Pankaj Metals vs. State Of Gujarat

Held

The Court held that the impugned reassessment order dated 24.03.2020 was not tenable in law. The reasoning was based on a plain reading of Section 35 of the Gujarat VAT Act, 2003. The Court found that Section 35 is applicable only if the Commissioner has reason to believe that taxable turnover has escaped assessment, been underassessed, assessed at a lower rate, or if any deduction or tax credit was wrongly allowed. In this case, the input tax credit in question had already been disallowed in the original assessment, meaning it was not wrongly allowed. Therefore, there was no scope for the authority to invoke Section 35 for reassessment. The Court clarified that this decision would not affect the determination of the pending Special Civil Application No. 18263 of 2019, which would be decided on its own merits.

Facts

The petitioner, Pankaj Metals, engaged in iron and steel trading, challenged a reassessment order dated 24.03.2020 for the year 2014-15. This order disallowed input tax credit for purchases from M/s. Bhadresh Sales Corporation, a disallowance previously made in an audit assessment under Section 34(2) of the VAT Act. The petitioner had previously filed Special Civil Application No. 18263 of 2019 challenging the original assessment order for the same period, which was also based on disallowing input tax credit. The original assessment order was allegedly passed late and without proper notice, leading to a stay on coercive recovery. While the first writ petition was pending, the reassessment notice under Section 35 of the VAT Act was issued.

Key Issues

1. Whether the reassessment order dated 24.03.2020, which disallowed input tax credit already disallowed in the original assessment, is tenable in law, particularly in light of Section 35 of the Gujarat VAT Act, 2003? The petitioner argued that Section 35 of the VAT Act could not be invoked for reassessment as no input tax credit was allowed in the previous assessment that needed to be rectified. They contended that Section 35 is applicable only when tax has escaped assessment, been underassessed, assessed at a lower rate, or when a deduction or tax credit was wrongly allowed. The respondent State argued that the reassessment was justified. (Specific arguments for the respondent are not detailed in the judgment).