THE PR.COMMISSIONER OF vs. M/S MAHAVEER CALYX

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 10TH DAY OF AUGUST 2021 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR.JUSTICE HEMANT CHANDANGOUDAR STRP NO.422 OF 2017 BETWEEN: M/S. DELL INDIA PRIVATE LIMITED (NOW PART OF M/S. DELL INTERNATIONAL SERVICES INDIA PVT. LTD) DIVYASHREE GARDENS GROUND FLOOR, NO.12/01 CHALLAGHATTA VILLAGE VARTHUR HOBLI, BANGALORE-37.

... PETITIONER (BY SRI. SHIVADASS G, SR. COUNSEL FOR SRI. SYED M. PEERAN, ADV.,) AND: THE STATE OF KARNATAKA REPRESENTED BY THE COMMISSIONER OF COMMERCIAL TAXES GANDHINAGAR, BANGALORE-09.

... RESPONDENT (BY SRI. SHIVAPRABHU S. HIREMATH, AGA) - - - THIS STRP IS FILED UNDER SECTION 65(1) OF KARNATAKA VALUE ADDED TAX ACT, 2003 AGAINST THE ORDER DATED 31.07.2017 PASSED IN STA NOs.129 TO

2 173/2013 (CH-7) ON THE FILE OF THE KARNATAKA APPELLATE TRIBUNAL, BANGALORE DISMISSING THE APPEALS. THIS STRP COMING ON FOR FURTHER HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: ORDER

This petition under Section 65(1) of the Karnataka Value Added Tax Act, 2003 hereinafter referred to as 'the Act' for short) has been filed against the order dated 31.07.2017 passed by the Karnataka Appellate Tribunal by which the Tribunal has upheld the common order dated 27.12.2012 passed by the Joint Commissioner of Commercial Taxes (Appeals) (hereinafter referred to as 'the Appellate Authority' for short) as well as common orders of re- assessment dated 04.01.2012 passed by the Deputy Commissioner of Commercial Taxes (hereinafter referred to as 'the Assessing Authority' for short) in respect of tax period namely April 2006 to March 2007 and April 2007 to March 2008 passed under Section 39(1) of the Act and Section 9(2) of the Central Sales Tax Act, 1956 (hereinafter referred to as 'the 1956 Act', for short). By the said orders, the claim of the petitioner for exemption on 'sales in the course of imports' under Section 5 of the 1956 Act has been rejected

3 and demand on account of Value Added Tax / Central Sales Tax has been raised on local / inter-state sales. 2. Facts leading to filing of this petition briefly stated are that the petitioner is engaged in the business of sale of desktops, work stations, note books and other information technology products. The petitioner caters directly to the customers. The process of import and sale of the products commences when a potential customer in India enquires about Dell products either online or through interactions with petitioner's sales representatives. On the basis of the enquiries and requirements of the customers, the petitioner raises a 'quotation' on the end customer containing the name of the customer, billing / shipping address, quotation date, quotation number, order number, description of product, quantity, agreed final price as well as the terms and conditions. The aforesaid quotation states that Dell product would be exported from Malaysia. Thus, the petitioner seeks customer's upfront contractual approval of manufacture and supply of required product from Malaysia. On receipt of the quotation, customer accepts either by signing the same or by raising a purchase order or by making an advance payment.

4 In cases where there is no separate purchase order, the quotation so accepted is treated as a purchase order subject to any variation as may be specifically agreed with the purchaser. The purchase order raised or the quotation accepted by the customer as the case may be forms a valid and binding contract of sale between the petitioner and the customer. 3. The petitioner electronically transmits the customer order to the manufacturer in Malaysia i.e. Dell Asia Pacific (DAP). On receipt of the order, DAP initiates the manufacturing process of laptops / desktops / servers of required configuration and dispatches the same to the petitioner in a separate / unique packaging and under cover of commercial invoice. The petitioner, on arrival of the aforesaid package, clears the same from customs authority in its own name and dispatches the same to the customers in the same form and packaging. The petitioner has a high volume of transaction in the States of Karnataka and Harayana. The petitioner therefore sought advance rulings in both the States. The Authority for Clarification and Advance Ruling (ACAR) in the State of Harayana by an order dated

5 9.3.2010 held that petitioner is entitled to benefit of exemption of claim in the course of imports. Similarly, in the State of Karnataka, the ACAR, by an order dated 13.1.2006, after considering all the relevant facts and documents submitted by the petitioner, clarified that import made by Dell Computer for delivery of products to the end customers was in the course of import and was not exigible to sales tax in India. 4. Thereafter, the enforcement wing of the Department undertook inspection / verification of books of accounts and premises of the petitioner for a period from March 2008 to August 2010. The Commissioner of Commercial Taxes issued a notice dated 15.7.2010 under Section 22-A(2) of the Act proposing to review and set aside the order passed by the ACAR. In the meanwhile, the Assessing Authority initiated re-assessment proceedings and issued a revised proposition notices dated 20.04.2011 and 25.04.2011 under Section 39 of the Act and under Section 9(2) of the 1956 Act for the tax period April 2006 to March 2007 and from April 2007 to March 2008, respectively. The Assessing Authority relied upon inter-company purchase agreement between the

6 petitioner and the DAP to propose denial of the claim for exemption on sales in the course of imports. The Commissioner of Commercial Taxes, by an order dated 19.7.2011 which was passed subsequent to issuance of proposition notice by the Assessing Authority, confirmed the order passed by the ACAR. However, liberty was granted to the Assessing Authority to verify the factual matrix to determine if there was any factual deviation so as to render the ruling of ACAR inapplicable. It is pertinent to note that the aforesaid order passed by the Commissioner has attained finality. 5. In response to the proposition notices dated 20.4.2011 and 25.4.2011, the petitioner filed replies on 22.7.2011 and 28.7.2011 in support of its claim for exemption on sales in the course of imports. The Assessing Authority by endorsements dated 28.7.2011 and 1.8.2011 directed the petitioner to furnish soft copy of all transactions made in the course of imports for the period from 2006-07 and 2007-08 and ten sample chain of documents. The petitioner supplied the details on 19.8.2011 and 25.8.2011. The Assessing Officer classified the transactions in 3 different

7 categories and by endorsements dated 25.8.2011 and 13.9.2011, directed the petitioner to produce documentary chain in respect of 865 sales which were made in the course of imports. The petitioner produced the documents and vide communication dated 9.12.2011, the summary of documents was also furnished. Out of the aforesaid documentary evidence, the Assessing Officer by a common order dated 4.1.2012, only analysed 60 transactions and rejected the claim for exemption in respect of all sales during the course of import between the period from 2006-07 and 2007-08. The assessee thereupon preferred appeals which were dismissed by the Appellate Authority by an order dated 27.12.2012 and the aforesaid orders have been uphold by the Tribunal by an order dated 31.7.2017. In the aforesaid factual background, this petition has been filed. 6. Learned Senior counsel for the petitioner submitted that decision of the ACAR was affirmed by the Commissioner by an order dated 19.07.2011 and liberty was granted to the Assessing Officer to examine the transactions to decide the question of exigibility of tax in case of deviation in the factual matrix. It is further submitted that since there was no

8 deviation in the factual matrix, the issue was covered by the advance ruling of ACAR, in view of Sections 60(4) and 60(5) of the Act and therefore, the order passed by the Assessing Authority which is in violation of the ruling of ACAR, is without jurisdiction. It is also submitted that Assessing Officer had no jurisdiction to sit in an appeal over the decision of ACAR and to question the sufficiency of documents filed before it. It is contended that the Tribunal has erred in adopting the findings of the Assessing Officer and the Appellate Authority without any independent analysis of the transactions before it. 7. It is also pointed out that Assessing Officer has examined only 0.11% of the entire transactions pertaining to sale in the course of import i.e. 60 out of 51,435 transactions and therefore, the basis of the finding recorded by the Assessing Officer that he has examined voluminous transaction to unearth different factual matrixes is factually incorrect. It is contended that inter-company purchase agreement is a framework agreement between the DAP and the petitioner which does not impose any obligation to buy and sell Dell products and the actual imports are not in

9 pursuance of the aforesaid agreement but are occasioned from Malasyia on the basis of purchase order / quotation which constitute binding agreement to sell / contract for sale between the customer and the petitioner. It is also argued that the transactions are sales in the course of imports under Section 5(2) of the 1956 Act and it is not necessary that sale should precede import. Alternatively, it is submitted that the Tribunal being the last fact finding authority, ought to have recorded its independent findings and erred in accepting the orders passed by the Adjudicating Authority and the Appellate Authority. 8. It is further submitted that in any case Assessing Authority was under an obligation to examine each individual transaction rather than to decide the question of levy of tax on mere generalities. It is also pointed out that distributorship agreement does not constitute an agreement to sale much less a contract of sale. It is also pointed that order of re-assessment was passed on 04.01.2012 and therefore, re-assessment proceeding for the tax period between April 2006 to December 2006 and from April 2007 to December 2007 is barred by limitation and retrospective

10 amendment to Section 40 of the Act does not apply to the facts of the case as the vested right had accrued to the petitioner which could not be taken away by a retrospective amendment. In support of aforesaid submission, reliance has been placed on the decisions in 'K.G.KHOSLA & CO. Vs. DEPUTY COMMISSIONER OF COMMERCIAL TAX' (1966) 017 STC 473, 'STATE OF KARNATAKA Vs. AZAD COACH BUILDERS' 2010 VIL 12 SC, 'ABB LIMITED Vs. COMMISSIONER, DELHI VALUE ADDED TAX' (2012) 55 VST 1, 'COMMISSIONER, DELHI VALUE ADDED TAX Vs. ABB LTD.' (2016) 91 VST 188 (SC), 'TATA ENGINEERING & LOCOMOTIVE CO. Vs. THE ASSISTANT COMMISSIONER OF CENTRAL TAX' (1970) 1 SCC 622, 'KELVINATOR OF INDIA LTD. Vs. STATE OF HARYANA' (1973) 32 STC 629 AND 'STATE OF A.P. Vs. COROMANDEL PAINTS AND CHEMICALS LTD.' (1995) 98 STC 82 AP. 9. On the other hand, learned Additional Government Advocate submitted that the advance ruling of ACAR dated 31.03.2006 is without jurisdiction and is non est as it has

11 been given by an Authority constituted under Section 4 of the Act interpreting Section 5(2) of the 1956 Act. Therefore, the aforesaid advance ruling is not binding on the respondent. It is further submitted that there is a sale and purchase transaction between DAP, Malaysia and Dell India and another sale of purchase transaction between Dell India and end customer. It is also urged that IT products are not specific to any customer and are general in nature and can be diverted to and used by any customer. It is argued that there is no privity of contract between the end customer and the DAP, Malaysia. It is also argued that agreement between end customer and Dell India and intercompany purchase agreement between DAP and Dell India are independent of each other. It is further submitted that petitioner is not entitled to benefit of exemption under Section 5(2) of the Act. It is contended that the petitioner, after execution of intercompany purchase agreement on 06.08.2000, had subjected itself to levy of tax till the advance ruling of ACAR till 31.03.2006 and in other States except Harayana and Karnataka, is paying tax. It is also urged that since the proceeding for re-assessment were initiated within the period

12 of limitation, therefore, the question of same being barred by limitation does not arise. In support of aforesaid submission, reliance has been placed on the decisions of this Court in 'BUSINESS PROCESS OUTSOURCING (INDIA) PRIVATE LIMITED, BANGALORE' Vs. THE AUTHORITY FOR CLARIFICATION AND ADVANCE RULINGS, BANGALORE' (2004) 56 KLJ 397 (HC) and 'HEWLETT PACKARD FINANCIAL SERVICES INDIA PRIVATE LIMITED Vs. THE STATE OF KARNATAKA AND ORS.' LAWS (KAR) 2016 2 146. 10. We have considered the submissions made on both sides and have perused the record. The questions of law which arise for consideration in this petition are as follows: (1) Whether advance ruling dated 31.03.2006 by the Authority for Clarification and Advance Ruling is without jurisdiction and non-est? (2) Whether there is any change in law or facts so as to render the ruling by the Authority for Clarification and Advance Ruling inapplicable?

13 (3) Whether the re-assessment proceedings initiated against the petitioner are barred by limitation? (4) Whether the transactions in question are exigible to tax under KST Act? We proceed to deal with the issues ad-seriatum. QUESTION OF LAW NO.1: 11. At this stage, it is pertinent to take note of Section 4 of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as 'the KST Act' for short), which deals with provision for clarification and advance ruling. The relevant extract of Section 4 reads as under: "4. Provision for clarification and advance rulings.- (1) The Commissioner may constitute a State level ‘Authority for Clarification and Advance Rulings’, (here in after referred to in this section as Authority) consisting of three Additional Commissioners, to clarify the rate of tax applicable under this Act in respect of any goods liable to tax under the Act or the exigibility of any transaction to tax under the Act on an application by a dealer registered under the Act.

14 (5) The Authority may, after examining the application and any records called for, by order, either, admit or reject the application. Provided that the Authority shall not allow the application where the question raised in the application,- (i) is already pending before any officer or authority of the Department or Appellate Tribunal or any Court; (ii) relates to a transaction or issue which is designed apparently for the avoidance of tax. Provided further that no application shall be rejected under this sub-section unless an opportunity has been given to the applicant of being heard and where the application is rejected, reasons for such rejections shall be recorded in the order. (9) The order of the Authority shall be binding only,- (i) on the applicant who had sought clarification; (ii) in respect of the goods or transaction in relation to which a clarification was sought; and (iii) on all the officers other than the Commissioner."

15 Section 22A of the KST Act deals with revisional powers of Additional Commissioner and Commissioner. The relevant extract of Section 22A reads as under: "22-A. (2) The Commissioner may on his own motion call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by any officer subordinate to him 1[or the Authority for Clarification and Advance Rulings constituted under section 4]1 is erroneous in so far as it is prejudicial to the interest of the revenue, he may, if necessary, stay the operation of such order for such period as he deems fit and after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment or directing a fresh assessment." Thus, from perusal of the aforesaid relevant statutory provisions, it is evident that the order passed by the Authority is binding on all the Officers of the State Government other than the Commissioner.

The

16 Commissioner is not bound by the order passed by the ACAR as under Section 22-A(2) of the KST Act, he has been given the suo motu revisional powers to examine the validity of the order passed by ACAR on the ground that the same is erroneous insofar it is prejudicial to the interest of the revenue. 12. In the instant case, the petitioner had made an application to the Authority under Section 4 of the KST Act and advance ruling / clarification order was passed by the Authority on 24.08.2004 and it was inter alia held that Authority is not empowered under Section 4 of the KST Act to clarify the transactions of sale or purchase in course of import into the territory of India, as the same requires the Authority to examine the provisions of Section 5(2) of the 1956 Act and the Authority has no power to do so. The relevant extract of the order reads as under: "xxxx On the facts and circumstances of the case of the applicant, whether the transaction is a sales in the Course of import, requires the Authority to examine the provisions of Section 5(2) of the CST Act 1956 and the Authority is not vested with such a power. With great

17 respects to the learned opinions rendered by Their Lordships (Retd), it is the considered opinion of the Authority that, this Authority is not empowered under Section 4 of the KST Act 1957 to clarify transactions under CST Act 1956 and no such powers to clarify under CST Act 1956 vests with the authority.

Regarding the issue, whether transactions under Section 5(2) of the CST Act are includable in the taxable turnover as defined under Section 2(1)(u-1) of the KST Act 1957. Considering the definition of taxable Turnover in Section 2(1)(u- 1) of the KST Act 1957 which specifically excluded 'turnover of purchase or sale in the course of import' in computing, the sale or purchase in the course of import as determined under Section 5(2) of the CST Act 1956 are not includable in the taxable turnover under KST Act 1957.

In view of the above the Authority rules as under:-

(i) Authority is not empowered under Section 4 of the KST Act 1957, to clarify the transactions of sale or purchase in the course of import in to the territory of India, on the facts of the case of applicant; hence the Authority abstains from clarifying."

18 13. The aforesaid order was challenged in an appeal under Section 24(1) of the KST Act by the petitioner. A Division Bench of this Court, by an order dated 13.01.2006 granted liberty to the petitioner to make an appropriate application before the Advance Ruling Authority as provided under Section 4 of the KST Act without expressing any opinion on merits and accordingly, the appeal was disposed of. The relevant extract of the order dated 13.01.2006 reads as under: "9. As we have already noticed, the query posed by the appellant company would give a feeling, that it was asking the Advance Ruling Authority to clarify, whether a particular transaction of it can be included in the taxable turnover under the KST Act? The Advance Ruling Authority relying on the observations made by a Division Bench of this Court in the case of Business Process Outsourcing (India) Private Limited -vs- Authority for Clarification and Advance Ruling STA No.63/2003 dated 10.3.2004, has concluded that it does not have the power to clarify a transaction, which would fall under the purview of the provisions of the CST Act.

19 10. At this stage, Sri. R.V. Prasad, learned Counsel very fairly would submit that without expressing any opinion on the merits or demerits of the case, he may be permitted to make an appropriate application before the authority for Clarification and Advance Ruling and further, requests this Court to direct the authority to pass an appropriate order, without being influenced by its earlier findings and conclusion. 11. Smt. Sujatha, learned Additional Government Advocate has no objection to the request made by Sri. R.V. Prasad, learned Counsel for the appellant company. 12. In view of the request made by the learned Counsel for the appellant company, in our opinion, we need not have to express any opinion on the correctness or otherwise of the impugned order passed by the authority for Clarification and Advance Ruling in case No.AR.CLR.CR.25/2004-05 dated 24.08.2004. Accordingly the following: ORDER I. Without going into the merits or demerits of the appellant company's case, the appeal is disposed off.

20 II. The appellant company is permitted to make an appropriate application, if it so desires, before the Advance Ruling Authority, as provided under Section 4 of the Act r/w Rul3 27 of the Karnataka Sales Tax Rules. III. Liberty is also reserved to the appellant company to produce such material, which are available with it including the material produced before this Court, before the Advance Ruling Authority. IV. If and when, such an application is filed by the appellant company, the Advance Ruling Authority is directed to consider the same without being influenced by any one of its observations, findings, conclusion reached by it in case No.AR.CLR.SR.25/04-05 dated 24.8.2004 and in accordance with law, after affording an opportunity of hearing to the appellant/appellant's Counsel/appellant's representative. Ordered accordingly." 14. Thereafter, the ACAR, by an order dated 31.03.2006, after taking note of the previous order passed by it on 24.08.2004 as well as the judgment of this Court dated 13.01.2006 passed in STA No.36/2004, held that purchases made by the petitioner for delivery of goods to the customers are in the course of import and not exigible to tax

21 under KST Act. The relevant extract of the order reads as under: "xxxx From the application it is seen that a ruling was sought on the applicability of tax or otherwise on a transaction under KST Act 1957, where the goods are purchased in the course of import into India. As per Sec.5(2) of CST Act, 1956, "a sale or purchase of goods shall be deemed to take place in the course of import of goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontier of India".

The nature of transaction carried out by the applicant is such that there exists a link between the two transactions i.e., the sale of goods to the customers in India and import of goods by Dell India, such that the two transactions form an integral part of the whole transaction. The movement of goods from DAP is as a result of contract of sale by the customer with Dell India and terminates when the goods are delivered to the customer. As explained earlier, the whole transaction is "in the course of import" and it cannot be taxed under CST Act as well as under the provisions of KST Act. Therefore, to decide that a transactions is not exigible to tax under

22 KST Act, it is necessary to discuss the provisions of CST Act 1956 in order to come to the conclusion that the purchases made by the dealer are "in the course of import" as falling u/s.5(2) of the CST Act.

Hence the following Order: In the light of the above discussions this Authority rules that the purchases made by the dealer for delivery of goods to the customers are in the course of import and not exigible to tax under KST Act 1957. The turnover is not includible in the taxable turnover u/s 2(1)(u-1) of the KST Act 1957." xxxx 15. Thus, it is evident that the ACAR vide order dated 31.03.2006, has opined on the issue of applicability of the tax or otherwise on a transaction under KST Act and has not dealt with the issue under Section 5(2) of the Act. It is pertinent to note that though the aforesaid order could either have been revised by the Commissioner of Commercial Taxes under Section 22-A(2) of the KST Act or could have been challenged by the respondent in a writ petition before this Court. However, the respondent has not chosen to challenge the same. In other words, the order dated 31.03.2006 passed by the ACAR is in existence and has attained finality

23 and binds the parties. The aforesaid order is neither without jurisdiction nor non est and the respondent cannot be permitted to raise a contention about its validity. Accordingly, the first question of law is answered in the negative. QUESTION OF LAW NO.2: 16. The Assessing Authority has recorded a finding that it has examined voluminous transactions to unearth a different factual matrix. It has further been held that petitioner did not produce intercompany purchase agreement executed between it and the DAP before ACAR and therefore, the advance ruling is inapplicable as it is based on insufficient information. In this connection, it is pertinent to note that the finding recorded by the Assessing Authority that it has examined voluminous transactions to arrive at a different conclusion on the facts of the case, is factually incorrect as Assessing Officer has only examined 0.11% of the entire transactions of sales in the course of import namely 60 transactions out of total 51,435 transactions. It is also noteworthy that on the basis of intercompany purchase agreement, the Commissioner of Commercial Taxes initiated suo motu proceeding and issued a notice dated 15.07.2011

24 to the petitioner and after considering the provisions of intercompany purchase agreement, passed an order on 19.07.2011, by which view taken by the ACAR was affirmed. The Assessing Authority infact has undertaken a fresh analysis and arrived at different conclusions in respect of the very transactions which were considered by ACAR. Therefore, in the fact situation of the case, the advance ruling by ACAR is binding. Accordingly, the second question of law is answered by stating that there is no change in the facts and in law so as to render the advance ruling by ACAR inapplicable to case of the petitioner. QUESTION OF LAW NO.3: 17. Section 40 of the Act, which deals with period of limitation for assessment, prior to its amendment reads as under: "40. Period of limitation for assessment.- (1) An assessment under Section 38 or re- assessment under Section 39 of an amount of tax due for any prescribed tax period shall not be made after the following time limits.- (a) five years after the end of the prescribed tax period; or

25 (b) three years after evidence of facts, sufficient in the opinion of the prescribed authority to justify making of the re- assessment, comes to its knowledge, whichever is later. (2) If any tax is, not paid by a dealer who has failed to get registered under Section 79, an assessment or re-assessment may be made as if in sub-section (1), reference to five years was a reference to ten years. (3) In computing the period of limitation specified for assessment or re-assessment, as the case may be under this Act, the period taken for disposal of any appeal against an assessment or other proceeding by the appellate authority, a tribunal or competent court shall not be taken into account in computing such period for assessment or reassessment as the case may be." Section 40 of the Act was amended by an amending Act No.17 of 2012 w.e.f. 01.04.2012 and the period of re- assessment was enlarged to 5 years and the time limit for re- assessment for any tax period ending on 31.3.2007 was increased to 8 years. The amended provision reads as under:

26 "40. Period of limitation for assessment.- (1) An assessment under Section 38 or re- assessment under Section 39 of an amount of tax due for any prescribed tax period shall not be made after the following time limits.- (a) four years after the end of the prescribed tax period; or (b) three years after evidence of facts, sufficient in the opinion of the prescribed authority to justify making of the re- assessment, comes to its knowledge, whichever is later. Provided that an assessment or re-assessment reliant to any tax period ending 31st day of March, 2007 shall be made within a period of five years after the end of the prescribed tax period. (2) If any tax is, not paid by a dealer who has failed to get registered though liable to do so or fraudulently evaded attracting punishment under Section 79, an assessment or re-assessment may be made as if in sub-section (1), reference to four years was a reference to eight years. (3) In computing the period of limitation specified for assessment or re-assessment, as the case may be under this Act, the period taken for disposal of any appeal against an assessment or other proceeding by the appellate authority, a tribunal or competent

27 court shall not be taken into account in computing such period for assessment or reassessment as the case may be." Section 40 of the Act was again amended by amending Act No.54 of 2013 and the aforesaid provision was given a retrospective operation 01.04.2005. The amended provision reads as under "40. Period of limitation for assessment.- (1) An assessment under Section 38 or re- assessment under Section 39 of an amount of tax due for any prescribed tax period shall not be made after five years after the end of the prescribed tax period: Provided that an assessment or re-assessment relating to any tax period upto the period ending 31st day of March, 2007 shall be made within a period of eight years after the end of prescribed tax period: Provided further that an assessment or re- assessment relating to any tax period commencing from the 1st day of April,2007 upto the period ending 31st day of March, 2012 shall be made within a period of seven years after the end of the prescribed tax period. (2) Notwithstanding anything contained in sub-section (1), if any tax is, not paid by a

28 dealer who has failed to get registered though liable to do so or fraudulently evaded attracting punishment under Section 79, an assessment or reassessment may be made within eight years from the end of the prescribed tax period. Provided

that

assessment

or reassessment relating to any tax period upto the period ending 31st day of March, 2007 shall be made under this sub-section within a period of ten years after the end of the prescribed tax period. (3) In computing the period of limitation specified for assessment or re-assessment, as the case may be under this Act, the period taken for disposal of any appeal against an assessment or other proceeding by the appellate authority, a tribunal or competent court shall not be taken into account in computing such period for assessment or reassessment as the case may be." 18. The dispute in this petition pertains to tax periods April 2006 to March 2008 and as on the date of re- assessment, the time limit for re-assessment for the disputed period was as under: Tax period Period of limitation Due date for completion of re-assessment April 2006 to March 5 years April 2011 to March 2012

29 2007 April 2007 to March 2008 4 years April 2011 to March 2012 The order of re-assessment was passed on 04.01.2012 and therefore, the proceeding for re-assessment for tax period between April 2006 to December 2006 and from April 2007 to December 2007 is barred by limitation. It is pertinent to note that under the unamended provision, a vested right had accrued in favour of the petitioner. The amendment made to Section 40 of the Act, cannot be construed so as to open up a liability which had become barred (See: 'INCOME-TAX OFFICER Vs. S.K.HABIBULLAH' AIR 1962 SC 918). Therefore, even by retrospective operation of law, the aforesaid vested right accrued to the petitioner cannot be taken away. A Division Bench of this Court in CIFTECH SOLUTIONS PVT. LTD. supra, while upholding the validity of Amending Act No.54 of 2013 insofar as it pertains to amendment to Section 40 of the Act, has held that a vested right accrued to a person cannot be taken away by enacting a new provision. The Division Bench in paragraph 21 has held as under: "21. It is well settled that no statute shall be construed to have a retrospective operation until

30 its language is such that would require such a conclusion. The exception to this Rule is enactments dealing with procedure. The law of limitation being a procedural law, is retrospective in operation in the sense that it will also apply to proceedings pending at the time of enactment as also to proceedings commenced thereafter. However, where the right to such action is barred under the law of limitation in force before the new provision came into operation and a vested right has accrued to another, the new provision cannot revive the barred right or take away the accrued vested right." We concur with the view taken in the aforesaid decision by the Division Bench of this Court. Thus, the re-assessment proceedings for the period between April 2006 to December 2006 and April 2007 to December 2007 is held to be barred by limitation. Accordingly, the third question of law is answered. QUESTION OF LAW NO.4: 19. It is pertinent to note that the Assessing Authority has not examined the individual transactions on the basis of 60 transactions selected out of 51,435 transactions, the Assessing Authority has passed an order of assessment

31 which is not permissible in law. However, the aforesaid aspect of the matter has not been appreciated by the Appellate Authority. The Tribunal which is the final fact finding Authority ought to have recorded its independent findings with regard to nature of transactions in question. However, on careful scrutiny of the order, it is evident that the Tribunal has failed to do so and has affirmed the orders passed by the Appellate Authority and the Assessing Authority. Since the adjudication of the nature of transaction involves factual adjudication, therefore, we deem it appropriate to remit the matter to the Adjudicating Authority in respect of the transactions beyond March 2007 and March 2008 as the transactions for a period between April 2006 to March 2007 and April 2007 to March 2008 have become final and the re-assessment proceedings cannot be initiated in respect of the transactions between the period from April 2006 to March 2007 and April 2007 to March 2008. Therefore, the fourth question of law is answered accordingly. 20. For the aforementioned reasons, it is evident that the Tribunal has decided the questions of law erroneously

32 and the order passed by the Tribunal as well as the Authorities under the Act cannot be sustained. 21. In the result, the orders passed by the Assessing Authority dated 4.1.2012, Appellate Authority dated 27.12.2012 and the Tribunal dated 31.7.2017 are hereby quashed. The Assessing Authority is granted the liberty to examine the nature of transaction which is except the transactions between April 2006 to March 2007 and April 2007 to March 2008 in the light of advance ruling by the ACAR and in view of provisions contained in Section 4(9)(iii) and 4(10) of the Karnataka Sales Tax Act, 1957. Needless to state that power of re-assessment shall be evoked by the Assessing Authority only if it finds any change in the factual or legal matrix. Accordingly, the petition is disposed of. Sd/- JUDGE Sd/- JUDGE RV