Gujarat High Court
H. Tribhovandas And Sons vs State Of Gujarat on 26 April, 2018
Author: Akil Kureshi
Bench: Akil Kureshi, B.N. Karia
C/SCA/3002/2018 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 3002 of 2018
With
R/SPECIAL CIVIL APPLICATION NO. 3256 of 2018
With
R/SPECIAL CIVIL APPLICATION NO. 3257 of 2018
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H. TRIBHOVANDAS AND SONS
Versus
STATE OF GUJARAT
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Appearance:
MR UCHIT N SHETH(7336) for the PETITIONER(s) No. 1,2
MS SHRUTI PATHAK, AGP, ADVANCE COPY SERVED TO GOVERNMENT
PLEADER/PP(99) for the RESPONDENT(s) No. 1
NOTICE SERVED BY DS(5) for the RESPONDENT(s) No. 2
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE B.N. KARIA
Date : 26/04/2018
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. These petitions involve the same assessee and similar questions of law. However, some minor facts are different. We may, therefore, record the facts separately.
2. In Special Civil Application No.3002/2018, facts are as follows;
The petitioner is a Partnership Firm and is engaged in trading of Ammonium Nitrate, for which the petitioner has obtained registration under the Gujarat Value Added Tax Act, 2003 ("the VAT Page 1 of 27 C/SCA/3002/2018 ORDER Act" for short) and the Central Sales Tax Act, 1956 ("the CST Act" for short). According to the petitioner, till 31.07.2009, Entry18(1) of ScheduleII to the VAT Act included "Chemicals of all types excluding those specified in any other entries in this ScheduleII" and the applicable rate of tax was 04% VAT and 01% additional tax. The petitioner, accordingly, used to classify Ammonium Nitrate under such Entry. With effect from 01.08.2009, such Entry was deleted and the assessee started classifying the goods under the residuary Entry and discharged corresponding tax liability. Entry42A of ScheduleII to the VAT Act was included inviting tax at the rate of 04% plus 01% additional tax. Such Entry read as under;
Sr. Description of Goods Rate of
No. Tax
1 2 3
42A Industrial inputs or agricultural Four inputs as may be specified by the paise in State Government by notification the in the Official Gazette. Rupee
3. In exercise of the powers under the VAT Act, the Government of Gujarat issued the Notification dated 31.03.2006 specifying certain goods as Page 2 of 27 C/SCA/3002/2018 ORDER "industrial inputs", which was amended from time to time. The relevant portion of such Notification effective from 15.02.2010 reads as under;
Sr. Description Central Excise
No. of Goods Heading Subheading Tariff
No. No. Item No.
252 Ammonium 3102.10.00
Nitrate
4. According to the petitioner, thus, the product - Ammonium Nitrate would, under the said Notification, invite tax at the rate of 04% plus 01% additional tax with effect from 15.02.2010. In the present petition, therefore, we are concerned with the period between 15.02.2010 till 31.03.2010 since the case pertains to the Financial Year 20092010.
5. The petitioner's case was taken in audit assessment by the Assessing Officer. He passed an order of assessment on 17.02.2014, in which, he levied VAT on Ammonium Nitrate at the rate of 04% plus 01% additional tax for the period between 15.02.2010 to 31.03.2010. However, for the period between 01.08.2009 to 14.10.2010, the rate of tax applied was 12.50% plus 2.50% additional tax Page 3 of 27 C/SCA/3002/2018 ORDER under the residuary Entry.
6. This order of assessment was neither challenged by the petitioner nor was taken in revision by the revisional authority and thus, achieved finality. On 01.02.2018, the Asst. Commissioner of State Tax issued the impugned Notice purportedly in exercise of powers u/s.34(8A) of the VAT Act. This was on the basis of his opinion that the petitioner had not discharged VAT liability for the period between 15.02.2010 to 31.03.2010 correctly and was required to pay VAT on Ammonium Nitrate at the rate of 12.50% plus 2.50% additional tax. The petitioner has challenged this Notice on various grounds, which we would outline later.
7. In Special Civil Application No.3003/2018, we are concerned with Financial Year 20132014. In the said year also, the petitioner was dealing in Ammonium Nitrate and had paid VAT at the rate of 04% plus 01% additional tax. The petitioner's Return was taken in audit assessment. The Assessing Officer had passed the order of assessment on 08.08.2017. In such order, he had accepted the petitioner's computation of VAT on Ammonium Nitrate. In the operative portion of the order, he referred to the Notification issued by the Government on 15.02.2010 under which Sr. Page 4 of 27 C/SCA/3002/2018 ORDER No.252 pertaining to Ammonium Nitrate was added in Entry No.42A to ScheduleII of the VAT Act. He, thus, computed the assessee's VAT liability on Ammonium Nitrate at the rate of 04% plus 01% additional tax.
8. The assessing authority, thereafter, issued the impugned Notice dated 02.02.2018 seeking to reassess the petitioner's tax liability by observing that he had reason to believe that in respect of the assessment for the said period between 01.04.2013 to 31.03.2014, the tax had been assessed at a rate lower than the rate at which it should have been assessed. The petitioner has challenged this Notice in this petition.
9. In Special Civil Application No.3004/2018, the facts are similar as to the previous matter. Here also, the Return filed by the petitioner for the Financial Year 20122013 came to be scrutinized. The Assessing Officer passed an order of audit assessment on 27.02.2017 in which he referred to the relevant Entry for the purpose of assessing the petitioner's tax liability on Ammonium Nitrate. He, thereafter, issued the impugned Notice dated 04.02.2018 expressing similar belief that for the period in question, the tax has been assessed at a rate lower than Page 5 of 27 C/SCA/3002/2018 ORDER the rate at which it should have been assessed. The petitioner has challenged this Notice in the present petition.
10. Learned counsel for the petitioner raised the following contentions;
(A) The Assessing Officer in the original assessment had correctly assessed tax at the rate of 05% in view of Sr. No.252 in Entry42A to ScheduleII of the VAT Act. The unstated stand of the Department that since there was mis description of the "HNS Code" in the Central Excise Tariff Act, 1985 and that there was no intention of the Government to prescribe reduced rate of duty on Ammonium Nitrate is not correct.
(B) Once audit assessment is framed, the re assessment can be made only in terms of Section 35 of the VAT Act. Reliance placed by the Department on the provisions of Section 34(8A) of the VAT Act is wholly misconceived. Even while exercising powers of reassessment u/s.35 of the Act, the assessing authority cannot enter into areas, which had already come up for consideration in the original assessment. In other words, the concept of change of opinion, would apply to the proceedings u/s.35 of the VAT Act also.
Page 6 of 27 C/SCA/3002/2018 ORDER11. Learned counsel relied on several decisions to which we would refer at a later stage.
12. On the other hand, learned AGP Ms. Shruti Pathak opposed the petitions by raising the following contentions;
(A) The Government never intended to prescribe a lower rate of duty for Ammonium Nitrate. The description in Sr. No.252 to Entry42A of ScheduleII, though may be to Ammonium Nitrate but, the reference in such Serial Number is to "Central Excise" with "Heading No.", "Subheading No." and "Tariff Item No." as "3102.10.00". It corresponds to "Urea, whether or not in aqueous solution"; whereas, Ammonium Nitrate carries Tariff Item No. 3102.30.00.
(B) The authority had ample power to collect tax at the correct rate, in terms of subsection (8A) of Section 34 of the Act. In the later two years, the authority has issued Notice under Section 35 of the VAT Act, which empowered him to reassess turnover that escaped assessment.
13. Since the petitions are filed at the stage of issuance of showcause Notice, we are not inclined to finally determine the question of Page 7 of 27 C/SCA/3002/2018 ORDER correct rate of tax applicable for Ammonium Nitrate. We may only briefly record the origin of the controversy. As noted, with effect from 15.02.2010, Sr. No.252 was added to Entry No.42A to ScheduleII of the VAT Act. This Entry carried description of goods "Ammonium Nitrate" and had a reference to Central Excise Tariff Item No.3102.10.00. The rate of duty prescribed was 04% plus 01% additional tax. It is under this Entry that the petitioner, on its dealings post 15.02.2010, deposited tax at such rate. The Revenue, however, contends that the Tariff Item No.3102.10.00 in the Central Excise Tariff Act pertains to "Urea" and therefore, the petitioner could not have availed of reduced rate of tax and the product - Ammonium Nitrate would invite tax as per the Residuary Entry at a higher rate.
14. In the present group of petitions, we are concerned with the jurisdiction of the assessing authority to reexamine this issue. In Special Civil Application No.3002/2018, we are concerned with the contours of the powers of the Assessing Officer under subsection 8A of Section 34 of the VAT Act. In the other two petitions, we would be examining the scope of his jurisdiction u/s.35 of the VAT Act.
15. ChapterV of the VAT Act pertains to Page 8 of 27 C/SCA/3002/2018 ORDER "Returns, Payment of Tax, Assessment, Recovery of Tax and Refund". This Chapter contains detailed provisions envisaging the filing of Return of every registered dealer, assessment of such Return, scrutiny, reassessment, refund and collection of tax. Subsection (1) of Section32 requires every registered dealer to furnish correct and complete Return of the goods in respect of his business and the transactions thereof, in the prescribed format, within the prescribed time and before the prescribed authority. Section 33 of the VAT Act pertains to Selfassessment. Subsection (1) thereof requires a registered dealer to file a Return of Self assessment in the prescribed form.
16. Section 34 of the VAT Act pertains to Audit Assessment, which reads as under;
"34. Audit Assessment : (1) Subject to the provisions of subsection (2), the amount of tax due from a registered dealer shall be assessed in the manner hereinafter provided, separately for each year, during which he is liable to pay tax.(2)
(a) Where,
(i) the Commissioner is not satisfied with the bonafides of any claim of tax credit, exemption, refund, deduction, concession, rebate or genuineness of any declaration or Page 9 of 27 C/SCA/3002/2018 ORDER evidence furnished by a dealer in support thereof with selfassessment or
(ii) the Commissioner has reason to believe that detailed scrutiny of the case is necessary, the Commissioner may notwithstanding the fact that the dealer may have been assessed under section 33, serve on such dealer in the prescribed manner a notice requiring him to appear on a date and place specified therein, which may be his place of business or a place specified in the notice either to attend and produce or cause to be produced the books of account and all evidence on which the dealer relies in support of his returns or to produce such evidence as specified in the notice.
(b) in respect of such class of dealers as the State Government may, by rules, specify;
(3) The dealer shall provide all co operation and reasonable assistance to the Commissioner as may be required in case the proceedings under this section are required to be conducted at his place of business.
(4) If proceedings under this section are to be conducted at the place of business of the dealer and it is found that the dealer is not functioning from such premises or no such premises exists, the Commissioner shall assess to the best of his judgment the amount of tax due from him.
(5) If the Commissioner is unlawfully prevented from conducting the proceedings under this section, he may assess to the best of his judgment the amount of tax due from the dealer and may further direct that the dealer shall pay, by way of penalty, in addition to the amount of tax so assessed, a sum equal to the tax amount.Page 10 of 27 C/SCA/3002/2018 ORDER
(6) If any dealer
(a) has not furnished returns in respect of any period by the prescribed date;
(b) has furnished incomplete or incorrect returns for any period;
(c) has failed to comply with the terms of notice issued under subsection (2).
(d) has failed to maintain books of accounts in accordance with the provisions of this Act or rules made thereunder or has not regularly employed any method of accounting the Commissioner shall assess to the best of his judgment the amount of tax due from him.
(7) If the Commissioner is satisfied that the dealer, in order to evade or avoid payment of tax,
(a) has failed to furnish, without reasonable cause, returns in respect of any period or the selfassessment by the prescribed date;
(b) has furnished incomplete or incorrect returns for any period;
(c) has availed tax credit for which he is not eligible;
(d) has employed such method of accounting which does not enable the Commissioner to assess the tax due from him; or
(e) has knowingly furnished false or incorrect self assessment;Page 11 of 27 C/SCA/3002/2018 ORDER
he shall, after giving the dealer an opportunity of being heard, direct that the dealer shall pay, by way of penalty, a sum equal to one and a half time of the amount of tax assessed on account of the said reason in the audit assessment.
(8) If the Commissioner, upon information which has come into his possession, is satisfied that any dealer who has been liable to pay tax under this Act in respect of any period, has failed to get himself registered, the Commissioner shall proceed to assess to the best of his judgment the amount of tax due from the dealer in respect of such period and all subsequent period. In making such assessment, he shall give the dealer an opportunity of being heard. The Commissioner may, if he is satisfied that the default was without reasonable cause, direct that the dealer shall pay, by way of penalty, in addition to the amount of tax so assessed, a sum equal to the amount of tax assessed or a sum of rupees five thousand, whichever is more.
(8A) (a) During the course of any proceedings under this Act, if the prescribed authority is satisfied that the tax has been evaded or sought to be evaded or the tax liability has not been disclosed correctly or excess tax credit has been claimed by any dealer in respect of any period or periods by not recording or recording in an incorrect manner, any transaction of sale or purchase, or that any claim has been incorrectly made, then in such a case notwithstanding any notice for assessment has been issued under other provisions of this section or any other section of this Act, the prescribed authority may, after giving such dealer a reasonable opportunity of being heard, initiate Page 12 of 27 C/SCA/3002/2018 ORDER assessment of the dealer in respect of such transaction or claim:
Provided that where such proceedings are under section 73 or section 75, the prescribed authority shall transfer the proceedings relating to such transaction or claim directing the concerned assessing authority to assess the dealer in respect of such transaction or claim:
Provided further that the prescribed authority shall, notwithstanding anything contained in section 17, be deemed to have the requisite jurisdiction and power to assess such dealer in respect of such transaction of sale or purchase or claim, covered by clause (a) and such assessment proceedings shall, for all purposes of this Act, be deemed to have been transferred to such authority.
(b) The assessment proceedings under this subsection shall be without prejudice to the assessment proceedings in respect of the said period or periods under any other provisions of this Act by any authority who otherwise has the jurisdiction to assess such dealer in respect of other transactions of sale or purchase or any other claim.
(c) The assessment under this subsection shall be made separately in respect of the transaction or claim relating to the said period or periods to the best of the judgment of the prescribed authority where necessary and irrespective of any assessment made under this subsection, the dealer may be assessed separately under the other provisions of this section in respect of the said period or periods:
Provided that, once the dealer is Page 13 of 27 C/SCA/3002/2018 ORDER assessed under this subsection, no tax from such transaction or claim and penalty and interest, if any, shall be levied or demanded from such dealer, at the time of assessment to tax under the other provisions of this section in respect of the said period or periods relating to such transaction or claim.
Explanation - For the purpose of this sub section, "prescribed authority", "the said authority", "such authority" and "any authority" shall mean, the Commissioner or, as the case may be, the authorities appointed under section 16 and other officers or persons to whom the Commissioner has delegated his power in this behalf."
(9) No assessment under subsections (2), (5), (6) or (7) shall be made after the expiry of four years from the end of the year in respect of which or part of which the tax is assessable.
(10) No assessment under subsection (8) shall be made after the expiry of eight yers from the end of the year in respect of which or part of which the tax is assessable.
Provided that where any assessment is required to be made in pursuance of an order of any court or authority, such fresh assessment shall be made at any time within two years from the date of such order.
Provided further that in computing the period of limitation for the purpose of this section, any period during which assessment proceedings are stayed by an order or injunction of any court or authority shall be executed.
(11) Any assessment made or penalty imposed Page 14 of 27 C/SCA/3002/2018 ORDER under this Section shall be without prejudice to prosecution for any offence under this Act.
(12) Where in the case of a dealer, the amount of tax assessed for any period under this section or reassessed for any period under section 35 exceeds the amount of tax already paid under subsection (1), (2) or (3) of section 30 by the dealer in respect of such period by more than twenty five per cent of the amount of tax so paid, there shall be leveled on such dealer a penalty not exceeding one and onehalf times the difference between the tax paid under section 30 and the amount so assessed or reassessed."
17. Section 35 of the VAT Act pertains to Turnover escaping assessment and it reads as under;
"35. Turnover escaping assessment:
(1) Where after a dealer has been assessed under section 32, 33 or 34 for any year or part thereof, the Commissioner has reason to believe that the whole or any part of the taxable turnover of the dealer in respect of any period has,
(a) escaped assessment; or
(b) been underassessed; or
(c) been assessed at a rate lower than the rate at which it is assessable; or
(d) wrongly been allowed any deduction therefrom; or
(e) wrongly been allowed any tax credit therein, the Commissioner may serve a notice on the Page 15 of 27 C/SCA/3002/2018 ORDER dealer and after giving the dealer an opportunity of being heard and making such inquiry as he considers necessary, proceed to determine to the best of his judgment, the amount of tax due from the dealer in respect of such turnover which comes to his notice subsequently and the provisions of this Act shall, so far as may be, apply accordingly.
(2) No order shall be made under subsection (1) after the expiry of five years from the end of the year in respect of which or part of which the tax is assessable;"
18. It can, thus, be seen that in terms of sub section (2) of Section 34 of the VAT Act, it is open for the Commissioner, if any of the grounds mentioned therein are present, to serve a notice upon a dealer requiring him to appear on a date and place specified and to produce necessary documents and supporting evidence. Subsection (6) of Section 34 authorizes the Commissioner to complete best judgment assessment in case a dealer does not cooperate with the scrutiny assessment undertaken by the Commissioner. Sub section (7) of Section 34 empowers the Commissioner to impose penalty under certain circumstances.
19. Subsection (8A) of Section 34, which is of importance to us, was inserted by the Gujarat Value Added Tax (Amendment) Act, 9 of 2013 with Page 16 of 27 C/SCA/3002/2018 ORDER effect from 01.04.2013. The Statement of Objects and Reasons for introduction of the said provision provided that the same was added "so as to provide to assess the dealers separately in respect of any period for certain transactions or claims not recorded or recorded in an incorrect manner to evade the tax". Let us first understand the scheme under subsection (8A). Under sub section (8A) of Section 34, during the course of any proceedings under the VAT Act, the prescribed authority, on being satisfied that the tax has been evaded or sought to be evaded or the tax liability has not been disclosed correctly or excess tax credit has been claimed by the dealer in respect of any period by not recording or recording in an incorrect manner, any transaction of sale or purchase, or that the claim has been incorrectly made, then he would, notwithstanding that any notice for assessment has been issued under the said section or any other section of the VAT Act, after giving an opportunity of being heard to the dealer, initiate assessment in respect of such transaction or claim.
20. The first proviso to subsection (8A) of Section 34 provides that if the proceedings are u/s.73, i.e. in an appeal or under Section 75, i.e. in a revision, the prescribed authority would transfer the proceedings of such Page 17 of 27 C/SCA/3002/2018 ORDER transaction or claim by directing the concerned assessing authority to assess the dealer in respect of the same. The further proviso provides that the prescribed authority, notwithstanding anything contained in Section 17 of the VAT Act, shall be deemed to have the requisite jurisdiction and power to assess such dealer in respect of the transaction in question. As per clause (b) of further proviso, assessment under subsection (8A) would not prejudice the assessment proceedings in respect of the said period by carrying out transaction by the authority having jurisdiction to assess. Clause
(c) of this proviso further clarifies that for the transactions being assessed under subsection (8A), there shall be separate assessment, if need be best judgment and the dealer could still be assessed for the said period under the other provision of the said Section. Last proviso to this subsection ensures that the transaction which has been subjected to tax under this provision is not subjected to tax again under other provisions.
21. The legislative intent, thus, for introduction of the said subsection (8A) clearly is to enable the Revenue to bring to tax certain transactions which are noticed in the course of any of the proceedings under the VAT Act. Such Page 18 of 27 C/SCA/3002/2018 ORDER proceedings may be for assessment of the dealer for some other Financial Year or may even be appellate or revisional proceedings. If the proceedings in question relate to appellate or revisional proceedings, the authority would place the issue before the concerned authority with a direction to assess the dealer in respect of such transaction or claim. This provision, in essence, enables the Revenue to isolate the instances of tax evasion whenever noticed and to bring to tax, turnover which may have escaped assessment in relation to such transactions without carrying out complete assessment of all transactions of the dealer during the relevant Financial Year. This provision, however, does not and cannot be seen to enable the Assessing Officer to correct an error, which might have been committed in the course of passing the audit assessment order. The VAT Act provides for proper mechanism in the form of appeal or revision, as may be available. The VAT Act also provides for an opportunity to re assess in case of turnover escaping assessment under certain circumstances, as provided under Section 35 of the Act, which, we would refer a while later. For the time being, we may express our opinion that powers under subsection (8A) of Section 34 of the VAT Act would be available when a certain claim or a transaction has not been subjected to audit assessment under subsection Page 19 of 27 C/SCA/3002/2018 ORDER (2) of Section 34 of the VAT Act.
22. We would elaborate our above observation further. As is wellknown, the Act provides for appeal and revisional remedies against the order of assessment. Section 73 of the VAT Act pertains to appeals, which may be filed against appealable orders. Section 75 pertains to revisional powers of the Commissioner. Under clause(a) of sub section (1), the Commissioner could take any order passed by the Assessing Officer in suo motu revision. Any order of assessment can, thus, be corrected by exercising the powers under the said provisions. The VAT Act also recognizes the power of the Assessing Officer himself to reopen a completed assessment, even if it is audit assessment. Subsection (1) of Section 35 of the VAT Act provides that where a dealer has been assessed u/s.32, 33 or 34 and the Commissioner has reason to believe that taxable turnover for any period has escaped assessment or has been underassessed or has been assessed at lower rate or the dealer has been wrongly allowed deduction or credit, he can serve a notice on the dealer and after giving an opportunity of being heard to him, could pass the best judgment assessment of the amount of tax due from the dealer. Sub section (2) of Section 35, however, provides for a time limit of 05 years from the end of the year Page 20 of 27 C/SCA/3002/2018 ORDER in respect of which the tax is being assessed.
23. Within the time limit envisaged in sub section (2) of Section 35 and on the grounds available as mentioned in subsection (1) thereof, it would always be open to the Commissioner to reassess a dealer for any period where the turnover might have escaped assessment. Such powers, however, cannot be exercised in the guise of carrying out assessment under sub section (8A) of Section 34. Any other view would give wholly arbitrary powers to the Assessing Officer. We have noticed that the power of re assessment, being peculiar and some what harsh to the dealer, comes with a time limit for its exercise. The powers under subsection (8A) of Section 34 are not akin to the powers of re assessment u/s.35. Essentially, under subsection (8A) of Section 34, if the authority, in the course of any proceedings, notices any evasion of tax, he can address to such an issue, without carrying out full assessment and if such authority happens to be either the appellate or the revisional authority, the issue would be placed before the assessing authority. Two things, thus, become abundantly clear. Firstly, the powers under subsection (8A) of Section 34 are not similar to the powers of reassessment flowing from Section 35 of the VAT Act and Page 21 of 27 C/SCA/3002/2018 ORDER secondly, such powers cannot be exercised when audit assessment has already been completed in case of a dealer with respect to a certain period. Any other view will make the limitation period provided in Section 35(1) of the VAT Act substantially, if not, completely redundant. Under the said provision, a completed assessment can be reopened only within five years. No such time limit is provided for exercising powers under subsection (8A) of Section 34. Instances where there may be occasion to exercise powers under Section 34(8A) and under Section 35(1) would over lap; though noticing escapement of turnover chargeable to tax during the pendency of any proceedings is peculiar to Section 34(8A). To hold that even if a case where period of limitation to reassess under Section 35 has expired, the Department can invoke powers under Section 34(8A) would go against the principles of harmonious construction of the statutory provisions. We may recall, this subsection (8A) is part of Section 34 which carries a caption "Audit assessment". The scope of this provision must be seen in light of the proceedings for audit assessment. Section 35 of the VAT Act, on the other hand, carries the title "Turnover escaping assessment". Powers of assessment under subsection (1) of Section 35 can be exercised where the dealer has already been assessed under Page 22 of 27 C/SCA/3002/2018 ORDER Sections 32, 33 or 34 of the VAT Act. Powers under Section 35 are, thus, in the nature of re assessment and can be exercised where the dealer has been subjected to audit assessment or otherwise, as long as the grounds mentioned in subsection (1) exist and such powers are exercised within the time limit prescribed under subsection (2).
24. In Special Civil Application No.3002/2018, the limitation period for issuing notice had already expired. It was, perhaps, therefore, that the authority sought to rely on subsection (8A) of Section 34 of the VAT Act. Since for the period in question audit assessment was already completed, as held by us earlier, such powers could not have been invoked.
25. We, now, come to the Notices issued by the competent authority in the later two years u/s.35 of the VAT Act. In such Notices, he wished to re assess the petitioner's tax liability on the ground that the tax was levied at a rate lower than the prescribed rate. We have noticed that in both the years, the assessing authority had completed audit assessment and had specifically referred to the product in which the petitioner was dealing in and the rate of tax applicable on such product along with a reference to the Entry Page 23 of 27 C/SCA/3002/2018 ORDER under which the tax was prescribed. He had, thus, examined the entire issue and upheld the petitioner's contention that on Ammonium Nitrate, the correct rate of tax was 04% plus 01% additional tax. He was aware and conscious about the Entry in which such tax was prescribed. He has, thus, formed a definite opinion on the rate at which the petitioner should be taxed. His opinion may have been erroneous. It cannot be said that he formed no opinion. If the Department held a belief that such opinion was incorrect, there were measures available to rectify such an error. Exercise of powers u/s.35 of the VAT Act was not one of them.
26. Perusal of the provision of subsection (1) of Section 35 of the VAT Act would demonstrate that unlike in case of Section 147 of the Income Tax Act, 1961, it does not make any distinction between a notice of reassessment within and beyond 04 years. It permits reassessment of turnover that has escaped assessment, whether the escapement is on account of any failure on the part of the assessee to disclose truly and fully all material facts or otherwise. However, the concept of change of opinion would certainly apply.
27. In case of Commissioner of Income Tax v.
Page 24 of 27 C/SCA/3002/2018 ORDERKelvinator India Ltd. & others reported in [2010] 320 ITR 561 (SC), the Supreme Court, in the context of the provision of Section 147 of the Income Tax Act, even post its amendment of 01.04.1989, held that the concept of change of opinion and reassessment would continue to apply since the power of reassessment cannot be equated with the power to review. This concept has been firmly entrenched in the Income Tax law as to require reference to more judgments. In the context of the VAT Act of different States and Sales Tax Acts also, the Courts have expressed similar opinions. In case of State of Uttar Pradesh and others v. Aryaverth Chawl Udyog and others reported in [2016] 91 VST 01 (SC), in the context of U.P. Trade Tax Act, while making a similar provision for reassessment, it was held that the expression "reason to believe" does not merely mean a subjective satisfaction on the part of the assessing authority. It was further observed that if there is a change of opinion, there must necessarily be a nexus that is required to be established between the change of opinion and the material present before the assessing authority. Discovery of an inadvertent mistake or nonapplication of mind during assessment would not be a justified ground to initiate proceedings for reassessment. In case of Binani Industries Limited v. Assistant Page 25 of 27 C/SCA/3002/2018 ORDER Commissioner of Commercial Taxes, VI Circle, Bangalore and others reported in [2007] 6 VST 783 (SC), in the context of Karnataka Sales Tax Act which envisages similar powers of reassessment, it was observed that reopening cannot be made on mere change of opinion.
28. The Division Bench of this Court in case of B.G. Exploration and Production India Limited and others v. State of Gujarat and others reported in [2015] 84 VST 01, in the context of notice of re assessment in proceedings under the Gujarat Sales Tax Act, observed in Para62 as under;
"62. On a plain reading of the above show cause Notice, it is apparent that the same does not disclose the formation of any opinion on the part of the Commissioner based on any new material on record. The reassessment is, therefore, sought to be made on a mere change of opinion. As held by the Supreme Court in Kelvinator of India Ltd. MANU/SC/0047/2010 : [2010] 320 ITR 561 (SC) a mere change of opinion cannot be per se reason to reopen an assessment. Therefore, the showcause notices which form the basis of the impugned assessment orders are without jurisdiction as the same have been issued without formation of the requisite opinion as required under the provisions of sections 41 and 44 of the GST Act. Consequently, the assessment orders based upon such showcause notices cannot be sustained."Page 26 of 27 C/SCA/3002/2018 ORDER
29. Under the circumstances, the impugned Notices, in all the three petitions, are quashed. The petitions are allowed and stand disposed of accordingly.
(AKIL KURESHI, J) (B.N. KARIA, J) PRAVIN KARUNAN Page 27 of 27