2014 (8) TMI 141 - HC - VAT and Sales Tax

Re opening of assessment - Jurisdiction of Additional Commissioner - Tangible basis for reopening of assessment - Taxability of containers made of plastic @ 8% at the point of sale by a manufacturer or importer by virtue of a notification dated 5 February 2003 - Held that - It is clear that the notification dated 5 February 2003 refers to plastic buckets, plastic basins, plastic soap case, plastic plates and other wares and containers made of plastic , amongst other things. The notification does not qualify the expression containers made of plastic by the words non disposable . Merely because the notification does not use the expression disposable containers made of plastic would not furnish any ground to the Additional Commissioner to permit a reopening of assessment. The Assessing Authority had duly applied its mind to the business activities of the petitioner and as the assessment order would indicate, the authority was conscious of the position that the petitioner manufactures disposable containers. In this view of the matter, there was absolutely no tangible material before the Assistant Commissioner to issue an authorization and the initiation of proceedings would have to be held as being contrary to law. Tax administration must be based on the principles of certainty and stability. Certainty and stability ensure objective, fair and accountable decision making procedures which are fundamental requirements of equality before law under Article 14 of the Constitution. Uncertainty produces chaos and renders the decision making process whimsical and arbitrary. This negates the fundamental right under Article 14 which is a guarantee against non arbitrariness. The precepts of Article 14 can and should be used not only to test the validity of legislative or administrative action but also to enhance that interpretation of the law which will render its administration and implementation fair. The proviso to sub-section (2) of Section 21 lifts the bar of time. But it cannot be construed to confer an unguided or subjective power to the Commissioner to authorise reopening of concluded assessments. The interests of the revenue have to be protected, but the guiding principle is whether the requirements of sub-section (1) are attracted. For that to happen, there must be tangible material. Tangible material ensures that the power is not exercised arbitrarily but for valid reasons contemplated by the statute. - Decided in favour of assessee.

Summary

Issues:
1. Legality of reassessment proceedings initiated against the petitioner for Assessment Year 2007-08.
2. Interpretation of the notification regarding the taxation of plastic containers.
3. Validity of the Additional Commissioner's authorization for reassessment.
4. Application of Section 21 for reassessment and the role of tangible material in the decision-making process.

Analysis:
1. The petitioner challenged the legality of the order initiating reassessment for the Assessment Year 2007-08. The petitioner, engaged in manufacturing and selling plastic containers, was previously taxed at 8% under a specific notification. The Additional Commissioner initiated reassessment, alleging the petitioner's goods were not covered by the taxing entry. The petitioner argued that the reassessment lacked tangible material and was contrary to law as the Assessing Authority was aware of the nature of the petitioner's business activities.

2. The notification in question covered various plastic items, including containers, without specifying disposable or non-disposable types. The petitioner contended that the Additional Commissioner's basis for reassessment, focusing on non-disposable containers, was unfounded as the original assessment considered the petitioner's manufacturing of disposable containers. The court emphasized that the notification did not distinguish between disposable and non-disposable plastic containers, highlighting the Assessing Authority's previous application of the 8% tax rate to the petitioner's goods.

3. Section 21 granted the Assessing Authority the power of reassessment if there was a reason to believe that turnover had escaped assessment or was under-assessed. The Commissioner could authorize reassessment within an extended period, but this required tangible material to justify the decision. The court stressed the importance of tangible material to prevent arbitrary exercise of power and ensure fairness. In this case, the court found no valid grounds for reassessment, as the original assessment considered all relevant factors, and the Additional Commissioner lacked tangible material to support the decision.

4. Upholding the principles of certainty and stability in tax administration, the court emphasized the need for valid reasons, not just a change in opinion, to justify reassessment. The judgment highlighted the importance of tangible material in decision-making to prevent arbitrary actions and ensure fair and accountable procedures. Ultimately, the court allowed the petition, setting aside the Additional Commissioner's order for reassessment and the consequent notice issued by the Deputy Commissioner, emphasizing the importance of adherence to legal principles and the protection of taxpayers' rights.