2016 (8) TMI 176 - HC - VAT and Sales Tax

Validity of default assessments of tax and interest - Refund - Input tax credit - carry forward of excess credit - After the amendment to Section 11(2) of the DVAT Act with effect from 12th September 2013, the credit earned for the fourth quarter of 201314 could not be carried forward to the next tax period. - Held that - The notices of default assessments of tax and interest and penalty bristle with numerous illegalities. First, as already noticed instead of processing refunds within the time granted under Section 38 of the DVAT Act, the AVATO compounded the problem by seeking to re-open the assessments for the earlier years including the period for which the refund was claimed using the order passed by this Court recording the assurance of the learned counsel for the respondent on 3rd June, 2016 in WP(C) 5584/2016 as a trigger. This is totally contrary to the law explained in several judgments which have been referred to hereinabove. Secondly, with the AVATO himself acknowledging that the authority in DVAT-50 was not available, there was no question of him proceeding further in the matter and issuing notices of default assessments of tax, interest and penalty in the manner that he has done. Thirdly, in an obvious violation of the principles of natural justice, with the AVATO by not informing the Petitioner of the adjourned date of hearing when he failed to attend office on 5th July 2016, which was the date fixed. took up the matters in his chamber on 9th July 2016 which, being a second Saturday, was a holiday and then reserved the matter for orders on 12th July 2016. The notices of default assessment of tax and interest and penalty are undoubtedly in violation of the principles of natural justice and patently illegal. The Court does not consider it necessary to do say anything more to demonstrate the patent illegality attached to the actions of the AVATO, triggered as they were by the order dated 3rd June 2016 passed by this Court. The Court, therefore, has no hesitation in setting aside the notices of default assessment of tax and interest and penalty dated 12th July 2016 issued by the AVATO Further refund shall be allowed with interest. - Decided in favor of assessee and against the revenue.

Summary

Issues Involved:
1. Violation of statutory provisions by the Department of Trade & Taxes (DT&T).
2. Delay in processing and issuing refunds under the DVAT Act.
3. Improper issuance of notices and default assessments by the AVATO.
4. Contravention of principles of natural justice.
5. Conduct and accountability of DT&T officials.

Detailed Analysis:

1. Violation of Statutory Provisions by DT&T:
The court noted that the Department of Trade & Taxes (DT&T), Government of NCT of Delhi, acted in blatant violation of the statutory provisions of the Delhi Value Added Tax Act, 2004 (DVAT Act) and the decisions of the Courts. The Petitioner, a registered dealer under the DVAT Act, was engaged in the sale and purchase of mobile phones and had been paying taxes and claiming input tax credit under Section 9(1) of the DVAT Act. Despite this, the DT&T failed to issue the refund due to the Petitioner for the fourth quarter of 2013-14.

2. Delay in Processing and Issuing Refunds:
The court emphasized the mandatory nature of the time limits under Section 38 of the DVAT Act for processing and issuing refunds. It was observed that numerous judgments and circulars had been issued emphasizing the need for timely refunds, but the problem of delayed refunds persisted. The court cited its recent order in Prime Papers and Packers vs. Commissioner of VAT, which summarized the legal principles regarding the timely processing of refunds.

3. Improper Issuance of Notices and Default Assessments by the AVATO:
The Assistant Value Added Tax Officer (AVATO) issued multiple notices under Section 59(2) of the DVAT Act, requiring the Petitioner to produce documents for various periods. Despite the Petitioner’s compliance, the AVATO proceeded to issue default assessments of tax, interest, and penalty without proper authorization (DVAT-50) and without adhering to the principles of natural justice. The AVATO’s actions were deemed illegal and in violation of the statutory provisions.

4. Contravention of Principles of Natural Justice:
The AVATO failed to inform the Petitioner of the adjourned hearing date and took up the matter on a holiday without issuing further notice. This conduct was deemed unacceptable and a violation of the principles of natural justice. The default assessments issued on 12th July 2016 were found to be patently illegal and in contravention of the legal requirements.

5. Conduct and Accountability of DT&T Officials:
The court expressed concern over the conduct of DT&T officials, particularly Mr. O. P. Singh, the AVATO, and Mr. Pravesh Ranjan Jha, the Joint Commissioner, who endorsed the AVATO’s illegal actions. The court imposed exemplary costs on the DT&T for unnecessarily increasing litigation and directed the Commissioner (VAT) to issue notices to the concerned officials to explain why the costs should not be recovered from their salaries and an adverse entry made in their Annual Confidential Reports.

Judgment:
The court set aside the notices of default assessment of tax, interest, and penalty dated 12th July 2016 issued by the AVATO. The DT&T was directed to pay costs of ?20,000 in each petition to the Petitioner within one week. The Commissioner (VAT) was instructed to ensure the refund due to the Petitioner for the fourth quarter of 2013-14, along with interest, was credited to the Petitioner’s account by 8th August 2016. The Commissioner was also required to file an affidavit of compliance by 10th August 2016. The court allowed WP (C) Nos. 6746/2016 and 6747/2016 and disposed of WP (C) No. 5584/2016 with the above directions.