2018 (3) TMI 1218 - HC - VAT and Sales Tax

Validity of assessment order - It is the case of the department that an investigation was conducted and as per the report submitted by the Investigation Officer tax invoices does not bear the name of the petitioners - Held that - Merely for the reason that the petitioner s name is shown as lessor in the tax invoice, it cannot be out rightly rejected to deny the input tax credit and create huge demands. No finding is given by the Prescribed Authority as to whether the tax invoices are in conformity with the Rules prescribed. This court would not have interfered with the assessment or re-assessment orders allowing the assessee to circumvent the alternative remedy available under the Act but when the error is apparent on the face of the record or no reasons are assigned by the Authority for arriving at a decision it can be held that it is nothing but violation of the principles of natural justice. It is imperative that decision making process is subjected to judicial review rather than the decision. In the circumstances, relegating the petitioner to Appellate Forum would not be appropriate in rendering the substantial justice. Hence this court is of the considered view that justice would be sub-served in remanding the matter to the Prescribed Authority setting aside the impugned re-assessment order and demand notices. The matter is remanded to the Prescribed Authority to re-do the re- assessment by providing an opportunity of hearing to the petitioner in accordance with law in an expedite manner - petition allowed by way of remand.

Issues Involved:
1. Legality and correctness of the reassessment order dated 21.12.2017.
2. Legality of the notice of demand dated 21.12.2017.
3. Challenge to the rectification order dated 5.3.2018.
4. Denial of input tax credit claimed by the petitioner.
5. Alleged violation of principles of natural justice by the Prescribed Authority.

Detailed Analysis:

1. Legality and Correctness of the Reassessment Order
The petitioner challenged the reassessment order dated 21.12.2017, arguing that the denial of input tax credit was based on the incorrect assertion that none of the purchase invoices were in the name of the petitioner-company. The petitioner contended that the name of the petitioner as lessor was clearly mentioned in the invoices, and the reassessment was conducted without considering the reply and material documents submitted by the petitioner.

2. Legality of the Notice of Demand
The notice of demand dated 21.12.2017, which accompanied the reassessment order, demanded tax, interest, and penalty amounting to ?11,67,10,384/-. The petitioner argued that the demand was arbitrary and unsustainable, as it was based on the incorrect denial of input tax credit.

3. Challenge to the Rectification Order
The rectification order dated 5.3.2018 was challenged on the grounds that the Prescribed Authority failed to consider the documents submitted by the petitioner, which included 574 invoices and other supporting materials. The petitioner argued that the rectification application was rejected without proper examination, constituting an error apparent on the face of the record.

4. Denial of Input Tax Credit
The core issue was the denial of input tax credit on the basis that the purchase invoices did not bear the name of the petitioner-company. The petitioner argued that the vehicles were purchased and leased out to lessee companies, with the registration certificates issued in the names of employees of the lessee companies due to compliance with the Motor Vehicles Act, 1988. The petitioner cited a judgment of the Hon'ble Apex Court to support the claim that the petitioner should be construed as the owner of the vehicles.

5. Alleged Violation of Principles of Natural Justice
The petitioner contended that the reassessment order and the rectification order were passed without assigning reasons and without considering the reply and documents submitted. This, according to the petitioner, was a violation of the principles of natural justice. The court noted that the decision-making process should be subjected to judicial review, and the lack of reasons and consideration of documents indicated a violation of natural justice.

Conclusion:
The court allowed the writ petition, setting aside the impugned reassessment order and demand notices. The matter was remanded to the Prescribed Authority for re-assessment, providing an opportunity of hearing to the petitioner. The court emphasized the need for a speaking order and directed the Prescribed Authority to conclude the re-assessment within four weeks, keeping in mind the observations made. All rights and contentions of the parties were left open to be agitated before the Prescribed Authority.

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