BEFORE THE APPELLATE TRIBUNAL VALUE ADDED TAX
2ND FLOOR, VYAPAR BHAWAN, I.P. ESTATENEW DELHI
Appeal Nos. 250-252/ATVAT/09-10
(A.Y. 2000-01, 2001-02 & 2002-03)
(CENTRAL)
M/s. Shruti Fasteners Ltd.,
1666-B, Govindpuri Extn.
New Delhi …..……...APPELLANT
V E R S U S
Commissioner, Value Added Tax Delhi ……….RESPONDENT
Present for the Appellant : Shri Ashok Kr. Sharma, Advocate
Present for the Respondent : Shri Rajesh Mahana, Advocate
O R D E R
1. This common order shall dispose of above noted three appeals as common question of law and fact is involved in all these three appeals.
2. Facts leading to filing these appeals are that Ld. VATO (Ward-90) issued a notice of re-assessment u/s 24 of Delhi Sales Tax Act, 1975 (hereinafter to be referred as the Local Act) r/w section 9, 10 & 10 A of the Central Sales Tax Act (hereinafter to be referred as the Central Act) to the appellant for re-assessment of the assessments pertaining to the assessment years 2000-01, 2001-02 and 2002-03. In response to the notice served upon the appellant, its CA Shri Rajesh Gupta attended the hearing before VATO (Ward-90). Vide order dated 10.10.2008, Ld. VATO (Ward-90) finalized the re-assessment for the year 2002-03 and vide
1. order dated 29.10.2008 he finalized the re-assessment for 2000-01 & 2001-02 whereby following demands were created:-
A.Y. Tax Calculated Tax deposited Balance Penalty Interest Total liability
2000-01 2799676 1203845 1595831 1595831 1675622 4867284
2001-02 3573902 1225598 2348304 2348304 2465715 7162323
2002-03 3666117 1891614 1774503 1774503 1330875 4879881
2. Aggrieved with the order of the Ld. VATO, appellant filed appeals before the Ld. Additional Commissioner-1, the First Appellate Authority (hereinafter to be referred as the FAA) who vide his common order dated 20.04.09 remanded the case back to the Assessing Authority for re-assessing the case after confronting the adverse report to the appellant. The operative part of this order reads as under: -
“I have heard the case and examined the documents produced before me. As per the assessment order it is clear that for some forms the assessing authority has adverse report in hand and the false transactions must attract the tax, interest and penalties but on the other hand it is also true that the re-assessment was initiated on the directions of the JC-IX. In my opinion to meet the ends of justice, it would be appropriate that another opportunity may be allowed to the appellant to present himself before the assessing authority. Hence the case is remanded back to the assessing authority to re-assess the case after confronting the adverse report to the appellant”.
3. Aggrieved with the order of the Ld. FAA appellant has filed these three appeals on following grounds: -
a) That Ld. FAA has erred in law & facts of the case by remanding back the case to VATO (Ward-90).
b) That once Ld. FAA has come to the conclusion that the notice u/s 24 of the Local Act was issued on the instructions of JC-IX, he has no option but to quash the order passed by VATO.
c) That neither reasons were recorded nor were communicated by VATO while issuing notice u/s 24 of the Local Act due to which entire proceedings become illegal and do not stand to legal scrutiny.
d) Hon’ble High Court of Delhi has decided in IMRL & LG Electronics case wherein the court has stated that power of revision are not saved & so the provisions of section 24 of the Local Act were not saved in the repealed Act by section 106 of the DVAT Act.
e) That even the orders passed by VATO were time barred as the same were not issued within one year of service of the notice i.e. notice was served on 13.10.2007 and orders were issued on 28.10.2008 and hence they are purported to have been passed beyond the period of Limitation.
f) Hon’ble High Court of Delhi has held in the cases of M/s Samagya Consultants (P) Ltd. Vs. CST, M/s Prashant Software Ltd. Vs. CST and also in the case of Jagdish Cold Storage & Ice Factory Vs. CST that if no reasons are recorded at the time of issuance of notice u/s 24 of the Local Act, then no assessment proceedings can be initiated and even if any order is passed under such circumstances then that order does not stand to legal scrutiny.
g) That not only reason for re-opening are to be recorded but the same are also to be communicated to the dealer when ST-15 is issued as held in case of Avery India Ltd. Vs. CAT by Sales Tax Tribunal.
h) That orders were passed under the Central Act and no Local assessment order was passed.
i) That even the demand notice which is mandatory has not been issued and served on the appellant till date.
4. Revenue has contested all the three appeals on the ground that the Ld. VATO did not commit any illegality in issuing the notices u/s 24 of the Local Act r/w section 9, 10 & 10 A of the Central Act because complaints had been received by the higher authorities. On the basis of these complaints, higher authorities had a reason to believe that it was a case of re-assessment and that is why due notices were served and hearing was given to the appellant. Further ground taken by the Revenue is that when the appellant raised further grievance before the Ld. FAA that he was not confronted with the adverse material by the Ld. VATO then the case was remanded back for giving an opportunity and so the Ld. FAA did not commit any illegality in remanding the case back for fresh hearing.
5. We have heard Shri Ashok Kr.Sharma, Advocate, Ld. Counsel for the appellant, Shri Rajesh Mahana, Advocate, Ld. Counsel for the Revenue and have gone through the record.
6. Ld. Counsel for appellant Mr. Sharma submitted that the photocopy of the ordersheet dated 10.10.07 clearly shows that the Ld. VATO took up the matter for reassessment u/s 24 of the Act not because there was a reason to believe that whole or any part of the turnover of the appellant had escaped assessment but because of the direction of the higher authorities. He submitted that reassessment is permissible u/s 24 of the Act only when there is reason to believe and that reason has also to be recorded in writing. Further contention of Mr. Sharma is that the reasons for reopening are to be communicated to the dealer. He submitted that the reassessment proceedings initiated u/s 24 of the Act are illegal being not as per law and as such the demand created on account of this reassessment is liable to be quashed.
7. We have carefully considered the contentions noted as above. The notice issued u/s 24 of the Act in appeal No. 251 reads as under:
“Whereas I have reason to believe that the turnover of your business for the year/period 2001-2002 has escaped assessment to tax/has been under assessed/has been assessed at rate lower than at rate which was assessable/deduction has been wrongly made vide assessment order dated 31.03.2003 made u/s 23 of Delhi Sales Tax Act, 1975…………”.
8. Notices in other two appeals are just similar to the notice in appeal no. 251. Point that arises for consideration, in view of the contention of Mr. Sharma is whether recording of reason before issuing notice u/s 24 of the Act and communication of the reason to the appellant was necessary and whether in absence of the same the notice issued becomes illegal.
9. In a judgment reported as Sales Tax Officer, Ganjam and another V/s Uttareswari Rice Mills: 30 STC 567 (SC), the Apex Court while considering section 12(8) of Orissa Sales Tax Act, 1947 and Rule 23 of Orissa Sales Tax Rules observed at page 576 as under: -
“Although the opening words used in section 12 (8) are ‘if for any reason’ and not ‘if the sales tax authority has reason to believe’, the difference in phraseology, in our opinion, should not make much material difference. A reason can not exist in vacuum. Somebody must form the belief the reason exists and looking to the context in which the words are used, we are of the view that it should be the sales tax authority issuing the notice who should have reason to believe that the turnover of a dealer has escaped assessment or has been under assessed. The approach in this matter has to be practical and not pedantic. Any view which would make the opening words of section 12(8) unworkable has to be avoided. It may be noted in this context that in Form VI appended to the Rules, which has been prepared in pursuance of rule 23, the words used are “whereas I have reason to believe that your turnover……….. has escaped assessment…………”.
10. Judgment in case of Uttareswari Rice Mills has been relied upon by Their Lordships in Supreme Paper Mills Ltd. vs. Assistant Commissioner, Commercial Taxes Calcutta & Ors.: VSTI 2010 Vol.8 B-346 (SC). In this case Their Lordships while considering Sec. 11 E (2) of Bengal Finance (Sales Tax) Act 1941 observed in para 15 of the judgment as under: -
“A notice was issued in order to provide an opportunity of natural justice to the dealer. There is nothing in the language of the aforesaid provision which either expressly or impliedly mandates the recording of any reason. The provision of the Act nowhere postulates that the reasons which led to the issue of the said notice should be incorporated in the notice itself, and that in case of failure to do so, the same would invalidate the notice”.(Emphasis supplied in bold)
11. As per the observation of the Apex Court in Uttareswari Rice Mills’ case (supra), somebody has to form the belief that a reason for re-assessment exists. Thus in the present case if the higher authorities directed the concerned VATO to issue notice for reassessment u/s 24 of the Act then it is clear that the concerned higher authority had formed the belief that reason existed for believing that a part of the turnover of the appellant had escaped assessment or had been under assessed. So far as the contention of Mr. Sharma that the reason was not recorded in the order sheet and was also not communicated, is concerned, it is to be noted that Their Lordships in case of Uttareswari Rice Mills, at page 578 of the judgment, referred to the decision in K.S. Rashid and son Vs. Income Tax Officer: 52 ITR 355 (SC) and S. Narananappa Vs. Commissioner of Income Tax: 63 ITR 219 (SC). Their Lordships noted that in K.S. Rashid and son Vs. Income Tax Officer it has been held that the assessee was not entitled to a copy of the reasons which were recorded by the Income Tax Officer when issued the notice u/s 34 of Income Tax Act, 1922 and in S. Narananappa Vs. Commissioner of Income Tax, repelling the contention that the ITO should have indicated to the assessee the reasons which led him to initiate the proceedings, it has been held that there is no requirement that for initiation of the proceedings u/s 34 of the Income Tax Act, 1922, the reasons which induced the commissioner to accord sanction to proceed u/s 34 of the Income Tax Act, 1922 must also be communicated to the assessee.
12. It is significant to note that Their Lordships in the case of Uttashwari Rice Mills, also observed at page 580 as under: -
“There is nothing in the language of section 12(8) of the Act which either expressly or by necessary implication postulates the recording of reasons in the notice which is issued to the dealer under the above provision of law. To hold that reasons which led to the issue of the said notice should be incorporated in the notice and that failure to do so would invalidate the notice, would be tantamount to reading something in the statute which, in fact, is not there. We are consequently unable to accede to the contention that the notice under the above provision of law should be quashed if the reasons which led to the issue of the notice are not mentioned in the notice. At the same time, we would like to make it clear that if the Sales Tax Officer is in possession of material which he proposes to use against the dealer in proceedings for reassessment, the said officer must before using the material bring it to the notice of the dealer and give him adequate opportunity to explain and answer the case on the basis of that material.”
13. In view of the hereinabove referred judgments of the Apex it is clear that reasons are to be recorded before issuing notice only when it is either expressly or impliedly mandated by the language of the section 24 of the Act. A careful perusal of section 24 of the Act shows that the language of this section does not mandate that the commissioner is to record any reason before issuing notice u/s 24 of the Act. By following the precedent as laid down by the Apex Court in the judgments referred hereinabove we hold that recording of reasons before issuing the notice for reassessment u/s 24 of the Act and communication of the reasons for reassessment, to the appellant, was not necessary. In our considered view both these contentions of Ld. Counsel for the appellant are without any merit.
14. Ld. Counsel for the appellant also contended that proceedings under section 24 of the Act could not be opened as section 24 has not been saved by section 106 of Delhi Value Added Tax Act, 2004. We have carefully considered this submission. A careful perusal of section 32 of the Delhi VAT Act shows that the proceeding under this section are in substance same proceedings as that of the proceedings initiated u/s 24 of the Act and so by incorporating a provision of reassessment in section 32 of Delhi VAT Act, the legislature saved the provisions of section 24 of the repealed Local Act. In our considered view this contention of the Ld. Counsel for the appellant is without any merit.
15. Another ground taken in appeal is that the order passed by the VATO was time barred as the same was not issued within one year of the service of the notice because the notice was served on 13.10.2007 and orders were issued on 28.10.2008 and so these orders are beyond the period of limitation.
16. Limitation is provided by section 24(2) of the Act which reads as under: -
No order of assessment, reassessment or re-computation shall be made under sub-section 1, after –
a) the expiry of six years or, as the case may be, four years, from the date of final order of assessment, as specified in sub-section (1); or
b) the expiry of one year from the date of service of notice under sub-section (1),
whichever is later.
17. A careful perusal of section 24 (2) of the Act reproduced as above shows that the period for reassessment that is available to Revenue is the period that is greater of the two periods i.e. the period permissible under clause (a) or under clause (b) of section 24 (2) of the Act. The appellant can take recourse to the period of limitation under sub clause (b) of section (2) of the Act only when the period of limitation under sub clause (a) is less than the period under sub clause (b) of section 24 (2) of the Act. It is not the case of the appellant that the period of limitation under sub clause (a) is less than the period under sub clause (b) of section 24 (2) of the Act. Further, appellant did not take this ground before the First Appellate Authority. Settled law is that question of limitation is a mixed question of law and fact and such a question cannot be permitted to be raised for the first time in second appeal in view of the principle of law laid down by the Apex Court in various judgments viz. AIR 1964 SC 907, (2005) 13 SCC 381, (2007) 4 SCC 599 and (1997) 1 SCC 68 which have been referred by Their Lordships in the judgment reported as Girnar Impex Ltd. Vs. State of Punjab and others: (2009) 25 VST 65 (P&H). It is not the case of the appellant that it had taken the point of limitation as a ground before the Ld. FAA. From the order of the Ld. FAA, on record, it is clear that the appellant had not taken this ground in the first appeal. We therefore, hold that this contention is also without any merit.
18. Now coming to the consideration of the contention that the Ld. FAA erred in law and fact by remanding the case back to VATO ward (90). For appreciating this contention the operative portion of the order of the Ld. FAA needs to be reproduced which reads as under: -
I have heard the case and examined the documents produced before me. As per the assessment order it is clear that for some forms the Assessing Authority has adverse report in hand and the false transactions must attract the tax, interest and penalty. On the other hand it is also true the reassessment was initiated on the directions of the J.C. IX. In my opinion to meet the ends of justice, it would be appropriate that another opportunity may be allowed to the appellant to present himself before the assessing authority. Hence the case is remanded back to the assessing authority to re-assess the case after confronting the adverse reports to the appellant.
19. A careful perusal of the operative portion of the Ld. FAA, reproduced as above, shows that the case was remanded back to the assessing authority for confronting the adverse report to the appellant. Order of the Ld. Addl. Commissioner –I, when considered as a whole, shows that the Ld. Counsel for the appellant had submitted before the Ld. FAA that the adverse material had not been confronted with the appellant till the completion of the assessment. Thus, the case was remanded back by the Ld. FAA to meet the requirements of the principles of natural justice.
20. The point that arises for consideration before us is whether the Ld. FAA committed any illegality in remanding the case for providing an opportunity of hearing to the appellant in compliance of principles of natural justice and also in view of the contention raised before him by the Ld. Counsel for the appellant. Here it is useful to refer to a judgment of the Apex Court reported as Commissioner of Sales Tax and others Vs Subhash and Co.:(2003) 130 STC 97 (SC). Brief facts of this case were that during December 1990 notices for reassessment for the assessment years 1981-82 to 1983-84 was affixed in the premises at the address in the certificate of registration and reassessments u/s 19(1) of Madhaya Pradesh General Sales Tax Act, 1958 were made on 23.04.1992. Respondent filed a writ petition challenging the reassessment on the ground that the service of notices under rule 63 of the Rules had not been followed. A single judge bench of the High Court held that the service of the notice was not effected properly as the assessing authority had failed to record the reasons for his satisfaction that the assessee was evading service and allowed the writ petition with a direction that the reassessments were to be done denovo within a period of six months after hearing the assessee. The assessee appealed to a Division Bench of the High Court on the ground that his right to challenge the proceedings on question of limitation had been precluded by the direction of the single judge. The Division Bench held that the direction for denovo assessment without reserving the right of the assessee to raise plea of limitation was not proper and so the proceedings needed to be quashed. Revenue filed appeal before the Apex Court. Their Lordships allowed the appeal of the Revenue by holding that whenever an order is struck down as invalid being in violation of principles of natural justice, there is no final decision of the case and, therefore, the proceedings are left open. All that is done is that the order assailed by virtue of its inherent defect is vacated but the proceedings are not terminated. In this judgment Their Lordships laid down following principles: -
a) Non issue of notice or mistake in the issue of notice or defective service of notice does not affect the jurisdiction of the assessing officer, if otherwise reasonable opportunity of being heard has been given.
b) Issue of notice as prescribed in the rules constitutes a part of reasonable opportunity of being heard.
c) If prejudice has been caused by non issue or invalid service of notice, the proceedings would be vitiated. But irregular service of notice would not render the proceedings invalid; more so, if assessee by his conduct has rendered service impracticable or impossible.
d) In a given case when principles of natural justice are stated to have been violated it is open to the Appellate Authority in appropriate cases to set-aside the order and require the assessing officer to decide the case de novo.
21. In our considered view the order of the Ld. FAA whereby he remanded the matter to the assessing authority to reassess the case after confronting the adverse report to the appellant, cannot be held to be illegal in view of the principle of law down by the Apex Court in the hereinabove referred judgment.
22. In view of the foregoing discussion we hold that there is no merit in these appeals. All the three appeals are hereby dismissed.
23. Announced in the open Court.
24. Copies of the order shall be served on the parties in the prescribed manner and the Registry shall bring proof of service on record.
(G.K MARWAH) (SANATAN PRASAD)
MAT, VALUE ADDED TAX MAT, VALUE ADDED TAX
(S.K. KAUSHIK)
CHAIRMAN
APPELLATE TRIBUNAL VAT
09/07/2010
M/s. Shruti Fasteners Ltd., Appeal Nos. 250-252/ATVAT/09-10
1666-B, Govindpuri Extn. (A.Y. 2000-01, 2001-02 & 2002-03)
New Delhi (CENTRAL)
Vs
Commissioner, Value Added Tax Delhi
No.ATVAT/2010/ Dated:
1) Commissioner, Trade & Taxes Department.
2) Addl. Commissioner – I, Trade & Taxes Department
3) VATO- Ward (90)
4) Dealer
5) 2nd Case file
6) Guard File
7) Govt. Counsel.
REGISTRAR
