Madras High Court Says Appeal Against Fresh Assessment Order Statutorily Barred, Remands BHEL Matter

The Madras High Court on 10 August remanded Bharat Heavy Electricals Limited's (BHEL) tax matter to the Assessing Officer for fresh assessment.

A Division Bench comprising Justices Dr. G. Jayachandran and N. Mala passed the order while disposing of a Tax Case Revision filed by BHEL against the order of the Sales Tax Appellate Tribunal. The judges held:

“The assessment orders in the instant case and the orders of the Appellate Authority are verbose and detailed. However, the fact remains that the exemption was claimed by the assessee in respect of inter-State sales during the transit of the goods, on the ground that the transactions involved specific boilers sold to its customers under a works contract and that the transfer falls within Section 6(2) of the CST Act”

The proceedings concerned assessment orders under the Central Sales Tax Act relating to BHEL's transit sales for the assessment years 2006-07 to 2011-12. BHEL, a Government of India undertaking, had challenged the disallowance of credit notes in the assessment proceedings.

The Appellate Authority, by an order dated 22 January 2016, remanded the matter for fresh consideration and permitted BHEL to produce 'C' Forms and other relevant declarations.

BHEL thereafter approached the Sales Tax Appellate Tribunal. The Department raised a preliminary objection to the maintainability of the appeal, relying on the third proviso to Section 58(1)(b) of the Tamil Nadu Value Added Tax Act, which bars an appeal against an order of the Appellate Authority setting aside an assessment and directing a fresh assessment.

BHEL contended that the Appellate Authority had merely remanded the matter and had not completely set aside the assessment. It argued that the case was therefore distinguishable from one where an assessment was wholly set aside.

The Tribunal, however, dismissed the appeal as not maintainable and subsequently rejected its rectification applications. BHEL then approached the High Court by way of revision and connected writ petitions.

The High Court considered whether an appellate order which reopens the predominant issue for fresh consideration, while recording findings on ancillary issues, would amount to an order setting aside the assessment for the purposes of the statutory bar. It noted that the Appellate Authority had reopened the issues for fresh consideration and specifically granted BHEL an opportunity to produce documents and declarations.

The Bench observed that although the Appellate Authority had not used the precise expression that the assessment order was “set aside and remanded”, the effect of its order was to require the Assessing Officer to reconsider the assessment afresh.

It therefore agreed with the Tribunal that BHEL's appeal was statutorily barred. Since the principal issue had itself been sent back for fresh consideration, the third proviso to Section 58(1)(b) was attracted.

At the same time, it clarified that the fresh assessment must be undertaken independently and that the Assessing Officer should not be prejudiced by any observations made by the Appellate Authority or the Tribunal.

It held that the “assessment shall be conducted entirely as a fresh assessment based on the materials produced by the assessee.” It also directed the Assessing Officer to complete the fresh assessment within three months from the date of receipt of its order.

Accordingly, the High Court disposed of the Tax Case Revision and dismissed the connected writ petitions, while granting BHEL liberty to place all relevant evidence and documents before the Assessing Officer in the fresh assessment.

For the Petitioner: N. Prasad, Advocate

For the Respondents: R. Sethuprabhakaran, Government Advocate