Provisions of RVAT Act, 2003 not applies to RIPS, 2003 prior to 1/7/2017

Commercial Taxes Officer Special Vs RSWM Ltd. (Rajasthan High Court)

These revision petitions under Section 84 of the Rajasthan Value Added Tax Act, 2003 (‘the RVAT Act, 2003’) are directed against the judgment of the Rajasthan Tax Board, Ajmer dated 15/10/2018 passed in appeals filed by the respondent assessee, whereby, the appeals have been allowed and the orders passed by the Assessing Officer and the Appellate Authority have been set aside.

The respondent assessee was issued five separate entitlement certificates for interest subsidy @ 2.5% for its five units by the State Level Screening Committee, Jaipur (‘SLSC’) under the provisions of Rajasthan Investment Promotion Scheme, 2003 (‘RIPS, 2003’), which were modified on 10/3/2010 by the SLSC, whereby, the interest subsidy @ 2.5% over seven years from 9/3/2007 except for thermal power plants was allowed.

By order dated 28/2/2011, the petitioner department determined the base tax for the year 2005-2006 and allowed the amount of subsidy over and above Rs.1,70,15,001 after considering the submissions and material on record. Whereafter, the Commercial Taxes Officer (Special Circle) passed orders dated 1/12/2012, 27/2/2013, 29/3/2013 and 21/6/2013 allowing the subsidy to the assessee under RIPS, 2003 for various quarters i.e. from 1/4/2011 to 30/6/2011, 1/7/2011 to 30/9/2011, 1/10/2011 to 31/12/2011 and 1/1/2012 to 31/3/2012.

On 27/5/2016 the department issued show cause notices under Sections 26 and 55 of the RVAT Act, 2003, for changing the base tax payable by the assessee. The assessee submitted reply to the show cause notices. On 22/6/2016, the department passed final order under Section 26 and 55 of the RVAT Act, 2003 read with Clause 9 (B)(viii) and 10 of the RIPS, 2003, whereby, the interest subsidy allowed to the assessee for various quarters was modified and the demand along with interest was created.

Feeling aggrieved the assessee filed appeals before the appellate authority, Commercial Taxes, Ajmer. The appellate authority by its order dated 31/3/2017 allowed the appeal qua one quarter holding the assessment as time barred and for the rest three quarters dismissed the appeals filed by the assessee.

The assessee then approached the Rajasthan Tax Board, Ajmer aggrieved by the order dated 31/3/2017. The Tax Board by the impugned judgment dated 15/10/2018 allowed the appeals and set aside the orders dated 22/6/2016 and 31/3/2017.

Learned counsel for the petitioner submitted that the order passed by the Tax Board is ex-facie against the law and as such the same deserves to be quashed and set aside.

Submissions were made that the Tax Board came to the conclusion that the department could not exercise powers under Section 26 of the RVAT Act, 2003 as the said power was not available under the RIPS, 2003 and also came to the conclusion on merits of the dispute that the amount of ‘partial exemption received by the assessee’ was not part of ‘payable tax’ and, therefore, basis for raising the demand was also quashed. It was vehemently submitted that the findings on both the issues are incorrect and deserve to be set aside.

It was emphasized that initially in RIPS, 2003 there was no provision for taking action under Section 26 or 33 of the RVAT Act, 2003, which provisions pertain to escaped assessment and rectification of mistake, respectively. However, vide amendment dated 10/10/2008, the provision for exercise of power under Section 33 of the RVAT Act, 2003 was introduced. In the subsequent Schemes i.e. Rajasthan Investment Promotion Scheme, 2010 (‘RIPS, 2010) and Rajasthan Investment Promotion Scheme, 2014 (‘RIPS, 2014) it was specifically provided that the orders passed under the Schemes shall be subject to provisions of RVAT Act, 2003 and the Central Sales Tax Act, 1956 and by order dated 30/4/2018 provisions of RIPS, 2003 were further amended and vide Clause 5 of the amendment order a new Clause 9A providing for procedure for disbursement of subsidy was introduced and provisions similar to the RIPS, 2010 and RIPS, 2014 pertaining to applicability of RVAT Act, 2003 and the Rajasthan Goods and Services Tax Act, 2017 (‘the RGST Act’) were inserted.

It was submitted that the intention of the legislature from the beginning is very clear, whereby, in each subsequent Schemes/RIPS, 2010 and RIPS, 2014 the provisions of RVAT Act, 2003 have been made applicable, which necessarily means that the provisions of Section 26 and 33 of the RVAT Act, 2003 are also attracted in the cases under RIPS, 2003 and, therefore, the determination made by the Tax Board by holding that at the relevant time the provisions of RVAT Act, 2003 were not applicable to the RIPS, 2003, cannot be sustained.

It was submitted that a bare look at the Amendment, 2018 would reveal that the RIPS, 2003 itself has been amended by introducing Clause 9A and, therefore, the objection, if any, has no basis and, consequently the judgment passed by the Tax Board deserves to be quashed and set aside.

Reliance was placed on Sree Bank Ltd. Vs. Sarkar Dutt Roy & Company : AIR 1966 SC 1953, State of Karnatake vs. Hansa Corporation : AIR 1981 SC 463 and Commissioner of Income Tax, Calcutta vs. National Taj Traders : AIR 1980 SC 485.

Further submissions were made that once the Tax Board had come to the conclusion that the Assessing Officer had no jurisdiction to pass the order impugned, there was no occasion for the Tax Board to have gone into the merits of the dispute raised inasmuch as, the same has created a precedent, which was not necessary for adjudication of the dispute. Without prejudice to the above submission, it was submitted that the determination made on merits also is factually incorrect and is based on wrong interpretation of the applicable provisions and, therefore, the same deserves to be set aside.

Learned counsel appearing for the respondent assessee vehemently opposed the submissions. It was submitted that the revision petitions have no substance inasmuch as the Tax Board has thoroughly and meticulously dealt with all the issues involved and has rightly come to the conclusion that in absence of any provision applying provisions of RVAT Act, 2003 including Section 26 to RIPS, 2003, the Assessing Officer had no jurisdiction to pass the orders impugned and, therefore, the petitions deserve to the dismissed.

It was submitted that admittedly the RIPS, 2003 did not contain any provision applying the provisions of RVAT Act, 2003 to the assessments made under the Scheme. The fact that the provision was introduced in the subsequent Schemes i.e. RIPS, 2010 and RIPS, 2014 are of no avail insofar as the assessments made under the RIPS, 2003 are concerned. The very fact that by the amendment introduced in RIPS, 2003 in the year 2008 the provisions of Section 33 were made applicable and in the amendment made in the year 2018, the provisions of RVAT Act. and RGST Act were made applicable to RIPS, 2003 clearly brings out the absence of said provisions and inapplicability of the RVAT Act to the RIPS, 2003.

It was also emphasized that the amendment introduced in the year 2018 cannot be termed as retrospective so as to apply to the case of the respondent, as the plain reading of the amendment reveals that the same has been inserted ‘with effect from 1/7/2017’ and as such, the plea sought to be raised about retrospectivity of the provisions has no basis.

It was submitted that the very action of the department in issuing notice and passing orders based on audit objection is also without jurisdiction.

Reliance was placed on Commissioner of Income Tax (Central)-I, New Delhi vs. Vatika Township Private Limited : (2015) 1 SCC 1 and Monnet Ispat and Energy Limited vs. Union of India & Ors. : (2012) 11 SCC 1.

On merits of the dispute, it was submitted that the entire basis for reassessment is non-existent as the assessee was rightly allowed the subsidy and the interpretation sought to be placed on the term ‘tax payable’ by including the amount of ‘partial exemption’ granted under the CST Act cannot be sustained. It was submitted that the judgment passed by the Tax Board does not call for any interference and the revision petitions deserve to be dismissed.

I have considered the submissions made by learned counsel for the parties and have perused the material available on record.

The facts are not in dispute, whereby, initially under the RIPS, 2003 the orders were passed determining the amount of subsidy to the respondent assessee by orders dated 1/12/2012, 27/2/2013, 29/3/2013 and 21/6/2013 for four quarters beginning from 1/4/2011 and ending with 31/3/2012. Whereafter, a notice under Section 26 of the RVAT Act, 2003, which pertains to escaped assessment was issued on 27/5/2016 and after hearing the assessee, the Commercial Taxes Officer, Special Circle-II, Bhilwara by its order dated 22/6/2016 came to the conclusion that the assessee was allowed excess subsidy based on its interpretation of the words ‘tax payable’ in the Scheme and consequently raised the demand along with interest.

The appellate authority on appeals filed by the assessee, negated all the objections raised pertaining to the exercise of jurisdiction by the Assessing Officer for three quarters and also upheld the determination made on merits.

The Tax Board on appeals filed by the assessee by its impugned judgment dated 15/10/2018 inter alia came to the following conclusion qua the jurisdiction of the assessing authority:

It was held that the provisions of RVAT Act, 2003 were not applicable to RIPS, 2003 and, therefore, the order passed under RIPS, 2003 could not be reopened.

On merits of the dispute, it was inter alia held as under:

It was determined that the amount of ‘partial exemption’ granted under the CST Act was not ‘tax payable’.

It is not in dispute that the RIPS, 2003 did not contain any provision for reopening the orders passed under the Scheme or for their rectification. The only provisions which dealt with variation of the orders were for review and appeal under Clause 12, whereby, SLSC and DLSC were empowered to review their decisions and SLSC was made appellate authority and power of revision was given to the State Government under Clause 13, whereby, it could suo moto or otherwise review an order passed by the Screening Committee.

Apparently, lack of any provision for variation in the orders passed was felt and, therefore, by order dated 10/10/2008 an amendment was introduced in RIPS, 2003 in the following manner:

“14. In clause 9(B) of the RajInvest Scheme 2003 after the existing S.No.(vii) and entries thereto the following new S.No. and entries thereto shall be added:

“(viii) Rectification of mistake. With a view to rectify mistake apparent on record, subsidy sanctioned by the assessing authority of the Commercial Taxes Department, under this scheme may rectify suo moto or otherwise any order passed by him as per the provision of section 33 of the Rajasthan Value Added Tax Act, 2003.”

A perusal of the above amendment clearly indicates that the power was conferred on the assessing authority of the department to ‘rectify suo moto or otherwise any order passed by him as per the provision of Section 33 of the RVAT Act, 2003’. The power conferred was confined to rectification of mistakes and no power to make escaped assessment/reopen the assessment was conferred.

The very fact that the power under Section 33 of the RVAT Act, 2003 was conferred also reinforces the aspect that the power did not exist in the RIPS, 2003.

Subsequently, in the Schemes of 2010 and 2014 in clauses relating to procedure for disbursement of subsidy, the following provisions were specifically incorporated:

“Any order passed under this clause by the Assistant Commissioner/Commercial Taxes Officer shall be subject to the provisions of the Rajasthan Value Added Tax Act, 2003, the Central Sales Tax Act, 1956 and rules made there under. The provisions of Recovery and Appeal in the said Act(s) shall apply mutatis mutandis for such orders.”

It need not be emphasized that the introduction of said provision in the subsequent Schemes, making applicable the provisions of RVAT Act, 2003, highlights the stark absence of similar provision in RIPS, 2003.

The important development is the amendment made in RIPS, 2003 in the year 2018 vide order dated 30/4/2018, whereby, several amendments were introduced to the RIPS, 2003 and insofar as relevant for the present purpose, its clause 5 reads as under:

“5. Insertion of Clause 9A.- After the existing sub-clause (C) of clause 9 and before the existing clause 10 of the scheme, the following new clause 9A shall be inserted, with effect from 01.07.2017, namely:-

“9A. PROCEDURE FOR DISBURSEMENT OF SUBSIDY

Insertion of Clause 9A.- After the existing sub-clause (C) of clause 9 and before the existing clause 10 of the scheme, the following new clause 9A shall be inserted, with effect from 01.07.2017, namely:-

“9A. PROCEDURE FOR DISBURSEMENT OF SUBSIDY

(a) For Capital Investment Subsidy (Interest Component) –

(i)…………..

(ii)…………..

(iii)…………..

(iv)…………….

(v)……………….

(vi) Any order passed under this clause by the Deputy Commissioner of State Tax/Assistant Commissioner of State Tax or Assistant Commissioner/Commercial Taxes Officer or the officer authorized by the Commissioner in this behalf, shall be subject to the provisions of the Rajasthan Goods and Services Tax Act, 2017 or the Rajasthan Value Added Tax Act, 2003, as the case may be and Rules made thereunder.”

(emphasis supplied)

By way of above amendment made on 30/4/2018 to RIPS, 2003, clause 9A was inserted in the RIPS, 2003 and provision similar to the provision, as noticed hereinbefore in the Schemes of 2010 and 2014, was introduced pertaining to the applicability of RVAT Act, 2003 and RGST Act and Rules made thereunder.

The crucial and clinching aspect of the above amendment is that it clearly provides that insertion of the same is w.e.f. 1/7/2017 i.e. the insertion was given a very limited retrospectivity i.e. from 1/7/2017, though the amendment was made on 30/4/2018.

The submissions made that as the subsequent Schemes of 2010 and 2014 provided for applicability of the RVAT Act, 2003 to the said Schemes, the same indicates the intention of the legislature, therefore, the same would necessarily apply to RIPS, 2003 also, apparently is without any basis. As already noticed hereinbefore, the absence of applicability of RVAT Act, 2003 to RIPS, 2003 is apparent. In the year 2008, the said aspect was modified to the limited extent of applying the provisions of Section 33 of the RVAT Act, 2003, which pertains to rectification of mistake and, thereafter, despite the fact that RVAT Act, 2003 was made applicable to the subsequent Schemes of 2010 and 2014, no amendment was introduced to RIPS, 2003 so as to make RVAT Act, 2003 applicable and as late as in the year 2018, the same, by way of amendment, has been made applicable to RIPS, 2003, that also w.e.f. 1/7/2017 only.

If the argument of learned counsel for the petitioner department regarding ipso facto applicability of provision in the Schemes of 2010 and 2014 to RIPS,2003 is accepted, there was no necessity to introduce amendment in RIPS, 2003 in the year 2018 and once the amendment has been introduced, it cannot be said that by dint of provisions indicated in RIPS, 2010 and RIPS, 2014, the provisions would be applicable to RIPS, 2003 as well.

Further, as already noticed hereinbefore, the retrospectivity of the amendment 2018, if any, has been limited to w.e.f. 1/7/2017 and not prior to it. Once the amendment itself indicates the extent of retrospectivity, the department cannot be heard to claim that the retrospectivity is beyond what has been indicated in the amendment, as such the plea sought to be raised regarding applicability of RVAT Act, 2003 to RIPS, 2003 prior to 1/7/2017 cannot be accepted.

The law on the aspect is well settled that if the right of the assessing authority to reopen the assessment is barred under the law for the time being in force, no subsequent enlargement of right can revive such right in the absence of express words or necessary intendment (see S.S.Gadgil v. Lal & Co. : AIR 1965 SC 171).

Further, in State of Tamil Nadu vs. M/s Star Tobacco Co. : AIR 1973 SC 1387, it was laid down by the Supreme Court that jurisdiction to reopen the assessment is not a question of mere procedure but a power and, therefore, the general principle that a procedural provision would be retrospective, has also no application.

As already observed, the provisions contained in RIPS, 2010 and RIPS, 2014 cannot be read into RIPS, 2003 and the amendment to RIPS, 2003 being with express limited retrospectivity, the same cannot apply to the cases in hand.

In view thereof, the apparent exercise of power by the assessing officer under Section 26 of the RVAT Act, 2003 for reopening the order passed in absence of any enabling power cannot be sustained.

So far as the judgments relied on by learned counsel for the petitioner are concerned, in the case of Sree Bank Ltd. (Supra) Section 45-O of the Banking and Companies Act introduced by Amending Act 52 of 1953 enacting that in computing the period of limitation prescribed for a suit or application by a banking company which is being wound up, the period commencing from the date of the presentation of the petition for winding up of the banking company shall be excluded. The section itself further provided that its provision shall also apply to a banking company in respect of which a petition for the winding up has been presented ‘before the commencement of the amending Act’. The said provision was interpreted by the Supreme Court holding that the same applied to the suits or applications by a banking company in respect of causes of action about which the suits could be instituted or applications made on the date of presentation of the winding up petition before the commencement of the amending Act, even though specified period of limitation for such action had expired before the commencement of the Act.

As noticed, the provision in the amending Act itself contained provisions applying the provisions to cases presented before the commencement of the amending Act, in the present case, neither there is any retrospectivity attached to the amendment so as to make it applicable from before 1/7/2017 nor the nature of exercise of power of reopening is such, which could be exercised in absence of any enabling provision.

The judgments in the case of Hansa Corporation (supra) and National Taj Traders (supra) relied on by learned counsel for the petitioners, in view of what has already been discussed hereinbefore pertaining to purported applicability of the provisions of RIPS, 2010 & RIPS, 2014 and amendment brought in 2018 to RIPS, 2003 from before 1/7/2017, the same have no application to the facts of the present case.

The judgment in the case of Monnet Ispat and Energy Ltd. (supra) cited by learned counsel for the respondent, in view of express provisions in the amendment 2018, need not detain the Court to dwell on the law laid down in the said judgments.

In view of the above discussion, it is apparent that the findings arrived at by the Rajasthan Tax Board pertaining to lack of jurisdiction in the assessing officer on account of non-applicability of provisions of RVAT Act, 2003 to RIPS, 2003, at the relevant time, cannot be faulted.

So far as the determination made by the Tax Board regarding the merits of the order of reassessment is concerned, the law is well settled that notwithstanding that a matter may be disposed of on a preliminary issue, the authority must pronounce judgment on all issues. The exception being that if the matter can be disposed of on an issue of law pertaining to jurisdiction or bar created by law, the matter can be dealt with in accordance with decision on such issue.

As such, it was not necessary for the Tax Board to deal with the issue relating to merits of the dispute.

However, once this Court has also come to the conclusion regarding lack of jurisdiction in the assessing authority to pass the assessment order, the determination made by the Tax Board on merits, loses its significance. Therefore, in the circumstances of the case, it is left open for the petitioner department to agitate the issue, as determined by the Tax Board, in an appropriate case and to that extent, as this Court has not dealt with the aspect on merits, it would always be open for the petitioner department to raise and agitate the issue, if the occasion arises.

In view of the above discussion, there is no substance in the revision petitions and the same are, therefore, dismissed.

No order as to costs.