2010 (9) TMI 956 - HC - VAT and Sales Tax

Whether on the facts and circumstances of the case the period of limitation for invoking powers under section 19(1) of the Sales Tax Act would run from the date of fresh assessment after the order of remand passed by the appellate authority or from the date of original order of assessment? Held that - Applying the doctrine of merger we find that the petitioner s appeal against the original order of assessment was on limited point about not giving of opportunity to furnish form B appendix declarations by the assessing authority. While deciding the appeal the appellate authority without touching any other ground though set aside the order of assessment but the remand was confined to give opportunity to the petitioner to file form B and appendix declarations and to pass a fresh appropriate assessment order. In compliance with the order of remand the assessing authority maintained its earlier order except to the extent ordered by the appellate authority in the order of remand. Therefore in our considered view the entire assessment order was not merged in the assessment order which was passed after remand. In the circumstances the initiation of the proceedings under section 19(1) for re-opening of the alleged escaped assessment of the items regarding which no appeal was filed by the petitioner could have been ordered being barred by limitation. Appeal allowed.

Summary

Issues Involved:

1. Validity of reassessment proceedings under section 19(1) of the M.P. General Sales Tax Act, 1958.
2. Applicability of the period of limitation for reassessment.
3. Doctrine of merger and its applicability to the case.
4. Correctness of conflicting judgments in similar cases.

Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 19(1):

The petitioner challenged the reassessment order dated December 26, 1998, arguing that the reassessment proceedings initiated under section 19(1) were barred by limitation. The original assessment order was passed on March 19, 1991, and the petitioner contended that the reassessment proceedings initiated on September 23, 1997, were beyond the permissible period of five calendar years from the original assessment order.

2. Applicability of the Period of Limitation for Reassessment:

The petitioner argued that the limitation period should run from the date of the original assessment order, March 19, 1991. However, the appellate authority held that the limitation period would run from the date of the fresh assessment order passed on October 26, 1994, following the appellate authority's remand order dated May 20, 1992. The court examined various judgments and concluded that the period of limitation should be counted from the original assessment order, not the fresh assessment order after remand, as the remand was limited to a specific issue regarding the submission of form B2 and appendix declarations.

3. Doctrine of Merger and Its Applicability:

The court analyzed the doctrine of merger, which states that an appellate order merges with the original order only to the extent of the issues addressed in the appeal. The court found that the appellate authority's remand order only addressed the issue of form B2 and appendix declarations, and did not affect other parts of the original assessment order. Therefore, the original assessment order did not entirely merge with the fresh assessment order passed after the remand.

4. Correctness of Conflicting Judgments:

The court reviewed conflicting judgments in similar cases, specifically the cases of *Commissioner of Sales Tax v. Jammatlal Prahaladrai* and *Commissioner of Sales Tax v. Himmatlal & Co.*. The court approved the view taken in *Jammatlal Prahaladrai*, which held that the appellate authority's order merges only to the extent of the issues addressed in the appeal. The court disapproved the view in *Himmatlal & Co.*, which overlooked the appellate authority's power to impose penalties under section 43(1) of the Sales Tax Act.

Conclusion:

The court concluded that the reassessment proceedings initiated on September 23, 1997, were barred by limitation as they were not initiated within five calendar years from the original assessment order dated March 19, 1991. The court quashed the reassessment proceedings and the subsequent orders passed by the appellate and revisional authorities. The petition was allowed, and no costs were awarded.