2017 (9) TMI 1170 - HC - VAT and Sales Tax

Validity of assessment order - Wrong claim of input tax credit - Discrepancy in Form WW - Defective certificates issued by buyers of capital goods - Service income - Miscellaneous income - Held that - as regards, wrong claim of input tax credit is concerned, the petitioner made a specific request for furnishing of statement on monthly basis and also invoice-wise break-up in respect of the suppliers concerned. Therefore, the finding that the petitioner could have sought for details is incorrect, as they have already sought for the details. So far as Form WW, which was produced by the petitioner appended along with the audited financial statement, is concerned, the respondent termed the sale as a suppression on the part of the petitioner and confirmed the proposal. Such a finding is incorrect because the respondent should examine the correctness of the intra unit transfer and if it is really an intra unit transfer, then the question of sale does not arise. Therefore, the observation with regard to Form WW and the audited statement produced by the petitioner is incorrect. With regard to sale of capital goods, the petitioner produced certificates from the buyer. According to the respondent, the certificate is defective, as the commodity code has not been properly mentioned. If there is a defect in the certificate, nothing prevented the respondent from returning the certificate for rectifying the errors, if any. This alone would be a reasonable procedure to be adopted by the Assessing Officer. Therefore, foreclosing the petitioner s right without returning the alleged defective certificate is incorrect. With regard to service income, the petitioner has pointed out that the petitioner has attached the required audited statement in respect of the sale of service - If, according to the respondent, the documents produced by the petitioner are insufficient, then an opportunity ought to have been granted to the petitioner to produce additional documents or explain whatever documents have been placed. Hence, the respondent should not have confirmed the proposal on the said head for the reasons given by him in the impugned assessment orders. With regard to miscellaneous income, the petitioner provided break-up details of miscellaneous income stating that they are from DGFT drawback claim provision and creditors write off and with regard to sale of scrap, they had indicated the amount and shown that they had already paid tax at 5%. However, the respondent confirmed the proposal under the said head by stating that the details furnished by the petitioner are also taxable categories and hence, confirmed the proposal. It is not clear as to how the respondent has brought the drawback claim within the taxable category. This finding is devoid of reasons. The findings rendered by the respondent on the above five issues are incorrect and not tenable - this Court is inclined to interfere with the impugned assessment orders on the above indicated five issues and remit the matters back to the respondent for a fresh consideration - petition allowed by way of remand.

Summary

Issues:
Challenging assessment orders under State Act for specific years based on five issues: 1. Wrong input tax credit claim, 2. Discrepancy in Form WW, 3. Defective certificates from buyers of capital goods, 4. Service income, and 5. Miscellaneous income.

Analysis:
1. Wrong Claim of Input Tax Credit: The petitioner requested monthly and invoice-wise details to scrutinize the alleged wrong claim but was not provided by the respondent. The court found the petitioner's request valid and disagreed with the respondent's stance that the petitioner should have sought details from the Assessing Officer separately.

2. Discrepancy in Form WW: The respondent alleged suppression due to intra-unit transfer, but the court emphasized the need to verify the correctness of such transfers before concluding on sales suppression. The court deemed the respondent's observation on Form WW and audited statements incorrect.

3. Defective Certificates for Capital Goods: The respondent claimed defects in certificates provided by the petitioner without allowing rectification, which the court deemed unreasonable. The court held that returning defective certificates for correction should have been the proper procedure.

4. Service Income: The respondent rejected the petitioner's audited statements as insufficient without granting an opportunity to supplement or explain further. The court ruled that denying the petitioner a chance to provide additional documents or explanations was unjustified.

5. Miscellaneous Income: The respondent categorized certain income as taxable without clear reasons, leading to a confirmation of the proposal. The court found this categorization lacking in justification and reasoned analysis.

6. Opportunity of Personal Hearing: The court highlighted the importance of providing a personal hearing opportunity, even if not explicitly requested, to resolve issues effectively and potentially prevent litigation.

7. Remittal of Matters: Considering the incorrect findings on the five issues, the court decided to remit the matters back to the respondent for a fresh consideration, emphasizing the need for a proper review based on the court's observations.

8. Direction and Relief: The court provided specific directions for the respondent to furnish necessary details, return defective certificates, allow additional objections, provide a personal hearing, and refrain from coercive actions until compliance. The writ petitions were partly allowed based on these directions.