2016 (10) TMI 559 - HC - VAT and Sales Tax

Denial of exemption on sale of cotton hank yarn - levy of penalty u/s 27(3) of the TNVAT Act, 2006 - audit conducted by officials of the Enforcement Wing - reliance placed on findings of Enforcement Officials - Held that - The Assessing Officer, being a Statutory Authority, is bound to independently consider the objections given by the dealer and not mechanically be guided by the observations of the officials of the Enforcement Wing. That apart, there are no reasons assigned by the respondent for not accepting the elaborate objections given by the petitioner. In fact, identical observations have been made for all the four assessment years, though the petitioner had filed separate objections for all the assessment years. Thus, the impugned orders are held to be one without any reasons and outcome of a total non application of mind. These are good and sufficient reasons to interfere with the impugned orders - petition allowed - matter remanded for fresh consideration after giving an opportunity of being heard - decided in favor of petitioner.

Summary

Issues:
Assessment based on Enforcement Wing report, Disallowance of exemption on hank yarn sale, Interest/penalty under Section 27(3) of the Act, Objections filed by the petitioner, Assessment completion by the respondent, Lack of independent consideration by the Assessing Officer, Non-acceptance of objections, Lack of reasons for decision, Interference with impugned orders, Remittance for fresh consideration.

Analysis:
The petitioner, a registered dealer under the Tamil Nadu Value Added Tax Act, faced assessment issues following an inspection by the Enforcement Wing, leading to pre-revision notices for four assessment years. The notices proposed disallowance of exemption on hank yarn sale and suggested interest/penalty under Section 27(3). The petitioner submitted detailed objections addressing all queries raised, emphasizing continuous compliance and clerical errors in documentation.

The Assessing Officer, however, based the assessment solely on the Enforcement Wing's findings, disregarding the petitioner's objections and evidence. The Officer concluded that the objections lacked substantial proof and upheld the proposed disallowances. The petitioner's sworn statement and submitted documents contradicted the Enforcement Wing's observations, highlighting the need for independent verification by the Assessing Officer.

The High Court criticized the Officer for not independently considering the objections and for failing to provide reasons for rejecting them. The Court deemed the assessment orders as lacking proper reasoning and a result of a mechanical approach, necessitating intervention. Consequently, the Court allowed the writ petitions, set aside the orders, and remitted the matters for fresh consideration by the respondent.

The Court directed the respondent to thoroughly review the objections, verify records, and conduct assessments independently without solely relying on the Enforcement Wing's report. The respondent was instructed to grant a personal hearing to the petitioner, allowing the submission of supporting records. The Court's decision aimed to ensure a fair assessment process with due consideration of the petitioner's contentions.