2017 (3) TMI 338 - HC - VAT and Sales Tax

Validity of assessment order - natural justice - notice for the assessment year 2009-10 was issued by the Excise and Taxation Officer, Sangrur to the petitioner under Section 29(2) of the Punjab Value Added Tax Act, 2005 for 9.3.2015. On 10.3.2015, the order was reserved, however, the petitioner was granted opportunity to give written submissions till 16.3.2015. The petitioner submitted written reply on 16.3.2015. On 20.3.2015, notice was issued to show cause as to why penal action be not taken under Section 56 of the VAT Act, which was issued for 26.3.2015. The notice was issued only under the VAT Act. No proceedings had taken place on 26.3.2015. As the assessment order had not been passed, the petitioner submitted his objections on 1.4.2015 and on the same day, vide separate letter filed reply to the penalty notice as well. There is no order sheet prepared for penalty proceedings. Held that - the assessment orders deserve to be set aside merely on the ground of violation of principles of natural justice. The matter was not dealt with properly. It was quite in haste towards the end. The assessment proceedings may have started earlier but the assessment was put on fast track after this Court directed the authorities to decide the claim of the petitioner for refund of the tax for the previous years. It is well settled that a quasi-judicial authority, while acting in exercise of its statutory power must act fairly with an open mind. Justice is rooted in confidence and justice is the goal of a quasi-judicial proceeding also. If the functioning of a quasi-judicial authority has to inspire confidence in the minds of those subjected to its jurisdiction, such authority must act with utmost fairness. The orders of assessments having been passed in haste without observing the principles of natural justice, deserve to be set aside - petition allowed - decided in favor of petitioner.

Issues Involved:

1. Violation of principles of natural justice.
2. Improper service of assessment orders via email.
3. Jurisdictional errors in assessment proceedings.
4. Hasty and improper conduct of assessment proceedings.
5. Non-supply of necessary documents to the petitioner.
6. Procedural lapses and discrepancies in the assessment process.
7. Non-issuance of penalty notice under the Central Sales Tax Act.

Issue-wise Detailed Analysis:

1. Violation of principles of natural justice:
The court found that the assessment orders were passed in violation of the principles of natural justice. The petitioner’s request for summoning parties and producing 'C' and 'F' forms was not dealt with properly. The petitioner was not given a fair opportunity to respond to the evidence used against them. The assessment proceedings were hastily concluded without considering the petitioner’s submissions and requests for document supply.

2. Improper service of assessment orders via email:
The court noted that the assessment orders were communicated via email, which was not in compliance with Rule 48 of the Punjab Value Added Tax Rules, 2005. The rules require a certified copy of the order and demand notice to be served, and there is no provision for service via email. The orders sent were not signed or digitally signed, rendering them invalid.

3. Jurisdictional errors in assessment proceedings:
For the assessment year 2010-11, the court found that there was no proper communication regarding the transfer of jurisdiction. The letter transferring jurisdiction lacked a dispatch number and referred to a letter pertaining to a different assessment year (2009-10). This raised doubts about the validity of the jurisdiction transfer.

4. Hasty and improper conduct of assessment proceedings:
The court observed that the assessment proceedings were conducted in undue haste, especially after the court directed the authorities to consider the petitioner’s refund claim. The Designated Officer communicated the order through email while not being present in the office and without signing the order. The haste was evident from the fact that the assessment order was dated 5.5.2015, but the demand notice was dated 6.5.2015, and the order-sheet showed the order was released on 6.5.2015.

5. Non-supply of necessary documents to the petitioner:
The petitioner repeatedly requested the supply of documents relied upon by the authorities, but these were not provided till the assessment was framed. This non-supply of documents was a significant procedural lapse and violated the principles of natural justice.

6. Procedural lapses and discrepancies in the assessment process:
The court highlighted several procedural lapses and discrepancies, including the absence of order-sheets for penalty proceedings, conflicting statements by the officer regarding the dispatch of the order, and the lack of a signed order on the assessment file even after a month. These lapses indicated a lack of proper record maintenance and procedural fairness.

7. Non-issuance of penalty notice under the Central Sales Tax Act:
The court found that no penalty notice was issued under the Central Sales Tax Act for the assessment year 2009-10, yet the penalty was levied. This procedural error deprived the petitioner of the opportunity to respond to the penalty proceedings.

Conclusion:
The court set aside the assessment orders for the years in question due to the violation of principles of natural justice, improper service of orders, jurisdictional errors, and procedural lapses. The petitioner was directed to appear before the Designated Officer for fresh assessment proceedings. The court also emphasized the need for proper maintenance of records and adherence to procedural fairness by quasi-judicial authorities.

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