Amendment under Sales Tax Law

Various Acts under the administration of the Sales Tax Dept. have been amended for right or wrong reasons. Some of the right reasons are evident in the amendment mentioned below:

Section 26 relating to ‘Appeals’ has been amended so as to delete the word ‘original’ therefrom. This word ‘original’ had created havoc ever since the Bombay High Court judgment in the case of M/s Shiv Shyam Sales Enterprises vs. State of Maharashtra (W.P. 312 of 1989 dt. 6-6-2006) was pronounced. It was held that revision orders passed u/s 57 of the B.S.T. Act are not ‘original’ orders and hence, not appealable as provided in section 55 of B.S.T. Act. This embargo has been removed from MVAT Act, 2002 but similar action ought to have been taken under B.S.T. Act.

If, for whatever reasons, it is not possible to amend the repealed B.S.T. Act at this juncture, the Commr. of Sales Tax at least should issue a trade circular allowing First Appeals to the departmental authorities against revision orders. He has issued such trade circulars in the past to comfort the trade against a contrary judgments of the Court which have unsettled the position holding field for a long period. For example, circulars relating to judgments in the case of M/s Berar Oil Mills, M/s National Plastic & Allied Industries, M/s BASF Ltd. etc.

The position as regards rectification orders passed beyond a period of two years is also the same. Fortunately, section 24 of the MVAT Act, 2002 dealing in rectification proceedings has categorically allowed the passing of rectification orders beyond the period of two years when such mistakes are brought to the notice of the Sales Tax authority by the dealer. The word ‘thereafter’ appearing in section 24 does the magic and it needs to be incorporated in section 62 of the B.S.T. Act as well in order to overcome the impasse created by the aforesaid BHC judgment.

Similar trade circular can be issued in case of rectification orders too, as discussed above.

However, it must be borne in mind that M.S.T.T., which is a creature of the statute and an independent body, is not governed by the trade circulars issued by the Commr. of Sales Tax and may not abide by the instructions or concessions granted under them. Therefore, amendment in sections 55 and 62 of the repealed B.S.T. Act is the only solution available to the State, so far as appeals against revision / rectification orders before M.S.T.T. are concerned.

Apparently, it may appear that validation of passing of rectification order at the request of the dealer even after the period of two years is always meant for the benefit of the said dealer and State is never a loser. However, the State may also suffer as a consequence of the said decision of the BHC since there are a number of rectification applications pending before the Hon’ble Tribunal, which are made by the State. Therefore, it is in the interest of both State and trade that such amendments are made at the earliest. For that purpose, the repealed B.S.T. Act needs to be amended by appropriate legislative process.

It is pertinent to note that Govt. has made such attempt in the case of Motor Spirit Taxation Act, 1958 by amending section 96 (Savings & Validation Section) in order to extend the limitation period for assessment under M.S.T. Act, 1958. By virtue of said amendment of section 96 of the MVAT Act, 2002, the last date for completing the assessments under M.S.T. Act, 1958 for the periods up to 31-3-2004 has been extended up to 31-3-2008 from 31-3-2007. The object of amending the repealed M.S.T. Act has been achieved through such means. (Refer, Maharashtra Act VI of 2007) It can be then said that where there is will, there is a way. Government should sincerely think about amending sections 55 and 62 of the repealed B.S.T. Act in the similar manner.

Assessment under newly inserted section 23(3A) – A draconian provision

Section 21(3) has already conferred wide rights to the sales tax authorities in respect of assessments for any period up to 31st March, 2008. A period for sending a notice for assessment for any period up to 31-3-2008 has already been extended from four years to six years vide amendment dt. 20-6-2006.

Now, the Government has gone a step further and has empowered the officer to assess the dealer to whom notice u/s 21(3) is sent to the best of his judgment. The only boundary to such unfettered right is the limitation period of seven years from the end of the year containing such period.

In other words, the sales tax authorities can assess, by default, to the best of their judgment even if the said dealer has filed the returns within prescribed time and has abided by the law in all other respects as well. This right may have been limited for a period of assessment from 1-4-2005 to 31-3-2008 but has tremendous potentials for harassment. The Government should explain the necessity behind granting such powers or else, this would turn into a draconian provision in the Act.

Interestingly, there is nothing mentioned about the said amendment in the statement of Objects and Reasons. Does this suggest that there is a hidden object behind it? A clarification in this respect must be published as to how such provisions are going to be used by the State.