2016 (7) TMI 1430 - HC - VAT and Sales Tax

Principles of natural justice - Input tax credit - Bogus purchases - absence of proof for inward movement of goods - contravention of Section 19(13) & 19(16) of the TNVAT Act - Held that - the assessment has been completed in a most cryptic and arbitrary manner. None of the contentions raised by the petitioner has been gone into, in fact, when the respondent has recorded that documents relating to transport of goods by M/s.Thejo Engineering were produced for verification, the respondent arbitrarily stated that the petitioner have not contested the matter with documentary evidences for Transport of goods. It is rather surprising as to how the respondent would have passed such an order, when she has recorded that transport documents were produced for verification. Thus, it is evidently clear that it is a case of total non application of mind on the part of the respondent. That apart, the impugned assessment order has been passed on the same day, when the petitioner submitted his objections dated 15.06.2016. This itself would indicate that the respondent had pre-judged the issue and the action in calling for objection is reduced to an empty formality. Hence, the notice dated 27.05.2016 as well as the impugned assessment order dated 15.06.2016 are held to be bad in law. Petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to assessment order for the year 2014-2015 based on alleged bogus purchases and input tax credit availed.

Analysis:
The petitioner, a dealer in raw rubber sheets, challenged the assessment order dated 15.06.2016 for the year 2014-2015. The respondent raised concerns regarding purchases from M/s.Grown Marketing and M/s.A.K.Traders, alleging these transactions to be bogus. The respondent accused the petitioner of conspiring with bill traders, leading to cheating the government and loss of revenue. The respondent proposed to reverse the input tax credit claimed by the petitioner and demanded payment of a substantial sum along with interest, with a proposal to levy a penalty. The petitioner submitted objections, asserting the genuineness of the transactions and providing evidence of bank transactions and delivery of goods to other entities. The petitioner requested time to trace M/s.Grown Marketing, who had absconded. Despite the petitioner's detailed objections and evidence, the respondent completed the assessment in a cryptic and arbitrary manner, failing to consider the petitioner's contentions and evidence properly.

The assessment order was found to be arbitrary and lacking in proper consideration of the petitioner's objections and evidence. The respondent's conclusion was based on a superficial analysis, ignoring crucial documentary evidence provided by the petitioner. The respondent failed to provide a copy of the communication from the Commercial Tax Officer or consider the petitioner's request for time to trace the absconding dealer. The assessment process lacked due diligence and failed to follow proper procedures by not gathering information from relevant parties involved in the transactions. The notice issued to the petitioner was deemed defective, as it pre-judged the matter and directed payment without fair consideration of the petitioner's objections. The assessment order was passed hastily on the same day the petitioner submitted objections, indicating a lack of impartiality and a predetermined decision-making process.

The High Court allowed the Writ Petition, quashing the impugned assessment order dated 15.06.2016 and the pre-revision notice dated 27.05.2016. The Court held that both the notice and the assessment order were flawed in law, emphasizing the importance of following proper procedures and giving due consideration to the submissions and evidence provided by the petitioner. The respondent was given the opportunity to initiate fresh action in accordance with the law, highlighting the need for a fair and thorough assessment process to uphold the principles of justice and legality in tax matters.