Revenue Can Tax Only if Case Falls Within Four Corners of Statute, Not on Legislative Intent or Substance: Supreme Court [Read Order]
If the Revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed, said the apex court.
Supreme - court - Taxscan
Supreme - court - Taxscan
In a recent ruling, the Supreme Court has held that the Revenue authorities cannot impose tax on the basis of legislative intent, substance, or analogy, unless the case strictly falls within the provisions of the statute.
M/s Shiv Steels filed an appeal before the apex court, it set aside the Gauhati High Court’s order upholding reassessments under the Assam General Sales Tax Act, 1993.
The issue belongs to assessment years 2003-2004, 2004-2005, and 2005-2006. The original assessments were declared time-barred under Section 19 of the 1993 Act, which prescribed a three-year limitation period for completing assessments.
However, the Revenue subsequently obtained sanction from the Commissioner and invoked Section 21 of the Act to justify fresh reassessments, contending that the extended limitation with sanction allowed reassessment within four additional years.
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The High Court had upheld this view, reasoning that sanction by the Commissioner under Section 21 revived the Revenue’s powers even though earlier assessments were already declared time-barred. Dissatisfied, the assessee approached the Supreme Court.
A Bench comprising Justice J.B. Pardiwala and Justice Sandeep Mehta disagreed with the High Court’s interpretation. The Court clarified that Section 21 applies only in cases where no assessment at all has been made within the time limits prescribed under Section 19.
It cannot be used as a tool to revive assessments that have already been declared invalid and barred by limitation. Since the assessments in question were already held to be time-barred, invoking Section 21 post-facto was impermissible.
The Court said that, “In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of law. If the Revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference, analogy, or by probing into the intention of the legislature or by considering the substance of the matter.”
While allowing the appeal, the Supreme Court set aside the Gauhati High Court’s judgment and quashed the reassessments made by the Revenue authorities.
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