State of Haryana vs Haryana State Warehousing Corporation and Another

Rajive Bhalla, J.—CM No. 30668-CII of 2012--Allowed as prayed. CM No. 30669-CII of 2022.--Prayer in this application is for condonation of delay of 139 days in filing the appeal.

Counsel for the appellant submits that delay in filing the appeal was occasioned by administrative exigencies, which involved, obtaining comments of the Assessing Officer, legal advice and then permission from the Principal Secretary to Government, Excise and Taxation Department, Haryana.

Counsel for the respondent has not filed any reply but has argued that administrative delays cannot be considered as sufficient cause for condonation of delay.

We have heard counsel for the parties, perused the averments in the application and are satisfied that administrative exigencies pleaded are sufficient to allow the application and condone delay in filing the appeal. Ordered accordingly.

VATAP No. 172 of 2012

The State of Haryana is before us impugning the legality of the order dated March 20, 2012 passed by the Haryana Tax Tribunal at Chandigarh (in short, "the Tribunal").

The facts, in brief, are that the assessment was finalised by the Excise and Taxation Officer-cum-Assessing Authority on March 15, 2007. A copy of the order was supplied to the Corporation on July 25, 2007. The Deputy Excise and Taxation Commissioner-cum-Revisional Authority, Rewari, vide order dated May 4, 2011, invoked the extended period of three years, provided by the second part of the second proviso to section 34 of the Haryana Value Added Tax Act, 2003 (in short, "the HVAT Act"), re-appraised the assessment order, on the basis of a High Court judgment in Food Corporation of India Vs. State of Punjab, raised an additional demand of Rs. 1,12,76,494, on account of sale of gunny bags. The respondent-corporation filed an appeal before the Tribunal, canvassing that, as the order was passed, after expiry of three years, provided by the first part of the second proviso to section 34 of the Act, the assessment is illegal. The learned Tribunal allowed the appeal, set aside the assessment order by holding that as Department always held the view that incidental charges from sale of gunny bags are part of turnover, it was not justified in invoking the extended period of limitation, for revising the assessment order.

Counsel for the State of Haryana submits that after expiry of the period of three years, prescribed for reassessment, by the second proviso to section 34(1) of the Act, the Commissioner is empowered by the second part of this proviso to invoke power conferred by section 34(1) of the Act if there is (i) a retrospective change in law; (ii) a decision of the Tribunal in a similar case; or (iii) a law is declared by the High Court or the Supreme Court. Thus, if any of the factors, referred to in the second part of second proviso to section 34(1) of the Act, exist, the Commissioner may exercise power to revise an assessment. The order passed by the Tribunal that as the Department always held the view that incidental charges are part of turnover, it was not justified in invoking the second part of second proviso to section 34(1) of the Act, is legally flawed. The second part of second proviso to section 34(1) of the Act, confers a power, independent of the limitation prescribed, for reassessment and therefore, exercise of power by the Commissioner, does not depend on an earlier view held by the Department. The fact that the Department''s view was upheld by the honourable High Court, is sufficient to validly invoke power under the second part of the second proviso.

Counsel for the respondents submits that the impugned order does not suffer from any error of jurisdiction or of law as should invite interference. The appellant held the view and passed orders directing inclusion of incidental charges from sale of gunny bags in the total turnover even before the High Court judgment and therefore, could not invoke the period beyond three years prescribed by the second part of the second proviso to section 34(1) of the Act. It is further argued that as the second part of the second proviso to section 34(1) of the Act, is in the nature of an exception, it has to be construed strictly.

We have heard counsel for the parties, perused the impugned order.

The question, in hand, relates to the nature of power conferred by the second part of the second proviso to section 34(1) of the Act. Section 34 of the Act reads as follows:

Revision.--(1) The Commissioner may, on his own motion, call for the record of any case pending before, or disposed of by, any taxing authority for the purposes of satisfying himself as to the legality or to the propriety of any proceeding or of any order made therein which is prejudicial to the interests of the State and may, after giving the persons concerned a reasonable opportunity of being heard, pass such order in relation thereto as he may think fit:

Provided that no order passed by a taxing authority shall be revised on an issue which on appeal or in any other proceeding from such order is pending before, or has been settled by, an appellate authority or the High Court or the Supreme Court, as the case may be:

Provided further that no order shall be revised after the expiry of a period of three years from the date of the supply of the copy of such order to the assessee except where the order is revised as a result of retrospective change in law or on the basis of a decision of the Tribunal in a similar case or on the basis of law declared by the High Court or the Supreme Court.

Section 34(1) of the Act confers plenary power, upon a Commissioner, to call for the record of any case pending before or disposed of by any taxing authority and satisfy himself as to the legality or propriety of such order or proceeding, insofar as it may be prejudicial to the interest of the State. The first part of second proviso, to section 34(1) of the Act, prohibits exercise of this power after expiry of three years, from the date of supply of a copy of such order, to the assessee. The second part of second proviso, to section 34(1) of the Act, however, provides that power u/s 34(1) of the Act may be exercised after expiry of the period of three years, in case of retrospective legislation, if an order is passed by the Tribunal, or an order is passed by the High Court or the Supreme Court of India.

Admittedly, reassessment was ordered after expiry of the period of three years by relying upon a judgment of the High Court in Food Corporation of India Vs. State of Punjab,

A perusal of the order passed by the Tribunal reveals that the order of reassessment has been set aside by holding as follows:

... It is not denied before us that the Revenue always held this view and had been assessing the cases by making incidental charges as part of turnover. Therefore, the learned revising authority cannot draw any assistance from the decision of the honourable High Court in FCI cases for overcoming the limitation. Section 34 of the HVAT Act deals with revision. The relevant part of the section reads, as under:--

...

It is fairly plain from reading of the above provision that under the second proviso to section 34(1) of the HVAT Act, the time-limitation for passing an order of revision is three years from the date of supply of the copy of the order to be revised and there are only three exceptions to this. These are (i) retrospective change in law, (ii) decision of the Tribunal in a similar case, and (iii) law declared by the High Court or the Supreme Court. That these are exceptions is quite evident. Even the proviso uses the word "except" before describing them. Exceptions mean that they would operate only when a case cannot be revised but for them. If a case can be revised without waiting for any of the exceptions to happen, then, the limitation shall be normal three years and it shall not be extended. In the present case, the learned Revising Authority had not to wait for the honourable Punjab and Haryana High Court to give its decision in Food Corporation of India Vs. State of Punjab, in order to enable him to revise the assessment order. He could have taken up the case in revision on the very day it was finalised by the Assessing Authority or at any time thereafter within the limitation of three years. Therefore, the case is not covered by the extended limit under the proviso and no assistance can be drawn from the order of the honourable High Court in Food Corporation of India Vs. State of Punjab, for extending the normal period of limitation of three years. In this view of the matter, we hold that the impugned order is hit by limitation and the same is, therefore, without jurisdiction, so quashed. This order shall not be construed as expressing any opinion on the question whether incidental charges and cost of gunny bags shall form part of the turnover of the appellant-Corporation or not.

With due deference to the opinion recorded by the learned Tribunal, we cannot but differ and have no hesitation in holding that the opinion so recorded is legally flawed.

Section 34(1) of the Act read along with the second proviso reveals that power to revise an assessment has to be exercised within three years from date of supply of a copy of the assessment order. The second part of the second proviso to section 34(1) of the Act, however, allows exercise of this power of revision beyond the period of three years, independent of the period of limitation provided by the first part of the second proviso and, therefore, cannot be read as an exception to the period of limitation of three years, prescribed by the first part of the second proviso. The power, so conferred can be exercised, after expiry of the period of three years on the occurrence of three separate events, namely, (i) a retrospective change in law; (ii) a decision of the Tribunal in a similar case; and (iii) a law declared by the High Court or the Supreme Court and is, therefore, neither qualified by any part of the limitation prescribed by the first proviso to section 34(1) of the Act nor is it in the nature of an exception. The power is independent and stands on its own two feet uninhibited or impeded by the first part of the proviso. This apart, the power so conferred is not dependent upon the Department having held a similar view before occurrence of any of the events referred to in the second part of the second proviso. The use of the word "except", does not suborn the power conferred by the second part of the second proviso to the period of limitation prescribed by the first part of the second proviso to section 34(1) of the Act. To hold otherwise, as held by the Tribunal, in our considered opinion, would violate legislative intent.

The finding recorded by the learned Tribunal that power of reassessment could not be invoked after expiry of three years as the Department was always of the view that incidental charges derived from sale of gunny bags form part of turnover, is based upon an incorrect interpretation of power conferred by the second part of the second proviso, to section 34(1) of the Act.

Admittedly, the order in Food Corporation of India Vs. State of Punjab, ) settled a controversy relating to incidental charges. The fact that the Department held a similar view or that similar orders were passed before the judgment in Food Corporation of India Vs. State of Punjab, is irrelevant. The controversy with respect to incidental charges was finally settled by the High Court and, therefore, entitled the Commissioner to exercise power to revise an assessment even after expiry of the period of three years. The Tribunal''s finding that as order could have been revised without waiting for the High Court, is based upon a misreading of the nature of power, conferred by the second part of the second proviso to section 34(1) of the Act. It would, therefore, be necessary to reiterate that power u/s 34(1) of the Act to revise an assessment order has to be exercised within three years but where there is, a change in law, a decision of a Tribunal in a similar case or a declaration of law by the High Court or the honourable Supreme Court of India the power may be exercised after expiry of the period of three years. The fact that the Department may have held a similar view, that has been upheld by the honourable Supreme Court or the High Court, shall not impede the exercise of this power. The power, however, has to be exercised within "reasonable time", which, depending upon the facts, would vary from case to case.

In view of what has been stated hereinabove, the appeal is allowed, the impugned order is set aside and the matter is remitted to the Tribunal, to decide the appeal on merits, afresh and in accordance with law. Parties are directed to appear before the Tribunal on October 10, 2013.