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Jamna Auto Industries Ltd. Versus State of M.P. And Others

Classification of goods - leaf springs - whether leaf springs are classifiable under Schedule-II Part-IV of the M.P. VAT Act liable to tax @12.5% or as iron and steel under Entry 30 (v) of Part II of Schedule II? - jurisdiction of the authority to reassess merely on the basis of change of opinion - sub-section (3) of Section 21 of M.P. VAT Act - obligation on the part of Assessing Authority to pass an order within one year from the date of initiation of proceedings - Held that: - in view of the .....

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d in the negative. - Whether the change of opinion can be the basis for re-assessment? - Held that: - the law is settled that mere change of opinion in absence of any other material will not be sufficient for reassessment - re-assessment of tax is permissible only when it has been under assessed or has escaped assessment, or has been assessed at a lower rate, or any wrong deduction has been made while making the assessment or a rebate of input tax has incorrectly been allowed, while making t .....

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aised for additional sum being the difference i.e. 8.5% amounting to ₹ 47754454/- is set aside. Consequently the demand carried for said amount is also quashed. - Sub section (3) stipulates that any order passed by the Commissioner under sub-section (1) and (2) shall have a prospective effect and shall be binding on the authorities referred to in Section 3 in all proceedings under this Act except appeals - the order passed on 5.6.2007 was applicable for next financial year i.e. 2007-20 .....

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eputy Commissioner, Commercial Tax, Gwalior Division No.1 is being challenged. The order is passed under sub-section (1) of section 21 of the Madhya Pradesh Vanijya Kar Adhiniyam (for brevity MPVAT Act ) in respect of assessment year 2006-07 (local) (VAT). 2. Engaged in the manufacture and sale of leaf springs within the State of Madhya Pradesh and inter-state sale outside the State of Madhya Pradesh, the petitioner is registered under MPVAT Act and Central Sales Tax Act, 1956 vide Tin No.236553 .....

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on 70 of MPVAT Act Commissioner, Commercial Taxes vide order dated 5.6.2007 reviewed the earlier order dated 3.6.2003 and 19.11.2003 which were passed under section 68 classifying leaf spring as iron and steel under Entry 30 (v) of Part II of Schedule II. However, by order dated 5.6.2007 it was held that the leaf spring being part of motor vehicles it was classified under Entry 1 of Part IV of Schedule II which is a residuary clause as it is existed at relevant time (Part IV of Schedule II now s .....

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o in Section 3 in all proceedings under this Act except appeals. 3. That the return filed by the petitioner for the year 2006-07 were assessed and the assessment order was passed on 26.5.2009 by the Assistant Commissioner, Commercial Tax, Gwalior Circle-3, whereby it was held that the leaf springs are taxable @ 4% being declared goods under section 14 of the CSI Act. 4. That show cause notice was issued to petitioner on 9.12.2011 for re-assessment of the year 2006-07 under sub-sections (1) and ( .....

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AT Act. 5. The show-cause notice dated 9.12.2011 was challenged by the petitioner vide Writ Petition No.6062/2012 primarily on the ground that the issuance of show-cause notice for re-assessment on the basis of change in opinion of the department is illegal in the eyes of law and beyond jurisdiction. That by interim order dated 29.08.2012, the operation of said show-cause notice was stayed. 6. The said Writ Petition was finally disposed of on 2.4.2014 with a liberty to the petitioner to file rep .....

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time. Thereafter the matter was posted for 15.10.2014. On said date also, no one appeared for the petitioner. 8. This factual aspect is not disputed by the petitioner. Be that as it may. The Deputy Commissioner, Commercial Tax, passed the re-assessment order on 19.12.2014 holding leaf spring sold by the petitioner classifiable under Schedule-II Part-IV of the M.P. VAT Act liable to tax @12.5% raising the demand of ₹ 4,77,54,454/-. The demand for penalty proposed with show cause notice was .....

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er having been passed beyond one year is nonest in the eyes of law as it was beyond the jurisdiction of the authority to pass order after expiry of one year. 10. Though it is contended on behalf of the petitioner that impugned order passed after a period of one year from the date of initiation of proceedings, even after calculating the period during which the operation of the show-cause notice was stayed is nonest in view of the stipulation contained under Section 21(3) read with Section 22 of t .....

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r delay, if any, in passing the final order, it is the petitioner who has to be accounted for and not the Authority concern. Even otherwise joint reading of the provisions contained in sub-section (3) of Section 21 and Section 22 of MPVAT Act does not lend the support to the contentions on behalf of the petitioner that the Authority concern had no jurisdiction to pass an order after expiry of one year from the date of issuance of notice. Had it been so, the legislature should have definitely mad .....

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der of assessment. The distinguishing feature on which emphasis has been laid by the counsel for the respondent is that the language employed in rule 33 is such as to lead to only one conclusion that the final determination of the turnover which has escaped assessment and the assessment of the tax have to be done within three years. It is pointed out that in the other Sales tax provisions which came up for consideration in the cases mentioned above the words employed were "proceed to assess .....

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ree years. We find it difficult to accept that in the context of sales tax legislation the use of the words "proceed to assess" and "determine" would lead to different consequences or result. In this connection the words which follow the word "determine" in Rule 33 must be accorded their due signification. The words "assess the tax payable" cannot be ignored and it is clearly meant that the assessment has to be made within the period prescribed. Assessment .....

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vision like Rule 33 can be completely defeated by taking certain collateral proceedings and obtaining a stay order as was done in the present case or by unduly delaying assessment proceedings beyond a period of three years. 5. It is undoubtedly open to the legislature or the rule making authority to make its intention quite clear that on the expiry of a specified period no final order of assessment can be made. Then the taxing authorities would certainly be debarred from completing the assessmen .....

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ub-section (1) shall be made within a period of one calendar year from the date of commencement of the proceedings under the said sub-section , we are of the considered opinion that impugned order of re-assessment does not get invalidated even if it is passed beyond the period of one year from the date of initiation of proceedings with the issuance of show cause notice. The decision in State of Punjab and others Vs. Shreyans Industries Ltd. and another (2016) 29 STJ 1 (SC) is distinguishable on .....

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the Assessing Authority to have passed the order of re-assessment after expiry of one year from the date of issuance of show cause notice is answered in the negative. 12. Coming to next contention as to whether the change of opinion can be the basis for re-assessment. Catena of decisions have been relied upon on behalf of the petitioner. 13. In Deputy Commissioner of Income Tax and others Vs. Simplex Concrete Piles (India) Limited, (2013) 11 SCC 373, which was a case under section 147, 149 (1) ( .....

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authorise the Department to reopen the assessment, which stood closed on the basis of the law, as it stood at the relevant time. 14. In Binani Industries Limited, Kerala Vs. Assistant Commissioner of Commercial Taxes, VI Circle, Bangalore and others, (2007) 15 SCC 435, it is held: 24. The issues can be looked at from a different angle. Undisputedly, the 1996 Circular was binding on the revenue authorities as is spelt out in the case of 12.4.1996 and 23.10.1999 Circulars. The assessments were co .....

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n nature and operated with effect from the date Section 5-C was amended i.e. 1.4.1986 yet this is an additional factor to set aside the High Court's judgment. 27. It is stated by a long line of decisions that reopening of assessment is not permissible by mere change of the opinion in the assessing officer. Here it has not been disputed that the Circular dated 23.10.1999 was on account of change of opinion of the Commissioner that too while reviewing the earlier Circular. It could not be brou .....

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7 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re- open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assess .....

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garb of re-opening the assessment, review would take place. 7. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to .....

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Assessing Officer. 16. In Eisher Motors Ltd. and another Vs. State of M.P. and others, 2005 (1) M.P.L.J. 408, learned Single Judge of this Court after relying on the decision by Supreme Court held: 7. A careful reading of provision reveals that expression 'escape' serves as a key and foundation of the jurisdiction to reopen an assessment is that of 'turnover' and not, be it noted, an assessment. A turnover escapes assessment when it is not noticed by the officer either because i .....

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als that show-cause notice was issued on the basis of flying squad report. Now the question is whether said report would come within the ambit of expression 'for any reason' occurring in Section 19 the Act of 1958. In (1996) 29 VKN 430 a Division Bench of this Court has already held reopening of assessment on the basis of audit report is not permissible under Section 19 of the Act of 1958. Same can safely be held in respect of Flying Squad Report. In Indian and Eastern News Paper Society .....

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t case to initiate the reassessment proceedings. There must exit a live link between the material coming to notice of assessing officer and the formation of his belief that there has been escapement of turnover because of concealment of true and material facts by the assessee. The power conferred by Section 19 reopen the assessment though very wide but is not plenary and certainly can not be invoked on mere change of opinion to rectify the mistake committed earlier. In the present case, during t .....

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sold in State as well in the course of inter-State trade & Commerce. Assessee requested the Commissioner of Sales Tax to treat the merchandise covered under Entry No. 6 of Schedule I. The said request after due consideration was allowed and the sale turnover of woolen felts manufactured by assessee was not subjected to tax during the period 1971 onwards and no tax was levied. However, in Union of India v. Gujrat Woolen Felt Mill AIR 1997 SC 1548 it was held that non woven felts manufactured .....

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vision Bench is based upon the decision of Supreme court in Ghanshyamdas v. Regional Assistant Commissioner of Sale Tax, Nagpur, reported in 1964 MPLJ (SC) 782= AIR 1964 SC 766. In view of the aforesaid discussion, I have no hesitation to hold it was not case of escaped assessment. In the present case there was no concealment of taxable turnover relating to inter-State sale of LCV. It was shown in returns and assessing authority exempted it from payment of tax by permitting deduction. Except for .....

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. 17. Thus the law is settled that mere change of opinion in absence of any other material will not be sufficient for reassessment. 18. Sub-section (1) of Section 21 of MPVAT Act which has been involved for re-assessment envisages that: (1) Where an assessment or re-assessment of a dealer has been made under this Act or the Act repealed by this Act and for any reason any sale or purchase of goods liable to tax under this Act or the Act repealed by this Act during any period,- (a) has been under .....

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date of order of assessment or reassessment in cases falling under clauses (a) to (d) and within a period of three calendar years from the date of judgment or order of any Court or Appellate Board in cases falling under clause (e) , proceed in such manner as may be prescribed, by issue a notice in the prescribed form appointing a place which may be the business premises or at such place specified in the notice to assess or reassess, as the 35 case may be the tax payable by such dealer after maki .....

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Court or Appellate Board, which has become final. Thus, except these circumstances no other grounds available for the Commissioner to reassess the tax. 20. In the present case evidently on the basis of earlier determination order dated 3.6.3003 the petitioner filed the return for the year 2006-07 and the assessment order was passed on 26.5.2009 accepting tax @ 4% on the leaf springs being declared goods under section 14 of CST Act. However, it was on the basis of the opinion formulated by order .....

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iew of the Tax Board which held that leaf springs sold by the assessee as Auto Vehicle parts and charged to tax at the rate of 6% were taxable @6% and could not be taxed in residuary or general category @ 10%. In the case at hand till an order is passed on 5.6.2007 the leaf springs were classified as iron and steel under Entry 30 (v) of Part II of Schedule II and it is only after the decision on 5.6.2007, it is being subjected to tax under Entry 1 of Part IV of Schedule II which is at relevant t .....

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