Carbon Edge Industries Ltd vs State Of Gujarat
2023 Latest Caselaw 2180 Guj

    C/SCA/18847/2022                             JUDGMENT DATED: 10/03/2023




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

              R/SPECIAL CIVIL APPLICATION NO. 18847 of 2022


FOR APPROVAL AND SIGNATURE:


HONOURABLE MR. JUSTICE N.V.ANJARIA

and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA

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1    Whether Reporters of Local Papers may be allowed                  Yes
     to see the judgment ?

2    To be referred to the Reporter or not ?                           Yes

3    Whether their Lordships wish to see the fair copy of              No
     the judgment ?

4    Whether this case involves a substantial question                 No
     of law as to the interpretation of the Constitution of
     India or any order made thereunder ?


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                       CARBON EDGE INDUSTRIES LTD.
                                  Versus
                            STATE OF GUJARAT

==========================================================
Appearance:
UCHIT N SHETH(7336) for the Petitioner(s) No. 1
for the Respondent(s) No. 1
MR ADITYA PATHAK, AGP for the Respondent(s) No. 1,2

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    CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA
          and
          HONOURABLE MR. JUSTICE NIRAL R. MEHTA

                             Date : 10/03/2023



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      C/SCA/18847/2022                                   JUDGMENT DATED: 10/03/2023




                              ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE N.V.ANJARIA)

In the facts and circumstances of the case and having regard to the request of learned advocates for the parties and with the consent, the petition was taken up for final consideration.

1.1 Rule, returnable forthwith. Learned Assistant Government Pleader Mr.Aditya Pathak waives service of rule on behalf of both the respondents.

1.2 Heard learned advocate Mr.Uchit Sheth for the petitioner and learned Assistant Government Pleader.

2. By filing present petition under Article 226 of the Constitution, the petitioner has prayed to set aside the notice dated 1.9.2022 as well as the consequential order dated 16.9.2022 passed under Section 34(8A) of the Gujarat Value Added Tax Act, 2003.

3. It appears that when the prayers originally framed, it was the notice which was sought to be challenged, whereas the order came to be passed during the pendency of the petition which was challenged by submitting a draft amendment by adding further grounds of challenge as well.

3.1 The petitioner which is a public limited company having its place of business at Village Meghpar- Borichi District Kachchh and having factory at Village Chhasara, Taluka Mundra, District Kachchh, was subjected to audit assessment under Section 34(2)

C/SCA/18847/2022 JUDGMENT DATED: 10/03/2023

of the Value Added Tax Act, 2003 (hereinafter referred to as 'the Act') for the assessment year 2013-14.

3.2 The audit assessment order came to be passed on 18.9.2017. The assessment order was not challenged further and attained the finality. When the notice was issued to the petitioner dated 1.9.2022, at that stage itself the petitioner objected to issuance of such notice on the ground that the audit assessment for the year 2013-14 was already concluded and that no proceedings were pending so as to permit the authority to exercise the powers under Section 34(8A) of the Act.

3.3 It is the main plank of the challenge to the notice and the consequential order dated 1.9.2022 and 16.9.2022 respectively that the powers were invoked under Section 34(8A) of the Act despite the fact that no proceedings were pending.

3.4 Section 34 of the Act deals with the audit assessment. It says that subject to the provisions of Sub section (2), the amount of tax due from registered dealer shall be assessed in the manner provided, separately for each year during which the registered dealer is liable to pay tax.

3.4.1 Noticing Sub section (8A) of Section 34 straightway, it reads as under,

"(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

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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 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 sub-section 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 sub-section 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 sub-section, the dealer may be assessed

C/SCA/18847/2022 JUDGMENT DATED: 10/03/2023

separately under the other provisions of this section in respect of the said period or periods: Provided that, once the dealer is assessed under this sub-section, 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.]"

3.4.2 The aforesaid provision contemplates that during the course of any proceedings under the Act if the authority concerned is satisfied that the tax has been evaded or sought to be evaded or is not recorded correctly in respect of any transaction of sale or purchase or there any such claim has been incorrectly made, after giving notice to such dealer and extending reasonable opportunity, the officer would initiate the assessment in respect of such transaction or claim.

3.4.3 The assessment which is contemplated under the aforesaid provision is an issue based assessment relating to particular transaction. As the opening part of the Section provides, the powers are exercisable 'during the course of any proceedings under this Act.'

3.5 Furthermore, though it is an issue based or transaction related assessment it continues to be the audit assessment

C/SCA/18847/2022 JUDGMENT DATED: 10/03/2023

under Section 34, therefore the time limit provided in Sub section (9) of Section 34 of four years from the end of the year in respect of which the tax is assessable, would also apply to assessment under Sub section (8A) of Section 34 of the Act. It is also a contention of the petitioner that the assessment proposed under the impugned notice and concluded by passing impugned order is beyond the period of limitation. The above submission that the assessment was time barred could not be brushed aside lightly.

3.6 Section 34(8A) begins with the group of words 'during the course of any proceedings under this Act', as could be immediately seen on bare reading of the section. Pendency of the proceeding is essential condition. It is in the nature of condition precedent.

4. In Dhanani Import Export Private Limited and Another Vs. State of Gujarat and Another [(2017 98 VST 439 (Guj)], the Division Bench of this court in the context of operation and exercisbilty of powers under Section 34(8A)(a), (9) as also Section 35(1), (2) of the Act, considered the issue to observe and held as under,

"There is yet another strong reason why we can not upheld the action of the respondent authorities. Clause(a) of subsection (8A) which empowers the prescribed authority to collect tax when it is found that tax has been evaded or sought to be evaded or tax liability has not been disclosed correctly or excess tax has been claimed, the same can be done during thecourse of any proceedings if the prescribed authority is so satisfied. The pendencyofproceedings therefore, would be sine

C/SCA/18847/2022 JUDGMENT DATED: 10/03/2023

qua non for exercise of such powers.

Admitted facts are that no proceedings for assessment of the petitioner were pending on that day."

4.1 It was further observed,

"The return filed by the petitioner for the relevant year was long past assessed and closed. We are not inclined to accept the contention of the counsel for the petitioner that the proceedings referred to in clause(a) of sub-

section (8A) must relate to the assessment of that period alone. Nevertheless, when the legislature has used the expression "during thecourse of any proceedings under this Act ..." it must have reference to proceedings forassessmentofliability of dealer for the tax at a ny stage that maybe pending. Mere internal scrutiny or examination of file cannot be said to be pendency of proceedings envisaged in clause(a) of subsection (8A)."

5. The clinching aspect is that the condition precedent for exercising powers under Section 34(8A) has not been satisfied, namely that any proceedings under the Act are not pending so as to invest the authority with the power to proceed under Sub section (8A) of Section 34. When the Section expressly contemplates that the assessment under the said provisions could be resorted to only during the proceedings under the Act, the powers has to be exercised in that manner only and upon fulfillment of the said condition.

5.1 In the facts of the case there is no gainsaying that any proceedings are not pending so as to justify the assessment proceedings under Section 34(8A) of the Act. When learned Assistant Government Pleader was confronted with the aforesaid

C/SCA/18847/2022 JUDGMENT DATED: 10/03/2023

aspect and non-compliance of the condition precedent for exercise of powers of assessment, he was entirely at his receiving end.

6. In view of the above, since the basic condition 'during the course of any proceedings under the Act' of Sub section (8A) of Section 34 of the Act is not satisfied and no proceedings under the Act are pending, the impugned notice dated 1.9.2022 and the assessment order dated 16.9.2022 stands without jurisdiction. It is an incurable jurisdictional defect and illegality rendering the notice and the order liable to be set aside.

7. Accordingly, notice dated 1.9.2022 and order dated 16.9.2022 are set aside. The present petition is allowed. Rule is made absolute.

(N.V.ANJARIA, J)

(NIRAL R. MEHTA,J) Manshi