2016 (1) TMI 1090 - HC - VAT and Sales Tax

Invokation of power under Section 60(2)(f) of the Delhi Value Added Tax Act, 2004 - Business premises of the petitioner sealed on non production of accounts and other documents at the time of inspection - Held that - the decision to invoke the powers under Section 60(2)(f) of the Act was taken in undue haste virtually in continuation of invocation of the power under Section 59 of the Act to search the premises for information and documents. Sufficient opportunity was not afforded to the Petitioner to explain why, if at all, it was unable to produce the documents and information sought by the Department. Also, there could not be an automatic presumption that since the Petitioner failed to produce the documents at once it was attempting to avoid or evade tax or was concealing its tax liability. Therefore, the premises of petitioner be de-sealed. - Decided in favour of petitioner

Summary

Issues:
1. Invocation of powers under Section 60 of the Delhi Value Added Tax Act, 2004.
2. Legality of sealing business premises based on failure to produce documents.
3. Jurisdictional requirements under Section 60(2)(f) of the Act.
4. Adequate opportunity for the petitioner to explain non-production of documents.
5. Automatic presumption of tax evasion based on non-production of documents.
6. De-sealing of business premises and production of records by the petitioner.

Analysis:
The judgment by the Delhi High Court, delivered by Justice S.Muralidhar and Justice Vibhu Bakru, addresses the issues surrounding the invocation of powers under Section 60 of the Delhi Value Added Tax Act, 2004. The court scrutinized the legality of sealing business premises by the Commissioner, Trade and Taxes, solely based on the petitioner's failure to produce documents during an inspection. The court emphasized the jurisdictional requirements under Section 60(2)(f) of the Act, highlighting the need for the Commissioner to have reasonable grounds to believe tax avoidance or evasion. The judgment criticized the mechanical exercise of power by the Commissioner, noting that the statutory requirement was not satisfied merely by the failure to produce documents.

Furthermore, the court noted that the decision to invoke powers under Section 60(2)(f) was hastily made without affording the petitioner adequate opportunity to explain the non-production of documents. The judgment emphasized that the mere failure to produce documents should not automatically lead to a presumption of tax evasion. Consequently, the court directed the immediate de-sealing of the petitioner's business premises, ensuring that the process is completed by a specified date in the presence of the petitioner's authorized representative.

Moreover, the judgment instructed the petitioner to appear before the Assistant Commissioner to produce the necessary accounts and books as required by law. The court highlighted the petitioner's willingness to cooperate by producing records as directed. Ultimately, the petition and the pending application were disposed of based on the court's directives, ensuring compliance with legal procedures and safeguarding the petitioner's rights in the tax matter.