2008 (9) TMI 897 - HC - VAT and Sales Tax

Order of TNGST assessment - Held that - The assessment order for the assessment year 2004-05 is passed arbitrarily and without jurisdiction and is liable to be dismissed without unnecessarily subjecting the appellant to the onerous and lengthy appellate proceedings, as held by the Constitution Bench of the Supreme Court in the case of Calcutta Discount Co. Ltd. 1960 (11) TMI 8 - SUPREME Court . The assessment order, which is the subject-matter of Writ Petition No. 2392 of 2008(1), is hereby set aside and the matter is remitted back to the assessing officer to reframe the assessment by giving an opportunity to the appellant in accordance with law. For this purpose, the appellant is hereby directed to appear before the assessing officer on October 23, 2008 with relevant materials. The assessing officer shall proceed with, to frame the assessment, in accordance with law without being influenced by the D3 proposals of the Investigating Wing Officers.

Issues Involved:
1. Jurisdiction of the assessing officer.
2. Violation of principles of natural justice.
3. Legitimacy of second-sale exemption claims.
4. Availability and efficacy of alternative remedies.
5. Arbitrary imposition of tax and penalties.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Officer:
The appellant contended that the assessment order for the year 2004-05 was ex facie illegal, exceeding the jurisdiction vested in the assessing officer, and constituted an abuse of process of law. The court noted that when an assessment order is passed without jurisdiction, it can be challenged under Article 226 of the Constitution of India. The appellant argued that the assessing officer had no jurisdiction to treat the transactions as first sales since the goods were purchased from registered dealers who had already been assessed and granted second-sale exemptions.

2. Violation of Principles of Natural Justice:
The appellant claimed that the assessment was passed in total violation of principles of natural justice as it was based on proposals made by the Enforcement Wing Officers without proper consideration of the appellant's objections. The court observed that generally, assessments should be based on books of accounts and supporting documents. The appellant had provided necessary details and documents to support their claim for second-sale exemption, which were not adequately considered by the assessing officer.

3. Legitimacy of Second-Sale Exemption Claims:
The appellant claimed second-sale exemption on iron and steel, which are declared goods taxable only at the first point of sale within Tamil Nadu. The court found that the appellant had purchased the goods from three registered dealers who were assessed and granted second-sale exemptions for the same transactions. The court held that the appellant had discharged their initial burden by providing sale/purchase bills and other documentary evidence, and the department failed to verify the accounts of the selling dealers properly.

4. Availability and Efficacy of Alternative Remedies:
The respondent argued that the appellant should have pursued the statutory appeal remedy. The court, however, noted that the rule of alternative remedy is a self-imposed limitation and not a jurisdictional bar. The court can entertain a writ petition if the assessment order is palpably arbitrary or without jurisdiction. The court cited several precedents affirming that if an order is passed without jurisdiction, the High Court can intervene despite the availability of alternative remedies.

5. Arbitrary Imposition of Tax and Penalties:
The court found that the reasons given by the assessing officer for disallowing the second-sale exemption were based on surmises and not supported by cogent materials. The assessment order was passed arbitrarily, imposing a huge amount of tax, additional tax, and penalties without proper justification. The court noted that the appellant cannot be treated as the first seller of the declared goods, which had already been subjected to tax at an earlier stage.

Conclusion:
The court concluded that the assessment order for the year 2004-05 was passed arbitrarily and without jurisdiction. The order was set aside, and the matter was remitted back to the assessing officer to reframe the assessment after giving the appellant an opportunity to present relevant materials. The assessing officer was directed to proceed in accordance with the law, uninfluenced by the proposals of the Investigating Wing Officers. The appeal was allowed with no costs, and the connected miscellaneous petition was closed.

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