2012 (12) TMI 955 - HC - VAT and Sales Tax

Reassessment proceedings - goods clandestinely removed - Held that - All that the assessing officer did was to rely on the show-cause notice issued by the Excise Department. Nowhere did he conclude that there was a case of clandestine removal of goods without payment of tax under the VAT Act. Merely because the Excise Department issued a show-cause notice, that cannot be a ground to presume and conclude that there was evasion of excise duty implying thereby that there was also evasion of tax under the VAT Act. It is not even the case of the Department that such show-cause notice proceedings has culminated into any final order against the petitioner. Reassessment order cannot be sustained and is accordingly quashed. When the order is ex facie illegal and wholly untenable in law, mere availability of alternative remedy would not preclude us from interfering at this stage in a writ petition.

Issues:
1. Reopening of assessment for the financial year 2006-07 based on excise raid findings.
2. Validity of making additions for VAT based on excise department's show-cause notice.
3. Justification of the assessing officer's actions in reassessment proceedings.
4. Legality of passing a final order of assessment solely on the basis of the excise department's show-cause notice.

Analysis:

1. The petitioner, a registered dealer under the Gujarat Value Added Tax Act, had its assessment for the financial year 2006-07 reopened due to findings from an excise raid conducted by the Excise Department. The raid revealed alleged suppression of sales leading to evasion of excise duty, prompting the Sales Tax Department to reopen the assessment.

2. The key contention was whether the Sales Tax Department could make additions for VAT based solely on a show-cause notice issued by the Excise Department without conducting further independent inquiry. The petitioner challenged the reassessment on the grounds that additions were made only on the basis of the excise department's notice, which was argued to be impermissible.

3. The assessing officer's actions in the reassessment proceedings were questioned for relying solely on the show-cause notice without conducting an independent evaluation of the alleged evasion. It was highlighted that the assessing officer did not establish a direct link between the excise duty evasion and VAT evasion, raising concerns about the validity of the reassessment process.

4. The final order of assessment, primarily based on the excise department's show-cause notice, was deemed illegal and unsustainable in law. The court found that the assessing officer had acted mechanically without independently verifying the excise raid findings, leading to the quashing of the order. The judgment emphasized that the mere availability of an alternative remedy did not prevent the court from intervening in the writ petition due to the order's illegality.

Overall, the court ruled in favor of the petitioner, quashing the reassessment order for the financial year 2006-07. The judgment highlighted the importance of conducting a thorough independent assessment before making additions for VAT based on findings from other departments, emphasizing the need for proper justification and legal basis for reassessment decisions.

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