The Bombay High Court declared Notice of VAT Audit invalid as issued beyond the limitation period of four years.
As many as 10 petitions were filed by the firms carrying on the business of retail petrol pump dealership challenging the issued notice of default assessment of tax and interest under section 32 in Form DVAT-24 as well as notice of assessment of penalty under section 33 in Form DVAT – 24A.
The petitioners urged that such audit report / order is basically re-assessment but the time limit for assessment and reassessment is four years as per section 34 of the VAT Regulations. Admittedly, the impugned notice as well as the impugned audit reports (orders) are beyond the limitation period of four years and, therefore, are without jurisdiction.
On the contention of the petitioner that the impugned notice and orders are barred by limitation, the respondent authority stated that the impugned orders are orders of audit under section 58 of the VAT Regulations. Hence, section 34 would not be applicable. So far the audit under section 58 is concerned, there is no limitation period. The VAT Department had initiated audit proceedings as discrepancies were found in the records of the oil companies and sales shown by the dealers in their returns.
The division bench of Justices Milind N.Jadhav and Ujjal Bhuyan held that impugned notices to be barred by limitation and consequently, the orders of the audit are also time-barred. It is a settled proposition of law that the question of limitation involves a question of jurisdiction. A plea of limitation is a plea of law that concerns the jurisdiction of the Court trying the proceeding. Consequently, when an impugned notice or an impugned order is held to be beyond limitation, needless to say, it becomes a notice or an order which is without jurisdiction.
The court concluded that the impugned orders of audit were passed in violation of the principles of natural justice.
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