2021 (8) TMI 90 - HC - VAT and Sales Tax

Validity of assessment order - Period of limitation - Power to extend the time limit for passing the assessment order - order is passed after lapse of more than six months to the date of completion of the Audit Visit Report (AVR) on 20th June, 2012 - periods from 2009-10 to 2011- 12 - grant of ex post facto extension of limitation by CST - proviso to Section 42 (6) of the Odhisa VAT Act - HELD THAT - It is seen that Audit Assessment , which is triggered by the Audit Visit Report in terms of Section 41 (4) of the OVAT Act is different from a regular assessment as it is meant to enable the department to revisit the assessment for previous years on detection of suppression of purchases or sales or both, erroneous claims of deductions including input tax credit, evasion of tax or contravention of any provision of the Act affecting the tax liability of the dealer. - The non-obstante clause at the beginning of Section 42 (6) of the OVAT Act indicates the importance of completion of proceedings in a time bound manner. Section 42 (6) mandates the assessment should be completed within a period of six months from the date of receipt of the Audit Visit Report. In the present case, there is no dispute at all that the notice in Form VAT-306 was served on the Petitioner on 1st October, 2012. The six months period from that date ended on 31st March, 2013. The assessment was therefore required to be completed on or before 31st March, 2013. Viewed from another angle, the CST was presented with a fait accompli by the time he applied his mind to whether extension should be granted at all or not. There was already an assessment order passed on 15th May 2003 by the time he had to decide on the question of extension. The language of the proviso to Section 42 (6) requires the CST to assess the merit of each such case. It is not a case of automatic extension of time. The Court is unable to sustain the validity of the impugned assessment order dated 15th May 2013, which, on the date it was passed, was in violation of Section 42(6) of the OVAT Act - Petition allowed.

Summary

Issues Involved:
1. Validity of the assessment order dated 15th May 2013.
2. Whether the assessment order was passed within the period of limitation.
3. Legality of the ex post facto extension of limitation by the Commissioner of Sales Tax (CST).

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order Dated 15th May 2013:
The assessment order dated 15th May 2013 was challenged on the grounds that it was passed beyond the period of limitation prescribed under Section 42 of the Odisha Value Added Tax Act, 2004 (OVAT Act). The petitioner argued that the assessment was completed after more than six months from the date of completion of the Audit Visit Report (AVR) on 20th June 2012, making it invalid.

2. Whether the Assessment Order was Passed Within the Period of Limitation:
The court examined Section 42 of the OVAT Act, which mandates that an assessment must be completed within six months from the date of receipt of the AVR. The AVR was received by the assessing authority on 26th September 2012, and the notice in Form VAT-306 was served on the petitioner on 1st October 2012. Therefore, the six-month period ended on 31st March 2013. The assessment order was passed on 15th May 2013, which was beyond the stipulated period. The court noted that the assessing authority requested an extension from the CST on 25th March 2013, but the CST granted the extension only on 20th July 2013, after the assessment order had already been passed.

3. Legality of the Ex Post Facto Extension of Limitation by the CST:
The court analyzed the proviso to Section 42 (6) of the OVAT Act, which allows the CST to extend the assessment period by six months on the merit of each case. However, the extension must be granted before the expiry of the original six-month period. The court found that the CST's order dated 20th July 2013, extending the time for assessment, was issued after the assessment order was passed, making it an ex post facto extension. The court emphasized that the CST's discretion to extend time must be exercised before the original period expires, as highlighted in the Supreme Court's decision in State of Punjab v. M/s. Shreyans Industries Ltd., where it was held that the power to extend time must be exercised before the normal period of assessment expires.

The court concluded that the assessment order dated 15th May 2013 was invalid as it was passed beyond the limitation period without a valid extension. The CST's order dated 20th July 2013 could not retroactively validate the time-barred assessment order.

Conclusion:
The court held that the assessment order dated 15th May 2013 was unsustainable in law and invalid due to being passed beyond the limitation period prescribed under Section 42(6) of the OVAT Act. The CST's ex post facto extension of time was also deemed invalid. Consequently, the court directed the refund of the amount deposited by the petitioner pursuant to the interim order dated 27th August 2013. The petition was allowed with no order as to costs.