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2019 DIGILAW 2159 (ALL)

Notional Chemical and Dyes Co v. State of U. P.

2019-09-18

BHARATI SAPRU, ROHIT RANJAN AGARWAL

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JUDGMENT : Rohit Ranjan Agarwal, J. Heard Sri Aloke Kumar, learned counsel for the petitioner and Sri C. B. Tripathi, learned Special counsel for the respondents-State. 2. Present petition has been filed assailing the order dated 07.03.2019 passed by Additional Commissioner, Grade-I, Commercial Tax, Varanasi Zone-I, Varanasi under Section 29(7) for reassessment for assessment year 2010-11 and notice dated 07.03.2019 issued by Joint Commissioner, (Corporate Circle), Commercial Tax, Varanasi Zone-I, Varanasi which had been issued in consequence of the order of authorisation. 3. According to petitioner the dispute relates to reassessment of assessment year 2010-11. Petitioner is registered proprietorship firm, and is involved in manufacture and sale of chemicals. According to petitioner the chemicals manufactured are commonly known as prepared driers and the same find place at Serial No. 134 of Part-C of Schedule 2 of Value Added Tax (in short 'VAT Act'). The said prepared driers are taxable at the rate of 4% from 01.01.2008. According to petitioner, the petitioner firm was assessed for assessment year 2008-09 and assessment order was passed on 22.10.2011, accepting the sale and tax at 4%. It was on 24.07.2013 that respondent no. 3 had issued a notice to petitioner firm regarding the taxability of prepared driers, which was replied on 25.08.2013 and the proceedings were, thereafter, dropped. According to petitioner assessment was made for the year 2010-11 and assessment order was passed on 13.01.2014 granting benefit to the firm that commodity sold by firm was prepared driers and was taxable under Item No. 134 of Schedule 2, Part-C. In the assessment year of 2011-12, the contention of the petitioner was also accepted as regards prepared driers manufactured and sold by petitioner firm and assessment order was passed on 23.07.2014. 4. According to petitioner, on 07.02.2019, respondent no. 2 exercising power under Sub-section 7 of Section 29 issued notice stating that the goods sold by the petitioner firm are liable to be taxed at the rate of 12.5% and stated that HSN Code 05000039 is for paints and varnishes of all kinds and all materials used in painting and varnishes, and prepared driers manufactured by petitioner was used only in manufacture of paint and varnishes, thus, it falls under the said HSN Code and accordingly 8.5% tax had been left to be imposed on the turnover of prepared driers and permission has been sought for reassessment. Petitioner appeared on the date fixed and filed his reply and submitted that original assessment order was passed after scrutiny of the records and no turnover was assessed to tax at lower rate and as such there was no occasion to grant permission for reassessment on basis of change of opinion. Respondent no. 2 exercising power under Section 29(7) passed the order of authorisation on 07.03.2019. 5. Counsel for the petitioner submitted that the order authorising for reassessment amounts to change of opinion as the question of taxability was never in dispute and the same has been accepted even after recording finding on the same by taking note of HSN Code specially prescribed for prepared driers. He submitted that reassessment cannot be made on the same material which was subject-matter of the original assessment. He relied upon judgment of this Court in case of M/s Vikrant Tyres Ltd. vs. State of U.P. and others, (2005) UPTC 501 that no reassessment can be made by same authority on the same material and if the same was permitted will open flood gate for arbitrary action exposing one to unending process, permitting uncertainty, reopening of closed chapters without assigning good reason, depending upon whims of individuals. 6. He further relied upon a judgment of the Apex Court in case of State of U.P. vs. M/s Aryawart Chawal Udyog and others, 2017 UPTC 262 which is on the question of change of opinion. Relevant Para 30 is extracted hereasunder:- "30. In case of there being a change of opinion, there must necessarily be a nexus that requires to be established between the "change of opinion and the material present before the Assessing Authority. Discovery of an inadvertent mistake or non-application of mind during assessment would not be a justified ground to reinitiate proceedings under Section 21(1) of the Act on the basis of change in subjective opinion Hon'ble Supreme Court (CIT v. Dinesh Chandra Shah, 1972 (2) SCC 231; CIT v. Nawab Mir Barkat Ali Khan Bahadur, (1975) 4 SCC 360 )." 7. He also relied upon the Division Bench judgment of this Court in Varun Beverages Ltd. Vs. State of U.P. and 2 others, (2016) 62 NTNDX 324 and case of M/s Sterling India vs. State of U.P. and 3 others, (2017) UPTC 379. 8. He also relied upon the Division Bench judgment of this Court in Varun Beverages Ltd. Vs. State of U.P. and 2 others, (2016) 62 NTNDX 324 and case of M/s Sterling India vs. State of U.P. and 3 others, (2017) UPTC 379. 8. Per contra, learned Special counsel for the Department submitted that the case of the petitioner was not covered under Article 134, Schedule 2, Part-C but was covered under HSN Code 05000039. He further submitted that it was not change of opinion but was on the basis of an audit held in the Department in which the said fact was pointed out and pursuant to the audit objection, review pertaining to the assessment year 2010-11 was taken. The said fact has been stated in Para Nos. 7 and 14 of the counter affidavit which is extracted hereasunder:- "7. That there was an audit held in the department in which the aforesaid inadvertence was pointed out and pursuant to the audit objection, review pertaining to the assessment year 2010-11 in respect of petitioner was made and during review of the matter it was found that 13.5% tax ought to have been charged instead of 5% tax inasmuch as Paint Drier comes under the purview of non-clasified category. Hence it has been decided to rectify the aforesaid inadvertence as per provision laid under under Section 29(7) of the Act which provides; "Where the Commissioner, on his own or on the basis of reason recorded by the assessing authority, is satisfied that it is just and expedient so to do authorize the assessing authority in that behalf, such assessment or re-assessment may be made within a period of eight years after expiry of assessment year to which such assessment or re-assessment relates notwithstanding such assessment or re-assessment may involve a change of opinion. Provided that it shall not be necessary for the Commissioner to hear the dealer before authorising the assessing authority." 14. That, the contents of paragraph nos. Provided that it shall not be necessary for the Commissioner to hear the dealer before authorising the assessing authority." 14. That, the contents of paragraph nos. 7, 8, 9 and 10 of the writ petition are not admitted as stated hence denied, in reply it is submitted that there was an audit held in the department in which the aforesaid inadvertence was pointed out and pursuant to the audit objection, review pertaining to the assessment year 2010-11 in respect of petitioner and during review of the matter it was found that 13.5% tax ought to have been charged instead of 5% tax inasmuch as the Paint Drier comes under the purview of non-classified category. Thereafter, after examining entire facts of the matter, impugned order dated 07.03.2019 has been passed by respondent no. 1 and consequently as show-cause notice dated 07.03.2019 was issued to the petitioner for initiating re-assessment process." 9. Having heard learned counsel for the parties and perusing the records of the case, we find that in previous as well as in subsequent years the petitioner had been constantly assessed under the heading prepared driers for which he has been taxed at the rate of 5% under the relevant Code by the assessing authority. Earlier in 2013 the notice was also issued to the petitioner which was replied by him and it seems that further proceedings were dropped and no orders were passed. For the relevant assessment year, the averment made in Para Nos. 7 and 14 of the counter affidavit clearly states that the reassessment is being made on the basis of audit objection thus, it is not the case of the Department that any part of the turnover of a dealer for any assessment year or part thereof has escaped assessment to tax, it is only on the basis of the audit objection that the proceedings for reassessment has been initiated by passing orders of authorisation by respondent no. 2 against the petitioner firm. 10. It is well settled that reassessment cannot be made on the same material by the same authority nor if there is any change of opinion, as in the present case there was no fresh material on record on which the authorities proceeded for reassessment, thus the order authorising for reassessment only on the basis of audit objection cannot be sustained. It is well settled that reassessment cannot be made on the same material by the same authority nor if there is any change of opinion, as in the present case there was no fresh material on record on which the authorities proceeded for reassessment, thus the order authorising for reassessment only on the basis of audit objection cannot be sustained. Thus we are of the considered view that the order dated 07.03.2019 passed by respondent no. 2 under Section 29(7) for reassessment of assessment year 2010-11 and notice dated 07.03.2019 issued by respondent no. 3 are unsustainable and are hereby quashed. 11. Writ Petition stands allowed.