2016 (4) TMI 320 - HC - VAT and Sales Tax

Validity of survey conducted in the premises of petitioner - Held that - it is now evident from the report filed by the CVAT that the decision to survey the premises of the Petitioner was based on a study of the profile in the computer system including indicators like High GTO- Low Tax, frequent change in returns etc. There were only oral discussions between the officers concerned without any written approval of the Commissioner on file. This by itself is sufficient for the Court to proceed to award exemplary costs in favour of the Petitioner since there could be no manner of doubt that there was a plain abuse of the process of law by the officers concerned of the DT&T. - Adjourned for another date

Summary

Issues:
1. Lack of proper documentation and approval for survey and sealing operations.
2. Contradictions in statements made before the Court by different officers.
3. Violations of law in delegation of powers and authorization.
4. Lack of corrective mechanisms for identified violations.
5. Need for accountability and disciplinary action for officers acting in violation of the law.

Issue 1: Lack of proper documentation and approval for survey and sealing operations
The judgment reveals that the decision to conduct a survey was made without creating any official files, maintaining secrecy of the operation. The report by the Commissioner of Value Added Tax (CVAT) highlighted that no files were created before the survey, and the grounds for the survey were not documented. The report also pointed out that necessary approvals were not obtained, and the authority to exercise powers under the DVAT Act was not issued in the prescribed form. The Court observed that there was a clear lack of proper documentation and approval procedures for the survey and sealing operations, indicating an abuse of the legal process by the officers involved.

Issue 2: Contradictions in statements made before the Court
The judgment identified contradictions in the statements made before the Court by different officers. It was noted that a file mentioned in an earlier affidavit could not be traced, but the subsequent report by CVAT revealed that there was no file in the first place. This discrepancy raised questions about the accuracy of the information provided to the Court by the officers. The Court emphasized the need for clarity and consistency in the statements presented before the Court to ensure transparency and accountability.

Issue 3: Violations of law in delegation of powers and authorization
The judgment highlighted violations of the law in the delegation of powers and authorization processes. The report by CVAT pointed out that deployment orders were issued without a legal basis, authorizing officers below the required rank to undertake surveys. The Court noted that the delegation of powers was not in compliance with the DVAT Act, and unauthorized officers were given the authority to perform audit, investigation, and enforcement duties. The judgment emphasized the importance of adhering to legal requirements in delegating powers to ensure the validity of actions taken by officers.

Issue 4: Lack of corrective mechanisms for identified violations
The judgment pointed out that the report by CVAT did not address the corrective mechanisms to be implemented in response to the identified violations of the law. The Court expressed concern that the violations highlighted in the report were ongoing, despite previous orders issued by the Court. The Court urged CVAT to develop a roadmap to prevent future violations and ensure compliance with legal requirements. It emphasized the need for proactive measures to rectify the identified deficiencies and prevent recurrence of similar violations.

Issue 5: Need for accountability and disciplinary action
The judgment underscored the importance of accountability and disciplinary action for officers found to be acting in violation of the law. The Court expected CVAT to name the officers involved, fix responsibility on them, and initiate disciplinary action following a vigilance inquiry. However, the report by CVAT did not address this aspect adequately. The Court emphasized the necessity of holding officers accountable for their actions and ensuring that appropriate disciplinary measures are taken to uphold the integrity of the legal system.