2017 (10) TMI 1476 - HC - VAT and Sales Tax

Validity of assessment order - assessment year 2004-05 - petitioner received pre-assessment notice, they have not filed objections, therefore the Revenue would have been justified in confirming the proposal in the revision notice - HELD THAT - Apart from that, the impugned assessment order has been passed solely guided by the 'D3' report formulated by the Enforcement Wing Officers. Even in the para wise comments furnished by the learned Special Government Pleader by the respondent vide letter dated 02. 02. 2007, the same stand has been taken stating that the petitioner accepted the suppression before the Enforcement Wing. The Assessing Officer being an independent authority cannot be boundover by a 'D3' proposal. Thus, the impugned assessment order is completely flawed for the above errors. Penalty - HELD THAT - The respondent has levied penalty on the ground of misuse of Form XVII. The petitioner filed an application under Section 55 of the TNGST Act to rectify the assessment order. This has been rejected by order dated 11. 10. 2006, stating that the machineries were not installed. Hence, the misuse of Form XVII occurred only during the assessment year 2004-05 and levy of tax and penalty under Section 23 of the TNGST Act is in accordance with law. The matter is remanded to the respondent for fresh consideration - petition allowed.

Summary

Issues:
Challenging assessment order under TNGST Act for the assessment year 2004-05, revision of turnover based on case study, reliance on 'D3' report by Enforcement Wing Officers for assessment, levy of penalty under Section 23 for misuse of Form XVII.

Analysis:

1. The petitioner, a registered dealer under the TNGST Act, challenged the assessment order for the year 2004-05. The assessment was based on a revision of turnover done by the respondent, primarily relying on a case study of the petitioner's business activities. The revision considered deficit production based on raw material inputs and electricity consumption charges, which the court found to be a flawed basis. The court emphasized that electricity consumption charges alone cannot justify revising turnover, as established by previous court decisions.

2. The assessment order was also criticized for being solely guided by a 'D3' report from the Enforcement Wing Officers. The court noted that the Assessing Officer, as an independent authority, should not be bound by such a report. The assessment order's reliance on the petitioner's acceptance of suppression before the Enforcement Wing was deemed erroneous. The court highlighted that the 'D3' proposal cannot be the sole basis for completing the assessment, pointing out the flawed nature of the assessment order due to these errors.

3. Regarding the levy of penalty under Section 23 for the misuse of Form XVII, the respondent imposed the penalty citing the misuse during the assessment year 2004-05. The petitioner's application to rectify the assessment order was rejected on the grounds of machinery not being installed. However, the court found that the misuse of Form XVII alone cannot justify the penalty under Section 23. Referring to a previous judgment, the court emphasized that the Assessing Officer is a quasi-judicial authority not bound by higher authorities' instructions. The court concluded that the defects in the assessment order warranted setting it aside.

4. As a result, the court allowed the writ petition, setting aside the impugned order and remanding the matter to the respondent for fresh consideration. The petitioner was directed to file objections to the revision notice within 30 days, followed by a personal hearing for a new assessment in accordance with the law. The court also specified that 50% of the disputed tax remitted by the petitioner should abide by the fresh assessment orders. No costs were awarded, and the connected miscellaneous petition was closed.