1991 (7) TMI 346 - HC - VAT and Sales Tax

Issues Involved:
1. Legality and validity of notices and orders extending the period for assessment.
2. Compliance with Section 42 of the Gujarat Sales Tax Act and Rule 37-A of the Gujarat Sales Tax Rules.
3. Petitioner's entitlement to a refund due to the alleged improper extension of the assessment period.

Issue-wise Detailed Analysis:

1. Legality and Validity of Notices and Orders Extending the Period for Assessment:

The petitioner, a public limited company registered under the Gujarat Sales Tax Act and the Central Sales Tax Act, challenged the legality of the notices and orders extending the assessment period for the years 1976 and 1977. The petitioner contended that the extensions were based on untenable and flimsy grounds. The court examined the series of show cause notices and orders issued between 1980 and 1983, which extended the assessment period multiple times. The court noted that the reasons for extension, such as the need for further examination of consignment transactions and pending proceedings under Section 46-A, were provided in the notices. The court concluded that the reasons mentioned were germane for the purposes of the Act and did not find them to be extraneous or irrelevant. Therefore, the court upheld the legality and validity of the notices and orders extending the assessment period.

2. Compliance with Section 42 of the Gujarat Sales Tax Act and Rule 37-A of the Gujarat Sales Tax Rules:

Section 42 of the Act mandates that assessment proceedings should be completed within a specified period to avoid indefinite delays. However, the State Government and the Commissioner have the power to extend this period under certain conditions. Rule 37-A requires that the Commissioner must not stay the assessment proceedings for more than five years at a time and must record reasons for the extension in writing. The court found that there was formal compliance with these provisions. The Commissioner had provided written reasons for the extensions and had issued show cause notices to the petitioner, allowing them an opportunity to respond. The court emphasized that these provisions are procedural and do not create substantive liability. The purpose is to ensure that reasons for extensions are documented to prevent arbitrary exercise of power. The court concluded that there was no contravention of the rules and that the extensions were justified.

3. Petitioner's Entitlement to a Refund Due to Alleged Improper Extension of the Assessment Period:

The petitioner argued that if the assessment was not completed within the prescribed period under Section 42, they were entitled to a refund of the amount paid. The court rejected this argument, stating that the same section provides for the extension of the assessment period. Once the conditions for extending the period are satisfied, the period of limitation stands extended, and the petitioner does not acquire a vested right to avoid assessment. The court also noted the petitioner's conduct, highlighting that the assessment proceedings were adjourned multiple times due to the petitioner's lack of cooperation or absence. The court found no merit in the petitioner's claim for a refund and concluded that the department acted reasonably in extending the assessment period.

Conclusion:

The court dismissed the petition, upheld the validity of the notices and orders extending the assessment period, and confirmed that there was compliance with the relevant statutory provisions. The petitioner's claim for a refund was also rejected. The interim relief granted was vacated, and the rule was discharged.

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