2016 (11) TMI 128 - HC - VAT and Sales Tax

Delay in challenging the order of demand of tax - violation of principles of natural justice - Demand of tax and penalty - attachment of bank property - intra-state sales or inter-state sales - treating of intra-state sale as an inter-state sale is a clear attempt on the part of the petitioner to evade actual tax due on its turnover and amounts to an offence under Section 59 of the PVAT Act - Held that - this Court is of the view that since there is no explanation for the inordinate delay in challenging the impugned order, this Court would have been well justified to dismiss the writ petition at this stage. However, considering the fact that interests of the Revenue are also involved and that the petitioner should not be left without any remedy, especially in the light of the fact that the petitioner alleges that they have not been heard in person, this Court directs the petitioner to pay 15% of tax within six weeks and if tax paid within the stipulated time the petitioner will be entitled to treat the impugned proceedings as a show cause notice and submit their objections within a period of two weeks therefrom. On such payment, the demand of remaining amount towards penalty, etc., shall remain stayed and the attachment on the bank accounts of the petitioner shall stand lifted. Thereafter, the second respondent shall hear the petitioner and redo the entire assessment in accordance with law.

Summary

Issues:
Challenge to assessment order under PVAT Act, violation of principles of natural justice, delay in challenging impugned order, direction to pay tax, penalty, and re-assessment.

Analysis:
The petitioner filed a writ petition to challenge the assessment order passed under the PVAT Act. The inspection revealed discrepancies in the petitioner's transactions, with allegations of treating intra-state sales as inter-state sales to evade tax. The Inspecting Team instructed the dealer to remit tax at 14.5% for the financial year 2014-15. The petitioner was given opportunities to dispute the findings but failed to provide satisfactory evidence. The second respondent concluded that the transactions lacked proper documentation, leading to the imposition of tax and penalty.

The petitioner contended that the second respondent should have provided a personal hearing before imposing penalties, citing the necessity of natural justice principles. The petitioner argued that failure to grant a personal hearing violated their rights, referring to a relevant judgment. The respondents highlighted the delay in challenging the order and pointed out that one partner was a government servant, which led to separate actions by the Intelligence Department.

The Court acknowledged the delay in challenging the order but decided not to dismiss the petition immediately. Instead, the Court directed the petitioner to pay 15% of the tax within six weeks. Upon payment, the petitioner could submit objections, and the remaining penalty demand would be stayed. The second respondent was instructed to conduct a fresh assessment after hearing the petitioner. Failure to comply would result in dismissal of the petition without further reference to the Court.

In conclusion, the Court disposed of the writ petition with directions for payment, objection submission, re-assessment, and consequences of non-compliance. No costs were awarded, and the related miscellaneous petition was closed.