In Kishan Lal vs. Additional Commissioner of Commercial Tax, the Chhattisgarh High Court held that the show cause notices issued after the expiry of three calendar years for the provincial tax and entry tax for Suo motu revision of original assessment order(s) are barred by limitation.
Several writ appeals & petitions were filed before the Chhattisgarh High Court by the assessee
challenging the revisional order passed under Section 49 (3) of the Chhattisgarh Value Added Tax Act, 2005 (VAT Act) imposing liability of payment of Value Added Tax & Entry Tax for the assessment years 2006-07, 2007-08 & 2008-09. The Petitions challenge the issuance of show cause notice dated 14-7-2015 on the ground that the very initiation of suo motu revisional jurisdiction is bad in law.
The Counsel for the petitioner argued that the order should have been passed within one year from the date of show cause notice i.e. 14-7-2015, but the same having been passed on 28-11-2016 i.e. beyond the period of one year from the date of initiation of the proceeding, it deserved to be set aside. However, the Court held that the order should be passed within one year from the date of initiation of proceeding, which in this case was the date on which he decides to issue notice as contemplated in Rule 61 of the Chhattisgarh Valued Added Tax Rules, 2006 (Rules, 2006) and that the mandate of passing final order within one calendar year is mandatory.
The Court pointed out that the word ‘one calendar year’ had been construed to mean the calendar year calculated from the first of January immediately following the calendar year in which the assessment period expired. Thus, the bench held that the period of one calendar year would commence from 1-1-2016 and the order having been passed within the one calendar year i.e. before 31-12-2016, as the order has actually been passed on 28-11-2016, it was within time allowed for passing the order as contemplated under Section 49 (3) of the VAT Act.
Regarding the validity of the show cause notices, the bench comprising of Justice Prashant Kumar Mishra and Justice Ram Prasanna Sharma noted that the proviso (a) to sub-section (3) of Section 49 of the VAT Act an embargo had been created for the purpose that no proceeding initiating suo motu revision under Section 49 (3) should be initiated after the expiry of three calendar years from the date of the order sought to be revised.
“Since the orders sought to be revised, as stated in the show cause notices, were passed on 1-5-2009, 1-5-2010 and 22-1-2008, they were clearly beyond the prescribed time period of three years. When once the period of limitation expires, the mandate against being subject to suo motu revision sets in and the right to embark upon and invoke Section 49 (3) get extinguished. we have no hesitation to hold that the show cause notices dated 14-7-2015 for the provincial tax and entry tax for suo motu revision of original assessment order(s) passed on 1-5-2009, 1-5-2010 and 22-1-2008 were barred by limitation, as the same were issued after three calendar years, therefore, the show cause notices deserve to be and are hereby quashed.” observed the Court.
As a consequence of quashing the show cause notices for provincial tax and entry tax for the assessment year 2006-07, 2007-08 and 2008-09, the final revisional order passed under Section 49 (3) of the VAT Act became illegal. Thus, the final orders were also quashed.
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