2011 (2) TMI 1314 - HC - VAT and Sales Tax

Whether collection of the alleged tax due from the petitioner by the respondents, cannot be held to be valid in the eye of law? Held that - It is not in dispute that, for assessing the tax liability of the petitioner, a pre-assessment notice ought to have been issued to the petitioner, by the respondents. Thereafter, an assessment order ought to have been passed, after giving an opportunity of hearing to the petitioner, including the permitting of the petitioner to raise its objections. Without following the said procedures, the collection of the alleged tax due from the petitioner by the respondents, cannot be held to be valid in the eye of law. In such circumstances, the respondents should refund the tax amounts, collected by the respondents, from the petitioner, as prayed for by the petitioner, in the present writ petition, within a period of six weeks from the date of receipt of a copy of this order. Accordingly, the writ petition stands allowed.

Issues involved:
1. Assessment order not passed for certain years.
2. Alleged arbitrary tax collection during inspection.
3. Dispute over maintaining correct accounts and tax payments.
4. Validity of tax collection without following proper assessment procedures.
5. Refund of tax amounts collected by the authorities.

Issue 1: Assessment order not passed for certain years
The petitioner, a registered dealer under the Tamil Nadu Value Added Tax Act, filed monthly returns for various assessment years, but the second respondent did not pass necessary orders accepting the returns. The petitioner contended that assessments should be made for each year if returns were filed in time, and revisions could be made if mistakes were found. The court noted that no assessment order had been passed for the relevant years, emphasizing the need for a pre-assessment notice and an opportunity for the petitioner to raise objections before tax collection.

Issue 2: Alleged arbitrary tax collection during inspection
During an inspection, the first respondent collected tax amounts from the petitioner, alleging that certain tax elements were not shown separately in the sales turnover. The petitioner argued that this collection was arbitrary, illegal, and contrary to the provisions of the Act. The court found that the tax collection without a proper assessment order and following due procedures was invalid, ordering the refund of the collected tax amounts within six weeks.

Issue 3: Dispute over maintaining correct accounts and tax payments
The respondents contended that the petitioner received a refund exceeding the input tax credit, had sales omissions, and claimed input tax credit on ineligible capital goods. The petitioner voluntarily paid a sum to rectify these issues. The court noted discrepancies in the petitioner's accounts and emphasized the purpose of the audit to prevent revenue leakage and undue enrichment. It clarified that payment made after accepting defects in accounts cannot be considered under coercion.

Issue 4: Validity of tax collection without following proper assessment procedures
The court highlighted the importance of issuing pre-assessment notices, passing assessment orders, and providing opportunities for objections before tax collection. It deemed the collection of alleged tax due without following these procedures as invalid in the eyes of the law, directing the authorities to refund the tax amounts collected from the petitioners.

Issue 5: Refund of tax amounts collected by the authorities
The court allowed the writ petitions, directing the respondents to refund the tax amounts collected from the petitioners within six weeks. It clarified that the authorities could pass assessment orders for the relevant years after issuing pre-assessment notices and allowing the petitioners to raise objections. The petitioners were not entitled to demand interest payment from the respondents.

This judgment underscores the significance of following proper assessment procedures, issuing pre-assessment notices, and providing opportunities for objections before tax collection to ensure legal validity and fairness in tax-related matters.

← Previous Next →