2016 (6) TMI 809 - HC - VAT and Sales Tax

Default notices of tax interest and penalty - Delhi Value Added Tax Act 2004 (DVAT Act) - mismatch in Annexures 2A 2, 03, 07, 461. - Consequently the Court has no hesitation in declaring the impugned notices of assessment tax interest and penalty both dated 29th September 2015 under Section 9 of the CST Act as well as the subsequent notice of default assessment of tax and interest under Section 32 of the DVAT Act dated 31st May 2016 to be invalid. They are accordingly quashed. The question now is about the future course of action - purchase from the suspicious or cancelled dealers - Held that - Given the contradictory stands of the Department on the one hand and the Petitioner on the other it is directed that within four weeks from today the AVATO/concerned Assessing Officer (AO) of Ward No. 8 will issue a notice to the Petitioner setting out the details of the dates on which purchases are supposed to be have been made during the first quarter of 2013-14 by the Petitioner from any of the above four entities and enclose the supporting documents if any. The AVATO/AO will also disclose in the said notice any other information in his possession leading to the conclusion that either any or all of the above four entities were either not functional during the first quarter of 2013 or where their registration was cancelled the date(s) of such cancellation. The AVATO/AO will also communicate the date on which the Petitioner should appear before him. The petition disposed with directions.

Summary

Issues:
Challenge to default notices of tax, interest, and penalty under DVAT Act and CST Act for the first quarter of 2013-14.

Analysis:
The petitioner's registration certificate was canceled, and a default assessment was issued for excess input tax credit claimed. Subsequently, the demand was reduced to nil after review orders were passed. However, new default notices were issued under the CST Act for the first quarter of 2013-14, alleging purchases from specific entities. Despite columns showing zero figures, a substantial demand was raised, indicating system errors.

The respondent admitted the errors in the notices, attributing them to system glitches. A subsequent notice rectifying the mistake was also found to be flawed, lacking proper assessment despite zero figures in relevant columns. The court declared all impugned notices invalid and quashed them due to serious errors.

Regarding the future course of action, the petitioner denied making any purchases or sales during the first quarter of 2013. The department alleged purchases from suspicious/cancelled dealers, leading to contradictory positions. The court directed the AVATO/AO to issue a notice to the petitioner within four weeks, detailing supposed purchases from the mentioned entities and providing supporting documents. The petitioner was instructed to appear before the AVATO/AO, comply with natural justice principles, and furnish necessary information/documents.

Upon serving the notice, the petitioner must appear through its authorized representative before the AVATO/AO, ensuring compliance with natural justice principles. The AVATO/AO was tasked with passing appropriate orders based on the information provided. The petition was disposed of with these directives, emphasizing the importance of following due process and principles of natural justice.