Assessment under VAT
Assessment under VAT
By N.T.Nirale, M.A. M.Com. LL.B. D.M.S. Advocate
1. Long awaited VAT has seen the light of the day on 1-4-2005. Much was advertised by the Govt about the VAT. By now the time for submission of first return is over and the dealers as well as practicetioners in taxation, after filing the first return, are thinking of the stage of ‘assessment’ to come.
2. SELF ASSESSMENT AND NOTICES:
Right from Mr. Chidambaram & Mr. Asim Das to Mr. Jayant Patil had said several times that the VAT brings the era of ‘Self assessment’. But the Maharastra Value Added Tax Act 2002 [MVAT Act] does not contain a single provision about self assessment of acceptance of returns except only Margin-heading of section 20. But this section 20 is in fact is a provision for submission of returns. On the contrary under old Act, section 33[2] of BST Act 1959, in clear words provided that if the Commissioner is satisfied that the returns are correct and complete he may assess according to the returns. Thus MVAT Act is more regressive than the BST Act.
The section 21 of the original MVAT Act was for self assessment. It provided for the intimation to be given about the dues or refund. It had also provided that if such intimation is not received by the dealers, the acknowledgement of the returns will serve as the intimation. This means that the acknowledgement is the evidence of acceptance of the returns. But now amended section 21 does not provide, neither for assessment as per returns nor for the acceptance of the returns. Section 21 provides only for a restriction that the notice for assessment can not be issued after 2 years if the returns are filed in time; and after 3 years if the returns are not filed by the prescribed date. [However this limit is extended upto 4 years in case of the period ending on 31-3-2008.] But what is the position of returns and assessment if the said notices are not issued is not clearly mentioned anywhere in MVAT Act.
3. ASSESSMENT OF DEALERS:
The assessment in particular is provided in section 23 of MVAT Act. Surprisingly it starts with the provision for assessment in cases of defaulters, as if the defaulters will be the order of the day in VAT regime. Under section 23[1], if the dealer files the return late, the Commissioner, [that is, the STO/AC/DC], will pass exparte assessment order without issuing any notice and without any opportunity of hearing. Such order can not be passed after three years. The power to pass the best judgment assessment order against the principles of natural justice may be the singular model among 126 countries where the VAT is said to have been introduced. The power of passing the order against the dealer without calling him and without giving hearing may be the meaning of ‘transparency’ much published in White Paper and the Govt advertisements about VAT.
If such exparte order is passed by the STO/AC/DC, then the only way out for the dealer is to file the writ in the High Court because under section 85[1][1-b] such order is nonappealable. If the dealer has filed the return and has paid the taxes then he can put the application in form 304 attaching the proof of submission of return and payment of taxes. Thereafter the
STO/AC/DC will cancel the exparte assessment order passed by him if the payment of tax was made before issue of notice. If the payment of tax is made after issue of the notice how it will affect the exparte assessment and total payment of taxes is not clear in the MVAT Act. This section 23[1] is the best example of excessive delegation of the powers granted to STO/AC/DC to pass the order without notice and take it back if on his satisfaction. Looking in to the big volume and the task involved in collection of returns from the Banks and their dispatch to the respective STO/AC/DC and the present experience in this respect, it is very evident that the new source of enormous work will be created for the STO/AC/DC. The dealers who have filed the returns in time will be assessed u/s 23[2]. By issue of notice in form 301 [similar to old form 27], the STO/AC/DC can call for the evidence on the basis of which the returns are filed by the dealer and after considering that evidence he will pass the assessment order. The date fixed for hearing should not be less than 15 days from the date of service [rule 21 of MVAT Rules 2005]. The assessment order will be in form 303 [similar to old form 30]. The notice can be served at any time but the assessment order can not be passed after the expiry of 3 years from the end of the year containing the period which
is being assessed. The dealers who have filed the returns late will be assessed u/s 23[3]. But notice in form 301 has to be served with in 3 years and the assessment order has to be passed within 4 years. The dealers can be assessed for the unregistered period u/s 23[4] by issue of notice in form 301 within 5 years but such assessment order has to be passed within 8 years.
4. ASSESSMENT OF TRANSACTION:
Section 23[5] provides for the assessment of the transaction or of the claim. The prescribed authority for this sub-section is not the Commissioner but, the STO. AC, DC, or Sr. DC are prescribed authorities under Rule 21[2]. The notice in form 302 [rule 21]can be issued to the dealer if the prescribed authority is satisfied that the tax is being evaded by not recording or by incorrect recording the transactions or any claim in incorrectly made. Even if the notice for regular assessment is issued by the STO/AC/DC, the notice under this sub section can be issued. If, during the search, the STO/AC/DC finds that the tax is being evaded, then the visiting officer can make the assessment of such transaction, even though the proceedings are not transferred to him u/s 59. The assessment order can be passed separately for each transaction. If there are 100 bills which could not be explained by the dealer to the satisfaction of the visiting offer at the time of visit, there will be 100 assessment orders in a single year. This is unique provision giving powers to the visiting officer who takes the search of the premises of the dealer to assess the dealer though he may not be within his jurisdiction. [Good example of excessive delegation to bureaucracy]. The STO/AC/DC having a regular jurisdiction can also take up the regular assessment of the dealer. Thus there will be two or more assessing authorities for one dealer, assessing the same period with out any transfer of proceedings. MVAT Act has really provided the polyandry in the days when even polygamy is condemned. However the MVAT Act is very kind to provide that no tax will be levied again in the regular assessment if it is already levied in transaction-wise assessment [proviso to sec 23[5][d]].
5. RE-ASSESSMENT BEFORE ASSESSMENT:
The MVAT has found out, for the first time in taxation history of Maharastra, the concept of reassessment of escaped turn over before the assessment. Section 23[6] gives powers to the STO/AC/DC to assess the dealer who in his opinion has,
- not disclosed the turn over of sales or purchases in the returns,
- paid tax at a lower rate,
- set-off has been wrongly claimed,
- any deduction has been wrongly claimed.
Notice in form 315 [similar to old form 28] is to be issued for this purpose and 15 days time from the date of service, has to be given for hearing [rule 21]. Though the notice in from 301 & 302 for assessment can not be issued after 2 years in
case of dealer filing returns in time and 3 years in case of defaulters, the notice in form 315 for deemed reassessment u/s 23[6], can be issued with in 5 years from the end of the period which is to be assessed. The assessment order under this section has to be passed within 6 years. Looking into the past experience about allowance of claims and the dispute about rate of tax, each and every dealer is likely to be covered by 4 defaults mentioned above. Therefore the limit of 2 or 3 years kept for assessment will be meaning less and all the dealers will be covered by the time limit of 6 years, though they commit bonafide mistakes.
6. FRESH ASSESSMENT AFTER REMAND:
Where the appeal is filed against the assessment order, the appellate authority [except Tribunal] has no power to remand the case for fresh assessment. In case the Tribunal remands the case for fresh assessment, the assessing authority has to complete the same within 36 months as provided in section 23[7]. The period of 36 months can be counted from the date of supply of the copy of the appeal order by the dealer to the assessing authority.
7. DIRECTIONS BY THE COMMISSIONER:
A novel provision has been made in the MVAT Act for seeking the directions of the Commissioner during the course of assessment. A dealer can apply in form 305 to the Commissioner [likely to be delegated to Jt. Commissioner] seeking his guidance in any assessment case. The Commissioner can examine the matter, hear the dealer and then give directions as to the completion of the assessment. Such directions will be binding on the STO/AC/DC. The practical utility of this provision can be very much disputed because at one place the Commissioner is empowered to pass the orders contrary to the law laid down by the Tribunal and if that is the policy, the chances are very rare that the directions will in favour of the dealer.
8. SINGLE ORDER FOR DIFFERENT PERIODS:
A provision is made u/s 23[10] for issue of single notice for different periods and passing of single order for different periods if all such periods are comprised in one year. It is not clear from the Rules as how the notice in form 301 and 315 which are differently worded and for different purposes, can be issued in one single piece even if the different periods are
covered by one and same year.
9. UNFETTERED OMNI-POWER OF THE MONARCH:
In the biggest land of democracy, where the rule of law is implemented through the Constriction, the MVAT Act 2002 gives unfettered powers of the monarch to the Commissioner [in turn to STO/AC/DC]. Section 23[8], which is the sub section of provisions related to assessment, gives powers to the Commissioner to call for record of any matter. Mind the words ‘matter’ and not ‘assessment’, which will mean he can call for any file of assessment, appeal, revision, grant of registration certificate or issue of documents etc. He can also call for the evidence from the dealer. And thereafter he can pass appropriate order. The meaning of the word ‘appropriate’ is very well known to the persons practicing in taxation. The order to be passed by him need not be ‘just & proper’. Thank the Creator that the provision is made for the hearing of the concerned. There is no time limit for issue of notice or for passing the order. No statutory notice is provided in this sub-section nor is any form prescribed for notice. For assessment, reassessment or review different time limits from 2 years to 8 years are provided, but for this sub-section the matter is open till eternity. The ‘appropriate’ order under this sub-section can be the order which is totally and wholly against the law laid down by the Tribunal, if the Govt is in reference or appeal against that decision before the High Court or Supreme Court. Again thank the Creator that he has made the provision that the recovery can not be effected in pursuance of such order passed u/s 23[8] till the High Court or Supreme Court decides the issue. REALLY, THE KING IS VERY KIND !
Written by ntnirale on June 13th, 2009 with
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