2016 (12) TMI 819 - HC - VAT and Sales Tax

Assessment of high value transactions - Government Representative Cell (GR Cell) to represent the case before the AO before adjudicating the case - Legality of circular dated 30.07.2016 - Held that - On considering and going through the Circulars it appears that they are issued with a view to see that there is a proper and fair government representation before the Assessing Officer / Adjudicating Officer and more particularly in the case of high value cases. The Circulars have been issued to protect the interest of the Revenue and the public exchequer. It cannot be disputed that as per the old practice there was no independent representation on behalf of the government. The dealers were represented through their consultant / Advocates. Therefore, strictly speaking the entire burden was upon the Assessing Officers. The Assessing Officers though being quasi judicial officers can be said to be representing the case of the Department also. Therefore, with a view to see that there is a proper government representation before the Assessing Officer / Adjudicating Officer like before the High Court and the Tribunal, it has been decided to form the GR Cell who after considering the material on record including the submissions made on behalf of the dealer would prepare the case in consultation with the Authorities forming part of the GR Cell and the same are required to be produced before the Assessing Officer / Adjudicating Officer and the Circulars further provide that thereafter the Assessing Officer / Adjudicating Officer is required to pass a speaking and reasoned order after considering the submissions made on behalf of the Government as well as made on behalf of the Dealer - From the procedure which is provided under the Circulars, it cannot be said that there is any external interference in exercise of quasi judicial functions by the Assessing Officers / Adjudicating Officers - the challenge to the impugned Circulars dated 30.07.2016 fails. Requirement of sending the case papers to the respondent No.1 for preaudit - Held that - the same is liable to be quashed and set aside in light of the decision of this Court in the case of M/s. Tanuj Agency Pvt. Ltd. 2016 (6) TMI 727 - GUJARAT HIGH COURT , where it was held that the procedure adopted by the department was wholly unauthorised and impermissible in law. To be bound by an order of higher authority in an administrative set up is entirely different from the discretion of a statutory authority being governed by an outside agency. Impugned action on the part of the first Appellate Authority to send the draft order to the higher Authority for preaudit is hereby quashed and set aside - challenge to circular fails - decided partly in favor of petitioner.

Summary

Issues Involved:
1. Legality of preaudit process directed by respondent Nos.1 and 3.
2. Validity of Circulars issued by respondent No.3 on 30.07.2016.

Detailed Analysis:

1. Legality of preaudit process directed by respondent Nos.1 and 3:

The petitioners challenged the action of the first Appellate Authority (respondent No.2) in sending the appeal files to respondent No.1 for preaudit, arguing it was illegal and contrary to the decision in M/s. Tanuj Agency Pvt. Ltd. The petitioners contended that the first Appellate Authority should independently decide the appeal without external influence. The court agreed with the petitioners, referencing the Division Bench's decision in M/s. Tanuj Agency Pvt. Ltd., which held that such practices undermine the independence of the quasi-judicial function of the Appellate Authority. The court quashed the action of the first Appellate Authority to send the draft order for preaudit and directed it to decide the appeal independently and on merits.

2. Validity of Circulars issued by respondent No.3 on 30.07.2016:

The petitioners also challenged the Circulars issued by the Commissioner of Commercial Tax, arguing they were without authority under the law and interfered with the independence of quasi-judicial authorities. The petitioners cited various judgments to support their claim that such circulars were illegal and influenced the decision-making process of the Assessing Officers and Appellate Authorities.

The respondents, represented by the Advocate General, argued that the circulars were interdepartmental communications aimed at ensuring effective government representation in high-value cases and protecting the revenue interest. They asserted that the circulars did not dictate the decision of the Assessing Officers or Appellate Authorities but merely required them to pass reasoned and speaking orders after considering government representations.

The court found that the circulars were intended to ensure proper representation of the government before quasi-judicial authorities and did not interfere with their independence. The circulars required Assessing Officers and Adjudicating Officers to pass reasoned and speaking orders after considering both government and dealer representations. The court concluded that the circulars were interdepartmental instructions aimed at protecting the revenue interest and did not affect the independence of quasi-judicial authorities. Therefore, the challenge to the circulars failed, and the petition was dismissed in this regard.

Conclusion:

The court quashed the action of the first Appellate Authority to send the draft order for preaudit and directed it to decide the appeal independently. However, the challenge to the circulars dated 30.07.2016 was dismissed, as the court found them to be valid interdepartmental instructions aimed at ensuring effective government representation and protecting revenue interests.