Gujarat HC strikes down VAT Provision permitting Revision of Old Assessments [Read Judgment]

A two-judge bench of the Gujarat High Court struck down Section 84A of the Gujarat Value Added Tax (GVAT) Act on the grounds that it was ultra vires the Constitution of India.

The bench was considering a bunch of petitions filed by various dealers including, Reliance Industries Limited challenging the constitutional validity of Section 84A of the Gujarat Value Added Tax Act, 2003.

Under the Gujarat VAT Act, the original period of limitation as provided under Section 75 of the VAT Act for issuing the notice is of 3 years from the date of the assessment order i.e. 30.03.2013 which had lapsed on 30.03.2016, in the case of the petitioners.

The department invoked section 84A and enabled itself to issue a notice for revision for revising the assessment made for 2008-09.

The industries challenged the amendment. It was submitted that the original period of limitation under Section 75 of the VAT Act for issuing the notice is of three years from the date of the assessment order- 2013 which lapsed in 2016. But with the amendment, the state government provided itself with an unlimited period, which is not fair.

the petitioners contended before the Court that the provision is ultra vires and beyond the legislative competence of the State under Entry 54 of List II of the Seventh Schedule to the Constitution of India. Also, the provision is arbitrary, unreasonable and, therefore, is violative of Article 14 of the Constitution of India.

The two-judge bench consisting of Justice J. B. Pardiwala and Justice A.C. Rao held that Section 84A of the Gujarat VAT Act is ultra vires and beyond the legislative competence of the State Legislature and is manifestly arbitrary, unreasonable and therefore, violative of the Articles 14 and 19(1)(g) of the Constitution of India.

Referring to various judicial precedents, the bench held that “We are of the view that if the unlimited time period is available to the Revenue for assessment/reassessment/revision in any case based on a decision rendered in the case of any other dealer the same would lead to an irreparable situation and, in such circumstances, it renders Section 84A manifestly arbitrary and unreasonable.”