested right had accrued in favour of the petitioner. The amendment made to Section 40 of the Act, cannot be construed so as to open up a liability which had become barred . Therefore, even by retrospective operation of law, the aforesaid vested right accrued to the petitioner cannot be taken away. The impugned notice dated 17.03.2013 issued by the respondent No.3 namely the Additional Commissioner of Commercial Taxes is hereby quashed - Appeal allowed.

Summary

Issues:
Challenge to validity of provisos under Section 40 of the Act for limitation period enlargement.

Analysis:
The appellant, a registered dealer under the Karnataka Value Added Tax Act, faced losses due to mining restrictions in Bellary district. The Additional Commissioner initially allowed a refund for a specific period. However, later, an order was passed demanding a substantial sum for the Assessment Year 2005-06. The appellant challenged the validity of provisos under Section 40 of the Act, which extended the limitation period for assessment. The Single Judge dismissed the writ petition citing a previous judgment. The appellant appealed against this decision.

The dispute revolved around the amendments to Section 40 of the Act. Initially, the limitation period for assessment was five years, but subsequent amendments extended this period to eight years and then further to ten years retrospectively from 01.04.2005. The appellant's re-assessment order in 2013 for the Assessment Year 2005-06 fell outside the limitation period as per the original provision.

The Court referred to precedent stating that a vested right accrued under the unamended provision could not be taken away by subsequent amendments. Citing 'INCOME-TAX OFFICER Vs. S.K.HABIBULLAH,' the Court emphasized that retrospective laws cannot revive barred rights or take away vested rights. Upholding the Division Bench's decision in 'CIFTECH SOLUTIONS PVT. LTD.,' the Court concluded that the appellant's vested right could not be infringed upon by the amended provisions.

Therefore, the Court quashed the impugned notice issued by the Additional Commissioner and set aside the Single Judge's order, allowing the appeal in favor of the appellant.