2017 (11) TMI 1656 - HC - VAT and Sales Tax

Jurisdiction - validity of the VAT audit, conducted by the officials of the Department based upon the authorization given by the second respondent/ The Joint Commissioner (CT), Enforcement-I, Chennai - Held that - With regard to the jurisdiction of the second respondent to authorize VAT Audit, the question arose for consideration before this Court in the case of M/s. Original Vel Sporting News Vs. The Joint Commissioner (CT) 2017 (7) TMI 1151 - MADRAS HIGH COURT , where it was held that the Statute prescribes that the Commissioner alone can authorize VAT Audit, the Joint Commissioner viz, the second respondent would have no jurisdiction to issue such authorization. The impugned VAT Audit proceedings dated 16.05.2014 are set aside - petition allowed - decided in favor of petitioner.

Summary

Issues: Validity of VAT audit based on authorization by Joint Commissioner under TNVAT Act.

The petitioner, a registered dealer under the TNVAT Act, challenged the validity of a VAT audit conducted by officials based on authorization from the Joint Commissioner. The petitioner contended that as per Section 64(4) of the TNVAT Act, only an Officer not below the rank of Deputy Commercial Tax Officer can conduct such audits. Citing a Supreme Court decision [(2008) 9 SCC 177], the petitioner argued that statutory provisions must be strictly followed. Additionally, the petitioner relied on circular instructions from 2014, stating that an assessee cannot be audited a second time if already audited after 01.01.2007. The jurisdiction of the Joint Commissioner to authorize the audit was questioned, referencing a previous case where it was held that only the Commissioner can authorize VAT audits.

The court noted that statutory provisions must be adhered to strictly. Referring to the previous case law, the court emphasized that only the Commissioner, not the Joint Commissioner, has the authority to authorize VAT audits. The court dismissed the petitioner's interpretation of the 2014 circular, stating that it is merely recommendatory and does not carry the force of law. The court held that if the Commissioner deems an audit necessary, there should be no restriction on exercising that power. Consequently, the court allowed the writ petition, setting aside the VAT audit proceedings and revision notices, directing the respondents to conduct the audit in accordance with Section 64(4) of the TNVAT Act, 2006.