Review Powers Under Repealed Act Invalid, Says Punjab and Haryana High Court in Nestle Tax Case

The Punjab and Haryana High Court has quashed the retrospective tax review against Nestle India Ltd., setting aside the demands imposed by the State of Punjab. The court, in its judgment, emphasized that the assessment of Rs. 1.48 crore was impermissibly conducted under the repealed Punjab General Sales Tax Act, 1948, underscoring that the review powers exercised by the Assessing Authority were beyond its jurisdiction.

The case pertains to the assessment year 2002-03, where initially, on December 10, 2007, the Assessing Authority-cum-AETC Moga declared that Nestle India Ltd. was entitled to a tax refund of Rs. 4,18,358 under the Punjab General Sales Tax Act, 1948 (referred to as “the Act of 1948”). However, this decision was later reviewed by the same authority, resulting in a revised tax liability of Rs. 1,48,03,499. Nestle appealed this decision, leading to a series of legal proceedings that culminated in the current judgment.

The High Court critically examined whether the review jurisdiction was validly exercised by the Assessing Authority under the repealed Act of 1948. The court noted, “The review of Annexure A-1, as made by the Assessing Authority-cum-Assistant Excise and Taxation Commissioner, Moga, whereby the earlier made exculpation towards tax liability (Annexure A-1) became quashed and set aside, thus was an impermissibly exercised review jurisdiction”​​.

The court highlighted that the Act of 2005, which repealed the Act of 1948, contained specific provisions protecting ongoing assessments and proceedings initiated under the old law. However, the court pointed out, “since in the repealed Act of 1948 there is no explicitly conferred review jurisdiction upon the authorities constituted thereunders, thereby the review of Annexure A-1 but naturally was impermissible and was also without any jurisdiction”​​.

Addressing the issue of timeliness, the court noted that the assessment was framed beyond the prescribed period. According to Section 11(3) of the Act of 1948, assessments must be completed within three years from the last date prescribed for filing the return. The court observed, “the prescribed date for filing of the return for the said year expired on 30.04.2006. However, the assessment... became much belatedly therefrom, framed on 10.12.2007”​​.

The Punjab and Haryana High Court's dismissal of the tax review against Nestle India Ltd. underscores the critical importance of jurisdictional boundaries and statutory limitations. By invalidating the retrospective assessment, the judgment reaffirms the principle that authorities must operate within the legal frameworks established by the applicable laws. This decision is expected to have significant implications for similar cases, providing clarity on the limits of review powers under repealed legislation.

Date of Decision: 11 July 2024