2022 (7) TMI 454 - SC - VAT and Sales Tax

Extension of time limit for completion of assessment - Power of the Commissioner to allow further time of six months to the Assessing Authority to complete the audit assessment must be exercised before the Assessing Authorities time to conclude the proceedings expire - Assessing Authority could pass the assessment order after the period of six months in expectation of the Commissioner extending the time or not - grant of post-facto extension, ratifying the assessment order passed beyond the period of six months - HELD THAT - Even where a statute uses varied expression such as deferment or extension , the purpose is only to grant further time to the Assessing Authority to complete the assessment. Therefore, there is no purpose in drawing a distinction in the power of extension by referring to the specific expressions used in different statutes provisioning extending the time. The ratio of the judgment is that, upon the lapse of period provided for the AO to make the assessment, the right of the department to assess gets extinguished. This extinguishment also gives rise to a valuable right to the assessee. Once the right to make assessment extinguishes there is no question of extension of time when the assessment has become time barred. There are similar provisions under the Income Tax Act,1961 i.e., Section 139(2) where this Court in COMMISSIONER OF INCOME-TAX VERSUS AJANTA ELECTRICALS 1995 (5) TMI 1 - SUPREME COURT has taken a view that the power of extension can be granted by an Income Tax officer even after the expiry of the prescribed period. Considering from the perspective of administrative law, the time limitations are restrains placed by the legislature to regulate exercise of administrative power. They are intended to enforce discipline in governance and could therefore be compelling guidelines or even mandatory prescriptions. The Court must therefore, examine the provisions in the context of balance between need for executive flexibility and the quest against arbitrariness. It is the duty of the Court to synthesize these competing claims keeping in mind the public interest of good governance. This Court has traditionally drawn a distinction between statutes prescribing no time limit while performing public duties and statutes providing a time limit. Even with the statutes providing for the time limit, there is a distinction between statutes providing for consequence for not acting with the time limit and statutes not providing for any such consequences. Examination of these factors become necessary for appreciating the procedural ultra vires in the executive action. For the present, we need not say anything more. In the case of STATE OF PUNJAB AND OTHERS VERSUS M/S SHREYANS INDUS LTD. ETC 2016 (3) TMI 331 - SUPREME COURT , it was held that the Commissioner should have exercised the power of extension before the original period of limitation expired on 31.03.2013. - These matters must be placed before a three Judge bench for a consideration of the principle in Shreyans Industries and also on the applicability of the said judgment to the proceedings arising under the Act.

Summary

Issues Involved:
1. Interpretation of Section 42(6) of the Orissa Value Added Tax Act, 2004.
2. Whether the Commissioner can extend the time for the Assessing Authority to complete the audit assessment after the initial six-month period has expired.
3. Validity of assessment orders passed after the initial six-month period but within one year.
4. Applicability of the Supreme Court's decision in Shreyans Industries to the Orissa Value Added Tax Act.

Detailed Analysis:

1. Interpretation of Section 42(6) of the Orissa Value Added Tax Act, 2004:
The court examined the statutory provisions of Section 42(6) of the Orissa Value Added Tax Act, 2004, which mandates that an audit assessment must be completed within six months from the date of receipt of the Audit Visit Report (AVR). The proviso to this section allows the Commissioner to grant an extension of up to six months if the assessment is not completed within the initial period. The court emphasized the need to interpret this provision in light of its text and context.

2. Whether the Commissioner can extend the time for the Assessing Authority to complete the audit assessment after the initial six-month period has expired:
The court analyzed whether the Commissioner's power to extend the time for completing the audit assessment must be exercised before the expiry of the initial six-month period. The court noted that the proviso to Section 42(6) does not explicitly limit the Commissioner's power to extend the time before the expiry of the initial period. However, the court acknowledged the principle laid down in Shreyans Industries, which held that the right to make an assessment gets extinguished after the expiry of the prescribed period, and any extension granted thereafter would be invalid.

3. Validity of assessment orders passed after the initial six-month period but within one year:
The court examined various cases where assessment orders were passed after the initial six-month period but within the extended period of one year. In the case of Essel Mining and Industries Ltd., the assessment order was passed within one year, but the extension was granted three days after the initial six-month period. The court noted that the High Court quashed the assessment order on the ground that the extension was granted telephonically without assigning reasons. Similarly, in the cases of M/s Shreem Electric Ltd., M/s Cobra Instalaciones Y Servicios S.A., and M/s Swastik Ingot (P) Ltd., the assessment orders were challenged on the ground that they were passed after the initial six-month period without proper extension by the Commissioner. The court observed that the High Court relied on the decision in Shreyans Industries to quash these assessment orders.

4. Applicability of the Supreme Court's decision in Shreyans Industries to the Orissa Value Added Tax Act:
The court considered whether the principle laid down in Shreyans Industries, which dealt with the Punjab General Sales Tax Act, 1948, is applicable to the Orissa Value Added Tax Act. The court noted that the principle in Shreyans Industries is based on the extinguishment of the right to make an assessment after the expiry of the prescribed period, which is a broad principle of law. The court found it difficult to distinguish Shreyans Industries on the facts or wording of the statute and acknowledged that the principle is wide enough to require critical consideration. Consequently, the court referred the matter to a three-judge bench for a detailed examination of the principle in Shreyans Industries and its applicability to the Orissa Value Added Tax Act.

Conclusion:
The court concluded that the issues raised in these cases require a detailed examination by a three-judge bench to ensure consistency and clarity in the law of precedents. The matter was referred to a larger bench to consider the principle laid down in Shreyans Industries and its applicability to the Orissa Value Added Tax Act.