Shri Pankaj Behari Saha vs Unknown
2021 Latest Caselaw 131 Tri

                                 Page - 1 of 17

                       HIGH COURT OF TRIPURA
                             AGARTALA
                              W.P(C) No.847/2020

1.     SHRI PANKAJ BEHARI SAHA
S/o Late Anil Chandra Saha, and carrying on the business
of bonded warehouse in the name and style of Udaipur
Bonded Ware House at Brahmabari, near National
Highway, P.O- R. K. Pur, P.S- R.K. Pur, Pin-799120
                                                           ............... Petitioner(s).
                                   Vrs.
1.     The State of Tripura
Represented by the Chief Secretary, Government of
Tripura, Agartala, New Civil Secretariat, P.O-Kunjaban,
P.S- New Capital Complex (NCC), District- West Tripura,
PIN-799006
2.     The Principal Secretary
Finance Department, Government of Tripura, Agartala,
New Civil Secretariat, PO- Kunjaban, P.S- New Capital
Complex (NCC), District- West Tripura, Pin code-799006
3.      The Commissioner of Taxes
Government of Tripura, P.N. Complex, Gurkhabasti, PO-
Kunjaban, P.S- New Capital Complex (NCC), Agartala,
District- West Tripura, Pin Code- 799006
4.     The Superintendent of Taxes
Government OF Tripura, Charge-Udaipur, P.O- R.K.Pur,
P.S- R.K. Pur, District- Gomati Tripura Pin code- 799120
                                                           ............ Respondent(s).

W.P(C) No.848/2020

1. SHRI PANKAJ BEHARI SAHA S/o Late Anil Chandra Saha, and carrying on the business of bonded warehouse in the name and style of Udaipur Bonded Ware House at Brahmabari, near National Highway, P.O- R. K. Pur, P.S- R.K. Pur, Pin-799120 ............... Petitioner(s).

Vrs.

1. The State of Tripura Represented by the Chief Secretary, Government of Tripura, Agartala, New Civil Secretariat, P.O-Kunjaban, P.S- New Capital Complex (NCC), District- West Tripura, PIN-799006

2. The Principal Secretary Finance Department, Government of Tripura, Agartala, New Civil Secretariat, PO- Kunjaban, P.S- New Capital Complex (NCC), District- West Tripura, Pin code-799006 Page - 2 of 17

3. The Commissioner of Taxes Government of Tripura, P.N. Complex, Gurkhabasti, PO- Kunjaban, P.S- New Capital Complex (NCC), Agartala, District- West Tripura, Pin Code- 799006

4. The Superintendent of Taxes Government OF Tripura, Charge-Udaipur, P.O- R.K.Pur, P.S- R.K. Pur, District- Gomati Tripura Pin code- 799120 ............ Respondent(s).

W.P(C) No.851/2020

1. SHRI PANKAJ BEHARI SAHA S/o Late Anil Chandra Saha, and carrying on the business of bonded warehouse in the name and style of Udaipur Bonded Ware House at Brahmabari, near National Highway, P.O- R. K. Pur, P.S- R.K. Pur, Pin-799120 ............... Petitioner(s).

Vrs.

1. The State of Tripura Represented by the Chief Secretary, Government of Tripura, Agartala, New Civil Secretariat, P.O-Kunjaban, P.S- New Capital Complex (NCC), District- West Tripura, PIN-799006

2. The Principal Secretary Finance Department, Government of Tripura, Agartala, New Civil Secretariat, PO- Kunjaban, P.S- New Capital Complex (NCC), District- West Tripura, Pin code-799006

3. The Commissioner of Taxes Government of Tripura, P.N. Complex, Gurkhabasti, PO- Kunjaban, P.S- New Capital Complex (NCC), Agartala, District- West Tripura, Pin Code- 799006

4. The Superintendent of Taxes Government OF Tripura, Charge-Udaipur, P.O- R.K.Pur, P.S- R.K. Pur, District- Gomati Tripura Pin code- 799120 ............ Respondent(s).

BEFORE HON‟BLE THE CHIEF JUSTICE MR. AKIL KURESHI HON‟BLE MR. JUSTICE S. G. CHATTOPADHYAY For Petitioner(s) : Mr. A. K. Saraf, Sr. Advocate.

Mr. Biplabendu Roy, Advocate.

For Respondent(s) : Mr. D. Bhattacharjee, Govt. Advocate.

             Date of hearing and
             Judgment & Order               :   8th February, 2021.
             Whether fit for reporting      : YES
                                  Page - 3 of 17

                       JUDGMENT AND ORDER(Oral)

(Akil Kureshi, CJ)

These petitions arise in similar background. They have been heard

together and would be disposed of by this common judgment. The petitioner

who is common in all these three petitions has challenged orders passed by the

Superintendent of Taxes dated 14.10.2020 under Section 25 of the Tripura Value

Added Tax Act, 2004 (TVAT Act, for short), raising unpaid tax demands from

the petitioner. The petitioner has also challenged notices dated 05.11.2020 and

18.11.2020 seeking recovery of such tax. The petitioner has also further

challenged orders dated 10.12.2020 again passed by the said authority imposing

penalty on the petitioner in terms of Section 75A of the TVAT Act.

[2] These petitions relate to the assessment period 2010-11, 2011-12

and 2012-13. For further details, we may refer to the facts in W.P(C) No.847 of

2020 which are as under:

The petitioner is an individual engaged in the business of

providing bonded ware houses in the name and style of Udaipur Bonded

Warehouse situated within the State of Tripura. The petitioner is a registered

dealer under the TVAT Act. For the assessment period 2011-12 the petitioner

had filed a return of its taxable turnover in terms of the TVAT Act and according

to the petitioner, necessary tax was also paid as per such declared taxable

turnover. The revenue however, was not entirely satisfied about the taxes paid by

the petitioner for the said assessment period. The Superintendent of Taxes

therefore, had issued a notice dated 11.02.2018 under Section 27 (2) of the

TVAT Act calling upon the petitioner to show cause why short payment of tax Page - 4 of 17

should not be recovered with interest. The petitioner opposed such proposal by

making a representation on 26.02.2019 in which he contended that the

assessment of the return was barred by limitation and that since no notice under

Section 24 of the TVAT Act was issued, no action under Section 27 of the Act

can be taken. When the Superintendent of Taxes refused to drop the show cause

notice, the petitioner approached this Court by filing WP(C) No.1109 of 2019

and connected petitions. These petitions were disposed of by a judgment dated

20th January, 2020 in which the Court after referring to various provisions

contained in TVAT Act, and particularly Sections 24, 25 and 27 thereof, held

and observed as under:

"15. All these provisions noted above contained in Chapter V of the TVAT Act pertaining to returns and assessment thus provide for detailed procedure for requiring a dealer to file periodic returns of his turnover, for audit assessment of such returns if so desired and also to address the issues of turnover escaping assessments. The relevant provisions of Sections 24 and 27 need to be looked from the angle of the scheme contained in Chapter V of the TVAT Act concerning returns and assessments.

16. Sub-section (1) of Section 24 requires every registered dealer to furnish return in such form by such due dates as may be prescribed. A registered dealer thus is obliged to file his return as mandated under sub-section (1) of Section 24 of the TVAT Act. Subsection (2) of Section 24 on the other hand, refers to a case of a dealer in respect to whom the Commissioner has reason to believe that his turnover of sales has exceeded the taxable limit, the Commissioner would serve a notice in the prescribed manner requiring such dealer to furnish return as if he was a registered dealer. Sub-section (2) of Section 24 thus covers a case of a person who may not be a registered dealer but in whose case the Commissioner has reason to believe that his turnover of sales has exceeded the taxable limit.

17. Section 27 of the TVAT Act pertains to scrutiny returns. Sub-section (1) of Section 27 provides that every return in relation to any tax period furnished by a registered dealer to whom notice has been issued by the Commissioner under Section 24 shall be subject to scrutiny by assessing authority to verify the correctness of calculation, application of correct rate of tax and interest and input tax credit claimed therein and full payment of tax and interest payable by the dealer during such period. Sub-section (2) of Section 27 provides that if mistake is detected as a result of such scrutiny, the Commissioner of Taxes shall serve a notice in prescribed Page - 5 of 17

form on the dealer to make payment of the extra amount of tax along with interest as per the provisions of the Act if payable.

18. Section 27 of the TVAT Act thus is not a provision for full assessment of the return filed in response to the notice issued by the Commissioner under sub-section (2) of Section 24 of the TVAT Act. It is merely for the purpose of verifying the correctness of necessary details furnished in such return such as calculation, application of rate of tax, interest etc. as well as payment of tax and interest by such dealer. If any error is detected in any of these aspects, under subsection (2) of Section 27, the Commissioner would issue a notice of recovery demanding payment of extra tax with interest. These powers are essentially in the nature of prima facie adjustments.

19. The provisions contained in Section 27 of the TVAT Act are vastly different from the provisions for self-assessment under Section 29, provisional assessment under Section 30 and most significantly, the audit assessment under Section 31 of the TVAT Act.

20. The special powers can be exercised only in relation to a dealer to whom notice has been issued by the Commissioner under Section 24 of the Act. Section 24 refers to issuance of notice only under sub-section (2) of the Act. Necessarily, therefore, unless and until such notice is issued in terms of sub- section (2) of Section 24 of the TVAT Act, the TVAT authorities cannot invoke the powers under Section 27 of the TVAT Act. Any other view would defeat the very scheme of the said Chapter providing for audit assessment and limitation for completing in such assessment as provided under Section 33 of the Act. The respondent authorities cannot be allowed to circumvent the limitation provision for completing audit assessment by permitting resort to the powers of summary adjustments under Section 27 which are peculiar in nature and are available only in case where notice under sub-section (2) of Section 24 of the Act has been issued to a dealer.

21. In the result, impugned orders under Section 27 of the TVAT Act are set aside. Any demand notices consequent to such orders shall also stand invalidated."

[3] After the said judgment of this Court, the department initiated

fresh proceedings against the petitioner for the same period and issued a show

cause notice dated 23.07.2020. The petitioner replied to the show cause notice

under communication dated 3rd August, 2020. The Superintendent of Taxes in

order to correct certain technical aspect withdrew the show cause notice and

issued a fresh show cause notice on 27th August, 2020 in which he stated as

under:

Page - 6 of 17

"And whereas, having paid VAT on taxable sales of Rs.4,30,45,451/-, Rs. 7,91,99,189/- & Rs.10,61,17,717/- as per declaration at Sl. No. (iv)(c) of Table 9 of the returns, VAT to the tune of Rs.5,38,383/-, Rs.8,05,845/- & Rs. 12,64,761/- was paid in short by the dealer during the year 2010-11,2011-12& 2012-13 and thus, the dealer failed to pay the full amount of due VAT according to the returns furnished;

And whereas, in view of the above, the dealer is liable to pay balance due VAT amounting to Rs.5,38,383/-, Rs.8,05,845/- & Rs. 12,64,761/- as per the returns furnished for the year 2010-11, 2011-12 & 2012 -13 respectively;

And whereas, interest at the rate of one and half percent per month from the date the tax payable had become due to the date of its payment or to the date of order of assessment, whichever is earlier. As per the returns furnished for the year 2010-11, 2011-12 & 2012 -13 respectively;

Now, therefore, the dealer or any person authorized by the dealer is hereby directed to appear before the Superintendent of Taxes, Udaipur, Gomati District at his office of the Superintendent of Taxes at 1st floor, O/O the Superintendent of Excise Office Building, Dakbanglow Road, Udaipur, Gomati Tripura on 11.09.2020 at 11.00 AM along with relevant books of account & documents and any other evidence, for the material year(s), on which the dealer may rely to show cause the following grounds:-

(i) As to why balance due VAT amounting to Rs.5,38,383/-, Rs.8,05,845/- & Rs. 12,64,761/- shall not be payable by the dealer as per total sales declared in the returns furnished for the year 2010-11,2011-12 & 2012-13 respectively;

(ii) As to why interest at the rate of one and half percent per month from the date the tax payable had become due to the date of its payment or to the date of order of assessment, whichever is earlier. For the year 2010-11,2011-12 & 2012-13 shall not be payable by the dealer under sub-section(1) of Section 25 of the TVAT Act, 2004 and****"

[4] The petitioner filed a detailed reply to the said show cause notice

under a communication dated 31.08.2020 raising several legal contentions. The

petitioner pointed out that previously the department had initiated proceeding

under Section 27 of the TVAT Act which the High Court had terminated. In the

present case, notice is issued under Section 25 of the Act which is also wholly

impermissible and would amount to circumventing the limitation provisions

since all the assessments in the present case have long become time barred. With Page - 7 of 17

respect to contentious issue of short payment of tax, the petitioner contended as

under:

"18. That, it‟s reiterated that the applicant-dealer is liable to deposit sales tax/VAT amounting to Rs.4,26,28,570/- for the financial periods 2010-11 but deposited amounting to Rs.4,31,06,304.00 against the sale proceeds amounting to Rs.14,42,94,836.00 after allowing discounts amounting to Rs.23,88,657.00. Hence, the applicant-dealer is deposited excess sales tax/VAT amounting to Rs.4,77,734.00(Taxable Sale proceeds Rs.14,42,94,836.00 - Discount Rs.23,88,657.00 = Rs.14,19,06,179.00 + Excise Duty Rs. 7,12,36,669.00 =Rs.21,31,42,848.00). Accordingly, sales tax/VT was/is Payable @ 20% amounting to Rs.4,26,28,570.00 but Rs. 4,31,06,304.00 was deposited. Hence, the applicant-dealer has already deposited excess amount of sales tax/VAT amounting to Rs.4,77,734.00 yet the applicant-dealer has been harassing continuously by issuing Notices and passing orders and dropping the same which the action of the Ld. Assessing Authority is surprised one and shows its such ill action as like as megalomaniac. The said ill action of the Ld. Assessing Authority, Charge-Udaipur violates the Article 19(1)(g) of the Constitution of India as well as the violation of the Judgment & order dated 20.01.2020 and 27.01.2020 passed in W.P(c) 1109 if 2019, 1111 of 2019, 1105 of 2019 (Pankaj Behari Saha - Vs- The State of Tripura & Ors.) respectively.

20. That, it‟s humbly submitted that the order for withdrawal/dropping of the Notice dated 27.08.2020 must be reached to the applicant-dealer within 2(two) days from the date of receipt of this application. Otherwise the applicant- dealer must seek appropriate relief before the competent court of law against the ill action taken against the applicant-dealer without jurisdiction.

Though the matter of the case is a fiscal one yet the Ld. Assessing Authority does not have any prim facie case n or is he entitled to assess the applicant-dealer after expiry of limitation and it‟s also clear that both the assessing authority and the A.G. Audit made computation with wrong notion and without deducting the „DISCOUNT‟ given to the buyers by the applicant-dealer. Hence, it‟s prayed before the Ld. Assessing authority to withdraw/drop the Notice dated 27.08.2020 within 2(two) days from the date of receipt of this application positively. Otherwise the applicant-dealer seeks appropriate relief before the competent court with contempt of Court against the Ld. Assessing Authority including the power delegated authorities."

[5] Undeterred by these oppositions of the petitioner, the

Superintendent of Taxes passed the impugned order dated 14.10.2020 in Page - 8 of 17

purported exercise of powers under Section 25 of the TVAT Act, relevant

portion of which reads as under:

"10.5. The proceeding under Section 25 of the TVAT Act, 2004 is detection of return default/defective return by making less payment of tax according to the declared total sales made by the dealer in the returns furnished for the periods 2010-11, 2011-12 & 2012-13 and the difference amount of sales detected and balance tax due arrived at as mentioned in the Notice dated 27.08.2020 issued under Section 25 of the TVAT Act, 2004 is at all based on the total sales declared by the dealer in the returns furnished in Form X of the TVAT Rules, 2005 and the difference amount of sales and balance tax due is not at all determined to the best of judgment of the Superintendent of Taxes.

10.6 The dealer totally failed to produce any documentary evidence with regard to the discount amounting to Rs.23,88,657.00, Rs.39,96,739.00 & Rs.63,23,680.00 as claimed to have been allowed by the dealer to its bonafide buyers under Section 2(26) of the TVAT Act, 2004.

10.7 As per Section 2(26) of the TVAT Act, 2004, "Sales Price" means the amount of valuable consideration received or receivable by a dealer for the sale of any goods less any sum allowed as cash discount, according to the practice normally prevailing in the trade;

It is an undisputed as well as established fact that the dealer declared the total sales at Sl. No.(i) in Table 9 of the return after deducting the amount/sum towards discount allowed by him to its buyers under Section 2(26) of the TVAT Act, 2004, which resulted less payment of tax mounting to Rs.5,38,383/-, Rs.8,05,845/- & Rs. 12,64,761/- according to the returns furnished for the periods 2010-2011, 2011-12 and 2012- 13 respectively, which is liable to be paid by the dealer along with applicable interest at the rate of one and half percent per month under Section 25(1) of the TVAT Act, 2004.

11. In view of the foregoing discussed paras, after careful examination of the facts and circumstances covering all aspects including written submissions of the dealer, I am not inclined to accept the dealer‟s submissions and justifications put forwarded by him and I am satisfied to take the following decision.

Decision

12. The dealer failed to pay full amount of tax according to the returns furnished by him for the periods 2010-11, 2011-12 and 2012-13 as required under Section 24(4) of the TVAT Act, 2004.

13. The dealer paid less tax/VAT amounting to Rs.5,38,383/-, Rs.8,05,845/- & Rs. 12,64,761/- for the periods 2010-11, 2011-12 and 2012-13 respectively, which is liable to be paid by the dealer in accordance with the declaration f total sales made by him at Sl. No.(i) in Table 9 of the returns furnished by the dealer for the said periods in question.

Page - 9 of 17

14. The dealer is also liable to pay interest at the rate f one and half percent per month under Section 25(1) of the TVAT Act, 2004, from the date of tax payable had become due to the date of payment, on the amount of balance tax due or less paid Rs.5,38,383/-, Rs.8,05,845/- & Rs. 12,64,761/- for the periods 2010-11, 2011-12 and 2012-13 respectively.****"

[6] Appearing for the petitioner learned Sr. counsel, Sri Saraf

submitted that the action of the Superintendent of Taxes is wholly without

authority. Section 25 of the TVAT Act would not permit the Superintendent of

Taxes to undertake a details scrutiny of the return filed by the petitioner. Such

scrutiny assessment can be made only under Sections 31 or 34 of the TVAT Act,

both of which come with time limits. In the present case, these assessments have

become time barred. The authority in the guise of exercise of powers under

Section 25 is seeking to circumvent such time barring provisions. Accordingly,

the impugned order is bad in law. Consequently, the demand notices and the

penalty orders may also be set aside.

[7] On the other hand, learned Govt. Advocate opposed the petitions

contending that the provision of Section 25 of TVAT Act are completely

independent of the assessment provisions and in which no limitation has been

prescribed by the statute and none therefore, can be read into it. The

Superintendent of Taxes found that the petitioner had made a misdeclaration

with respect to the taxable turnover since the petitioner excluded the discount

stated to have been given to the dealer from the taxable turnover. Firstly, the

factum of such discount was not established and secondly, even otherwise the

question whether such discount would form part of the taxable turnover or not

was a disputed question. The declarations made in the return filed by the Page - 10 of 17

petitioner therefore, were inaccurate. When these aspects came to the notice of

the Superintendent of Taxes, he raised the demands after hearing the petitioner,

which needs no modifications. If the petitioner has any dispute about the

correctness of the order, he must file an appeal as is provided under the Act.

[8] In the present petitions, we are concerned with the jurisdictional

aspect of the powers exercise by the Superintendent of Taxes. There are no

disputed questions to be decided and we have proceed on admitted facts. When

in such background jurisdictional question arises, it would not be necessary to

relegate the petitioner to appellate remedy.

[9] The relevant facts which are not in dispute may be summarized

thus:

(i) The petitioner had filed the returns for the period of 2010-

11, 2022-12 and 2012-13;

(ii) On the basis of declarations of taxable turnover made by the

petitioner in such returns, he had also paid the taxes at applicable

rates;

(iii) At no stage, the department either undertook audit

assessment of such return or undertook assessment for turnover

escaping assessment;

(iv) The first attempt on part of the department to include the

discount component in the taxable turnover and to demand taxes

on the basis of such higher turnover was by issuance of a notice

under Section 27 of the TVAT Act which attempt was terminated Page - 11 of 17

by the High Court in the judgment dated 20.01.2020. It was held

that since no notice under Section 24 of the TVAT Act was issued,

powers under section 27 of the Act cannot be exercised;

(v) After this judgment was delivered, the Superintendent of

Taxes issued notice under Section 25 of the TVAT Act and after

hearing the petitioner proceeded to pass order of raising tax

demands and also imposing penalty. The question is, was the

Superintendent of Taxes within his right to do so. To answer this

question, we may refer to certain provisions contained in TVAT

Act.

[10] Chapter-V of the TVAT Act pertains to returns and assessment.

Section 24 contained in the said chapter pertains to periodical returns and

payment of tax. Sub-section (1) of Section 24 provides that every registered

dealer shall furnish return in such forms for such period, by such dates and to

such authority as may be prescribed. Sub-section (2) of Section 24 provides that

if the Commissioner has reason to believe that the turnover of sales of any dealer

has exceeded the taxable limit as provided in sub-section (3) of Section 3, he

may by notice served in the prescribed manner, require such dealer to furnish

return as if he were a registered dealer. However, no tax would be payable by

such a person unless his taxable turnover exceeds the taxable limit. Sub-section

(4) of Section 24 provides that every dealer required to file return under sub-

section (1) or sub-section (2) shall pay the full amount of tax according to the

return or the differential tax according to the revised return, if so filed, into the

Government Treasury in such manner as may be prescribed.

Page - 12 of 17

[11] Section 24 thus casts a duty on a registered dealer to furnish the

return and to pay tax as per the declarations made in such return. If a dealer has

taxable turnover but is not registered, the Commissioner may require him under

Sub-section (2) of Section 24 to file the return as if he is a registered dealer.

[12] Section 25 of the TVAT Act pertains to return defaults. Relevant

portion of which reads as under:

"25. Return defaults:

(1) If a dealer required to file return under sub-section (1) or sub-section (2) of section 24 -

(a) fails without sufficient cause to pay the amount of tax due as per the return for any tax period; or

(b) furnishes a revised return under sub-section (3) of section 24 showing a higher amount of tax to be due than was shown by him in the original return; or

(c) fails to furnish return;

Such dealer shall be liable to pay interest in respect of -

                     (i)       the tax payable by him according to the
                     return, or
                     (ii)      the difference of the amount of tax according
                     to the revised return; or
                     (iii)     the tax payable for the period for which he
                     has failed to furnish return;

at the rate of one and half percent per month from the date the tax payable had become due to the date of its payment or to the date of order of assessment, whichever is earlier.

(3) If a registered dealer, without sufficient cause, fails to pay the amount of tax due and interest along with return or revised return in accordance with the provisions of sub-section (1), the Commissioner may, after giving the dealer reasonable opportunity of being heard, direct him to pay in addition to the tax and interest payable by him a penalty, not exceeding one and half times of the tax due but which shall not be less than 10% of that amount."

[13] Section 27 of the TVAT Act pertains to scrutiny of returns. Sub-

section (1) of Section 27 provides that every return in relation to any tax period

furnished by a registered dealer in which notice has been issued by the Page - 13 of 17

Commissioner under Section 24 shall be subject to scrutiny by the Assessing

Authority to verify the correctness of calculation, application of correct rate of

tax and interest and input tax credit claimed therein and full payment of tax and

interest payable by the dealer during such period. As per sub-section (2) of

Section 27 if any mistake is detected as a result of such scrutiny the

Commissioner shall serve a notice to the dealer to make payment of the extra

amount with interest.

[14] Section 29 of the TVAT Act pertains to self assessment and

Section 30 pertains to provisional assessment. Section 31 of the TVAT Act

pertains to audit assessment and authorizes the Commissioner to carry out

scrutiny assessment where a dealer has failed to furnish the return or his case is

selected for audit assessment or the Commissioner is not satisfied with the

correctness of any return filed under Section 24 or the bonafides of any claim of

exemption, deduction, concession, input tax credit or genuineness of any

declaration or the Commissioner has reason to believe that detailed scrutiny of

the case is necessary. Under such circumstances, the Commissioner would carry

out a detailed scrutiny of the assessment of the petitioner and in terms of sub-

section (5) of Section 31, may also impose penalty under circumstances

mentioned therein.

[15] Section 32 of the TVAT Act pertains to assessment of dealer who

fails to get himself registered. Section 33 of the TVAT Act provides that no

assessment under Section 31 and 32 shall be made after expiry of five years from

the end of the tax period to which the assessment relates. Section 34 pertains to Page - 14 of 17

turnover escaping assessment. As per sub-section (1) of Section 34 where after a

dealer is assessed under Section 29 or Section 30, the Commissioner has reason

to believe that whole or any part of the turnover for any period has escaped

assessment or has been under assessed or has been assessed at the lower rate or

been wrongly allowed any deduction or allowed any wrong credit, it is open for

the Commissioner to proceed to assess amount of tax due from the dealer. Here

also sub-section (2) of Section 34 provides that no order of assessment shall be

made under sub-section (1) after expiry of five years from the end of the year in

respect of which or part of which the tax is assessable.

[16] Chapter V of the TVAT Act thus provides for a complete

mechanism for filing of the returns, their assessments and provisions for

limitation for exercising such powers of assessment. Once a dealer files a return,

it may be subjected to different kinds of treatment depending on the situation

and the treatment that the Assessing Officer chooses to accord to it. He may

either chose to scrutinize the return under Section 27 if conditions contained

therein are satisfied or the return may be selected for audit assessment in which

case, the Assessing Officer can scrutinize the return of the assessee and make

necessary adjustments as found appropriate. If there is a case of turnover

escaping assessment or been under assessed or assessed at a lower rate or grant

of wrong and excess deduction of credit, the assessing authority can resort to the

powers contained under Section 34 of the TVAT Act. However, one significant

aspect of the matter is the power of audit assessment as well as assessment in

case of turnover escaping assessment, both can be exercised only within the

period of limitation prescribed in relevant section. We have noticed that as per Page - 15 of 17

Section 33 of the TVAT Act no assessment under Section 31 i.e. audit

assessment can be made after expiry of five years from the end of the tax period

in question likewise as per sub-section (2) of Section 34 powers of assessing

turnover escaping assessment cannot be exercised after expiry of five years from

the end of the year in respect of which or part of which the tax is assessable.

[17] It was in this context, while examining the previous exercise of

powers by the Assessing Officer under Section 27 of the TVAT Act, this Court

had made certain observations, relevant portion of which we have reproduced

earlier. Noticing that once the assessing authority had missed the time limit for

carrying out audit assessment or for bringing to tax turnover escaping

assessment, the powers under Section 27 could not be exercised that too without

satisfying the pre condition of a notice under Section 24 having been issued, the

action was quashed. It was at this stage that the Assessing Officer once again

tried to bring to tax the same element of petitioner's turnover which according to

him had escaped assessment. The dispute between the petitioner and the

department with respect to the correct assessment is that according to the

petitioner the discounts offered by the petitioner to his dealers were correctly not

included in the taxable turnover, the Assessing Officer however, holds the belief

that such discounts have to be verified and in any case should have formed part

of the taxable turn over. In the present case, we are not required to and therefore,

not inclined to go into the correctness of the rival version. But proceed on the

basis that there is a bonafide genuine dispute between the assessee and the

department with respect to an element of sale proceed whether would form part Page - 16 of 17

of the taxable turnover or not. Such a dispute can be resolved only through the

assessment in terms of various provisions contained in Chapter-V. The same

under any circumstances cannot be a subject matter of adjustments under Section

25 of the Act.

[18] We may recall, under sub-section (1) of Section 25 the Assessing

Officer can charge tax from a dealer at a prescribed rate if the dealer fails

without sufficient cause to pay amount of tax as due as per the return or has

furnished a revised return showing higher amount of tax as compared to the

original return or has failed to furnish return. Obviously, in the present case the

department does not argue that the case of the petitioner falls in the later of the

two clauses of sub-section (1) of Section 25 of the TVAT Act. Even according to

the department the case of the petitioner falls in Clause (a) namely that the dealer

has failed without sufficient cause to pay the amount of tax due as per the return.

[19] There is a clear misconception on part of the Assessing Officer as

to his powers under sub-section (1) of Section 25 of the TVAT Act. Clause (a) of

sub-section (1) of Section 25 can be activated when a dealer has not paid the tax

at prescribed rate without sufficient cause which tax liability emerges from the

return filed by him. If there is any legal dispute about the declaration of the

taxable turnover or any other element of any of the claims made by the assessee

in the return, the same cannot be a subject matter of a demand by the Assessing

Officer under Clause (a) of sub-section (1) of Section 25 of the TVAT Act. Any

dispute as to correct taxable turnover, any claim of exemption or deduction or

any other disputed item under the return filed by a registered dealer, has to be Page - 17 of 17

first adjudicated by the Assessing Officer in the assessment proceedings. Clause

(a) of sub-section (1) of Section 25 cannot be termed into an assessment which

in the present case the Assessing Officer has done. According to him, the

petitioner could not have excluded the discounts passed on to the dealers from

his taxable turnover and to that extent the assessee had declared turnover less

than the actual turnover. Even if the Assessing Officer is correct in so

contending, it is not under Section 25(1)(a) of the Act that he can bring such

turnover to tax. Allowing him to do so, would not only be expanding the

boundaries of the powers under sub-section (1) of Section 25 of the TVAT Act

but also overriding the limitation provisions contained in the said chapter.

[20] In the result, the impugned orders of tax demands raised by the

Assessing Officer under Section 25 of the TVAT Act are set aside.

Consequently, the demand notices are also quashed. The attachment or

attachments on the petitioner's bank accounts are lifted. The penalty orders are

also quashed.

[21] All the petitions disposed of accordingly. Pending application(s),

if any, also stands disposed of.

   (S. G. CHATTOPADHYAY),J.                          (AKIL KURESHI),CJ.




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