2020 (12) TMI 1171 - HC - VAT and Sales Tax

Reassessment order - input credit which was allowed in the original assessment is now disallowed - jurisdiction - time limitation - violation of the principles of natural justice - whether the impugned order of reassessment once again raising a demand by disallowing the very same input tax credit which was disallowed in the original assessment is tenable in law? - Section 35 of the Gujarat VAT Act 2003 - HELD THAT - The provisions of Section 35 of the Act 2003 would indicate that after a dealer has been assessed under Sections 33 34 and 35 of the Act as the case may be in any particular year if the Commissioner has reason to believe that the the whole or any part of the taxable turnover of the dealer in respect of any period has escaped assessment or has been under assessed or has been assessed at a rate lower than the rate at which it is assessable or wrongly been allowed any deduction therefrom or has wrongly been allowed any tax credit therein the Commissioner may serve a notice on the dealer and after giving an opportunity of hearing proceed to pass appropriate order to determine the best of his judgment the amount of tax due from the dealer. In this petition it is the original assessment order disallowing the credit which is made the subject matter of challenge. This Court is yet to adjudicate this writ application. If ultimately the writ applicant is not successful in the Special Civil Application No.18263 of 2019 then he will have to pay the tax as assessed - the impugned reassessment order is not tenable in law as there was no scope for the authority to invoke Section 35 of the VAT Act. The impugned order of reassessment order is quashed and set aside - Application allowed.

Summary

Issues:
Challenge to reassessment order under VAT Act for the year 2014-15. Invocation of Section 35 of the Gujarat VAT Act, 2003 for reassessment. Legality of raising demand by disallowing input tax credit in reassessment.

Analysis:

1. The writ applicant challenged a reassessment order dated 24.03.2020 under the VAT Act for the year 2014-15, seeking quashing of the order and restraining coercive recovery. The applicant, engaged in trading of iron and steel bars, had faced delays in receiving assessment orders previously, leading to a challenge in a separate case. The initial assessment order was challenged for lack of jurisdiction, being time-barred, and violating natural justice principles.

2. While the original challenge was pending, a reassessment notice was issued under Section 35 of the VAT Act for the same period, proposing to disallow input tax credit. The subsequent reassessment order repeated the disallowance, prompting the writ applicant to file the present application. The legality of disallowing the same credit again was the key issue before the court.

3. The court examined Section 35 of the Act, which allows reassessment if taxable turnover has escaped assessment or been underassessed. The Commissioner can determine tax due after providing a hearing. The court noted that Section 35 couldn't be invoked if no credit was allowed in the previous assessment, as it applies when credits are wrongly allowed. As the initial assessment disallowed credit, invoking Section 35 for reassessment was deemed inappropriate.

4. Considering the above, the court allowed the writ application, quashing the reassessment order. The decision clarified that this ruling wouldn't impact the pending case challenging the original assessment. The court emphasized that the reassessment order lacked legal basis due to the improper invocation of Section 35, ensuring the applicant's success in this particular case.