2015 (3) TMI 1171 - HC - VAT and Sales Tax

Eligibility of notice - Held that - Interference at the show cause notice stage should be rare and not in a routine manner. Mere assertion by the petitioner that notice was without jurisdiction would not suffice and it should be prima facie established to be so. Further, where only factual adjudication is necessary, interference should not be done by the Courts. In the case on hand, it is only a show cause notice. It may or may not be correct that for breach of the provisions of the sellers, action should be initiated only against those persons or against the petitioner. But it is for the petitioner to submit his explanation before the authority concerned to the show cause notices and if the same is established, the authority will have to consider the case of the petitioner and pass appropriate orders. Since factual adjudication is required in the case of the petitioner, this Court is not inclined to interfere with the show cause notices. However, it is open to the petitioner to submit his explanation/objections within a period of 15 days from the date of receipt of a copy of this order and if the respondent is not satisfied with the explanations, the petitioner shall be given an opportunity of being personally heard and put forth his submissions to clarify the same.

Summary

Issues Involved:
1. Jurisdiction of the respondent to issue impugned notices.
2. Violation of principles of natural justice.
3. Applicability of previous judicial decisions to the present case.
4. Requirement for factual adjudication before court interference.

Detailed Analysis:

1. Jurisdiction of the respondent to issue impugned notices:
The petitioner contends that the impugned notices lack jurisdiction as the alleged breach pertains to the sellers, not the petitioner. The petitioner argues that any proceedings against them are unsustainable and bad for want of jurisdiction. This argument is supported by the decision in Tvl. Raymix Concrete India Pvt. Ltd. vs. Assistant Commissioner (CT), where it was held that the liability for non-payment of tax by the selling dealer should not be imposed on the purchasing dealer who has shown proof of tax payment on purchases made.

2. Violation of principles of natural justice:
The petitioner asserts that the impugned notices violate the principles of natural justice as the notices were issued without proper jurisdiction and contrary to established judicial precedents. The decision in M/s New Consolidated Construction Co. Ltd. vs. The Assistant Commissioner (CT) supports this view, emphasizing that the reversal of Input Tax Credit based solely on the vendor's verification is improper and violates natural justice principles.

3. Applicability of previous judicial decisions to the present case:
The petitioner relies on several judicial decisions to support their case:
- Tvl. Raymix Concrete India Pvt. Ltd. vs. Assistant Commissioner (CT): This decision asserts that the liability for unpaid tax by the selling dealer should not be transferred to the purchasing dealer.
- Althaf Shoes Pvt Ltd. vs. Assistant Commissioner (CT): It was held that the claim of the purchasing dealer cannot be denied if they have complied with the requirements, even if the Revenue has not assessed the vendor.
- Sri Vinayaga Agencies vs. Assistant Commissioner (CT): Similar to the above, this decision states that the liability for unpaid tax lies with the selling dealer, not the purchasing dealer.
- Hindustan Poles Corporation vs. Commissioner of Central Excise: This Supreme Court decision emphasizes that show cause notices should not be issued without proper application of mind and should consider settled legal positions.
- Union of India vs. Vicco Laboratories: This decision acknowledges that while courts should generally not interfere at the show-cause notice stage, exceptions exist where notices are issued without jurisdiction or in abuse of process.
- East India Commercial Company vs. Collector of Customs: It was held that authorities cannot ignore the law declared by higher courts and initiate proceedings contrary to such law.
- Raza Textiles Ltd. vs. Income Tax Officer: This decision asserts that a quasi-judicial authority cannot confer jurisdiction on itself by wrongly deciding a jurisdictional fact.

4. Requirement for factual adjudication before court interference:
The court notes that interference at the show-cause notice stage should be rare and not routine. It emphasizes that mere assertions of lack of jurisdiction are insufficient without prima facie evidence. The court concludes that factual adjudication is necessary in this case, and the petitioner should submit their explanation to the respondent. If the respondent is unsatisfied, the petitioner should be given an opportunity for a personal hearing to clarify their submissions.

Conclusion:
The court disposes of the writ petitions, allowing the petitioner to submit their explanation/objections within 15 days. If the respondent remains unsatisfied, the petitioner shall be given an opportunity for a personal hearing. The connected miscellaneous petitions are closed. No costs are awarded.