Rajasthan High Court Declines Writ Against Entry Tax Assessment, Says Appeal Is Equally Efficacious

The Rajasthan High Court on 6 August held that a statutory appeal under the Rajasthan Tax on Entry of Goods into Local Areas Act, 1999 is an equally efficacious remedy against an assessment order, including a challenge based on limitation.

A Division Bench comprising Justices Arun Monga and Ashutosh Kumar disposed of a writ petition filed by Sika India Pvt. Ltd. challenging an assessment order dated 18 December 2018 and the consequential demand of Rs. 21.24 lakh towards entry tax, interest and penalty. The Court observed:

“...The appellate authority under Section 23(5) is clothed with wide powers. It can confirm, reduce, enhance or annul the assessment or penalty. It can even set aside the assessment and direct a fresh assessment. Every ground now urged before us, including the ground of limitation under Section 12(6), can effectively be urged before, and examined by, the appellate authority. The remedy of appeal is, therefore, not only alternative but equally efficacious”

Sika India, which manufactures, markets and distributes waterproofing, thermal and acoustic insulation products, primarily challenged the assessment on the ground of limitation. It contended that Section 12(6) of the 1999 Act prescribes a two-year limitation period for making an assessment and that the assessment for the financial year 2015-16 was made beyond the prescribed period.

The company further contended that it had not received the assessment notice within the prescribed limitation period and that the assessment order was therefore without jurisdiction.

The State opposed the petition, pointing out that Section 23 provides a statutory appeal against an assessment order. It argued that Sika India had failed to avail the remedy within the prescribed period and had instead approached the High Court after considerable delay.

The Court noted that the appellate authority has the power to confirm, reduce, enhance or annul an assessment or penalty, and to set aside an assessment and direct a fresh assessment. It held that the limitation issue raised by Sika India could therefore be effectively examined in appeal.

It further noted that the dispute involved questions as to whether the assessment notice had been issued and served within the prescribed period, the date of service and whether any statutory exception extending the limitation period applied. It held that “these are all matters resting on the record of the assessing authority,” holding that such disputed questions of fact could not be resolved in proceedings under Article 226 of the Constitution on the basis of affidavits.

The Bench also noted that the assessment order was passed in December 2018, while Sika India approached the High Court only in January 2021 after submitting a representation in December 2020. However, since the petitioner was being relegated to the statutory appellate remedy, it left the question of delay open for consideration by the appellate authority. It added:

“...mere long pendency of a petition cannot, by itself, furnish a ground to adjudicate the lis, particularly when the relevant material is not on record before us. Pendency does not cure the inherent limitation of the writ court in resolving disputed questions of fact. In any case, the said material has to be gone into by the competent statutory authority, which is equipped to summon the assessment record, examine the factual position and return findings thereon in accordance with law”

Further, the judges noted that the entire demand of Rs. 21.24 lakh had already been realised, with Rs. 7.35 lakh recovered through attachment of Sika India's bank account and Rs. 13.88 lakh deposited by the petitioner under protest.

They directed that these amounts be treated as compliance with the pre-deposit requirement, subject to verification by the appellate authority. The Bench further directed that no further recovery be made towards the demand during the pendency of the appeal, if filed within the period granted by the Court.

Accordingly, the High Court disposed of the writ petition, granting Sika India liberty to file an appeal along with an application seeking condonation of delay.

For the Petitioner: Advocates Gagan Sharma, for Sanjay Rahar.

For the Respondents: Chelsi Agarwal, AAAG; Kuldeep Singh Rathore, AAAG, for Mahi Yadav, AAG.