TMI Blog2017 (2) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order was still existing - extended period for exercise of revisional jurisdiction will be applicable only in cases where period prescribed prior to the amendment had not expired and not where the period had earlier expired as the amendment cannot put life to a dead claim. Whether a show cause notice issued to exercise revisional jurisdiction is bad as it is lacking in basic facts to invoke exception clause and extended period of limitation? - Held that: - This court is not going into this aspect of the matter for the reason that at this stage, it has lost its significance, in terms of the earlier order passed by this court, the Commissioner has already disposed of the preliminary objections raised by the petitioner regarding assumption of jurisdiction. Once the order has already been passed, this court is examining the validity of the order as such - The issue is not being examined as in pursuance to the SCN, orders have already been passed and those are under consideration before this court. Whether exception clause enabling exercise of revisional jurisdiction beyond the normal period of limitation prescribed in the Act, could be invoked even in cases where the eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is no question of grant of specific liberty to the department to pass any fresh order, as if the law permits, it can always take action. Petitions disposed off. - C.W.P. No. 20788 of 2015 (O&M) - - - Dated:- 30-1-2017 - MR. RAJESH BINDAL AND MR. HARINDER SINGH SIDHU, JJ. For The Petitioner : Mr. Ashok Aggarwal, Senior Advocate with Mr. Puneet Agrawal, Advocate; Mr. Abhishek Boob, Advocate; Mr. Rishabh Kapoor, Advocate; Mr. Sandeep Goyal, Advocate; Mr. Rishabh Singla, Advocate; Mr. Amrinder Singh, Advocate; Mr. Amar Pratap Singh, Advocate; and Mr. Rajiv Agnihotri, Advocate For The Respondent : Mr. Lokesh Sinhal, Additional Advocate General, Haryana. Rajesh Bindal J. 1. This order will dispose of a bunch of petitions bearing CWP Nos. 20788, 23671, 23721, 24700, 24847, 24966, 25336, 25848, 26508, 26833, 27005, 27006, 27032, 27448, 27458, 27526 of 2015, 787, 788, 798, 1868, 2197, 3196, 3748, 3768, 6796, 8820, 18377 and 19413 of 2016, as the issues involved in all the petitions are identical. FACTS OF THE CASES CWP No. 20788 of 2015 2. The petitioner claims itself to be a registered dealer under the provisions of the Haryana Value Added ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide order dated 28.4.2011. Notice under Section 34 of the Act for revision of the order was issued on 2.7.2015. The revisional order was passed on 15.7.2015. In the writ petition, challenge has been made to the aforesaid order being without jurisdiction. CWP No. 24966 of 2015 7. Assessment of the petitioner for the year 2007-08 was framed vide order dated 11.2.2010 while accepting the returns filed by the petitioner. Notice under Section 34 of the Act for revision of the assessment order was issued on 17.7.2015. The same was challenged by filing CWP No. 16955 of 2015, which was disposed of on 14.9.2015 directing the authority to dispose of the objections raised by the petitioner for initiation of revisional proceedings before taking further action in the matter. The revisional authority passed the order on 20.10.2015 dismissing the objections. In the writ petition, challenge has been made to the aforesaid order being without jurisdiction and vires of Explanation (i) to Section 2(1) (zg) of the Act. CWP No. 25336 of 2015 8. Assessment of the petitioner for the year 2009-10 was framed vide order dated 29.2.2012, while accepting the returns filed by the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out jurisdiction, vires of Explanation (i) to Section 2(1)(zg) of the Act and competence to levy tax in the absence of machinery provision. CWP No. 27005 of 2015 12. Assessment of the petitioner for the year 2008-09 was framed vide order dated 24.5.2010, while accepting the returns filed by the petitioner. Notice under Section 34 of the Act for revision of the assessment order was issued on 18.6.2015. The same was challenged by filing CWP No. 14842 of 2015, which was disposed of on 14.9.2015 directing the authority to dispose of the objections raised by the petitioner for initiation of revisional proceedings before taking further action in the matter. The revisional authority passed the order on 16.11.2015 dismissing the objections. In the writ petition, challenge has been made to the aforesaid order being without jurisdiction. CWP No. 27006 of 2015 13. Assessment of the petitioner for the year 2010-11 was framed vide order dated 17.4.2012, while accepting the returns filed by the petitioner. Notice under Section 34 of the Act for revision of the assessment order was issued on 18.6.2015. The same was challenged by filing CWP No. 15494 of 2015, which was dispos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder on 16.11.2015 dismissing the objections. In the writ petition, challenge has been made to the aforesaid order being without jurisdiction. CWP No. 27526 of 2015 17. Assessment of the petitioner for the year 2010-11 was framed vide order dated 29.11.2012, while accepting the returns filed by the petitioner. Notice under Section 34 of the Act for revision of the assessment order was issued on 18.6.2015. The same was challenged by filing CWP No. 16010 of 2015, which was disposed of on 19.9.2015 directing the authority to dispose of the objections raised by the petitioner for initiation of revisional proceedings before taking further action in the matter. The revisional authority passed the order on 20.11.2015 dismissing the objections. In the writ petition, challenge has been made to the aforesaid order being without jurisdiction. CWP No. 787 of 2016 18. Assessment of the petitioner for the year 2007-08 was framed vide order dated 30.4.2009, while accepting the returns filed by the petitioner. Notice under Section 34 of the Act for revision of the assessment order was issued on 2.7.2015. The same was challenged by filing CWP No. 15655 of 2015, which was dispo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed of on 14.9.2015 directing the authority to dispose of the objections raised by the petitioner for initiation of revisional proceedings before taking further action in the matter. The revisional authority passed the order on 20.10.2015 dismissing the objections. In the writ petition, challenge has been made to the aforesaid order being without jurisdiction and vires of Explanation (i) to Section 2(1) (zg) of the Act. Quashing of exception to second proviso to Section 34 of the Act has also been prayed for. CWP No. 2197 of 2016 22. Assessment of the petitioner for the year 2005-06 was framed vide order dated 6.3.2009, while accepting the returns filed by the petitioner. Notice under Section 34 of the Act for revision of the assessment order was issued on 7.10.2015. The revisional authority passed the order on 30.11.2015. In the writ petition, challenge has been made to the aforesaid order being without jurisdiction and vires of Explanation (i) to Section 2(1)(zg) of the Act. Quashing of exception to second proviso to Section 34 of the Act has also been prayed for. CWP No. 3196 of 2016 23. Assessment of the petitioner for the year 2007-08 was framed vide or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 6796 of 2016 26. Assessment of the petitioner for the year 2006-07 was framed vide order dated 19.5.2008, while accepting the returns filed by the petitioner. Notice under Section 34 of the Act for revision of the assessment order was issued on 1.10.2015. In the writ petition, challenge has been made to the aforesaid notice, vires of Explanation (i) to Section 2(1)(zg) of the Act, second proviso to Section 34 of the Act and competence to levy tax in the absence of machinery provisions. CWP No. 8820 of 2016 27. Assessment of the petitioner for the year 2006-07 was framed vide order dated 30.3.2009, while accepting the returns filed by the petitioner. Notice under Section 34 of the Act for revision of the assessment order was issued on 28.12.2015. The same was challenged by filing CWP No. 6795 of 2015. The revisional authority dismissed the objections of the petitioner vide order dated 12.4.2016. Thereafter, the petitioner withdrew the writ petition on 25.4.2016 with liberty to challenge the order disposing of the preliminary objection. In the writ petition, challenge has been made to the aforesaid order being without jurisdiction and vires of Explanation (i) to S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been mentioned in the notice, but without there being any factual basis showing how extended period of limitation is being invoked. 31. Fundamental facts have to be mentioned therein, namely, the ground for invocation of extended period of limitation. The reasons have to be assigned so as to enable the noticee to respond to the same. Even if any fact is mentioned in the notice, there is no question of inference as the words have to be specific as to which of the grounds has been invoked for extended period of limitation. In the case in hand, none of the grounds was available for invocation of extended period of limitation. There was no retrospective change in law; no decision of the Tribunal and there was no fresh statement of law declared by this court or Hon'ble the Supreme Court, as the legal position was existing even before the assessment orders were passed. 32. If the judgment of Hon'ble the Supreme Court in K. Raheja Development Corporation v. State of Karnataka, (2005) 5 SCC 162, delivered on 5.5.2005, much prior to the framing of assessment, which was the law declared at that time, was not considered by the assessing authority at the time of framing of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ble the Supreme Court, while deciding lis between the parties, declares law, which is binding not only between the parties but is considered as law of the land. It has precedent value. In addition, under Article 142 of the Constitution of India, Hon'ble the Supreme Court can pass any order to do complete justice between the parties. Referring to the judgment of Hon'ble the Supreme Court in C. Golak Nath and others v. State of Punjab and another, (1967) 2 SCR 762, it was submitted that declaration of law is when it is settled for the first time on any legal issue. Any subsequent judgment considering the same, either reiterates or approves the earlier one. That cannot be said to be declaration of law. In the case in hand, declaration of law was when Hon'ble the Supreme Court first opined on the issue in K. Raheja Development Corporation's case (supra), vide judgment dated 5.5.2005. 37. Further the argument is that even if legal issue decided in an earlier judgment is referred to be considered by a larger Bench, the same does not lose its precedent value or enforcement. It is binding till such time a different view is expressed by a larger Bench. In support, relia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the provision before the amendment was carried out, stood already expired. Can life be injected in a dead claim? He submitted that in most of the cases, the notices have been issued to the assessees beyond the period of three years and the amendment was notified later on. The contention is that once the period prescribed in the Act for exercising revisional power already stood expired, certain rights were vested in the assessees. The same could not be taken away. The period could possibly be extended only in the cases where three years had not yet expired. In support of the plea, reliance was placed upon judgment of Hon'ble the Supreme Court in Union of India and others v. Uttam Steel Ltd., (2015) 319 ELT 598 and State of Punjab and others v. M/s Shreyans Inds Ltd. etc., 2016 SCC OnLine SC 218. He further argued that the language used in the amendment made in Section 34 of the Act is indicative of the fact that the same is prospective and not retrospective. Even the amending Act also does not suggest the same. Reg. Reasonableness of period for exercise of revisional jurisdiction 40. The next contention raised by learned counsel for the petitioner was regarding reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... final, whichever is later. It was further submitted that maximum period, as provided for under Section 29(2)(e) of the Act, for which books of accounts have to be retained by an assessee is eight years. Hence, any action thereafter would be barred. In support of the aforesaid plea, reliance was placed upon The State of Gujarat v. Patil Raghav Natha and others, (1969) 2 SCC 187; Sulochana Chandrakant Galande v. Pune Municipal Transport and others, (2010) 8 SCC 467; Neeldhara Weav. Factory v. Dir. Gen. Of Foreign Trade, New Delhi, 2007(5) STR 404 (P H); Teekoy Rubbers (India) Ltd. v. Commissioner of Agricultural Income Tax, (1996) 219 ITR 615 (Ker.); and Pratibha Syntex Ltd. v. Union of India, 2013(287) ELT 290 (Guj.). Regarding instructions issued by the Department 42. Mr. Ashok Aggarwal, learned senior counsel for the petitioners submitted that Excise Taxation Commissioner had issued a circular bearing Memo No. 6152/ST-4 dated 7.5.2013 on the subject of taxability of civil works contracts/builders and developers. It was specifically mentioned in the aforesaid circular that judgment of Hon'ble the Supreme Court in K. Raheja Development Corporation's case (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore a Division Bench of this Court in CHD Developers Limited's case (supra). In that case, the State Government was directed to bring necessary changes in the Rules in consonance with the observations made therein. The re-framed Rules were notified on 23.7.2015 having retrospective effect from 17.5.2010, hence, in the absence of machinery provision, no demand of tax can be raised from the builders with reference to composite contracts of builders. 45. Referring to the language of Section 2(1)(zg) of the Act, which defines 'sale price', it was submitted that normal definition is that it is the amount payable to a dealer as consideration for sale of any goods. The explanation attached to the definition defines the sale price with reference to works contract. As per the explanation, the sale price in case of transfer of property in goods involved in execution of a works contract shall mean total sale consideration received by him for execution of the works contract, reducing therefrom the amount representing labour and other service charges incurred for such execution. The submission is that Entry 54 in List-II of Seventh Schedule of the Constitution of India entitles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s used in works contract by the builder till such time the part of the property is sold cannot be taxed. No tax is to be charged in case the unit is sold after the construction is complete. 47. The only change in the provision w.e.f. 20.3.2009 is that where the amount representing labour and other service charges is not quantifiable, the same can be calculated at such percentage, as may be prescribed. The provision still does not provide as to how the cost of the land and other expenses are to be taken care of. In any taxing statute, four para-meters are important, namely, taxable event, taxable person, rate of tax and the machinery provision. Even if any one of them is missing, the levy cannot be upheld. In the case in hand, fourth para-meter is missing. 48. It was further submitted that Section 6 of the Act provides for determination of taxable turnover. It provides that no deductions shall be permissible except those provided in sub-section (1) thereof. No deduction on account of value of the land and other services provided by the builder has been provided at any stage. Meaning thereby even in terms of the definition of sale and the manner in which taxable turnover is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pport, reliance was placed upon L T's 4 th case (supra). A Division Bench judgment of Delhi High Court in Suresh Kumar Bansal v. Union of India and others, 2016 SCC OnLine Del 3657 was also relied upon. In the aforesaid judgment, Delhi High Court had struck down levy of service tax on the builders after the amendment carried out vide Finance Act, 2010, in the absence of explicit machinery provisions. Reference was also made to judgment of Hon'ble the Supreme Court in National Mineral Development Coporation Ltd. v. State of M. P. and another, (2004) 6 SCC 281, wherein levy was set aside, even though the charging section provided for levy of tax, however, in the schedule, where rates were prescribed, nothing was mentioned regarding the commodity to be taxed. ADDITIONAL ARGUMENTS In CWP No. 25336 of 2015 52. Mr. Sandeep Goyal, learned counsel for the petitioner submitted that the petitioner in the present case had opted for payment of tax under composition scheme on the entire turnover as works contracts. The assessment for the assessment year 2009-10 was framed on 29.2.2012. He further submitted that judgment of Hon'ble the Supreme Court in K. Raheja De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ality as no further appeal was filed. 54. While citing the judgment of this court in VATAP No. 132 of 2013-M/s H. R. Steels P. Limited v. State of Haryana and others, decided on 19.8.2014, it was submitted that if the return of an assessee is accepted under Section 15(1) of the Act, the period of limitation is to be counted from the last date of filing of return and not when any order of assessment is passed by the authority, as no order is required to be passed. In CWP No. 26508 of 2015 55. Mr. Amar Pratap Singh, learned counsel for the petitioner submitted that even if the exception clause is to be invoked, it can be during reasonable period, which can be maximum five years from the date of assessment order, which will make it total eight years. It gives further period of two years after the expiry of normal period of limitation for exercise of power under Section 34 of the Act. It was so opined by Hon'ble the Supreme Court in State of Punjab and others v. Bhatinda District Coop. Milk P. Union Ltd., (2007) 19 VST 180 (SC), while considering the scheme of Punjab General Sales Tax Act, 1948. In CWP No. 18377 of 2016 56. Mr. Amar Pratap Singh, learned co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d already expired before the amendment was made on 3.8.2015. Despite the fact that the issue was specifially raised before the assessing authority, the same was not considered in the order of assessment. Delay in service of order has not been explained. If taken from the date of service of order on 27.6.2016, it was beyond even six years from the close of assessment year in question. In fact, the order has been ante-dated. 59. It was further argued that even if the transferee company joins proceedings, there is no estoppel to raise the issue that assessment could not be framed against the company, which had already been dissolved. Reference was made to the provisions of Rule 28(2) of the Rules, which provides for filing of objections in the assessment proceedings and Rule 28(3) of the Rules, which enjoins a duty on the assessing authority to decide those objections while recording reasons. ARGUMENTS ON BEHALF OF THE STATE 60. On the other hand, Mr. Lokesh Sinhal, learned Additional Advocate General, Haryana submitted that Section 34 of the Act gives ample power to the Commissioner to call for the records of any pending case or the decided one, to examine the legality o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d issued notices to the assessees referring to the judgment of Hon'ble the Supreme Court in K. Raheja Development Corporation's case (supra), the immediate response of the assessees would have been that the matter has been referred to a larger Bench and the correctness is in doubt, hence, no action should be taken. 62. Regarding the circular issued by the department, it was submitted that it was no where mentioned in the circular that exception clause cannot be invoked. It only provided the normal period during which power of revision could be exercised. Referring to judgment of Hon'ble the Supreme Court in Commissioner of Central Excise Bolpur v. Ratan Melting Wire Industries, (2008) 13 SCC 1, it was submitted that the circulars issued by the department are not binding on the court as it is merely understanding of law of the department. He could not dispute the fact that in the circular dated 7.5.2013, the Commissioner mentioned that judgment of Hon'ble the Supreme Court in K. Raheja Development Corporation's case (supra) was still a good law, however, he tried to explain that those were merely guide-lines so that assessments could be framed in terms there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dealer to pay the tax and it is his option either to pass on the burden to the buyer or not, though in law he may be entitled to. Mere this fact will not debar the State from collecting due taxes. 66. Justifying the enhancement of period for revision from three years to six years and its applicability to all pending cases, while relying upon the judgment of Hon'ble the Supreme Court in Addl. Commissioner (Legal) and another v. Jyoti Traders and another, (1999) 2 SCC 77, it was submitted that the amendment, in fact, being procedural and as the language suggests is retrospective in nature, hence, will be applicable to all the cases, even where limitation of three years for passing the revisional order had expired before the amendment was notified. Even the amendment suggests that the words three years had been substituted with words six years . In support of the plea that if there is conflict in two judgments of Hon'ble the Supreme Court of equal number of Judges, which of the judgment is to be followed, reference was made to a Full Bench judgment of this Court in Indo Swiss Time Limited, Dundahera v. Umrao and others, AIR 1981 P H 213. 67. As regards reasonable ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted that provisions of Explanation (i) to Section 2(1)(zg) of the Act, as existed after 20.3.2009, Sections 9 and 42 of the Act and Rules 25(2) and 49 of the Rules were also challenged and prayer was also for setting aside the assessment orders and the revisional orders. This court, while deciding the aforesaid cases, upheld the vires of Section 2(1)(zg) of the Act opining that it was not a charging section, rather, the provision merely provided for definition. 69. Analysing Explanation (i) to Section 2(1)(zg) of the Act, as existing prior to 20.3.2009, it was submitted that case of the petitioners before this court is that they are maintaining regular books of account, hence, the value of the property in goods, which is transferred in execution of works contract, can very well be calculated therefrom by applying deductive method. The provisions of the Act envisage levy of tax on sale of goods. The term goods has been defined and so the gross turnover . It also talks about the sale price of the goods. After deducting expenses incurred on account of labour and service charges, the gross turnover can be calculated and thereafter taxable turnover in terms of Section 6 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment to pass fresh order. REPLY ON BEHALF OF THE PETITIONER 72. In response, learned counsel for the petitioner submitted that in Bhatinda District Coop. Milk P. Union Ltd.'s case (supra), Hon'ble the Supreme Court opined that even if there is no time limit prescribed in any Act for exercise of jurisdiction, the same has to be read in it. Wherever no limitation is provided, the concept of reasonable period steps in. As the stand of learned counsel for the State is that for invoking the exception clause there is no limitation, reasonable period has to be read therein. The department cannot be permitted to invoke exception clause at its own whims and fancies after the cause of action arose. It is the admitted case of the department that judgment of Hon'ble the Supreme Court in K. Raheja Development Corporation's case (supra) was a good law. It was in favour of the department. There was no reason to wait for the decision of reference in L T's 1 st case (supra). In fact, the proper course would have been, if required, to initiate action for revision on the basis of K. Raheja Development Corporation's case (supra) and pass the order within the perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n though some amendment in the circular was made on 10.2.2014. Regarding contents of the notice, it was submitted that unless an assessee knows why the proceedings are sought to be initiated against him, especially invoking the extended period of limitation, he will not be able to file specific reply thereto. In support of the plea, reliance was placed upon Aban Loyd Chiles Offshore Ltd.'s case (supra) and Commissioner of Income-Tax v. Contimeters Electricals P. Ltd., (2009) 317 ITR 249. 76. The judgment of Jyoti Traders and another's case (supra) in support of the plea regarding substitution of period of limitation for passing the revisional order from three years to six years, as cited by learned counsel for the State, was distinguished by stating that in the facts of that case, while going through the language of amendment, Hon'ble the Supreme Court opined that intention was to amend the law with retrospective effect, otherwise the amendment could not be given true meaning. In the case in hand, neither from the language of the amendment nor from the Act, it can be opined that intention was to amend the Act with retrospective effect. The rights vested in an assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended period of limitation for exercise of revisional jurisdiction will apply even in cases where the period provided in the Act prior to the amendment had already expired ? (3) Whether a show cause notice issued to exercise revisional jurisdiction is bad as it is lacking in basic facts to invoke exception clause and extended period of limitation ? (4) Whether exception clause enabling exercise of revisional jurisdiction beyond the normal period of limitation prescribed in the Act, could be invoked even in cases where the event had taken place during the normal period prescribed in the Act ? (5) Whether the circulars issued by the Department are binding on the department and the assessees ? (6) Whether explanation (i) to Section 2(1)(zg) of the Act is ultra vires ? (7) Whether levy of tax on builders can be sustained in the absence of machinery provisions ? The period being upto 16.5.2010 and thereafter, when the Rules were framed. (8) Whether assessment could be framed in the name of a company which stood merged in another company and lost its entity by operation of law ? ISSUE NO. (1) Whether revisional power could be exercised on the basis of judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate. Second proviso to Section 34 of the Act provides that no order shall be revised after the expiry of three years from the date of supply of copy of such order to the assessee. The proviso, however, carves out exceptions to the aforesaid period of limitation, where an order can be revised even beyond the period of three years, in case: (i) there is retrospective change in law; (ii) any decision of the Tribunal in a similar case; and (iii) on the basis of law declared by the High Court or the Supreme Court. 84. In the case in hand, it is not in dispute that neither there is any retrospective change in law nor a decision of the Tribunal, on the basis of which the revisional jurisdiction has been exercised, that too by invoking the exception clause beyond the normal period of limitation. 85. The exception clause for invoking the extended period for exercise of revisional jurisdiction was analysed by learned counsel for the petitioner in two parts, first being on the basis of and second being law declared by the High Court or the Supreme Court . 86. The basis of anything is that on which it stands. Meaning thereby, in the case in hand, the very basis, on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t opined that the law declared by the Supreme Court means law made while interpreting the statutes or the Constitution. 91. In the case in hand, it cannot be disputed that the law was declared by Hon'ble the Supreme Court regarding taxation on the transactions of the type involved in the present petition vide judgment in K. Raheja Development Corporation's case (supra) on 5.5.2005. It was only vide order dated 19.8.2008 passed in L T's 1 s t case (supra) that the matter was referred to be considered by a larger Bench, which was finally decided vide judgment dated 26.9.2013 in L T's 2 nd case (supra) approving the law as declared in K. Raheja Development Corporation's case (supra). Binding nature of judgment even if issue refered to larger Bench 92. An ancillary issue, which arises for consideration in the facts of the present case, is as to whether the law declared by Hon'ble the Supreme Court is still a good law and a binding precedent, even if the issue is referred to be considered by a larger Bench. The question was considered by Hon'ble the Supreme Court in State of Rajasthan v. M/s R. S. Sharma and Co., (1988) 4 SCC 353. It was opined t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was the view in State of Orissa v. Dandasi Sahu, (1988) 4 SCC 12. 93. The issue was subsequently considered by a Division Bench of Bombay High Court in Madhao's case (supra). On the subject-matter involved therein, the legal issue was decided by Hon'ble the Supreme Court in State of Maharashtra v. Sant Joginder Singh, (1995 Supp (2) SCC 475), however, doubting the judgment delivered by two Hon'ble Judges in the aforesaid case, in Girnar Traders v. State of Maharashtra, (2004) 8 SCC 505 (hereinafter referred to as Girnar-I case ), the matter was referred to a larger Bench. The Bench consisting of three-Judges in Girnar Traders v. State of Maharashtra, (2007) 7 SCC 555 (hereinafter referred to as Girnar- II case ) referred the matter still to be heard by a larger Bench. The contention sought to be raised by the party before the Bombay High Court was that in view of the order passed by Hon'ble the Supreme Court in Girnar-I and Girnar-II cases , the law laid down by Hon'ble the Supreme Court in Sant Joginder Singh's case (supra) no more holds the field, hence, cannot be relied upon, as the issue has not been finally decided by Hon'ble the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decisions of the Apex Court in Girnar-I and Girnar-II cases affect the binding nature of the law declared by the Apex Court in Sant Joginder Sxingh's case and whether it loses its efficacy ? (III) Whether the law declared by the Apex Court in the case of Sant Joginder Singh in regards to applicability of Section 11-A of Land Acquisition Act to the acquisition proceedings under the MRTP Act loses its binding nature under Article 141 of the Constitution in view of pendency of reference in this regard before the larger Bench of the Apex Court for decision ? Both the aforesaid questions were answered in negative. 95. A Division Bench of Kerala High Court in Denny Fernandez v. State of Kerala, 2003(1) KLT 280 opined that the judgment pronounced by Hon'ble the Supreme Court continues to be the law of land under Article 141 of the Constitution of India and binding upon all the courts below till such time it is reversed or modified by a larger Bench. The observation made in Indian Oil Corporation Limited, Barauni v. The Presiding Officer Central Government Industrial Tribunal and another , 1994 SCC OnLine Pat 277 in para No. 23 is also in same line. The releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der was now six years, as against three years. 98. The issue, which arises for consideration, is as to whether the period stood extended even in the cases where three years had already expired from the date of supply of copy of order to an assessee. The answer would be in negative, as a dead claim cannot be revived. Right to revise the order had extinguished, which could not be revived. Further life could be injected only in the cases where limitation for revising an assessment order was still existing. 99. Similar issue was considered by Hon'ble the Supreme Court in Uttam Steel Ltd.'s case (supra), where the claim for rebate on export shipment was made. The period prescribed under Section 11B of the Central Excise Act, 1944 at the relevant time for making such claim was six months, which was later on substituted by one year. The assessee therein did not prefer claim within the period of six months. The amendment enlarging the period came later on. Hon'ble the Supreme Court opined that where the claim under the existing provision was already time-barred before the enlargement of period by the amending Act, the same will not be available to the assessee. While refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act for passing the assessment order expires, thereafter, the Commissioner is debarred from exercising his powers under sub-section (1) of Section 11 of the Act and cannot extend the period of limitation for the purpose of assessment. This order is assailed by the Revenue in the instant appeals before us. xx xx xx 24. It was also observed that upon the lapse of the period of limitation prescribed, the right of the Department to assess an assessee gets extinguished and this extension confers a very valuable right on the assessee. 25. If one is to go by the aforesaid dicta, with which we entirely agree, the same shall apply in the instant cases as well. In the context of the Punjab Act, it can be said that extension of time for assessment has the effect of enlarging the period of limitation and, therefore, once the period of limitation expires, the immunity against being subject to assessment sets in and the right to make assessment gets extinguished. Therefore, there would be no question of extending the time for assessment when the assessment has already become time barred. A valuable right has also accrued in favour of the assessee when the period of limitation expire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice under Section 34 of the Act proposing to revise order of assessment was sufficient. No facts were required to be mentioned. The section envisages only opportunity of hearing before passing an order. There are no pre-requisites required to be fulfilled before jurisdiction is assumed by the Commissioner. 105. This court is not going into this aspect of the matter for the reason that at this stage, it has lost its significance, in terms of the earlier order passed by this court, the Commissioner has already disposed of the preliminary objections raised by the petitioner regarding assumption of jurisdiction. Once the order has already been passed, this court is examining the validity of the order as such. Though the order as such may be appealable before the Tribunal, but the unfortunate situation, as existed was that for the last about two years, till the arguments were heard, there was no functional Tribunal in the State of Haryana on account of non-appointment of Presiding Officer and the Members thereof. 106. The issue is not being examined as in pursuance to the show cause notices, orders have already been passed and those are under consideration before this court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provision, namely, three years from the date of passing of order sought to be revised. If the exception clause is to be invoked, there have to be exceptional circumstances. Even if any amendment, order of the Tribunal or judgment of the High Court or Hon'ble the Supreme Court is subsequent to the passing of the order of assessment, in normal circumstances the exercise of revisional jurisdiction has to be during the period of limitation except in cases, where the amendment or the order/ judgment, on the basis of which revisional jurisdiction is sought to be exercised, had come into existence just before the limitation, as provided in Section 34 of the Act, was to expire. Those cases will depend on the facts of each case to be examined as to whether exception clause for exercise of power for revision beyond the period prescribed in that section can be allowed to be invoked or not. 109. However, in the cases, where the grounds, namely, three exceptions as carved out in second proviso to Section 34(1) of the Act were available much before even the passing of the order of assessment, the exception clause providing extended period of limitation cannot possibly be permitted in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal was referred to. It is not in dispute that the aforesaid two orders attained finality. 112. If considered in the light of the facts in the present case, binding precedent in the form of judgment of Hon'ble the Supreme Court in K. Raheja Development Corporation's case (supra) was delivered on 5.5.2005. Undisputedly, all the assessment orders were passed subsequent thereto ignoring that settled principle, for which there is no explanation available. Merely because the co-ordinate Bench of Hon'ble the Supreme Court had referred the matter to be considered by a larger Bench in L T's 1 st case (supra), vide order dated 19.8.2008, it did not take away its value of binding precedent till such time the matter was decided by the larger Bench. The judgment by the larger Bench in L T's 2 nd case (supra) was pronounced on 26.9.2013. The notices were issued for revision to the petitioners much after the judgment of Hon'ble the Supreme Court in L T's 2 nd case (supra). Finding 113. The question posed deserves to be answered in negative opining that for exercise of power of revision while invoking extended period of limitation as provided fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellate authority. It further provides that the State Government may, if it considers necessary, for the purpose of maintaining uniformity in the levy, assessment and collection of tax or for removal of any doubt, suo motu , or on an application made by any affected party issue an order clarifying the points. Such a clarification shall be binding on all except the appellate authority. Any order passed under Section 56(3) of the Act is to be publicised by uploading on the website of the department. 116. In exercise of the aforesaid power, the Commissioner vide memo dated 7.5.2013, issued instructions to all the officers in the department on the subject instructions regarding civil works contracts/ builders and developers- deductions allowable in computation of turnover and consideration liable to tax . Referring to the fact that there is some confusion regarding levy of tax on the works being executed by the developers/builders of flats and buildings, especially in the cases where there are agreements for sale of constructed buildings, while referring to the definition of sale and the works contract as provided for in the Act, it was specifically mentioned that judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts entered into by the developers or others with prospective customers for sale of fully constructed apartments or flats or other buildings before the commencement of actual construction or before completion of construction, should be treated as agreements or contracts for execution of works contract of construction of building as held by the Hon'ble Supreme Court in the case of K. Raheja Development Corporation v/s State of Karnataka (reported in 141 STC at page 298). It is still a good law and has not been reversed by the Hon'ble Supreme Court in any subsequent judgment. Claims to the contrary, if any, should be rejected. 1.2 It has come to the notice of this office that many developers/promoters/builders are not registered and not paying any tax, except tax deducted at source of Works Contract Tax (WCT) while making payments to the contractors engaged by them for the construction of building. Even where they are registered they are not filing returns in form VAT R-1 or VAT R-6, as the case may be. They are actually filing returns in form VAT R-4A as contractee. The correct interpretation of law in such cases is that the developers/promoters/builders are liable to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he instructions issued by the department clarifying any position under the Act are binding on the department, however, the same are not binding on the court, if there is a judgment to the contrary. No direction can be given to give effect to any instructions, which run contrary to the view expressed by the court. Relevant paragraph of the judgment in Ratan Melting Wire Industries' case (supra), dealing with the issue, is extracted below: 7. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/ circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the court to declare what the particular provision of statute says and it is not for the executive. Looked at fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le reading it down to the extent mentioned in the affidavit filed by the State. The State was further directed to bring necessary changes in the Rules in consonance with the observations made in the judgment. It was further observed that any effort to levy tax on any amount other than value of goods transferred in the course of execution of works contract would be ultra vires. Relevant para thereof is extracted below: 38. Explanation (i) to Section 2(1)(zg) of the Act, which defines sales price provides for deduction on account of labour, material and services related charges from the gross turnover as defined under Section 2(1)(u) of the Act while arriving at the sale price in a works contract. It is not a charging provision which creates any liability for assessing VAT in a works contract . It is in the definition clause of the Act and the provision does not embrace within its ambit something which is otherwise prohibited by law. Thus, the said provision does not suffer from any vice or defect of unconstitutionality. Finding 126. As the vires of the aforesaid provision has already been upheld by this court, we do not find any reason to re-examine the issue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han by sale; (g) turnover of sale of exempted goods in the State; (h) turnover of sale of goods to such foreign diplomatic missions/consulates and their diplomats, and agencies and organizations of the United Nations and their diplomats as may be prescribed; and (i) turnover of sale of goods returned to him, subject to such restrictions and conditions as may be prescribed, and to the remainder shall be added the purchases taxable under sub-section (3) of section 3, if any. xx xx xx 128. 'Dealer' has been defined in Section 2(1)(m) of the Act. 'Goods' have been defined in Section 2(1)(r) of the Act. 'Sale' has been defined in Section 2(1)(ze) of the Act to include even transfer of property in goods involved in execution of works contract. Explanation (I) thereto provides that in relation to transfer of property in goods involved in execution of a works contract 'sale price' shall mean, amount arrived at by deducting from the amount of valuable consideration, the amount representing labour and other service charges. No details of other service charges have been provided. Cost of land cannot be said to be falling in the term service c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods and the margin of profit on them prevalent in the trade plus the cost of transferring the property in the goods and all other expenses in relation thereto till the property in them, whether as such or in any other form, passes to the contractee and where the property passes in a different form shall include the cost of conversion. (i) In relation to the transfer of property in goods (whether as goods or in some other form) involved in execution of a works contract, 'sale price' shall mean such amount as is arrived at by deducting from the amount of valuable consideration paid or payable to a person for the execution of such works contract, the amount representing labour and other service charges incurred for such execution, and where such labour and other service charges are not quantifiable, the amount of such charges shall be calculated at such percentage as may be prescribed. 130. Rules 25(2) to (5) were added in the Rules vide notification dated 26.3.2010. These provide for method for calculation of taxable turnover in execution of a works contract. Certain deductions are provided. The issue was considered by this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following paras: 14. A reading of this judgment, on which counsel for the assessees heavily relied, would go to show that the separation of the value of goods contained in the execution of a works contract will have to be determined by working from the value of the entire works contract and deducting therefrom charges towards labour and services. Such deductions are stated by the Constitution Bench to be eight in number. What is important in particular is the deductions which are to be made under sub-paras (f), (g) and (h). Under each of these paras, a bifurcation has to be made by the charging Section itself so that the cost of establishment of the contractor is bifurcated into what is relatable to supply of labour and services. Similarly, all other expenses have also to be bifurcated insofar as they are relatable to supply of labour and services, and the same goes for the profit that is earned by the contractor. These deductions are ordinarily to be made from the contractor s accounts. However, if it is found that contractors have not maintained proper accounts, or their accounts are found to be not worthy of credence, it is left to the legislature to prescribe a formula o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes very important to segregate the two elements completely for if some element of transfer of property in goods remains when a service tax is levied, the said levy would be found to be constitutionally infirm. This position is well reflected in Bharat Sanchar Nigam Limited v. Union of India, (2006) 3 SCC 1, as follows:- 88. No one denies the legislative competence of the States to levy sales tax on sales provided that the necessary concomitants of a sale are present in the transaction and the sale is distinctly discernible in the transaction. This does not however allow the State to entrench upon the Union List and tax services by including the cost of such service in the value of the goods. Even in those composite contracts which are by legal fiction deemed to be divisible under Article 366(29-A), the value of the goods involved in the execution of the whole transaction cannot be assessed to sales tax. As was said in Larsen Toubro v. Union of India[(1993) 1 SCC 364] : (SCC p. 395, para 47) :- 47....The cost of establishment of the contractor which is relatable to supply of labour and services cannot be included in the value of the goods involved in the execution of a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract. xx xx xx 25. We have already seen that Rule 2(A) framed pursuant to this power has followed the second Gannon Dunkerley case in segregating the service component of a works contract from the goods component. It begins by working downwards from the gross amount charged for the entire works contract and minusing from it the value of the property in goods transferred in the execution of such works contract. This is done by adopting the value that is adopted for the purpose of payment of VAT. The rule goes on to say that the service component of the works contract is to include the eight elements laid down in the second Gannon Dunkerley case including apportionment of the cost of establishment, other expenses and profit earned by the service provider as is relatable only to supply of labour and services. And, where value is not determined having regard to the aforesaid parameters, (namely, in those cases where the books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment of a tax on person or property is a quasijudicial exercise. 16. Speaking for the majority Sinha, C.J. said: (K.T. Moopil case [AIR 1961 SC 552] , AIR p. 559, para 9) 9. Ordinarily, a taxing statute lays down a regular machinery for making assessment of the tax proposed to be imposed by the statute. It lays down detailed procedure as to notice to the proposed assessee to make a return in respect of property proposed to be taxed, prescribes the authority and the procedure for hearing any objections to the liability for taxation or as to the extent of the tax proposed to be levied, and finally, as to the right to challenge the regularity of assessment made, by recourse to proceedings in a higher civil court. The Act merely declares the competence of the Government to make a provisional assessment, and by virtue of Section 3 of the Madras Revenue Recovery Act, 1864, the landholders may be liable to pay the tax. The Act being silent as to the machinery and procedure to be followed in making the assessment leaves it to the Executive to evolve the requisite machinery and procedure. The whole thing, from beginning to end, is treated as of a purely administrative chara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision Act, 1962 (22 of 1962) as amended by the Amendment Act (23 of 1962). Noticing the absence of machinery provisions in the impugned enactments this Court observed: (AIR p. 1468, para 22) 22. if Section 6 is put aside, there is absolutely no provision in the Act prescribing the mode of assessment. Sections 3 and 4 are charging sections and they say in effect that a person will have to pay an additional assessment per acre in respect of both dry and wet lands. They do not lay down how the assessment should be levied. No notice has been prescribed, no opportunity is given to the person to question the assessment on his land. There is no procedure for him to agitate the correctness of the classification made by placing his land in a particular class with reference to ayacut, acreage or even taram . The Act does not even nominate the appropriate officer to make the assessment to deal with questions arising in respect of assessments and does not prescribe the procedure for assessment. The whole thing is left in a nebulous form. Briefly stated under the Act there is no procedure for assessment and however grievous the blunder made there is no way for the aggrieved party to ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act would apply to assessment of such dissolved firm. Interestingly enough, this provision is referred to only in the minority judgment in M/s. Murarilal s case (supra). xx xx xx 32. The impugned judgment in the present case has referred to Ellis C. Reid s case but has not extracted the real ratio contained therein. It then goes on to say that this is a case of short levy which has been noticed during the lifetime of the deceased and then goes on to state that equally therefore legal representatives of a manufacturer who had paid excess duty would not by the self-same reasoning be able to claim such excess amount paid by the deceased. Neither of these reasons are reasons which refer to any provision of law. Apart from this, the High Court went into morality and said that the moral principle of unlawful enrichment would also apply and since the law will not permit this, the Act needs to be interpreted accordingly. We wholly disapprove of the approach of the High Court. It flies in the face of first principle when it comes to taxing statutes. It is therefore necessary to reiterate the law as it stands. In Partington v. A.G., (1869) LR 4 HL 100 at 122, Lord Cairns stated: . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration that under the Rules the deduction in relation to any other charges in the manner and to the extent were also to be prescribed. Rule 13-A cannot be said to be an absolute follow-up legislation to sub-clause (i) of clause (a) of Section 21(1). When the law provides that something is to be prescribed in the Rules then that thing must be prescribed in the Rules to make the provisions workable and constitutionally valid. In Gannon Dunkerley Co. [(1993) 1 SCC 364 : (1993) 88 STC 204] the Supreme Court observed that as sub-section (3) of Section 5 and sub-rule (2) of Rule 29 of the Rajasthan Sales Tax Act and the Rules were not providing for particular deductions, the same were invalid. In the present matter the constitutional provision of law says that particular deductions would be provided but unfortunately nothing is provided in relation to the other charges either in Section 21 itself or in the Rules framed in exercise of the powers conferred by Section 58 of the Bihar Finance Act. xx xx xx 31. In our considered opinion sub-clause (i) of clause (a) of Section 21(1) read with Rule 13-A of the Rules did not make sub-clause (1) fully workable because the manner and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocedure and principles for effectively determining the taxable turnover, after excluding the items of turnover relating to such works contract which could not be subjected to levy of tax by the State in exercise of its power of legislation under entry 64 of the State List. Rule 6 by its own operation had no application in the matter of determination of liability under section 3-B since it has been made applicable only in respect of determining the taxable turnover of a dealer under section 3, 3-A, 4 or 5. Consequently, with our decision above striking down rules 6-A and 6-B of the Rules, there is no proper machinery provisions to determine the taxable turnover for purposes of section 3-B. The provisions of section 3-B, therefore, in the absence of the necessary rules for enforcing the same and determining the taxable turnover for the purposes of section 3-B is rendered dormant, ineffective and unenforceable. Such would be the position till sufficient provisions are made either in the Act itself or in the rules by virtue of the rulemaking power to ignite, activate and give life and force to section 3-B of the Act. 37. And the Orissa High Court in Larsen Turbo v. State of Ori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of land is also involved. The consideration charged by the builder from a buyer does not include only the services provided or the element of goods. Referring to various judgments dealing with the issue including the judgment of Hon'ble the Supreme Court in L T's 2 nd case (supra) and also dealing with the fact that vide notification of the circular, abatement to the extent of 75% was provided from the gross receipt for the purpose of determination of services rendered in a contract, the court opined that no service tax is chargeable on the composite contract and levy to that extent was set aside. 136. The issues, as involved therein, were summed up in para No. 4 thereof, which is extracted below: 4. The controversy involved in these petition relates to the question whether the consideration paid by flat buyers to a builder/promoter/developer for acquiring a flat in a complex, which is under construction/development, could be subjected to levy of service tax. According to the Petitioners, the agreements entered into by them with the builder are for purchase of immovable property and the Parliament does not have the legislative competence to levy service tax on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopers Limited's case (supra) giving liberty to the State to amend the Rules in consonance with the affidavit filed in the court. Subsequent thereto, Rule 25 of the Rules was amended vide notification dated 23.7.2015 with retrospective effect from 17.5.2010. Relevant paras of the aforesaid judgment are extracted below: 44. In case the provisions of law are seeking to charge sales tax on any amount other than the value of the goods transferred in course of execution of works contract, the provisions would be ultra vires to the Constitution of India. The tax is to be computed on a value not exceeding the value of transfer of property in goods on and after the date of entering into agreement for sale with the buyers. However, the 'deductive method' requires all the deductions to be made therefrom to be specifically provided for to ensure that tax is charged only on the value of transfer of property in goods on and after the date of entering into agreement for sale with the buyers. When 'deductive method' has been prescribed under the rules for ascertaining the taxable turnover, ordinarily it should include a residuary clause in consonance with the mandate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferor and transferee company as partners or jointly liable in respect of their liabilities and assets. 144. The issue was subsequently considered by a Division Bench of Delhi High Court in Spice Entertainment Ltd.'s case (supra), where challenge was to the order of assessment framed in the case of the company, which stood dissolved after amalgamation with the transferee company. As to whether it was merely procedural defect or fatal, was addressed. While referring to the judgment of Hon'ble the Supreme Court in Saraswati Industrial Syndicate Ltd.'s case (supra), it was opined that the company incorporated under the Companies Act is a juristic person. It takes its birth and gets life with the incorporation and dies with the dissolution. On amalgamation, the amalgamating company ceases to exist in the eyes of law. It was further opined that mere participation by the transferee company in assessment proceedings will be of no consequence as there is no estoppel against law. It is not a mere procedural defect. Relevant paras thereof are extracted below: 8. A company incorporated under the Indian Companies Act is a juristic person. It takes its birth and gets lif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te. (2) The extended period for exercise of revisional jurisdiction will be applicable only in cases where period prescribed prior to the amendment had not expired and not where the period had earlier expired as the amendment cannot put life to a dead claim. (3) The issue is not being examined as in pursuance to the show cause notices, orders have already been passed and those are under consideration before this court. (4) The question is answered in negative opining that for exercise of power of revision while invoking extended period of limitation as provided for in second proviso to Section 34(1) of the Act, in normal circumstances, the event has to be after the normal period of limitation had already expired. However, there can be some exceptions such as where event occurred just before expiry of period of limitation and the action was taken within reasonable time or the delay is satisfactorily explained. Exception clause is to be invoked only in exceptional circumstances. It is always required to be strictly interpreted even if there is hardship to any of the parties. (5) Any instructions issued by the Department are binding on the departmental authorities except o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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