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2017 DIGILAW 790 (KER)

VDO MARINE INSTRUMENTS v. COMMERCIAL TAX OFFICER

2017-05-23

A.K.JAYASANKARAN NAMBIAR

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JUDGMENT : A.K. JAYASANKARAN NAMBIAR, J. 1. The petitioner is a partnership firm and a dealer in marine equipment. It is a registered dealer under the Kerala General Sales Tax Act, 1963 [hereinafter referred to as the 'K.G.S.T. Act']. The petitioner filed returns declaring its total and taxable turnover for the assessment years 2000-01 and 2001-02, by claiming concessional rate of 3% on goods sold to M/s. Bristol Boats against Form 18. The assessments were completed by the Assessing Officer after allowing the concessional rate claimed by the petitioner. It would appear that, subsequently, the assessments were modified through proceedings for rectification under Section 43 of the K.G.S.T. Act, on the premise that the tax levied at 3% on the strength of Form 18 declaration was not correct for both the years, since, the items covered by the Form 18 declaration could not be treated as component parts and raw materials for the manufacture of Fiber Glass Boat. The assessments were therefore revised by the Assessing authority, for both the years, by levying the higher rate of tax on the turnover that was covered by the Form 18 declaration submitted by the assessee. The petitioner assessee carried the matter in Appeals before the Deputy Commissioner (Appeals), and pursuant to the dismissal of the Appeals, the petitioner challenged the order before the Appellate Tribunal. The Appellate Tribunal found in favour of the petitioner by Ext.P3 common order, wherein, the Appellate Tribunal found that the power of rectification, envisaged under Section 43 of the K.G.S.T. Act, could not have been exercised in the instant case, since, the action of the Assessing Officer virtually amounted to a change of opinion, and rectification proceedings could not be maintained based on a change of opinion of the Assessing Officer. It was therefore found by the Appellate Tribunal that the exercise of power under Section 43 of the K.G.S.T. Act was erroneous, and the revised assessment orders passed pursuant to the exercise of such a power were legally unsustainable. The Appeals filed by the petitioner for the said assessment years were therefore allowed by the Tribunal. 2. Pursuant to Ext.P3 order of the Appellate Tribunal, the Department proceeded to issue notices under Section 19(1) read with Section 17(8) of the K.G.S.T. Act, for the purposes of revising the assessments that were already done in favour of the petitioner as already noted above. 2. Pursuant to Ext.P3 order of the Appellate Tribunal, the Department proceeded to issue notices under Section 19(1) read with Section 17(8) of the K.G.S.T. Act, for the purposes of revising the assessments that were already done in favour of the petitioner as already noted above. The provisions of Section 19(1) and Section 17(8) of the K.G.S.T. Act read as under: 19. Assessment of escaped turnover :- (1) Where for any reason the whole or any part of the turnover of business of a dealer has escaped assessment to tax in any year or has been under assessed or has been assessed at a rate lower than the rate at which it is assessable or any deduction has been wrongly made there from, the assessing authority may, at any time within five years from the expiry of the year to which the tax relates, proceed to determine to the best of its judgment the turnover which has escaped assessment to tax or has been under assessed or has been assessed at a rate lower than the rate at which it is assessable or the deduction that has been wrongly made and assess the tax payable on such turnover after issuing a notice on the dealer and after making such enquiry as it may consider necessary: Provided that before making an assessment under this sub-section the dealer shall be given a reasonable opportunity of being heard: Provided further that the time limit mentioned in this sub-section shall not apply where the turnover which escaped assessment relates to any business done by such dealer as benamidar or through a benami or where it relates to dealer, who being liable to get himself registered under this Act and the rules made there under has failed to do so. 17. Procedure to be followed by the assessing authority:- (1) xxxxxxxxxxxxxxxxxxxxxxx (2) xxxxxxxxxxxxxxxxxxxxxxx (3) xxxxxxxxxxxxxxxxxxxxxxx (4) xxxxxxxxxxxxxxxxxxxxxxx (5) xxxxxxxxxxxxxxxxxxxxxx (6) xxxxxxxxxxxxxxxxxxxxxxx (7) xxxxxxxxxxxxxxxxxxxxxxx (8) Any assessment or reassessment in pursuance of an order of an appellate or revisional authority shall, be completed within a period of four years from the expiry of the year in which the order was received: Provided that all such assessments or re-assessments pending as on the 1st day of April, 1993 shall be completed on or before the 30th day of September 1998. 3. 3. Although the petitioner preferred a detailed reply to the notices issued to him contending inter alia that the re-opening of the assessments that was proposed by the notices issued to it, in terms of Sections 19 and 17(8) of the K.G.S.T. Act, were barred by limitation, the respondent proceeded to revise the assessments, and passed Exts.P7 and P8 orders for the assessment years 2000-01 and 2001-02 respectively. In the writ petition, the petitioner assails Exts.P7 and P8 orders, inter alia, on the ground that the respondent committed a jurisdictional error in passing fresh orders of assessments by invoking the provisions of Section 19 read with Section 17(8) of the K.G.S.T Act, when the reassessment proceedings had become time barred. 4. I have heard Sri. A. Kumar, the learned counsel for the petitioner as also Smt. M.M. Jasmin, the learned Government Pleader for the respondent. 5. On a consideration of the facts and circumstances of the case as also the submissions made across the bar, I find that, for the reasons stated hereunder, the challenge in the Writ Petition, against Exts.P7 and P8 orders, must necessarily succeed, it will be apparent from a reading of the provisions of Section 19(1) and Section 17(8) of the K.G.S.T. Act, which are quoted above, that a re-opening of an assessment under Section 19 of the K.G.S.T. Act is contemplated only within five years from the expiry of the year to which the tax relates. In the instant case, it is not in dispute that the proceedings under Section 19 were initiated through the issuance of Exts.P4 and P5 notices, both of which are in the year 2011, but pertained to the assessment years 2000-01 and 2001-02. On a plain reading of the provisions of Section 19, therefore, it is clear that the assessments that were contemplated by invoking the said provisions were clearly barred by time. The respondents would however take umbrage under the provision of Section 17(8) of the K.G.S.T. Act, which also has been extracted above. The said provision is an enabling provision which enables the Department to resort to a reassessment, pursuant to an order of the appellate or revisional authority, and in that event, the Department is granted a period of four years from the expiry of the year in which the appellate or revisional order was received to complete a reassessment proceedings against any assessee. It can immediately be noticed from a perusal of the provisions of Section 17(8) that the provision is one which enables an assessment or reassessment based on an appellate or revisional order that decides an issue on merits. In the instant case, it is the case of the Department that Ext.P3 order of the Tribunal, which allowed the appeals preferred by the petitioner assessee against an order that was passed by exercising the power of rectification under Section 43 of the K.G.S.T. Act, effectively enabled the Department to resort to a reassessment under Section 19 of the K.G.S.T. Act. I am afraid, I cannot accept the said contention of the Department. Ext.P3 order of the Tribunal cannot be seen as one that enabled the Department to reassess the petitioner on the basis of the said order. As a matter of fact, Ext.P3 order of the Tribunal finds against the Department in the matter of exercise of power under Section 43 of the K.G.S.T. Act. While holding against the Department, the said order also finds that while exercising the power under Section 43, the Department was effectively resorting to a change of opinion, and a change of opinion could not have been the basis of the exercise of a power of rectification under Section 43 of the K.G.S.T. Act. I might add, at this juncture, that even for the purposes of reassessment under Section 19, it is now trite that a mere change of opinion cannot be the basis of a reassessment proceedings under Section 19 either See Binani Industries Limited, Kerala v. Assistant Commissioner of Commercial Taxes, VI Circle, Bangalore and Ors. (2007) 15 SCC 435 . Thus, I find that, both, in view of the express period of limitation prescribed under Section 19 as also on the ground that an exercise of power under Section 19 cannot be based on a mere change of opinion, the reassessments completed by Exts.P7 and P8 orders, cannot be legally sustained. I therefore quash Exts.P7 and P8 orders, and allow the Writ Petition with consequential reliefs.