Delhi Tax Amnesty Scheme: Supreme Court Clarifies Powers of Designated Authority in Tax Dispute

Introduction

The Supreme Court of India, in Commissioner of Trade and Taxes and Ors. vs. M/S Ahluwalia Contracts (India) Ltd., [2017] INSC 854, addressed a critical question about the authority of tax officials under the Delhi Tax Compliance Achievement Scheme, 2013. The bench comprised Justices Ranjan Gogoi and Navin Sinha. This case revolves around the interpretation of powers granted to different authorities under the amnesty scheme and the validity of actions taken by them. Specifically, the court examined whether an Additional Commissioner, acting as a designated authority, could issue a show cause notice under Clause 8 of the scheme, or if that power was exclusively vested with the Commissioner.

Case Background

The case involves multiple appeals by the Commissioner of Trade and Taxes against orders of the High Court of Delhi. These orders favored the respondent assessees, who had challenged notices issued under the Delhi Tax Compliance Achievement Scheme, 2013. The scheme, introduced under Section 107 of the Delhi Value Added Tax Act, 2004, aimed to provide amnesty for tax dues before April 1, 2013. The core issue arose when the Additional Commissioner, acting as the designated authority, issued show cause notices to the assessees for allegedly making false declarations under the scheme. The assessees argued that the Additional Commissioner lacked the jurisdiction to issue such notices, as that power was vested solely with the Commissioner.

The assessees had initially made declarations under the amnesty scheme and received acknowledgments of discharge. However, they later received show cause notices from the Additional Commissioner, which they contested in the High Court. The High Court ruled in favor of the assessees, stating that the Additional Commissioner did not have the power to issue the notices and that any fresh notice would be time-barred. The Revenue then appealed to the Supreme Court.

Timeline

Course of Proceedings

The High Court of Delhi ruled in favor of the assessees, holding that the Additional Commissioner lacked the authority to issue show cause notices under Clause 8 of the Amnesty Scheme. The High Court also stated that any fresh show cause notice would be barred by time, as it was beyond one year from the date of the declarations. The Revenue appealed to the Supreme Court, challenging the High Court’s decision.

Legal Framework

The Delhi Value Added Tax Act, 2004, specifically Section 107, empowers the Government of National Capital Territory of Delhi (GNCTD) to notify amnesty schemes for tax dues. The Delhi Tax Compliance Achievement Scheme, 2013, was introduced under this provision. Key clauses of the scheme include:

• Clause 2(c): Defines “designated authority” as an officer not below the rank of Joint Commissioner, notified by the Commissioner.
• Clause 4: Outlines the procedure for making declarations and payments of tax dues. It mandates that declarations be made to the designated authority.
• Clause 5: Grants immunity from penalties, interest, and other proceedings upon payment of declared tax dues.
• Clause 8: Deals with the failure to make true declarations, empowering the Commissioner to issue show cause notices for false declarations.

Clause 8 of the Amnesty Scheme states:

“8. Failure to make true declaration .- (1) Notwithstanding anything contained in clause 5 of the Scheme, where the Commissioner has, for a period beginning from 1st April, 2009, reasons to believe that the declaration was false in material particulars, he may, for reasons to be recorded in writing, serve notice on the declarant in respect of such declaration requiring him to show cause as to why he should not be required to pay the tax dues unpaid or short-paid as per the provisions of the Scheme.”

Clause 8(3) of the Amnesty Scheme states:

“(3) No notice shall be issued under sub-clause (1) of this clause after the expiry of one year from the date of declaration.”

Arguments

Appellants (Revenue):

• The Additional Solicitor General (ASG) argued that the Government Order dated April 30, 2014, delegated the power under Clause 8 of the Amnesty Scheme from the Commissioner to the Designated Authority.
• The ASG contended that the power to dispose of applications under the scheme includes the power to finalize matters after issuing show cause notices under Clause 8.
• The ASG stated that Clause 4 requires the Designated Authority (Additional Commissioner) to consider declarations. Therefore, the power to reopen cases based on false declarations must be available to the Designated Authority.

Respondents (Assessees):

• The Senior Counsel for the assessees argued that the power to reopen concluded cases by issuing show cause notices is specifically conferred on the Commissioner, not the Designated Authority.
• The power to decide an application under Clause 4 is different from the power to reopen a case under Clause 8.
• The power under Clause 8 was not delegated to any other authority. Therefore, the Additional Commissioner lacked jurisdiction to issue the show cause notice.
• The issue of jurisdiction is a question of law and can be raised at any stage, including before the High Court.
• Clause 8(3) of the Amnesty Scheme requires the show cause notice to be issued within one year of the date of declaration, with no provision to condone delays.

The innovativeness in the argument by the assessees was that they raised the issue of jurisdiction before the High Court, which was not raised by them before the Adjudicating Authority.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the Designated Authority had the power and jurisdiction to issue a notice under Clause 8 of the Amnesty Scheme, and whether there was any delegation of the said power from the Commissioner.
2. If the Designated Authority was not empowered to act under Clause 8, whether a fresh notice could be issued by the competent authority (the Commissioner or their delegatee).

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

What weighed in the mind of the Court?

The Supreme Court’s decision was influenced by several factors. The court emphasized the importance of adhering to the specific language of the Amnesty Scheme, particularly the distinction between the powers of the Commissioner and the Designated Authority. The court also considered the conduct of the assessee, noting that they did not raise the issue of jurisdiction until after the limitation period had expired.

The court also considered the need to ensure that the Revenue was not unduly disadvantaged by a procedural lapse. The court noted that the initial show cause notice was issued within the time period specified in the scheme and the assessee had not raised the issue of jurisdiction at the initial stage.

Fact:Law Ratio

Logical Reasoning

Court’s Reasoning

The Supreme Court began by examining the specific language of Clause 8 of the Amnesty Scheme, which clearly vests the power to issue show cause notices with the Commissioner. The Court noted that the Government Order dated April 30, 2014, did not delegate this power to the Additional Commissioner. Instead, the order only empowered the Additional Commissioner to hear and decide applications filed under the scheme.

The Court also considered the distinction between the power to decide applications under Clause 4 and the power to reopen cases under Clause 8. The Court held that the power to decide applications does not automatically include the power to reopen a decided matter.

The Court also considered the conduct of the assessee, noting that they had not raised the issue of jurisdiction until after the limitation period had expired. The Court observed that had the assessee raised the issue earlier, the Commissioner could have cured the defect by issuing a valid notice. The Court cited Grindlays Bank Ltd. vs. Income Tax Officer, Calcutta and Ors. [1980] 2 SCC 191, to support the view that the High Court can issue directions to correct procedural lapses and prevent undue advantage to a party.

The Court stated: “The interests of justice require that any undeserved or unfair advantage gained by a party invoking the jurisdiction of the court, by the mere circumstance that it has initiated a proceeding in the court, must be neutralised.”

The Court also stated: “The power of the High Court under Article 226 of the Constitution, wide and pervasive as it is, should have enabled the High Court to appropriately deal with the situation and issue consequential directions permitting initiation of fresh proceedings, if the Revenue was so inclined.”

The Court concluded that the High Court was wrong in holding that a fresh notice was time-barred. The Court held that the initial show cause notice was issued within the time limit, and the assessee’s failure to object to the jurisdiction of the Additional Commissioner initially meant that the Revenue should be allowed to issue a fresh notice.

The Court further stated: “The respondent-Assessee, therefore, cannot be allowed to take advantage of its own wrong. The courts exercising extraordinary jurisdiction cannot be understood to be helpless but concede to the assessee an undeserved victory over the Revenue.”

Key Takeaways

• Clarity on Authority: The judgment clarifies that the power to issue show cause notices under Clause 8 of the Delhi Tax Compliance Achievement Scheme, 2013, is vested exclusively with the Commissioner, not the Designated Authority.
• Importance of Timely Objections: Assessees must raise objections regarding jurisdiction at the earliest opportunity. Failure to do so may prevent them from taking advantage of procedural lapses later.
• Power of High Courts: High Courts have the power to issue consequential directions to correct procedural errors and ensure that justice is served.
• Revenue’s Ability to Issue Fresh Notices: The Revenue can issue fresh notices if the initial notice was within the time limit and the assessee did not object to jurisdiction initially.

Directions

The Supreme Court directed that the Revenue is allowed to issue a fresh notice to the assessee under Clause 8 of the Amnesty Scheme, if it so desires and is so advised.

Development of Law

The ratio decidendi of this case is that the power to issue show cause notices under Clause 8 of the Delhi Tax Compliance Achievement Scheme, 2013, is vested exclusively with the Commissioner and not the Designated Authority. Further, the court held that the High Court has the power to issue consequential directions to correct procedural errors, and that the Revenue can issue a fresh notice if the initial notice was within the time limit and the assessee did not object to jurisdiction initially. This case clarifies the scope of authority under the amnesty scheme and the importance of raising jurisdictional issues promptly. This is a new position of law because it clarifies the powers of the authorities under the amnesty scheme.

Conclusion

The Supreme Court’s judgment in Commissioner of Trade and Taxes and Ors. vs. M/S Ahluwalia Contracts (India) Ltd. clarifies the jurisdictional aspects of the Delhi Tax Compliance Achievement Scheme, 2013. The Court held that the Additional Commissioner, as the designated authority, did not have the power to issue show cause notices under Clause 8 of the scheme. However, the Court also ruled that the Revenue could issue a fresh notice as the initial notice was within the time limit and the assessee had not raised the issue of jurisdiction at the initial stage. This decision emphasizes the importance of adhering to the specific language of the law and raising objections in a timely manner.