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2015 DIGILAW 272 (GAU)

SHALIMAR CHEMICAL WORKS LIMITED v. STATE OF ASSAM

2015-03-04

K.SREEDHAR RAO, UJJAL BHUYAN

body2015
JUDGMENT : Ujjal Bhuyan, J. Since the subject matter is identical, both the writ petitions were heard together and are being disposed of by this common order. 2. Issue raised in this two writ petitions is regarding bar of limitation in concluding the assessment for the assessment years 1999-2000 and 2000-2001 under the Assam General Sales Tax Act, 1993. Consequential challenge made is to the notices dated 10.02.2009 and 17.02.2009, issued by the Superintendent of Taxes, Guwahati, Unit-D for production of books of accounts etc. for purpose of assessment for the assessment years under consideration. WP(C) No. 708/2009 is concerned with the assessment year 1999-2000 and WP(C) No. 709/2009 is concerned with the assessment year 2000-2001. 3. Since both the writ petitions are identical, for the sake of convenience, facts of WP(C) No. 708/2009 are briefly referred to hereunder. 4. Petitioner is a company incorporated under the provisions of the Companies Act, 1956, having its registered office at Kolkata. It has one of its Area Sales Office at Guwahati. Petitioner was a registered dealer under the Assam General Sales Tax Act, 1993 (AGST Act) and after its repeal it is a registered dealer under the Assam Value Added Tax Act, 2003. Respondent No. 3 is the Assessing Officer of the petitioner. 5. Petitioner is engaged in the business of manufacture and marketing of coconut oil under the brand name "Shalimar Coconut Oil". According to the petitioner, coconut oil manufactured and marketed by it, is suitable for consumption and is certified as an edible grade oil. Petitioner submitted representation before respondent No. 2 on 11.04.2000, seeking clarification regarding taxability on coconut oil, since it is partly used as edible oil and partly used as hail oil. Request was made to the respondent No. 2 to treat it as an edible oil for the purpose of taxation under the AGST Act. This was followed by reminder dated 27.02.2001. 6. Request was made to the respondent No. 2 to treat it as an edible oil for the purpose of taxation under the AGST Act. This was followed by reminder dated 27.02.2001. 6. However, a notice dated 28.02.2001 was issued to the petitioner by the AGST authorities calling for appearance and explanation from the petitioner as to why provisional assessment should not be carried out against the petitioner for the period from April, 2000 to December, 2000 for paying tax on sales of Shalimar Coconut Oil at the rate of 4% instead of 12%, since coconut oil is covered by Entry No. 22 of Schedule-II appended to the AGST Act, which prescribes rate of tax at 12%. Petitioner was also asked to show cause as to why penalty should not be levied. 7. At that stage, petitioner moved this Court by filing WP(C) No. 1989/2001, which was disposed of vide order dated 23.03.2001 by directing the respondents, particularly, respondent Nos. 2 and 3 of the present petition, to dispose of the representation submitted by the petitioner after giving an opportunity of hearing. It was further held that after the decision was taken about exigibility of the item to taxation, the authority should proceed as per such decision and in accordance with the provisions of law. Liberty was given to the petitioner to approach this Court again, if so advised. 8. Though there were some communications between the petitioner and the AGST authorities, it appears that no decision was taken by respondent Nos. 2 and 3. 9. Ultimately, after a long gap, respondent No. 2 issued a communication dated 11.10.2007 addressed to the Deputy Commissioner of Taxes, Guwahati, Zone-B, in response to his letter dated 20.06.2007 stating that coconut oil in the State is not used for cooking and hence should not be treated as edible oil as it is mainly used as hair oil; therefore, it is taxable at the rate of 12.5% under 5th Schedule of the Assam Value Added Tax Act, 2003. 10. Following the same, notice dated 16.11.2007 was issued by the respondent No. 3 to the petitioner for depositing tax at the rate of 12.5% on sales of coconut oil instead of 4%. The above notice was in respect of assessment for the periods 2005-2006 and 2006-2007. 10. Following the same, notice dated 16.11.2007 was issued by the respondent No. 3 to the petitioner for depositing tax at the rate of 12.5% on sales of coconut oil instead of 4%. The above notice was in respect of assessment for the periods 2005-2006 and 2006-2007. Petitioner then filed WP(C) No. 6250/2007 challenging the legality and validity of the communication dated 11.10.2007 as well as the notice dated 16.11.2007. Interim order was granted in the said proceeding on 13.12.2007 directing the respondents not to make any recovery of tax pursuant to the impugned communications on condition that petitioner would give bank guarantee for the differential amount of tax. 11. Petitioner received a notice from respondent No. 3 dated 10.02.2009 asking him to produce books of accounts, documents and evidence in support of the return submitted in respect of the assessment years 1999-2000, 2000-2001 and 2001-2002. It was stated that in case of non-compliance, summary assessment would be carried out. 12. Petitioner submitted reply dated 17.02.2009 contending that the notice issued for the years 1999-2000 and 2000-2001 was without jurisdiction being barred by limitation. It was pointed out that under section 19 of the AGST Act, no assessment could be made after expiry of 3 years from the end of the year in respect of which the assessment was made. The limitation period for the 2 years had expired on 31.03.2003 and 31.03.2004 respectively. Therefore, respondent No. 3 was requested to withdraw the notice. 13. Respondent No. 3 thereafter issued impugned notice dated 17.02.2009 to the petitioner stating that a reference was made to the respondent No. 2 on 28.02.2003 seeking a clarification as to the rate of tax on coconut oil along with a copy of judgment of this Court in WP(C) No. 1989/2001. Respondent No. 2 vide his clarification dated 21.11.2006 clarified that Shalimar Coconut Oil should be treated as hair oil for the purpose of levying tax under Entry No. 22 of Schedule-II of the AGST Act. Respondent No. 2 vide his clarification dated 21.11.2006 clarified that Shalimar Coconut Oil should be treated as hair oil for the purpose of levying tax under Entry No. 22 of Schedule-II of the AGST Act. Referring to section 19(3) of the AGST Act, it was stated that notwithstanding anything contained in sub-section (1) or sub-section (2) of section 19, an assessment, re-assessment or re-computation to give effect to any order or direction in appeal, revision or reference may be made at any time before expiry of 2 years from the end of the year in which the order in appeal, revision, or reference is communicated to the Assessing Officer. It was stated that since the order of respondent No. 2 was communicated to the office of respondent No. 3 on 21.11.2006, the assessment for the years in question would become time barred on 31.03.2009. Petitioner was, therefore, asked to produce books of accounts for the years under consideration, failing which, it was stated that best judgment assessment would be made under section 17(5) of the AGST Act, read with section 108 of the Assam Value Added Tax Act, 2003. 14. It was at this stage that the present two writ petitions came to be filed by the petitioner. 15. This Court by order dated 20.02.2009 issued notice and passed an interim order suspending the impugned notices dated 10.02.2009 and 17.02.2009. 16. Respondent No. 2 has filed affidavit. Referring to the sequence of events which ultimately led to issuance of the notices dated 10.02.2009 and 17.02.2009, it is stated that the letter dated 28.02.2003 submitted by respondent No. 3 (Assessing Officer) to the respondent No. 2 seeking clarification squarely fell within the meaning of "reference" under section 19(3) of the AGST Act. Since the answer to the reference from the respondent No. 2, dated 21.11.2006, was received by respondent No. 3, during the year 2006-2007, the time limit for completion of assessment for the years 1999-2000, 2000-2001 and 2001-2002 ought to expire on 31.03.2009 i.e. 2 years from the end of the year in which the reference order was communicated to the Assessing Officer i.e., 2 years from 31.03.2007. Reference has also been made to section 73A of the AGST Act to contend that under the AGST Act, the Commissioner was empowered to determine certain disputes. Reference has also been made to section 73A of the AGST Act to contend that under the AGST Act, the Commissioner was empowered to determine certain disputes. Therefore, it is contended that submission of petitioner that the impugned notices are time barred is clearly unsustainable and the writ petitions should be dismissed. 17. In its reply-affidavit, petitioner has contended that clarification given by the Commissioner, respondent No. 2, cannot be deemed to be a "reference" as is understood in law. AGST Act does not provide for any reference. Therefore, impugned notices are clearly barred by limitation under section 19(1). 18. We have heard learned counsel for the parties. 19. Short point for consideration is whether the impugned notices are barred by limitation or not. 20. To answer the above question, it may be apposite to first refer to the relevant documents placed on record. 21. From the clarification of respondent No. 2, dated 21.11.2006, addressed to the respondent No. 3, it is seen that the said clarification was issued on the letter of respondent No. 3, dated 17.03.2003. It was clarified by respondent No. 2 that coconut oil is generally used in the State of Assam as hair oil and, therefore, Shalimar Coconut Oil would be treated as hair oil for the purpose of levying tax under Entry No. 22 of Schedule-II of the AGST Act. The clarification reads as under:- "No. CTCA-51/2001/(71)/23 Dated 21st November, 2006 To, The Superintendent of Taxes, Guwahati Unit-D. Sub: Clarification regarding taxability of coconut oil. Ref: Your letter No. 6435 dtd. 17.03.2003. With reference to your letter referred to the above, I am to state that "Coconut Oil" is generally used in the State of Assam as "Hair Oil" only Assam General Sales Tax Act, 1993 being a taxation Act for the State of Assam and applying the test of common parlance "Coconut Oil", it is clarified that the item "Shalimar Coconut Oil" will be treated as "Hair Oil", for the purpose of levying tax under entry at Sl. No. 22 of Schedule-II of the Assam General Sales Tax Act, 1993. Commissioner of Taxes (i/c), Assam, Dispur, Guwahati-6." 22. This was followed by the impugned notice dated 10.02.2009 asking the petitioner to produce books of accounts, documents and evidence in support of the returns filed for the three assessment years. No. 22 of Schedule-II of the Assam General Sales Tax Act, 1993. Commissioner of Taxes (i/c), Assam, Dispur, Guwahati-6." 22. This was followed by the impugned notice dated 10.02.2009 asking the petitioner to produce books of accounts, documents and evidence in support of the returns filed for the three assessment years. When the petitioner filed reply and contended that the impugned notice dated 10.02.2009 was barred by limitation, respondent No. 3 issued the subsequent impugned notice dated 17.02.2009, which reads as under:- "No. 40436 Date 17-2-09 To, M/s. Shalimar Chemical Works Ltd. Rehabari, Guwahati. Sub:-Notice for production of books of account under AGST and CST Act. Ref:- This office notice number 40315 dated 10.02.2009 and your reply dated 17.02.2009. Dear Sir, With reference to the above, I would like to inform you that a reference was made to the Commissioner of Taxes, Assam vide this office No. 6047 dated 28.02.2003 to clarify as to rate of taxes on coconut oil alongwith the copy of judgment of Hon'ble Gauhati High Court in WP(C) No. 1989/2001 (M/s. Shalimar Chemical Works Ltd. Vs. The State of Assam and Ors.). The Commissioner of Taxes, Assam vide his clarification communicated to this office under Memo No. CTCA-51/2001/(71)/23 dated 21.11.2006 clarified that Shalimar Coconut Oil should be treated as hair oil for the purpose of levying tax under entry at Sl. No. 22 of Sch. II of the Assam Central Sales Tax Act, 1993. Your kind attention is drawn to Sec. 19(3) of the Assam General Sales Tax Act, 1993 (since repealed) wherein it is mentioned that notwithstanding anything contained in sub-section (1) or sub-section (2) of section 19 an assessment, reassessment or consumption (sic) to give effect to any order to direction in appeal, revision or reference, may be made at any time before the expiry of two years from the end of the year in which the order in appeal, revision or reference is communicated to the Assessing Officer. Since the Commissioner of Taxes, Assam order was communicated to this office on 21st Nov, 2006, the assessment for the year 1999-2000, 2000-01 and 2001-02 will become time barred on 31.03.2009. So, you are hereby asked to produce books of accounts of the above mentioned years on or before 26.02.2009 failing which the assessment would be done u/s. 17(5) of AGST Act, CST Act read with sec. 108 of the AVAT Act." 23. So, you are hereby asked to produce books of accounts of the above mentioned years on or before 26.02.2009 failing which the assessment would be done u/s. 17(5) of AGST Act, CST Act read with sec. 108 of the AVAT Act." 23. From a careful reading of the aforesaid notice, it is seen that the clarification given by respondent No. 2 on 21.11.2006 has been treated to be an order passed in reference within the meaning of section 19(3) of the AGST Act and, therefore, it has been contended that the limitation period in computing assessment stood extended by a further period of 2 years from the end of the year in which the reference order was communicated to the Assessing Officer. Since the reference order was communicated on 21.11.2006, the assessment would become time barred on 31.03.2009 i.e., 2 years from the end of the year in which the reference order was communicated which was 31.03.2007. Though there is some discrepancy regarding the date of the letter of respondent No. 3 to respondent No. 2 seeking clarification - in the clarification of respondent No. 2 dated 21.11.2006 the date of the letter is given as 17.03.2003 whereas in the impugned notice the date of the letter is mentioned as 28.02.2003, the same may be ignored as in the ultimate analysis it may not have a decisive bearing on the outcome of the proceeding. 24. Having noticed the above, we may now turn to section 19 of the AGST Act, which prescribes the time limit for completion of assessment and reassessment. 24. Having noticed the above, we may now turn to section 19 of the AGST Act, which prescribes the time limit for completion of assessment and reassessment. Section 19 reads as under:- "Time limit for completion of assessment and reassessment 19.(1) No assessment shall be made under section 17 after the expiry of three years from the end of the year in respect of which or part of which the assessment is made or, in a case where the dealer has furnished a return or a revised return under sub-section (4) of section 16 after the expiry of two years (from the end of the year) in which such return or revised return is received by the Assessing Officer, whichever is later: Provided that in a case under sub-section (6) of section 17, the assessment may be made at any time before the expiry of eight years from the end of the year in respect of which or part of which the assessment is made under that sub-section. (2) No re-assessment under section 18 shall be made- (a) in a case falling under clause (a) of that section, after the expiry of three years; and (b) in a case falling under clause (b) of that section after the expiry of one year from the end of the year in which the notice under that section is served on the dealer. (3) Notwithstanding anything contained in sub-section (1) or sub-section (2) an assessment, re-assessment or re-computation to give effect to any order or direction in appeal, revision or reference, may be made at any time before the expiry of two years from the end of the year in which the order in appeal, revision or reference is communicated to the Assessing Officer. Explanation: In computing the period of limitation for the purposes of sub-section (1) or sub-section (2), the period during which the assessment proceeding is stayed by an order or injunction of any court or other authority, shall be excluded and such proceeding may be completed within one year from the end of the year in which the stay was vacated as if the limitation period had not expired." 25. From a careful reading of section 19, it is seen that no assessment could be made under section 17 of the AGST Act after expiry of 3 years from the end of the year in respect of which or part of which the assessment is made. In other words, under section 19(1) of the AGST Act, for the assessment year 1999-2000, the limitation period would expire on 31.03.2003 and for the assessment year 2000-2001, the limitation period would expire on 31.03.2004. It is not necessary to delve into the other part of sub-section (1) or the proviso thereto or sub-section (2), since no defence has been put up by the respondents on the basis of the said provisions. We may now deal with sub-section (3) of section 19. As per subsection (3), the limitation period of 3 years under section 19(1) would stand extended by a period of 2 years to give effect to any order or direction in appeal, revision or reference. This extended limitation period of 2 years would commence from the end of the year in which the order in appeal, revision or reference is communicated to the Assessing Officer. With the aid of this provision, respondents would like to contend that since the clarificatory order of respondent No. 2 was communicated on 21.11.2006, the extended limitation period of 2 years would commence from 31.03.2007 (end of that year) and would continue upto 31.03.2009. Therefore, it is contended that the two impugned notices dated 10.02.2009 and 17.02.2009 are within the period of limitation. 26. Before we examine the contention of the respondents as to whether the letter written by respondent No. 3 to the respondent No. 2, whether on 28.02.2003 or on 17.03.2003, seeking clarification regarding taxability of coconut oil and the clarification given by respondent No. 2 on 21.11.2006 can be treated to be a "reference" within the meaning of section 19(3) of the AGST Act, we may briefly refer to an order of this Court in the case of Hindustan Petroleum Corporation Limited Vs. State of Assam and Others, (2013) 57 VST 1 . In that case, the issue involved was whether the re-assessment orders were barred by limitation under section 19(2) of the AGST Act. State of Assam and Others, (2013) 57 VST 1 . In that case, the issue involved was whether the re-assessment orders were barred by limitation under section 19(2) of the AGST Act. While examining the said issue, this Court held that limitation period prescribed in the AGST Act is not for "providing to make assessment", but for "making assessment", in which case, mere initiating proceeding is not enough, but final order has to be passed within the prescribed time. Therefore, the assessment has to be completed within the limitation period subject of course to any stay order of Court or other authority in which case the Explanation to Section 19 will come into play. 27. If we go through the provisions of the AGST Act, we find that Chapter-VIII thereof deals with appeal, revision, determination and rectification. Section 33 provides for filing of appeal to the Appellate Authority and Tribunal. Section 35 provides for filing of revision petition before the High Court on any question of law. Section 36 deals with revision of order by the Commissioner. In addition, section 5A provides for filing of appeals to the Assam Board of Revenue against orders passed under sections 34 and 36 of the AGST Act till constitution of Appellate Tribunal. 28. Section 73A on which some reliance was placed by the respondents deals with the general powers of the Commissioner to issue orders, instructions, directions and clarifications not inconsistent with the provisions of the AGST Act for the purpose of bringing about uniformity in the classification of goods, if it is considered necessary or expedient. Thus, under the AGST Act, there is statutory provision for appeal and revision. But there is no such provision for reference. Can an internal letter of an Assessing Officer to the Commissioner seeking clarification on exigibility of a good to taxation or on the rate of tax be construed as a reference? In our considered view, answer to this question will have to be in the negative inasmuch as in procedural law, the word reference has a definite connotation. 29. Under section 19(3), the word reference is used in conjunction with the words appeal and revision. But as we have seen both appeal and revision are statutorily recognised remedies under the AGST Act, which is not the case with reference. 30. 29. Under section 19(3), the word reference is used in conjunction with the words appeal and revision. But as we have seen both appeal and revision are statutorily recognised remedies under the AGST Act, which is not the case with reference. 30. If we look to the Civil Procedure Code, section 113 read with Order 43 thereof, provides for reference to the High Court. By invoking this provision, a Sub-ordinate Court may make a reference to the High Court for its opinion. The essential conditions for making a reference under section 113, which may not be necessary to be gone into in the present proceeding, has been set out in section 113 itself. Therefore, a Sub-ordinate Civil Court gets the jurisdiction to make a reference to the High Court under section 113 read with Order 43 of the Civil Procedure Code. The Civil Procedure Code has clear provisions for appeal, revision, review and reference. Likewise, under the Income Tax Act, 1961, before the provision for appeal to the High Court under section 260A was inserted by the Finance Act, 1998 w.e.f. 01.10.1998, the provision of reference used to be invoked either by the assessee or by the Commissioner. Under section 256(1), either the assessee or the Commissioner could move the Income Tax Appellate Tribunal to make a reference to the High Court on any question of law arising out of the order of the Tribunal. On refusal by the Tribunal to make such a reference, the assessee or the Commissioner could approach the High Court under sub-section (2) to require the Tribunal to make a reference. Thus the Income Tax Act, 1961 recognised separate provisions of appeal, revision and reference. In fact, most statutes dealing with revenue matters provide for reference to be made to higher authorities, including to the High Court. For example, the Central Excise Act, 1944 provides for reference to the High Court on any question of law from the order of the Tribunal. The Customs Act, 1962 also provides for making a reference to the High Court on any question of law arising out of an order passed by the Appellate Tribunal. Though the nature of the jurisdiction may be somewhat different, even under the Land Acquisition Act, 1894, there is a provision for reference to the Principal Civil Court under section 18 on various aspects of compensation. Though the nature of the jurisdiction may be somewhat different, even under the Land Acquisition Act, 1894, there is a provision for reference to the Principal Civil Court under section 18 on various aspects of compensation. Therefore, procedural law recognises the separateness of these jurisdictions - appellate jurisdiction, revisional jurisdiction, review jurisdiction and reference jurisdiction. There is clear distinction between each of the above jurisdictions. Without delving into the contours of the respective jurisdictions, it can safely be said that each of these jurisdictions operate in separate and distinct spheres. But despite the distinctiveness of each of the above jurisdictions, there is one commonality in all the jurisdictions i.e., all such jurisdictions must be statutorily recognised. The statute must provide for such a jurisdiction to be availed of either by the assessee or by the Revenue. 31. Reverting back to the facts of the present case, we are afraid we cannot accept the stand taken by the respondents. Internal request made by the Assessing Officer to the Commissioner for clarification in the absence of any statutory backing cannot be construed to be a "reference" in law. The power to make a reference must be traced to a valid source of law which is not available in the AGST Act. Section 19(3) or section 73A of the AGST Act cannot be construed to be provisions providing for a "reference". There is another aspect. Limitation period prescribed for completion of assessment or re-assessment is for a definite purpose. An assessee cannot be subjected to assessment or re-assessment proceeding for an indefinite period. If the contention of the respondents, as advanced, is accepted, it would lead to a situation where an Assessing Officer would have the liberty to seek clarification from the Commissioner in the garb of reference thereby extending the limitation for framing assessment for an indefinite period and the Commissioner can also without any limitation of time provide the clarification whereafter the extended limitation of 2 years would commence from the end of the year in which the clarification is received by the Assessing Officer. This will certainly lead to an absurd situation and confer unfettered limitation on the Assessing Officers while framing assessment or re-assessment. 32. Accordingly and in the light of the discussions made above, the impugned notices dated 10.02.2009 and 17.02.2009 are clearly unsustainable being beyond the period of limitation and are accordingly adjudged void ab initio. This will certainly lead to an absurd situation and confer unfettered limitation on the Assessing Officers while framing assessment or re-assessment. 32. Accordingly and in the light of the discussions made above, the impugned notices dated 10.02.2009 and 17.02.2009 are clearly unsustainable being beyond the period of limitation and are accordingly adjudged void ab initio. Consequently, those are set aside and quashed. 33. Both the writ petitions are allowed. No costs.