2009 (10) TMI 832 - AT - VAT and Sales Tax

Issues Involved:
1. Legality of the suo motu revision proceeding.
2. Validity of the certificate of settlement revocation.
3. Compliance with principles of justice and fair play.
4. Proper service of notice and opportunity of hearing.
5. Authority and jurisdiction of the officers involved.

Analysis:

1. Legality of the suo motu revision proceeding:
The petitioner-company was assessed for tax liability for four quarters ending on March 31, 2000, and the tax, interest, and penalty were paid as demanded. However, the assessment order dated April 3, 2002, was revised suo motu by the Assistant Commissioner of Sales Tax on March 28, 2008, without proper notice to the petitioner. The suo motu revision was initiated based on a Bureau of Investigation report alleging tax evasion due to misclassification of items. The suo motu revision was deemed premature and unauthorized as it was initiated while the certificate of settlement was still in force, violating Section 9 of the SOD Act, which bars reopening settled cases.

2. Validity of the certificate of settlement revocation:
The Deputy Commissioner revoked the certificate of settlement ex parte on March 24, 2008, without recording satisfaction about the service of notice on the petitioner. The revocation was based on vague and indefinite reasons, failing to provide specific details of the alleged tax evasion. The revocation process did not comply with Section 12(1) of the SOD Act, which requires a reasonable opportunity of hearing and recording reasons in writing. The Tribunal set aside the revocation order but allowed the authority to proceed afresh, giving the petitioner an opportunity to be heard.

3. Compliance with principles of justice and fair play:
The Tribunal emphasized that the proceedings for revocation of the certificate of settlement and the suo motu revision must adhere to principles of justice and fair play. The designated authority failed to provide reasonable opportunity of hearing to the petitioner, and the suo motu revision was initiated without proper consideration and independent opinion by the revisional authority. The Tribunal highlighted that mechanical initiation of proceedings without due process is impermissible.

4. Proper service of notice and opportunity of hearing:
The Tribunal found that the notice for the revocation proceeding was not properly served on the petitioner, and the ex parte order was passed on the very first day of hearing. The petitioner was not given a reasonable opportunity to present their case, and the notice lacked specific details, making it impossible for the petitioner to understand the basis of the accusations. The Tribunal quashed the proceedings due to the denial of a reasonable opportunity of hearing.

5. Authority and jurisdiction of the officers involved:
The Assistant Commissioner, who conducted the suo motu revision, was not authorized to do so. The initiation and disposal of the suo motu revision by an unauthorized officer rendered the proceedings invalid. The Tribunal noted that the Assistant Commissioner acted under the direction of the Deputy Commissioner due to the impending bar on suo motu revision but emphasized that compliance with procedural rules is essential, regardless of time constraints.

Judgment:
(a) The order revoking the certificate of settlement dated March 24, 2008, was set aside, with liberty to proceed afresh after giving the petitioner a reasonable opportunity of hearing.
(b) The suo motu revisional proceeding was quashed as premature and unauthorized, and all related orders, including the final order dated March 28, 2008, were set aside.
(c) The impugned tax recovery proceeding was quashed and set aside.
The application was allowed with no order as to costs.

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