HASTI PETROCHEMICALS AND SHIPPING LTD. vs. STATE OF GUJARAT

C/SCA/15868/2021 ORDER DATED: 27/10/2021 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 15868 of 2021 ========================================================== HASTI PETROCHEMICALS AND SHIPPING LTD. Versus STATE OF GUJARAT ========================================================== Appearance: UCHIT N SHETH(7336) for the Petitioner(s) No. 1,2 for the Respondent(s) No. 2 ADVANCE COPY SERVED TO GOVERNMENT PLEADER/PP(99) for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MS. JUSTICE SONIA GOKANI and HONOURABLE MR. JUSTICE HEMANT M. PRACHCHHAK

Date : 27/10/2021

ORAL ORDER (PER : HONOURABLE MS. JUSTICE SONIA GOKANI) 1. By way of the present petition under Article 226 of the Constitution of India, petitioners have challenged the order dated 13.09.2021 passed by the Gujarat Tax on Entry of Specified Goods into Local Areas Act, 2001 (“the Entry Tax Act” for short) on the ground of the same is unconstitutional and violative of Article 304(A) of the Constitution of India. 2. Brief facts leading to the present Page 1 of 17

C/SCA/15868/2021 ORDER DATED: 27/10/2021 petition are as follows: 2.1. Petitioner No.1 is a Public Limited Company having its place of business at Sanand.

The

second

petitioner

is authorised signatory of the first petitioner. The petitioner is engaged in the business of logistic services. For the said purpose, the petitioner purchased trucks that are used for transporting the goods from the premises of customers to ports/inland depots and office vise versa. The petitioner has a place of business in the State of Gujarat as well as in the State of Rajasthan. The petitioner purchased seven trucks in the financial year 2006-07. They were taxable under the Rajasthan Vat Tax Act, 2003 (“the Rajasthan VAT Act” for short). During the relevant years, the trucks were purchased on payment of such tax under the VAT Act Page 2 of 17

C/SCA/15868/2021 ORDER DATED: 27/10/2021 at Rajasthan. These trucks were registered with RTO authority in Gujarat. Seven trucks were brought in the year 2007-08 and one truck was brought in the year 2008-09. 2.2. The petitioners since purchased the trucks after the payment of tax at the rate of 12.5% under the Rajasthan VAT Act, it used such trucks in the State of Rajasthan and thereafter, brought them to the State of Gujarat. No tax as averred, was required to be paid on entry of such trucks in the State of Gujarat. 2.3. Section 6 of the Entry Tax required filing of the written challan only by person liable to pay under the Entry Tax Act, as the petitioners believed that they were liable to pay tax under the Entry Tax Act. As the petitioner was of a firm belief that they were not required to file Page 3 of 17

C/SCA/15868/2021 ORDER DATED: 27/10/2021 the return, it did not file the return from Challan. 2.4. For more than 13 years of entry of the trucks into the State of Gujarat, no demand for the Entry Tax was made and after more than 13 years of entry of such trucks, suddenly, an inquiry started in July, 2021 regarding this issue. The petitioner informed the authority that the records were very old and they required time to gather the details and then to produce the same. 2.5. On 18.08.2021 Notice under the Entry Tax Act for the Assessment year 2007-08 and 2008-09 was issued. The petitioner responded to the said notice by reply dated 03.09.2021 urging that the notice had been issued after more than 13 years of entry of the vehicle and such unreasonable period, according to the Page 4 of 17

C/SCA/15868/2021 ORDER DATED: 27/10/2021 settled law, would bar the period of limitation. Respondent No.2, despite objection, passed the order impugned under section 8(5) of the Entry Tax Act. 2.6. According

the

petitioner,

its contention has been rejected relying upon the decision of this Court in the case of M.H.Khansuiya vs. State of Gujarat, 2018(57) GSTR 395(Guj). It is worth noting that the Special Leave Petition filed against the said judgement has been dismissed by the Apex Court. According to the petitioner, it was shocking that the authority imposed the tax with penalty under the Entry Tax Act without taking into consideration the fact that the vehicle had been purchased in the State of Rajasthan on payment of Tax under the Rajasthan VAT Act and that fact was brought to the notice of the authority. Page 5 of 17

C/SCA/15868/2021 ORDER DATED: 27/10/2021 2.7. The petitioners made efforts for obtaining the purchase invoice in respect of these vehicles. The record of the earlier financial years was not available. They could not obtain it till the passing of the assessment order. However, the purchase invoices were available with the two respondent authorities. 2.8. According to the petitioner, after an unpardonable period when the entry of the goods is questioned, the petitioner, therefore, is before this court seeking following reliefs: “37. In view of the aforesaid premises, the Petitioners humbly pray that: RELIEFS CLAIMED A. This Hon’ble Court may be pleased to issue a writ of certiorari or writ in the nature of certiorari or any appropriate writ or order quashing and setting aside the impugned order dated 13.9.2021(annexed at Annexure A) as being time-barred, wholly without

jurisdiction

well

as unconstitutional as violating Article 304(a) of the Constitution of India; B. In the alternative this Hon’ble Court may be pleased to issue a writ of certiorari or a writ in the nature of Page 6 of 17

C/SCA/15868/2021 ORDER DATED: 27/10/2021 certiorari or any appropriate writ or order quashing and setting aside the impugned order dated 13.9.2021(annexed at Annexure A) as being passed in breach of principles of natural justice and hence illegal; C. This Hon’ble Court may be pleased to declare and clarify that the judgement rendered

the

case

of M.H.Khansuiya(supra) cannot lead to the conclusion that assessment orders can be passed under the Entry Tax Act even beyond reasonable time limit; D. Pending notice, admission and final hearing of this petition, this Hon’ble Court may be pleased to stay the operation, implementation and execution of impugned order dated 13.9.2021 (annexed at Annexure A); E. Ex parte ad interim relief in terms of prayer D may kindly be granted; F. Such further relief(s) as deemed fit in the facts and circumstances of the case may kindly be granted in the interest of justice for which act of kindness your petitioners shall forever pray.” 3. Reliance is placed on the decision of the Apex Court in the case of State of Punjab and others vs. Bhatinda District Coop. Milk P. Union Ltd., [2007]10 VST 180(SC), where the Court has held that there is no period of limitation specified in the statue. Action has been taken within the reasonable time. 4. We have heard Mr. Uchit Sheth, learned Page 7 of 17

C/SCA/15868/2021 ORDER DATED: 27/10/2021 advocate for the petitioner, who has urged that

despite

the

decision

of M.H.Khansuiya(supra), the action of the authority deserves interference. He has urged that after 13 years when the time was sought for collecting and then adducing the evidence, the same had not been availed of and this had led to an outright violation of principles of natural justice. He insisted on the very order of the assessment to be quashed. 5. At the outset, the Court needs to refer to the decision of M.H.Khansuiya(supra). In the writ petition against the notice, the contention was raised that the notice had been issued in the year 2016 in respect of the purchase of hydraulic excavator in the year 2006 and, hence, it was barred by law of limitation as provided under section 8(A) of the Entry Tax Act and against notice of Page 8 of 17

C/SCA/15868/2021 ORDER DATED: 27/10/2021 demand directing the assessee to pay entry tax on the ground that it was impermissible in absence of any assessment order and because the entry tax was not liable, as they were not specified goods. The Court referring to the decision of the Kerala High Court in the case of A. Kunhikoya Thangal vs. State of Kerala and others,[2007] 6 VST 432(Ker.) held thus: “Held,(i) that under the scheme of the Act and the Gujarat Tax on Entry of Specified Goods into Local Areas Rules, 2001, every importer is required to first pay the tax due and payable under the Act along with return in the for of return-cum-challan in form 1. Under section 8(5), no order of assessment under sub-section (3) or (4) of section 8 shall be made after the expiry of three years from the last date prescribed for furnishing of returns of the particular period. If for any reason, such order is not made within this period, the return so furnished shall be deemed to have been accepted as correct and complete for assessing the tax due from such person. The limitation for assessment as provided under sub-section (5) of section 8 of three years from the last date prescribed for furnishing the return provided the importer file the return. However, in case the importer did not file the return at all, sub-section(5) of section 8 shall not be applicable.” Page 9 of 17

C/SCA/15868/2021 ORDER DATED: 27/10/2021 6. In the matter before the Division Bench of this Court also the contention that the impugned notice/assessment order was barred by the law of limitation had not been accepted in view of the non-filing of the return. 7. It is also to be noted that this decision was challenged by way of a Special Leave to Appeal No.18060 of 2018. The Apex Court did not interfere and Special Leave Petition was dismissed. 8. In the case of State of Punjab and others vs. Bhatinda District Coop. Milk P. Union Ltd. (supra) the issue arose with regard to the limitation. The Court held that if no period of limitation is prescribed, the statutory authority must exercise its jurisdiction with a reasonable time. What, however, shall be a reasonable period would depend upon the nature of the statute, the Page 10 of 17

C/SCA/15868/2021 ORDER DATED: 27/10/2021 rights and liabilities thereunder and other relevant factors. “16. Sub-section (1) of Section 11 empowers the Commissioner to extend the period of three years for passing the order of assessment wherefor reasons are required to be recorded in writing subject, however, to the mximum period of five years. Ordinarily, therefore, a period of three years has been prescribed for completion of the assessment in terms of the provisions of the Act. We may also notice that in cases where an assessment order is to be reviewed, the same should be done within a period of one year. 17. A bare reading of Section 21 of the Act would reveal that although no period of limitation has been prescribed therefor, the same would not mean that the suo moto power can be exercised at any time. 18. It is trite that if no period of limitation has been prescribed, statutory authority must exercise its jurisdiction within a reasonable period. What, however, shall be the reasonable period would depend upon the nature of the statute, rights and liabilities thereunder and other relevant factors. 19. Revisional jurisdiction, in our opinion, should ordinarily be exercised within a period of three years having regard to the purport in terms of the said Act. In any event, the same should not exceed the period of five years. The view of the High Court, thus, cannot be said to be unreasonable. Reasonable period, keeping in view the discussions made hereinbefore, must be found out from the statutory scheme. As indicated hereinbefore, maximum period of limitation provided for in sub-section (6) of Section 11 of the Act is five years. 20. In The State of Orissa v. Debaki Debi & Ors. reported in [AIR 1964 SC 1413], on interpretation of the provisions of Section Page 11 of 17

C/SCA/15868/2021 ORDER DATED: 27/10/2021 12(6) of the Orissa Sales Tax Act, 1947, 36 months time was considered to be the period of limitation for exercise of the revisional jurisdiction. 21. In S.B. Gurbaksh Singh v. Union of India & Ors. [1976 (37) STC 425], Untwalia J., speaking for the Bench, opined : “Appropos the fourth and last submission of the appellant, suffice it to say that even assuming that the revisional power cannot be exercised suo motu after an unduly long delay, on the facts of this case it is plain that it was not so done. Within a few months of the passing of the appellate order by the Assistant Commissioner, the Commissioner proceeded to revise and revised the said order. There was no undue or unreasonable delay made by the Commissioner. It may be stated here that an appeal has to be filed by an assessee within the prescribed time and so also a time-limit has been prescribed for the assessee to move in revision. The appellate or the revisional powers in an appeal or revision filed by an assessee can be exercised in due course. No time-limit has been prescribed for it. It may well be that for an exercise of the suo motu power of revision also, the revisional authority has to initiate the proceeding within a reasonable time. Any unreasonable delay in exercise may affect its validity. What is a reasonable time, however, will depend upon the facts of each case.” 9. Since direct decisions under the Entry Tax Act clearly provide for the filing of the return with a reasonable time period and in absence thereof, the contention has been Page 12 of 17

C/SCA/15868/2021 ORDER DATED: 27/10/2021 raised that the initiation of any proceedings is barred by the law of limitation. The notice, in the matter on hand, has been issued in the matter on hand, as can be noticed from the chronology of events, after 13 years of the entry of the concerned vehicles into the State of Gujarat. Purchase had been made in the year 2006-07 when the trucks were taxable at the rate of 12.5 % under the Rajasthan VAT Act. All seven trucks were bought in the year 2007-08 and one truck was bought in the year 2008-09. The inquiry made is in the month of July, 2021 referring entry of such vehicles, more particularly, when the intimation to the authority was in the year 2017, as can be noticed from the show cause notice, is questioned, which requires to be addressed. 10. According to the petitioner, the respondent authority came to know about the entry of Page 13 of 17

C/SCA/15868/2021 ORDER DATED: 27/10/2021 these trucks within the Gujarat jurisdiction in the year 2017. The notice has been issued on 18.08.2021, since the petitioner had not filed the return, admittedly at any point of time, and therefore, the authority would have no other way of knowing the entry of the vehicles. The notice states that the entry of specified goods into the local area had been effected during the period from 01.04.20008 to 31.03.2009, in respect of which the petitioner is liable to pay tax under the Entry Tax Act and, as the petitioner did not furnish the prescribed date of return/challan in respect of the said period, he was directed to attend the office of the respondent on 03.09.2021 and produce the evidence in support of such return/challan. The petitioner was given the time of two weeks to pay the tax under the Entry Tax Act. The reply to this was given on 03.09.2021, Page 14 of 17

C/SCA/15868/2021 ORDER DATED: 27/10/2021 where all through out the contention raised is of the law of limitation. It had also raised the issue of having purchased the trailers in the State of Rajasthan and also with regard to the tax having been paid at Rajasthan. 11. Although no time has been sought for adducing the evidence, according to learned advocate Mr. Uchit Sheth, such a request was made to the authority concerned and it would take a while for the petitioner to produce an old record of the tax paid at Rajasthan, which was at the rate of 12.5% and, therefore also, there is no substantive reason to pay the tax so far as the petitioner is concerned. 12. Without entering into the merits and without quashing the notice on the ground of limitation in wake of the decision of M.H. Khansuriya(supra), the matter is being remanded back to the Assessing Officer. Page 15 of 17

C/SCA/15868/2021 ORDER DATED: 27/10/2021 Learned AGP has no input from the department on the factum of payment of tax at the rate of 12.5% at the relevant point of time in the State of Rajasthan. However, the tax liability under the VAT Act is at par with Gujarat, as non-filing of the return would permit the respondent authority to initiate proceedings of issuance of notice, payment of tax at Rajasthan shall need consideration at the end of respondent. 13. Noticing the long span, if the petitioner could gather those substantive documents even now, on quashing the order of assessment, matter is being remanded to the State Tax Officer Unit-II, Ahmedabad. Let the same be decided within six weeks from the date of receipt of the copy of this order. The respondent shall examine all the documents carefully and shall address the issues in accordance

with

law,

without

being Page 16 of 17

C/SCA/15868/2021 ORDER DATED: 27/10/2021 influenced by this disposal. 14. Petition stands disposed of in above terms. (MS. SONIA GOKANI, J. ) (HEMANT M. PRACHCHHAK,J) SUDHIR Page 17 of 17