2017 (9) TMI 60 - HC - VAT and Sales Tax

Time limitation - validity of assessment - case of petitioner is that initiation of assessment barred by limitation - Held that - Under Section 22 of the VAT Act, the time limit prescribed for issuance of notice for re-assessment is three calendar years from the date of order of assessment - the order of assessment in the present case for the assessment year 2001-02 was 28.01.2005 and under the new law i.e. VAT Act, the notice for re-assessment could have been issued within three years from the date of order of assessment i.e. by 28.01.2008. For argument sake even if we take three years from coming into force of the new law, the notice could have been issued only by 28.01.2009 as VAT Act came into force w.e.f. 01.04.2006 and the notice for reassessment as mentioned earlier was 14.06.2010 which again is much beyond the prescribed period under Section 22 of the VAT Act for issuance of notice of re-assessment. The notice of re-assessment issued by the respondents were beyond the period of prescribed limit. No plausible explanation has been furnished by the State Govt. justifying the delay part. Neither does the Act empower the authorities under any circumstances to proceed for re-assessment beyond the limitation period prescribed under Section 22 of the VAT Act - assessment not sustainable and is quashed. Petition allowed - decided in favor of petitioner.

Summary

Issues involved:
1. Barred by limitation for initiation of assessment
2. Distinction between Light Diesel Oil (LDO) and Furnace Oil (FO) for separate tax rates

Analysis:

Issue 1: Barred by limitation for initiation of assessment
The petitioner challenged the notice of re-assessment, subsequent re-assessment order, and revisional order issued by the Additional Commissioner, Commercial Tax. The assessment year in dispute was 2001-02 under the Commercial Tax Act. The petitioner argued that the notice of re-assessment issued on 14.06.2010 was beyond the prescribed period of limitation under Section 22 of the VAT Act. The court referred to Section 28 of the Commercial Tax Act, which allowed a time limit of five calendar years from the date of the assessment order for re-assessment. However, the notice in this case was issued after the expiration of this period. The court also analyzed Section 22 of the VAT Act, which limited the issuance of a re-assessment notice to three calendar years from the date of the assessment order. The notice in this case was issued well beyond this period as well. The court held that the notice of re-assessment and subsequent orders were beyond the prescribed time limits and quashed them.

Issue 2: Distinction between Light Diesel Oil (LDO) and Furnace Oil (FO) for separate tax rates
The petitioner contended that LDO and FO are distinct commodities and should be taxed separately at different rates. The petitioner argued that there was no specific entry for FO under the Commercial Tax Act, and FO had been treated as a subsidiary entry under Entry-39 of Part-IV of Schedule-II. The court noted that the State counsel relied on previous judgments to support the tax treatment of LDO and FO. However, the court did not delve into this issue extensively due to the primary issue of limitation. The court emphasized that legal issues, including jurisdictional matters like limitation, could be raised at any stage, as upheld by the Supreme Court. The court ultimately quashed the re-assessment notice and subsequent orders due to being in contravention of the prescribed time limits under the VAT Act.

In conclusion, the High Court of Chhattisgarh held that the notice of re-assessment and subsequent orders were barred by limitation under the VAT Act and, therefore, quashed them. The court did not extensively address the issue of distinct tax treatment for LDO and FO due to the primary focus on the limitation issue.