2022 (8) TMI 697 - HC - VAT and Sales Tax

Levy of Entry Tax - initiation of proceeding by issue of notice for reassessment for the tax periods from 01.04.2013 to 31.03.2014 - HELD THAT - Conjoint reading of Section 10(1), Section 2(p) and Section 2(oo) of the Act read with Rule 10 of the said Rules makes it clear that for the tax periods commencing from 01.04.2013 to 31.03.2014, the end of the year to which they relate would be 31.03.2014. Thus, the notice for reassessment under Section 10 being issued on 13.01.2022, it is manifest that the proceeding in respect of the year 2013-14 was not initiated within the time-frame envisaged under sub-section (1) of Section 10. It is clearly stipulated in said sub-section that the notice in Form E32 prescribed under Rule 15D(1) was required to be served on the petitioner within a period of seven years from the end of the year to which the tax periods from 01.04.2013 to 31.03.2014 relate. Entry tax - contention of the petitioner is that the subject-goods, i.e., plant and machinery, which were brought from outside into the local area during the period from 2009-10 till 2014-15 and subsequently capitalized in the year 2014-15, had already suffered entry tax - HELD THAT - It is glaring on face of record that the instruction provided to the Additional Standing Counsel by the Assessing Authority pursuant to direction of this Court vide Order dated 11.07.2022 is incorrect - the onus lies on the assessee to satisfy the Assessing Authority by adducing evidence to the effect that subject-goods have already been subjected to entry tax or that the entry tax has been paid by any other person or dealer under the OET Act. This Court is of the considered opinion that as the explanation of the petitioner-company has not been given due consideration by the Assessing Authority. As has already been held that the assessment in respect of the tax periods from 01.04.2013 to 31.03.2014 out of the impugned tax periods from 01.04.2013 to 30.09.2015 undertaken for assessment under Section 10 is time-barred, and the assessment is required to be set aside for fresh consideration pertaining to rest of the periods, i.e., from 01.04.2014 to 30.09.2015, the Assessing Authority is also required to consider the submissions furnished to him by the petitioner on different dates with reference to evidence available on record and/or to be produced by the petitioner-company. Thus, the impugned reassessment order dated 31.03.2022 passed under Section 10 of the OET Act is unsustainable being barred by limitation so far as it relates to the tax periods from 01.04.2013 to 31.03.2014. However, so far as assessment for the tax periods from 01.04.2014 to 30.09.2015 is concerned, the same is liable to be set aside and remanded to the Assessing Authority-Sales Tax Officer, Angul Circle, Angul - assessment order dated 31.03.2022 is hereby set aside and the matter relating to the tax periods 01.04.2014 to 30.09.2015 is remanded to the Sales Tax Officer for proceeding with the matter afresh. Petition disposed off.

Issues Involved:
1. Limitation period for reassessment under Section 10 of the OET Act.
2. Misinterpretation of capitalization of assets in the balance sheet.
3. Validity of reassessment notices and orders.
4. Compliance with Accounting Standards and Companies Act.
5. Onus of proof for payment of entry tax.

Detailed Analysis:

1. Limitation Period for Reassessment:
The petitioner contended that the assessment for the year 2013-14 is barred by limitation as per Section 10(1) of the OET Act. The court noted that Section 10(1) mandates that reassessment must be initiated within seven years from the end of the relevant year. Since the notice for reassessment was issued on 13.01.2022, it was beyond the permissible period for the year 2013-14, which ended on 31.03.2014. Consequently, the assessment for the tax periods from 01.04.2013 to 31.03.2014 was held to be barred by limitation.

2. Misinterpretation of Capitalization of Assets:
The petitioner argued that the addition of Rs.6019,11,90,908/- shown in the balance sheet for 2014-15 was misconstrued by the Assessing Authority as purchases made during that period. The court acknowledged the petitioner's explanation that these figures included work-in-progress expenses from 2009-10 onwards, capitalized in compliance with Accounting Standards AS-10 and AS-16, and the Companies Act, 2013. The court found that the Assessing Authority had not duly considered these explanations and submissions.

3. Validity of Reassessment Notices and Orders:
The court examined the sequence of reassessment notices issued and withdrawn by various authorities, noting that multiple notices were issued and subsequently withdrawn due to inadvertence. The final notice dated 13.01.2022 led to the impugned assessment order dated 31.03.2022. The court found that the reassessment for the period from 01.04.2013 to 31.03.2014 was time-barred, but the assessment for the period from 01.04.2014 to 30.09.2015 required fresh consideration.

4. Compliance with Accounting Standards and Companies Act:
The petitioner's compliance with Accounting Standards and the Companies Act was a significant point. The court noted that the petitioner had capitalized pre-operative expenses in accordance with AS-10 and AS-16, and the Companies Act, 2013. The Assessing Authority's failure to consider these standards and the petitioner's detailed submissions was a critical oversight.

5. Onus of Proof for Payment of Entry Tax:
The court highlighted that under Section 3(2) of the OET Act, the onus lies on the assessee to prove that the goods have already been subjected to entry tax. The petitioner claimed that the plant and machinery had already suffered entry tax, but the Assessing Authority did not adequately consider this claim. The court directed that the Assessing Authority should verify the authenticity of the petitioner's claim with proper evidence.

Conclusion:
The court held that the reassessment order dated 31.03.2022 was unsustainable for the tax periods from 01.04.2013 to 31.03.2014 due to the limitation period. For the tax periods from 01.04.2014 to 30.09.2015, the court set aside the assessment and remanded the matter to the Sales Tax Officer for fresh consideration, directing the petitioner to produce relevant books of account and evidence. The court emphasized the need for the Assessing Authority to consider the petitioner's explanations and documents, and to conclude the reassessment within two months from the petitioner's appearance on 26th August 2022. The writ petition was disposed of with these directions.

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