2018 (2) TMI 1547 - HC - VAT and Sales Tax

Validity of inspection alleged to have been conducted in the place of business of the petitioner - principles of natural justice - Held that - it is seen that there is no document produced by the Department to show that despite the business premises having been sealed by the Forest Department still he was carrying on business. If the petitioner had been carrying on business it would have been illegal, since the seal of the premises cannot be opened without express orders and permission from the Forest Department. Therefore, the question of inspecting the sealed premises that too on 09.04.2015 is impossible. The entire proceedings initiated by the respondent are thoroughly flawed for serious procedural infirmities and for that reason, the impugned order is liable for interference. Petition allowed - decided in favor of petitioner.

Summary

Issues:
Violation of principles of natural justice in assessment order,
Validity of re-assessment based on third-party complaint,
Closure of business premises and relocation of proprietor,
Procedural flaws in enforcement proceedings.

Violation of principles of natural justice in assessment order:
The petitioner challenged the assessment order for various years, citing the non-service of a pre-revision notice as a violation of natural justice. The respondent argued that a notice was indeed received by a person on behalf of the petitioner, supported by an acknowledgment bearing the dealer's signature. The court noted the absence of documents proving the business was operational after being sealed by the Forest Department, making the inspection improbable. The judge found the enforcement's surprise inspection impossible and concluded that the assessment lacked procedural fairness due to the absence of proper notice and opportunity for the petitioner to respond.

Validity of re-assessment based on third-party complaint:
The petitioner contended that the re-assessment was initiated solely based on a complaint from M/s. Ali Timbers in Kerala, without proper enquiry or summoning of the complainant. The court emphasized that reliance on information from an unregistered dealer required the petitioner to have an opportunity to refute the claims, including cross-examining the complainant. The judge highlighted the lack of procedural fairness in not following these steps before taking action, deeming the entire process flawed and warranting interference.

Closure of business premises and relocation of proprietor:
The petitioner asserted that the business was closed in 2014 and the proprietor had shifted to Ireland, supported by a copy of the proprietor's passport. The court verified the proprietor's absence from India during the relevant period, indicating the impossibility of her involvement in the proceedings. This information further discredited the enforcement's actions, reinforcing the petitioner's argument against the assessment orders.

Procedural flaws in enforcement proceedings:
The court identified serious procedural flaws in the respondent's actions, emphasizing the lack of proper investigation, summoning of the complainant, and opportunity for the petitioner to counter the allegations. The judge concluded that the entire enforcement process was flawed due to these procedural inadequacies, leading to the quashing of the impugned assessment orders. The judgment allowed the respondent to proceed lawfully with proper considerations and notice to the petitioner's residential address, highlighting the importance of adhering to procedural fairness in such matters.