Madras High Court
M/S.Eureka Systems And Electrodes (P) ... vs The Assistant Commissioner (St) on 27 February, 2025
Author: Mohammed Shaffiq
Bench: Mohammed Shaffiq
WP No.21877 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 27.02.2025
CORAM:
THE HONOURABLE MR.JUSTICE MOHAMMED SHAFFIQ
WP. No.21877 of 2021
and
WMP No.23070 of 2021
M/s.Eureka Systems and Electrodes (P) Ltd.,
Represented by its Managing Director,
K.Chandrashekar,
11/15A, Selvarajapuram, Chinthamanipudur,
Coimbatore-641 103. ... Petitioner
versus
The Assistant Commissioner (ST),
Palladam-2 Assessment Circle,
Palladam. ... Respondent
PRAYER: Writ Petition filed under Article 226 of the Constitution of India,
for the issuance of a writ of Certiorari, calling for the records of the
respondent in his proceedings in CST No.750340/2002-03 dated 02.09.2021
and quash the same as illegal and pass orders.
For the Petitioner :Mr.S.Ramanathan
For the Respondent :Ms.Amrita Dinakaran
Government Advocate
1/11
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WP No.21877 of 2021
ORDER
The present writ petition is filed challenging the impugned order
dated 02.09.2021 for the assessment year 2002-2003 on the premise that it is
made after an unreasonable delay and thus suffers from the vice of manifest
arbitrariness, thereby falling foul of Article 14 of the Constitution.
2.1. The petitioner was engaged in the manufacture and sales of
welding electrodes. The petitioner was a registered dealer under the Tamil
Nadu General Sales Tax Act and Central Sales Tax, 1956. During the
relevant assessment year viz. 2002-2003, the petitioner reported a total and
taxable turnover of Rs.65,21,217/- and Rs.9,97,181/- respectively. The
petitioner claimed exemptions on transactions which according to them
constituted stock transfer in terms of Section 6A of the CST Act. While so,
there was an inspection in the petitioner's place of business on 09.01.2004.
During the course of such inspection, it is stated that certain files and
records were recovered. Pursuant thereto, a notice dated 12.11.2004 came
to be issued proposing to reject the claim of stock transfer made by the
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petitioner and treating it to be a direct inter-state sales under Section 3(a) of
the CST Act.
2.2. The petitioner submitted its preliminary objection on 20.12.2004
inter alia highlighting that no orders were received prior to the inter-state
sales and that transactions are stock transfer and not inter-state sales, as
proposed by the respondent.
2.3. The petitioner also filed a writ petition in W.P.No.39413 of 2004
seeking, furnishing of details of investigation, findings of the Revenue in
respect of 259 transactions, proposed to be treated as inter-state sales. This
court, by order dated 31.12.2004 was pleased to dispose of the above writ
petition recording the submission of the learned counsel for the respondent
therein that the respondent are willing to furnish the details required by the
petitioner within a period of four weeks.
2.4. Thereafter, the petitioner vide letter dated 03.01.2005 sought for
details of investigation and findings, in respect of the 259 transactions
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proposed to be treated as inter-state sales rejecting the petitioner's claim of
stock transfer. Thereafter, the respondent authority had not proceeded
further until a personal hearing notice came to be issued on 08.07.2021 i.e.
almost more than 15 years after the request for furnishing of
documents/details made by the petitioner pursuant to the orders of this
Court in W.P.No.39413 of 2004 dated 31.12.2004. Pursuant thereto, the
petitioner submitted its reply, wherein it was inter alia stated that the
continuation of the assessment proceedings after more than 16 years since
its initiation cannot be sustained and reliance was sought to be placed on a
judgment of this court in M/s.Pondy Die Casting (P) Ltd vs Appellate
Assistant Commissioner in T.C.(Revision) Nos.37 and 39 of 2017 dated
27.10.2017.
3. The petitioner filed its reply on 21.08.2021 and again on
25.08.2021 reiterating that the impugned proceedings cannot be sustained in
view of delay. However, the respondent authority had passed the impugned
order on 02.09.2021 by placing reliance upon Section 12 (2)B of the Act
which reads as under:
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In computing the period of limitation for
assessment under this section the following period
shall be excluded, namely:-
i)the time during which the proceedings for
assessment, remained stayed under the orders of a
civil court or other authority;
ii) the time during which any appeal or
other proceeding in respect of any other
assessment or reassessment is pending before the
Special Tribunal, the High Court or the Supreme
Court involving a question of law having a direct
bearing on the assessment in question.
iii) the time during which any appeal or
proceeding in respect of any assessment or
reassessment of the same part of the turnover
made under any other enactment was pending
before any appellate or revisional authority or the
Special Tribunal or the High Court or the
Supreme Court.
4. It is brought to the notice of this Court that the above provision was
introduced by Act 60/97-Gazette dated 06.11.1997, with retrospective effect
from 11.04.1996 and the same was omitted by Act 6/2000-Gazette dated
31.03.2000, effective from 01.04.1996 with retrospective effect. In other
words, the effect of the above amendment was as though the above
provision never existed.
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5. It was thus submitted that the impugned order suffers from an error
apparent inasmuch as it looks to non-existent provision.
6. In any view it was submitted that the impugned order suffers from
the vice of being unreasonable and arbitrary in view of the unreasonable
delay.
7. To the contrary, learned counsel for the respondent would submit
that proceedings were initiated within reasonable time and it was in view of
the fact that the petitioner had not responded that there was delay and
therefore the petitioner cannot blame the respondent authority for the delay.
8. Heard both sides and perused the materials available on record.
9. It is trite law that wherever limitation has not been prescribed for
taking any action or passing any orders, it has been consistently held that
action ought to be taken or orders ought to be passed within a reasonable
time.
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10. It may be relevant to note that this Court had held that though the
issuance of notice was within the period of limitation, however if the orders
are not made within a reasonable time, mere issuance of show cause notice
would not by itself provide immunity to the assessment orders being
challenged as having been made beyond reasonable period thereby suffering
from the vice of arbitrariness. In this regard, it may be relevant to refer to
the following judgments:
(i) J.M.Baxi and Co. Vs. UOI reported in 2016 (336) E.L.T. 285 (Mad):
“16. In the order of adjudication dated 07.01.2000, there is nothing to
indicate as to what transpired from 23.5.1995 up to 07.01.2000, except
for two dates. One is a letter dated 23.10.1999 where the appellant
sought an injury to be inflicted upon them voluntarily, reminding the
Department of the pendency of the show cause notice. The next date is
04.01.2000 when a personal hearing took place. Therefore, the order of
adjudication certainly had not taken place within a reasonable period.
Though the statute does not prescribe a period of limitation for passing
an order of adjudication, the law is well settled that anything in respect
of which no period of limitation is prescribed, should be done at least
within a reasonable time. What is reasonable time, would depend upon
the facts and circumstances of each case. In cases of this nature, where
the weight of the cargo discharged by the vessel of a Steamer Agent is
questioned, it is not possible for a Steamer Agent to defend themselves
against the show cause notice long after the vessel had sailed.
Therefore, the third question of law is also be answered in favour of the
appellant.”
(emphasis supplied)
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(ii) J.Sheik Parith Vs. Commissioner of Customs and another reported in
2020 (374) E.L.T. 15 (Mad.):
“23. In Premier Ltd. v. UOI (W.P. No. 12780 of 2016 dated
13.02.2017), a Division Bench of the Bombay High Court considered
a challenge to the show cause - cum-demand notice dated 22.07.1991,
in response to which personal hearings were fixed only in 1997. The
Court held that such delay would vitiate the validity of the notice itself
holding at paragraph 9 that the power to issue a show cause notice
carries with it the responsibility to adjducate upon it promptly.
...28. In Sanghvi Reconditioners Pvt. Ltd. v. Union of India (2018 (12)
GSTL 290), a Division Bench of the Bombay High Court considered
the delay of fifteen (15) years from issuance of a show cause notice
and thirteen (13) years after a hearing for fresh proceedings had been
initiated by the revenue. This was also a case where the proceedings
had been consigned to the call book. The petitioner in that matter
succeeded on the ground that the inordinate delay had not been
justified by the revenue.
29. In Transworld Shipping Services Pvt. Ltd. v. Government of
India (381 ELT 178) a learned single Judge of this Court, and
in Surendralal Girdharilal Mehta v. Union of India (W.P. No. 322 of
2015 dated 17.05.2018) the Calcutta High Court once again
reiterated the settled position that an authority exercising power under
the Statute can engage in an action that has the effect of disturbing the
rights of a citizen only within the time stipulated and where such
limitation was not stipulated, within a reasonable time.”
(emphasis supplied)
(iii) Kanthimathy Estate vs. The Assistant Commissioner Commercial Taxes
in W.P.(MD)Nos.3056 of 2016 etc., batch:
“7. It is thus clear that a dealer is required to statutorily
maintain and preserve books of accounts and all documents
connected and ancillary to its business only for a period of five
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years from the date on which the assessment relating to that year
had become final. In the present case, the periods of assessment
stretch from 1989-1990 to 1994-1995. The pre-assessment notices
have been sent only on 23.08.1999 and proceedings completed in
2015. Thus even on this score, the time taken for conclusion of
proceedings appears inordinately delayed and it thus
unacceptable. The impugned orders are quashed.”
(emphasis supplied)
11. It is thus clear that even if the notice was issued within the
prescribed period of limitation, inordinate/unreasonable delay in completing
the proceedings would vitiate the same. In the present case, there is no
explanation as to why it has taken more than 16 years after the issuance of
the first notice on 12.11.2004 to issue the hearing notice on 08.07.2021
while proceeding to pass the impugned order on 02.09.2021 after almost 16
years from the date of deemed assessment. This Court in the case of
J.M.Baxi (cited supra) found that failure to explain the delay of 5 years after
initiation would vitiate the proceeding on the ground of unreasonable delay.
In view of the same and following the above orders of this Court and in
particular, the case of Kanthimathy Estate vs. The Assistant Commissioner
Commercial Taxes in W.P.(MD)Nos.3056 of 2016 etc., batch, wherein it was
held that failure to complete the reassessment proceedings within a
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reasonable time after initiation of proceedings within the prescribed period
would vitiate the reassessment, this Court is of the view that the impugned
order of reassessment cannot be sustained and is liable to be set aside.
14. As a result, the writ petition is allowed. No costs. Consequently,
connected writ miscellaneous petition is closed.
27.02.2025
Index : Yes/No
Neutral Citation : Yes/No
mrn
To:
The Assistant Commissioner (ST),
Palladam-2 Assessment Circle,
Palladam
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MOHAMMED SHAFFIQ, J.
(mrn)
27.02.2025
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