2014 (4) TMI 494 - HC - VAT and Sales Tax

Whether tribunal erred despite the fact that the principal order under challenge was a notice u/s 44 and not the assessment order Jurisdiction of Tribunal Notice for recovery u/s 44 of Gujarat VAT Act Opportunity of hearing - Held that - It is undisputed position that before issuing recovery notice dated 25.5.2009 purportedly in exercise of powers u/s 44 no assessment adjudication or final order quantifying the liability of the assessee was passed by AC - Thus notice for recovery dated 25.5.2009 was a unilateral ex-parte action on his part without any hearing or opportunity of hearing given to the assessee - Section 44 is only a mode of recovery and not the power of authority to pass any order deciding the liability of an assessee for payment of tax or any other monies due to the Government under the VAT Act - Such recovery therefore necessarily shall have to be provided by such order as may be passed by the competent authority in terms of provisions of VAT Act - Only once the demand is quantified the question of recovering either through the special mode as provided in section 44 or through any other mode under the Act would arise. When admittedly no order of assessment or any other order of quantification of the assessee s liability was passed straightway ordering recovery without any opportunity of hearing to the assessee was wholly not permissible - Tribunal s final conclusion that notice of recovery and the appellate order confirming such notice must be quashed was perfectly in order - However while doing so the tribunal could not have gone into the validity of merits and de-merits of rival stands - Such a stage had not yet arisen - Tribunal committed an error in striking down the Government demand holding that the assessee was entitled to retain all export benefits without curtailment of VAT incentive limit - This is not to suggest that on merits this Court disagrees with the view of the tribunal This is only to suggest that the tribunal could have refrained from entering into such arena when the stage of doing so had not yet arrived - To this limited extent thus appeal of the Revenue would be allowed Decided partly in favour of Revenue.

Summary

Issues:
1. Whether the tribunal erred in adjudicating the issue on merit despite the principal order being a notice under section 44 and not the assessment order?

Analysis:

Issue 1:
The appeal before the High Court challenged an order of the Value Added Tax Tribunal dated 30.4.2010. The respondent company was engaged in manufacturing and exporting goods, availing sales tax incentives declared by the State Government. The dispute arose regarding the refund of input tax credit related to exported goods, with authorities suspecting the company of availing benefits not entitled to. The Assistant Commissioner of Value Added Tax issued a notice under section 44 of the VAT Act, demanding a significant sum from the company. The Commissioner upheld the demand, leading the company to appeal to the VAT tribunal. The tribunal allowed the appeal, holding that the export benefits could not be used to limit the VAT incentive. The Revenue challenged the tribunal's authority to decide on the issue's merits, arguing that the tribunal should not have examined the matter on its substance as the challenge was to a notice under section 44, not an assessment order.

Analysis:
The High Court found that the notice under section 44 was a unilateral action without any prior assessment or final order quantifying the company's liability. Section 45 of the VAT Act allows provisional attachment for protecting government revenue, with a limited duration. On the other hand, section 44 provides for a special mode of recovery, not for deciding an assessee's liability. Since no assessment order quantifying the liability was passed, the recovery notice was impermissible. The tribunal's decision to quash the recovery notice was upheld. However, the High Court noted that the tribunal erred in delving into the merits of the case prematurely. The tribunal should have refrained from deciding on the validity of the rival stands at that stage. The High Court allowed the Revenue's appeal to the limited extent that the tribunal should not have delved into the merits prematurely. The High Court directed that the respondent company would be entitled to a refund collected under coercion pending appeal, and the tribunal's observations on the retention of export benefits without curtailment of VAT incentive limit would be nullified. The Tax Appeal and civil application were disposed of accordingly.