Harvinder Singh v. UOI & Ors.

2. The petitioners challenge the re-assessment notice on the ground that the mere introduction of a new provision - albeit with retrospective QiiQcX.per se does not authorize the Revenue to issue the / \ 2017:DHC:8233-DB re-assessment notices. The petitioners had claimed and were granted benefits under Section 8QHHC(3) of the Act, in the original assessments that were framed under Section 143(3). By virtue of the Taxation Laws (Second Amendment) Act, 2005, which is given retrospective effect from 01.04.1998, two provisos were added to section 80HHC(3). They arereproduced below: ".... Provided also that in the case ofan assessee having export turnover exceeding rupees ten crores during the previous year, the profits computed under clause (a) or clause (b) or clause (c) of this sub-section or after giving effect to the first proviso, as the case may be, shall befurther increased by the amount which bears to ninety per cent ofany sum referred to in clause (Hid), of section 28, the same proportion as the export turnover bears to the total turnover ofthe business carried on by the assessee, ifthe assessee has necessary andsufficient evidence toprove that, - (a) he had anoption to choose either the duty drawback or the Duty Entitlement Pass Book Scheme, being the DutyRemission Scheme; and (b) the rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the Duty Entitlement Pass Book Scheme, beingtheDuty Remission Scheme: Provided also that in the case of,an assessee having export turnover exceeding rupees ten crores during the previous year, the profits computed under clause (a) or clause (b) or clause (c) of this sub-section or after giving effect to the first proviso, as the case may be, shall befurther increased by the amount which bears to ninety per cent ofany sum referred to in clause (Hie) of section 28, the same proportion as the export turnover bears to the total turnover ofthe business carried on by theassessee, ifthe assessee has necessary and sufficient evidence to prove that, - (a) he had an option to choose either the duty drawback or the Duty Fee Replenishment Certificate, being the Duty Remission Scheme; and (b) the rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the Duty Free Replenishment Certificate, being the Duty RernissionScheme. Explanation. - For thepurposes ofthis clause, "rate of credit allowable" means the rate of credit allowable under the Duty Free Replenishment Certificate, being the Duty Remission Scheme calculated in the manner,as may be notified by the Central Government....."

3. In essence, the effect of these amendments was that for an assessee to claim eligibility to the benefit under the provision, in addition to the existing conditions, it had to produce sufficient evidence provingthat it had eitherthe optionto choseDutyDrawback Scheme or Duty Entitlement Pass Book Scheme (DEPB) entitlement with a further condition that the rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the DEPB Scheme being the Duty Remission Scheme, At the time when the petitioners had entered into transactions and claimed and were granted benefits under Section 80HHB this condition did not exist. The retrospective introduction of these provisions, as it were, led to the re-assessment notice.

4. The Gujarat High Court in its judgment reported as M/s Avani Exports & Am. vs CIT (2012) 348 ITR 391 (Guj.) held that the retrospective effect given to these provisions was unsustainable. The Court held as follows: " 26. On consideration ofthe entire materials on record, we, therefore, find substance in the contention of the learned counsel for the petitioners that the impugned amendment is violativefor its retrospective operation in order to overcome the decision of the Tribunal, and at the same time, for depriving the benefit earlier granted to a class of the assessees whose assessments were still pending although such benefit will be available to the assessees whose assessments have already been concluded. In other words, in this type of substantive amendment, retrospective operation can be given only if it isfor the benefit of the assessee but not in a case where it affects evenafewer section ofthe assessees.

27. We, accordingly, quash the impugnedamendment only, to this extent that the operation of the said section could be given effect from the ate of amendment and not in respect of earlier assessment years of the assessees whose export turnover is above Rs. 10 crore. In other words, the retrospective amendment should not be detrimental to any of the assessees "

5. The Supreme Court confirmed the Gujarat High Court's judgment to the extent itheld that the retrospectivity was invalid in its judgment dated 30.03.2015 passed in Special Leave to Appeal (C) ^ No. 9273/2013, titled: CITS &Anr. vs M/s Avani Exports &Anr. At the same time the Court further modified the Gujarat High Court's ruling to the following extent: "... Having seen the twin conditions and since 80HHC benefit is not available after 1.4.05, we are satisfied that cases of exporters having a turnover below and those above 10 cr. should be treated similarly. This order is in substitution of the judgment in appeal..."

6. The Revenue contends that the re-assessment notice in this case issued subsequent to the amendments, should not be interfered with. It relies upon two circumstances - first that the original assessment was framed, under Section 143(3) and, secondly, that the explanation (ii)(c) to Section 147 would apply in the present case. But for the reassessment notice they would be under-assessed.

7. The Taxation Laws (Second Amendment) Act was enacted in 2005 and sought to be brought into force w.e.f 01.04.1998. The present case concerns AY 2001-02. Clearly, therefore, the period for which the re-assessment notice was issued, falls within the mischief of the Gujarat High Court's judgment in that retrospective effect of the amendment which was the only basis for the impugned re assessment notice, no longer exists. In other words, the declaration by the Gujarat High Court, as confirmed by the Supreme Court that the explanations to section 80HHC(3) would be prospective i.e. w.e.f 01.04.2005, would mean that there was no such condition when the assessee filed its return.

8. For this short reason itself the re-assessment notices carmot be sustained. They are hereby quashed. The writ petitions are allowed.

S. RAVINDRA BHAT, J

NAJMIWAZIRI, J