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2023 (3) TMI 5 - HC - VAT and Sales TaxConstitutional Validity of Entry No.25 of the 6 Schedule to the Karnataka Sales Tax Act, 1957 - assessment order, reopening of assessment, barred by limitation or not - time limitation as per Section 12-A(1) of the KST Act - whether the proviso to Section 12-A(2) of the KST Act is applicable to the facts of the instant case? HELD THAT - The proviso to Section 12-A(2) of the KST Act is not applicable to the instant case and the impugned assessment orders are barred by limitation. It is a matter of record that the petitioner was not one of the parties in PRO Lab s case 2015 (2) TMI 388 - SUPREME COURT and consequently, would not come under the expression assessee contained in the proviso to Section 12-A(2). The petitioner can also not be considered, construed or treated as any person as contemplated in the said proviso since the same means, only a person who is intimately connected or interlinked or has a nexus to the parties in PRO Lab s case and not to anyone else, much less, the petitioner herein, who was neither a party to PRO Lab s case nor had any connection / link / nexus with the parties to the said case; to put it differently, in order to apply the judgment of the Apex Court in PRO Lab s case, which would enable the respondents to initiate the impugned re-assessment proceedings, pursuant thereto, it is absolutely essential that the petitioner herein has to be any person within the meaning of the proviso to Section 12-A(2); it follows there from that if the petitioner cannot be construed, considered or treated as any person in terms of the said proviso, the same would be inapplicable to the petitioner and the benefit of exclusion of the period of 8 years prescribed in Section 12-A(1) would not be available to the petitioner. In ITO, Sitapur vs. M/s.Muralidhar Bhagwan Das case 1964 (1) TMI 5 - SUPREME COURT , the Apex Court held that the said proviso would not save the time limit prescribed under sub-section (1) of Section 34 of the Act in respect of an escaped assessment of a year other than that which is the subject-matter of the appeal or the revision, as the case may be. It follows that the notice under Section 34(1) of the Act issued in the present case was clearly barred by limitation. In Mysore Cements Ltd., case 1999 (7) TMI 641 - KARNATAKA HIGH COURT , the coordinate Bench of this Court while dealing with proviso 12- A(2) of the KST Act, under identical circumstances, held that Section 12-A(2) has extended the time-limit during which the stay was granted by any court or any other authority. It is only the time during which the stay granted is extended. But in a case where the stay is not granted and ultimately the matter is decided against the assessee requiring to make the assessment on the basis of the ultimate order or judgment given then the proviso further extends the time but, if a judgment is given in other case, then it would justify reopening of the assessment only within the time prescribed under section 12-A(1) and if it is in the case of the same assessee or person then, proviso to sub-section (2) of section 12-A thereof extends the time-limit for initiation of the assessment/reassessment of that assessee. The impugned re-assessment orders for the years 1998-99 to 2004-05 dated 15.04.2016 and consequent demand notices dated 15.04.2016 passed by the 3rd respondent at Annexures-K, L, M, N, P, Q and R respectively - petition allowed.
Issues Involved:
1. Constitutionality of Entry No. 25. 2. Applicability of the proviso to Section 12-A(2) of the KST Act. 3. Limitation period for reassessment under Section 12-A(1) of the KST Act. 4. Impact of the Apex Court's judgment in the PRO Lab case on the petitioner. 5. Validity of the reassessment orders and demand notices issued by the respondents. Detailed Analysis: 1. Constitutionality of Entry No. 25: The petitioner was initially exempt from sales tax due to the unconstitutionality of Entry No. 25 in the Sixth Schedule to the Karnataka Sales Tax Act, 1957 (KST Act), as declared in Keshoram Surindranath Photo-Mag. (Pvt.) Ltd. vs. ACCT. This decision was confirmed by the Apex Court on 20.04.2000. Entry No. 25 was reintroduced with retrospective effect through Karnataka Act No. 3 of 2004, but was again struck down by this Court in M/s. PRO Lab, Mangalore vs. State of Karnataka on 19.08.2005. The Apex Court later reversed this decision on 30.01.2015, restoring Entry No. 25. 2. Applicability of the Proviso to Section 12-A(2) of the KST Act: The respondents argued that the proviso to Section 12-A(2) applied, which would exclude the period during which the PRO Lab case was pending. However, the Court held that the proviso was inapplicable to the petitioner, who was neither a party to the PRO Lab case nor had any connection with it. The Court emphasized that the proviso applies only to those intimately connected or having a nexus with the parties in the case. 3. Limitation Period for Reassessment under Section 12-A(1) of the KST Act: Section 12-A(1) prescribes an 8-year limitation period for reassessment from the expiry of the year to which the tax relates. For the years 1998-99 to 2004-05, the last date for reassessment would be 31.03.2013 for the year 2004-05. The notices issued on 07.10.2015 were beyond this 8-year period, making the reassessment proceedings time-barred. 4. Impact of the Apex Court's Judgment in the PRO Lab Case on the Petitioner: The Apex Court's interim order in the PRO Lab case allowed the revenue authorities to proceed with assessments but restrained them from taking coercive steps. This interim order was in effect from 19.11.2007 to 30.01.2015. The Court noted that the respondents could have proceeded with the reassessment during this period, and thus, this time could not be excluded for computing the limitation period. 5. Validity of the Reassessment Orders and Demand Notices Issued by the Respondents: The Court found that the reassessment orders dated 15.04.2016 and the consequent demand notices were barred by limitation. The respondents' reliance on the proviso to Section 12-A(2) was misplaced as it did not apply to the petitioner. The Court quashed the reassessment orders and demand notices. Conclusion: The petition was allowed, and the impugned reassessment orders for the years 1998-99 to 2004-05 dated 15.04.2016 and the consequent demand notices dated 15.04.2016 were quashed.
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