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TMI Blog2019 (2) TMI 1016X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 4A(3) of the Act were to be initiated by the Commissioner, Trade Tax. No legal or factual impediment has been shown to exist as may have prevented the Commissioner from initiating those proceedings. Scope and conduct of the two proceedings being completely independent of each other, mere pendency of the assessment proceedings could never be relevant for the purpose of initiation of proceedings under Section 4A(3) of the Act. The period of limitation prescribed under Section 21 of the Act is relevant. Though the initiation, conduct and scope of the two proceedings is independent of the other, the cancellation of eligibility certificate would directly impact the assessment proceedings and consequently on the penalty proceedings as well though the opposite may not be true. Normally, the assessing authority could not have made an assessment beyond a period of six years from the close of the assessment year in which the exemption came to an end. Therefore, normally, cancellation of the exemption certificate beyond that period would be a futile exercise. Thus, the proceedings under section 4A(3) of the Act were initiated outside reasonable period of time - even if the all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. Therefore, the assessee started importing (from outside the country), another raw material namely 'thinner' to manufacture Industrial Composite Solvent, by the process of distillation. Also, it has come on record that the assessee had obtained the registration under the provision of Central Excise Act, 1944 and that it paid excise duty @ 16% on clearance of Industrial Composite Solvent manufactured by it. 5. Relevant to the present controversy, on 28.01.2004, a survey was conducted at the business premises of the assessee by the Special Investigation Branch (hereinafter referred to as SIB), of the Trade Tax Department. During that survey, certain statements of workers of the assessee were claimed to have been recorded, who allegedly denied fact of manufacturing activity having been conducted by the assessee. According to those statements, the assessee did not utilize the raw material purchased by it to manufacture any goods. In this regard, certain other facts were also noted with respect to the condition of the factory premises to conclude that the assessee was not engaged in the manufacturing activity and that it was merely engaged in trading in the raw material. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment order could be passed belatedly on 27.02.2017, due to the conduct of the assessee. It was therefore concluded the conduct of the assessee estabished his intention to cause delay. As a principle of law, it was observed, there was no period of limitation prescribed under Section 4A(3) of the Act, and therefore in view of the finding of fact recorded by the Commissioner as to the breach of the terms and conditions of exemption, committed by the assessee, the order dated 02.08.2017 passed by the Commissioner did not call for any interference. 9. Learned counsel for the assessee submits, in the first place, though there was no limitation prescribed under Section 4A(3) of the Act where after the Commissioner may not bring a proceeding for cancellation of the eligibility certificate, however, that power may be exercised only within a reasonable period of time. He has placed reliance on the decision of the Supreme Court in Joint Collector Ranga Reddy District and Another Vs. D. Narsing Rao and others, (2015) 3 SCC 695 . In that case with respect to the power of revision under Section 166B of the A.P. (Telangana Area), Land Revenue Act, it was held though no period of limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fraud upon the statute that vests such power in an authority. 11. Then as to the computation of reasonable time, reliance has been placed on the another decision of the Supreme Court in the case of State of Punjab and others Vs. Bhatinda District Cooperative Milk Producers Union Ltd, 2007 (11) SCC 363. In that case, the dispute pertained to levy of purchase tax on milk. The normal period of limitation for imposing the tax liability was three years that could be extended up to 5 years. In that factual background, in the context of revision jurisdiction (for which no period of limitation had been prescribed), the Supreme Court concluded that the revisional jurisdiction should ordinarily be exercised within three years and in any case, it could not exceed the period of five years. Paragraph no. 19 of that judgment is quoted below: 19. Revisional jurisdiction, in our opinion, should ordinarily be exercised within a period of three years having regard to the purport in terms of the said Act. In any event, the same should not exceed the period of five years. The view of the High Court, thus, cannot be said to be unreasonable. Reasonable period, keeping in view the discussi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lucknow, 2002 NTN (Vol. 20) 1, wherein relying on the decision in the case of Janta Dal Mill, Radha Nagar, Fatehpur Vs. The Commissioner of Trade Tax, U.P., Lucknow (supra) , this Court held that cancellation of the eligibility certificate well after the expiry of the period of exemption was highly improper. In that case, the proceedings had been drawn up about four and a half years after the expiry of the period of exemption. Further, reliance has been placed on the decision of the another learned single judge of this Court in the case of Chetna Chemicals Private Limited Shah Maroof Pvt. Ltd. Vs. Commissioner of Trade Tax, 2007 10 VST 569 (All) , wherein following the earlier decision of this Court in the case of Janta Dal Mill, Radha Nagar, Fatehpur Vs. The Commissioner of Trade Tax, U.P., Lucknow (supra) and M/s Bharat Steel Rolling Mill vs. The Commissioner of Trade Tax, U.P., Lucknow (supra) , this Court held the proceedings under Section 4A(3) of the Act initiated five to six years after the expiry of the period of the exemption was highly belated and improper. In those facts and circumstances of that case, it was observed the Commissioner should not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 when the notice to cancel the eligibility certificate was first issued under section 4A(3) of the Act. 18. In this context, the ratio of the decision of the Supreme Court in the case of Joint Collector Ranga Reddy District and Another Vs. D. Narsing Rao and others (supra) is pertinent. In that case also, there was no period of limitation prescribed to exercise revision jurisdiction. A plea was also set up that the revenue entries had been obtained fraudulently and therefore in absence of any period of limitation being prescribed, the concept of reasonable period be excluded. In fact, the High Court had quashed the order passed in revision on account of that power having been exercised 50 years after the revenue entries had been recorded. Thus, plea of fraud having been set up yet, the Supreme Court held merely describing an act to be fraudulent may not extend the time for its correction, to infinity. In fact, it was further held, to allow such power to be exercised would tantamount to a fraud upon the statute that vests the power in the authority. 19. Therefore, as a principle, merely because the revenue authorities had asserted that the assessee had committed breach o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile the assessment order was to be made by the assessing authority, the proceedings under Section 4A(3) of the Act were to be initiated by the Commissioner, Trade Tax. No legal or factual impediment has been shown to exist as may have prevented the Commissioner from initiating those proceedings. Scope and conduct of the two proceedings being completely independent of each other, mere pendency of the assessment proceedings could never be relevant for the purpose of initiation of proceedings under Section 4A(3) of the Act. 23. Clearly, the principle of reasonable time remained applicable and is relevant to the proceedings for cancellation of the eligibility certificate arising from the allegation of breach of the terms and conditions of eligibility. 24. As to the period of time that may be construed to be reasonable, certainly, the period of limitation prescribed under Section 21 of the Act is relevant. Though the initiation, conduct and scope of the two proceedings is independent of the other, the cancellation of eligibility certificate would directly impact the assessment proceedings and consequently on the penalty proceedings as well though the opposite may not be true. Nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been notified, he could not plead bar of limitation for acts that a court must perform. Similarly, reference to the Division Bench decision in the case of Bharat Pump Corporation Ltd (supra) is also not appropriate inasmuch as in that case, arising under section 3-B of the Act, it was reasoned, there was no quantification of liability required, but only a recovery to be made equal to the benifit availed on the basis of a wrong or false certificate. The nature of that proceeding was held to be not of assessment of tax liability and therefore that limitation was held inapplicable. 28. However, in the instant case, disputed questions of fact are involved as to whether the assessee had committed breach of terms and conditions of the Eligibility Certificate granted to it. Only, after adjudicating that issue, the Eligibility Certificate could be cancelled as may have an impact in the assessment proceedings. An allegation of breach of terms and conditions, by its nature calls for an adjudication after putting the concerned to notice. 29. To summarise, even if the allegation of breach of terms and conditions of exemption made against the assessee were to be treated at par wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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