2021 (3) TMI 1294 - HC - VAT and Sales Tax

Reversal of input tax credit - petitioner had been selling goods by offering quantity discount to their customers ultimately resulting in sale price being lessor than their purchase price - HELD THAT - When this Court wanted to know the basis on which the pre-revision notices have been issued Mr.Kumaresen the present Commercial Tax Officer Virudhungar read out from the statement given by the petitioner herein before the enforcement wing officials during inspection. While such a statement may not be binding on the petitioner herein that can certainly furnish cause of action for initiating proceedings under Section 27 of the Tamil Nadu Value Added Tax Act - When the pre-revision notice does not contain the relevant particulars it would be difficult for the assessee to appropriately respond. However there is considerable merit in the stand of the respondent that at the stage of show cause notice the Writ Court should be highly reluctant to interfere. Therefore even while declining to interfere with the impugned notices the respondent is directed to issue a supplemental notice enclosing the relevant particulars. The petitioner has to necessarily offer his explanation in time without entangling the respondent in further litigation. The respondent will consider the objections of the petitioner in the light of the aforesaid circular dated 04.11.2013 and the relevant provisions of law. If the respondent is not satisfied personal hearing will be granted and thereafter orders in accordance with law will be passed - petition disposed off.

Summary

Issues:
Challenge to pre-revision notices for assessment years 2011-12 to 2014-15 based on alleged discrepancies in input tax credit due to quantity discounts offered to customers.

Analysis:
The petitioner, M/s.V.R.Muthu and Bros, filed writ petitions challenging pre-revision notices issued by the respondent following an inspection by Enforcement Wing Officials. The respondent proposed to reverse input tax credit by 15% due to alleged sale price being less than the purchase price after offering quantity discounts. The petitioner argued that the notices did not align with a circular from the Commissioner of Commercial Taxes dated 04.11.2013, which was previously considered in a Division Bench order. The circular outlined three steps for identifying cases of accumulated ITC due to lower sale prices, requiring verification of purchase and sale prices per unit, and reversing excess ITC exceeding output tax.

The Commercial Tax Officer read out a statement given by the petitioner during inspection, which could serve as a cause of action under Section 27 of the Tamil Nadu Value Added Tax Act. However, the pre-revision notices lacked relevant particulars, making it challenging for the assessee to respond effectively. Despite reluctance to interfere at the show cause notice stage, the Court directed the respondent to issue a supplemental notice with necessary details for the petitioner to provide a timely explanation. The respondent was instructed to consider the objections in line with the 2013 circular and relevant laws, with provision for a personal hearing if needed before passing orders.

In conclusion, the writ petitions were disposed of without costs, and connected miscellaneous petitions were closed. The judgment emphasized the importance of providing relevant particulars in notices to enable proper responses from the affected parties, ensuring a fair and transparent process in tax assessment matters.