VAT Appeal No.10 of 2008 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. VAT Appeal No.10 of 2008 Date of decision: 1.10.2008 MOI Engineering Limited -----Appellant Vs. The State of Punjab and another -----Respondents CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE AJAY TEWARI Present Mr. KL Goyal, Advocate with Mr. Sandip Goyal, Advocate for the appellant. Ms.Sudeepti Sharma, AAG, Punjab for the respondents. JUDGMENT: 1. This appeal has been preferred by the assessee under section 68 of the Punjab Value Added Tax Act, 2005 (in short, ‘the 2005 Act’) against the order of the VAT Tribunal in Appeal No.515-517 of 2004-05 dated 6.9.2007, for the assessment year 1994-95. The assessment and other proceedings have taken place under the Punjab General Sales Tax Act, 1948 (in short, ‘the 1948 Act’) which was applicable prior to 1.4.2005. 1 VAT Appeal No.10 of 2008 2. In para 3 of the appeal, following substantial questions of law have been proposed:- “i) Whether on the facts and circumstances of the case, the impugned order (A-9) passed by the Tribunal in rectification proceedings on 6.9.2007, was beyond the scope of rectification jurisdiction under section 21A(2) of the PGST Act, 1948 and therefore without jurisdiction, hence liable to be set aside? ii) Whether the impugned order Annexure A-9 is beyond the prescribed period of limitation of 2 years, given in section 21A(2) of the Act and therefore without jurisdiction, hence liable to be quashed? iii) Whether on the facts and circumstances of the case the learned Tribunal was bound to adjudicate all the issues raised in original appeal which were not decided by the Tribunal while passing original order? iv) Whether the order passed by Assessing Authority is barred by limitation as prescribed under section 11 (3) as amended by notification dated 3.3.1998? v) Whether on the facts and circumstances of the case, the original order of assessment was time barred even under the unamended section 11(4) of the PGST Act, as no notice of best judgment assessment was ever given to the assessee before passing any order? 2 VAT Appeal No.10 of 2008 3. The appellant is a dealer registered under the provisions of the 1948 Act and 2005 Act and filed four quarterly returns for the assessment years 1994-95 and paid tax according to the returns. The assessing authority issued notice dated 24.10.1997 under section 11(2) of the 1948 Act and made assessment creating additional demand vide orders dated 29.4.2004. It was observed that the assessee failed to attend the proceedings and assessment could not be finalized earlier due to non-cooperation of the assessee. After fresh notice, Shri Rajiv Lumba, Advocate appeared and took adjournment. Thereafter, written objections were filed. The assessee refused to produce the account books on the ground that the assessing authority had no jurisdiction to frame assessment. The assessing authority rejected the objection as to jurisdiction on the strength of notification dated 28.9.1992 conferring powers of assessing authority on AETC (Inspection). It was observed that the conferment of the said power had already been upheld by the High Court in Devi Dass Gopal Krishan v. State of Punjab (1973) 31 STC 536. It was further observed that transfer under Rule 39-A of the case from ETO to AETC (Inspection) was valid. The plea of assessment being time barred was also rejected. It was observed that amendment was dated 3.3.1998 prescribing the time period of three years from the last date for furnishing the last return. The amendment was held to be 3 VAT Appeal No.10 of 2008 prospective which did not affect the earlier assessment years for which no time limit was laid down. The assessing authority created a demand of Rs.1,53,901/-, in addition to tax of Rs.3103/- paid by the assessee.The assessee preferred appeals which were dismissed. The appellate authority affirmed the view of the assessing authority that limitation prescribed under the Amending Act 12 of 1998 was not applicable to the present case which was for the assessment year 1994-95. Thereafter, the assessee preferred second appeal before the Tribunal. Main contention raised was that the orders of assessment were after the period of limitation prescribed for assessment and demand for additional tax was without jurisdiction. The Tribunal allowed the appeal vide order dated 8.7.2005. The Tribunal held that statutory period of three years laid down in the Amending Act was applicable and the assessment was time barred. Observations of the Tribunal are as under:- “4…The learned counsel for the State is unable to give any reasonable explanation for not completing the assessment within the statutory period of three years as per the latest amendment made in the law. Accordingly, the orders of the Appellate Authority as well as the Assessing Authority are set aside, the tax liability as per the GTO already deposited by the appellant shall be treated as final and the learned counsel for the appellant also agrees that he shall not claim any refund at any time.” 4 VAT Appeal No.10 of 2008 4. The revenue filed rectification application under section 21A(2) of the 1948 Act on 27.11.2006. It was submitted that the Act was amended on 3.3.1998 prescribing the period of limitation but the same could not apply in the case of assessment in question which was prior to the amendment. The amendment had to be treated as prospective in absence of the same being expressly or by necessary implication being retrospective. The revenue also filed identical application on 18.4.2007. First application was dismissed as not pressed on 27.8.2007 on the ground that another application had been filed and the second application was allowed vide order dated 6.9.2007 which has been impugned in the present writ petition. Therein, it was observed that since prior to amendment, no period was prescribed for framing assessment under section 11 (4) and period prescribed was under section 11(4) only to proceed to assess, the assessment was not barred by limitation. The assessing authority had already proceeded to assess by giving notice dated 24.10.1997. Amendment which came into force only on 20.4.1998 did not have retrospective effect. Matter was governed by old section 11(4) of the Act. Prayer on behalf of the assessee that in case, the order of the Tribunal was to be rectified, the matter should be decided afresh, was also rejected as being beyond the scope of rectification application. Reliance was placed on judgments of this Court in Emkay Industries v. State of 5 VAT Appeal No.10 of 2008 Punjab and others, (2005) 139 STC 57 and Khazan Chand Nathi Ram v. State of Haryana and others, (2004) 136 STC 261. 5. Inspite of opportunity given, no reply has been filed on behalf of the State. 6. We have heard learned counsel for the parties and perused the record. 7. Learned counsel for the appellant submitted that by virtue of amendment made in the year 1998, a period of three years was laid down for completing the assessment and even if the said period is taken to have commenced from the date of amendment, the same came to an end on 3.3.2001 while the order of assessment was beyond the period of six years from the date of amendment. The amendment was applicable to the present case which was pending on the date the amendment came into force. The provision being procedural was applicable to pending proceedings and its applicability did not depend on the date of filing of return or commencement of the lis. General principle of prospective application of amendment not applying to lis already commenced prior to amendment could not apply to a procedural provision. Provision introducing limitation was a procedural provision. Such a provision would apply to all pending proceedings. In any case, the period of three years prescribed in the amending provision can 6 VAT Appeal No.10 of 2008 apply from the date of coming into force of the amendment if not from the date of ending of the year of assessment and to that extent, the provision may be prospective and the same made in the year 2004 or thereafter could not be justified. In any case, the Tribunal having held the bar of limitation to be applicable, in rectification proceedings, the said order could not be set aside even if two views are possible with regard to the view already taken by the Tribunal. Even where no limitation was prescribed, assessments must be completed in reasonable time. 8. Learned counsel for the revenue/State submitted that under section 11 of the Act, no period of limitation having been prescribed, the impugned order of assessment passed on 29.4.2004 or other dates were valid orders of assessment. In respect of years of assessment preceding the amendment, the amendment could not be looked into. Learned counsel for the State referred to letter dated 22.8.2002 written by the assessee stating that the company was sick company and reference was pending before the BIFR. The company had sought various concessions including deferment of sales tax liability. It was submitted that limitation had to commence from the date of the said letter. 9. Before we proceed to deal with the questions proposed on behalf of the appellant, it will be appropriate to refer to 7 VAT Appeal No.10 of 2008 provisions of Section 11 of the Act before and after the amendment:- Before amendment After amendment 8 VAT Appeal No.10 of 2008 “11. Assessment of tax. – (1) If the Assessing Authority is satisfied without requiring the presence of dealer or the production by him of any evidence that the returns furnished in respect of any period are correct and complete, he shall assess the amount of tax due from the dealer on the basis of such returns. (2) If the Assessing Authority is not satisfied without requiring the presence of dealer who furnished the returns or production of evidence that the returns furnished in respect of any period are correct and complete, he shall serve on such dealer a notice in the prescribed manner requiring him, on a date and at place specified therein, either to attend in person or to produce or to cause to be produced any evidence on which such dealer may rely in support of such returns. (3) On the day specified in the notice or as soon afterwards as may be, the Assessing Authority shall, after hearing such evidence as the dealer may produce, and such other evidence as the Assessing Authority may require on specified points, assess the amount of tax due from the dealer. (4) If a dealer having furnished returns in respect of a period, fails to comply with the terms of notice issued under sub-section (2), the Assessing Authority shall within five years after the expiry of such period, proceed to assess to the best of his judgement the amount of the tax [ASSESSMENT OF TAX] “(1) If the Assessing Authority is satisfied without requiring the presence of dealer or the production by him of any evidence that the returns furnished in respect of any period are correct and complete, he shall pass an order of assessment on the basis of such returns within a period of three years from the last date prescribed for furnishing the last return in respect of such period. (2) If the Assessing Authority is not satisfied without requiring the presence of dealer who furnished the returns or production of evidence that the returns furnished in respect of any period are correct and complete, he shall serve on such dealer a notice in the prescribed manner requiring him, on a date and at place specified therein, either to attend in person or to produce or to cause to be produced any evidence on which such dealer may rely in support of such returns. (3) On the day specified in the notice or as soon afterwards as may be, the Assessing Authority shall, after hearing such evidence as the dealer may produce, and such other evidence as the Assessing Authority may require on specified points, pass an order of assessment within a period of three years from the last date prescribed for furnishing the last return in respect of any period. (4) If a dealer having furnished returns in respect of a period, fails to comply with the terms of notice issued under sub-section (2), the Assessing Authority shall, within a period of three years from the 1st date prescribed for furnishing the last return in respect of such period, pass an order of assessment to the best of his judgment. (5) If a dealer does not furnish returns in respect of any period by the last date 9 VAT Appeal No.10 of 2008 Re:Q.No.(i) 10. According to the learned counsel for the assessee, the impugned order was beyond the scope of rectification in view of law laid down by the Hon’ble Supreme Court in Deva Metal Powders P.Limited v. Commissioner, Trade Tax, UP, (2008) 10 RC 78 : (2008) 2 SCC 439 and T.S.Balaram, Income Tax Officer, Company Circle IV, Bombay v. Volkart Brothers and others, (1971) 82 ITR 50. 11. Learned counsel for the assessee also referred to judgments of the Hon’ble Supreme Court in Anand Gopal Sheorey v. The State of Bombay, AIR 1958 SC 915 and New India Insurance Co. Limited v. Smt.Shanti Misra, AIR 1976 SC 237 and judgments of this Court in CIT v. Mrs. Manjula Sood, (1997) 227 ITR 873, CIT, Patiala II v. Sadhu Ram, (1980) 127 ITR 517 and Haryana Iron and Steel Rolling Mills v. CIT, (1987) 164 ITR 779, which laid down that procedural law is retrospective and that limitation law is procedural law. 12. Learned counsel for the assessee has also relied on judgments of the Hon’ble Supreme Court in The State of Orissa Debaki Debi and others, AIR 1964 SC 1413, State of Gujarat v. Patel Raghav Natha and others, AIR 1969 SC 1297 and State of Punjab and others v. Bhatinda District Coop. Milk P.Union 10 VAT Appeal No.10 of 2008 Limited (2007) 10 VST 180 to submit that where no period was laid down, power should be exercised within reasonable time. 13. Learned counsel for the revenue/State submitted that rectification could be sought by the revenue also and rectification could be allowed if there was error apparent on the record. Subsequent contrary view of a higher Court could also be a ground for holding that the view of the Tribunal suffered from error apparent on the record. Reliance has been placed on judgments in PS Jain Motor Company (Pb) Pvt. Limited v. State of Punjab, (1992) 84 STC 177 (P&H), Mysore Cements Limited v. Deputy Commissioner of Commercial Taxes (AssessmentV) City Division II, Bangalore, (1994) 93 STC 464 (Karnataka) and Jagatjit Distilling and Allied Industries Limited v. the Assessing Authority, Kapurthala and others, (1978) 42 STC 233 (P&H). It was also submitted that it had been held by the Hon’ble Supreme Court in The State of Punjab and another v. Murlidhar Mahabir Parshad, (1968) 21 STC 29 that under the 1948 Act, once notice for assessment had been served, the assessment has to be treated to be within limitation. The Tribunal in its order dated 8.7.2005 having simply referred to the amended provisions, committed an error apparent on the face of record by observing that the assessment was barred by limitation. The Tribunal had not gone into the question whether the new 11 VAT Appeal No.10 of 2008 amendment was applicable or not. In the order of rectification, it was rightly held that new amendment did not apply. Reliance has also been placed on judgment of this Court in Emkay Industries (supra) holding that the amendment was applicable if notice for assessment was after the coming into force of the Act and not otherwise. 14. Scope of rectification is well known and has been subject matter of consideration by the Hon’ble Supreme Court, inter-alia, in Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale, AIR 1960 SC 137, Thungabhadra Industries Ltd. v. Govt. of A.P,AIR 1964 SC 1372, T.S. Balaram v. Volkart Bros., (1971) 2 SCC 526 : AIR 1971 SC 2204 and Deva Metal Powders P.Limited (supra). 15. Since judgment in Deva Metal Powders P.Limited (supra) is a recent one, we may refer to the observations in the said judgment. Referring to earlier judgments in T.S.Balaram and Satyanarayan, (supra),it was observed as under:- 10. This Court in Thungabhadra Industries Ltd. v. Govt. of A.P, AIR 1964 SC 1372, held as follows: “There is a distinction which is real, though it might not always be capable of exposition, between a mere erroneous decision and a decision which could be characterised as vitiated by ‘error 12 VAT Appeal No.10 of 2008 apparent’. A review is by no means an appeal in disguise whereby an erroneous decision is reheard and corrected, but lies only for patent error. Where without any elaborate argument one could point to the error and say here is a substantial point of law which stares one in the face, and there could reasonably be no two opinions entertained about it, a clear case of error apparent on the face of the record would be made out.” 11. “17. … an error apparent on the face of the record for acquiring jurisdiction to [effect rectification] must be such an error which may strike one on a mere looking at the record and would not require any long-drawn process of reasoning. The following observations in connection with an error apparent on the face of the record in Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale, AIR 1960 SC 137: ‘An error which has to be established by a long- drawn process of reasoning on points where there may conceivably be two opinions can hardly be said to be an error apparent on the face of the record. Where an alleged error is far from self- evident and if it can be established, it has to be established, by lengthy and complicated arguments, such an error cannot be cured by a writ of certiorari according to the rule governing the powers of the superior court to issue such a writ.’ 13. In our view rectification of an order does not mean obliteration of the order originally passed and 13 VAT Appeal No.10 of 2008 its substitution by a new order. What the Revenue intends to do in the present case is precisely the substitution of the order which according to us is not permissible under the provisions of Section 22 and, therefore, the High Court was not justified in holding that there was mistake apparent on the face of the record. In order to bring an application under Section 22, the mistake must be “apparent” from the record. Section 22 does not enable an order to be reversed by revision or by review, but permits only some error which is apparent on the face of the record to be corrected. Where an error is far from self-evident, it ceases to be an apparent error. It is, no doubt, true that a mistake capable of being rectified under Section 22 is not confined to clerical or arithmetical mistake. On the other hand, it does not cover any mistake which may be discovered by a complicated process of investigation, argument or proof.” 16. In the present case, the Tribunal held that the assessment was barred by limitation without going into the question whether amendment introduced on 3.3.1998 was applicable to proceedings already pending for which notice for assessment had already been given. The Tribunal held that this was error apparent as the amendment did not extinguish the period of limitation still available for the pending assessments. View of the Tribunal is based on a judgment of this Court in Emkay 14 VAT Appeal No.10 of 2008 Industries (supra) which is directly on the point. Order of the Tribunal was, thus, clearly within the scope of rectification. The view of the Tribunal is also supported by judgment of the Hon’ble Supreme Court in Murlidhar Mahabir Parshad (supra). It is well settled that pending proceedings which are initiated within applicable limitation, do not stand extinguished unless it is expressly so provided under the new law nor closed proceedings are revived. 17. In Smt.Shanti Misra (supra), the Hon’ble Supreme Court observed:- “9…..Amendment of the law of limitation could not destroy the plaintiff’s right of action which was in existence when the Act came into force. We are conscious of the distinction which was sought to be made in the application of these principles. It was said that the right could not be destroyed but recourse to suit would be available under the old law of limitation. We, however, think that giving retrospective effect to the change of law in relation to the forum, in the context of the object of the change, is imperative. That being so the principles aforesaid for overcoming the bar of limitation will be applicable.” 18. The position has been summed up as under in ‘Principles of Statutory Interpretation’ by Justice G.P.Singh, Tenth Edition:- 15 VAT Appeal No.10 of 2008 “…Statutes of Limitation are thus retrospective in so far as they apply to all legal proceedings brought after their operation for enforcing causes of action accrued earlier, but they are prospective in the sense that they neither have the effect of reviving a right of action which is already barred on the date of their coming into operation, nor do they have the effect of extinguishing a right of action subsisting on that date. But a statute may, expressly or impliedly by retrospectively extending limitation, revive a barred claim….” 19. In view of above settled legal position, we are of the view that the assessment was not barred by limitation. In Murlidhar Mahabir Parshad (supra), the Hon’ble Supreme Court held that if notice of assessment had already been given, the assessment was to be treated to be within limitation. In Emkay Industries (supra), this Court held that if notice of assessment was after the date of coming into force of the amendment, the period of limitation will apply and not otherwise. In the present case, notice of assessment was prior to the enforcement of amending law. The order of the Tribunal dated 8.7.2005, thus, suffered from error apparent on the face of record, which could be rectified. 20. Accordingly, question No.(i) is decided against the assessee and in favour of the revenue. 16 VAT Appeal No.10 of 2008 Re:Q.No.(ii) 21. Learned counsel for the assessee submitted that the order of rectification was passed on 6.9.2007, while original order of the Tribunal was dated 8.7.2005 and thus, order of rectification was beyond limitation. Reliance has been placed on judgment of this Court in State of Punjab and others v. The PO Sales Tax Tribunal and another, (2000) 119 STC 82. 22. Learned counsel for the State is unable to show any contrary view. In view of judgment of this Court relied upon on behalf of the assessee, we hold that the order of the Tribunal was beyond the limitation for rectification and on that ground, the impugned order is liable to be quashed. Re:Q.No.(iii) 23. If the order of the Tribunal holding the assessment to be barred by limitation was to be set aside, the Tribunal was bound to adjudicate on all issues in the original appeal. However, in view of our answer to Question No.(ii), this question has become academic. Re:Q.Nos.(iv) and (v) 24. In view of our finding on Question No.(i), these questions are to be answered in favour of the revenue. We order accordingly. 17 VAT Appeal No.10 of 2008 25. As a result of above discussion, this appeal is allowed and the impugned order of the Tribunal dated 6.9.2007 is set aside. (Adarsh Kumar Goel) Judge October 1, 2008 (Ajay Tewari) ‘gs’ Judge 18