2018 (8) TMI 528 - HC - VAT and Sales Tax

Principles of Natural Justice - reversal of Input Tax Credit - the original invoices were not produced before the Enforcement Wing officials at the time of surprise inspection, nor they were enclosed in the objections submitted by the petitioner - Held that - Admittedly, the petitioner while filing his objections, has given an undertaking that he will produce the original invoices before the respondent - It is well settled that before deciding the issue, an opportunity of personal hearing shall be given. Had the respondent called for production of the original invoices as promised by the petitioner, he would have produced them and a decision on the basis of materials could have been taken. The observation made by the assessing authority would lead us to infer that he has taken the report submitted by the Enforcement Wing officials as gospel truth and passed orders being influenced by the same. Such an order is not fair and sustainable. The matter is remanded back to the respondent for fresh consideration - petition allowed by way of remand.

Summary

Issues:
Challenging an order under TNVAT Act for Input Tax Credit reversals based on surprise inspection findings and failure to produce original invoices.

Analysis:
The petitioner, a registered dealer under the TNVAT Act, challenged an order issued by the respondent based on a surprise inspection conducted by Enforcement Wing officials at the petitioner's business premises. The inspection revealed certain defects, leading to a pre-revision notice being issued on 10.11.2017. The petitioner submitted objections, contending that Input Tax Credit reversals were unjustified as original invoices were not produced during the inspection or enclosed with the objections. The petitioner argued that the statement given during the inspection did not amount to admission, and the payment of tax was not voluntary.

The respondent, represented by the Special Government Pleader, argued that the original invoices should have been produced during the inspection and with the objections. The respondent contended that the failure to produce the invoices indicated tax evasion and wrongful Input Tax Credit claims by the petitioner. The respondent defended the order as lawful and justified, not warranting any interference.

The court considered both parties' submissions and noted that the petitioner had undertaken to produce the original invoices before the respondent. Emphasizing the importance of providing an opportunity for a personal hearing before making a decision, the court highlighted the necessity of verifying defects based on material documents in such cases. The court rejected the notion that the petitioner's sworn statement during the inspection amounted to admission of defects.

The court criticized the assessing authority for relying solely on the Enforcement Wing officials' report without independent verification, deeming the order unfair and unsustainable. Consequently, the court set aside the impugned order and remanded the matter to the respondent for fresh consideration. The petitioner was directed to produce the original invoices promptly, and the respondent was instructed to provide ample opportunity for a personal hearing before passing final orders, ensuring independence from the Enforcement Wing officials' report.

In conclusion, the writ petition was allowed, with no costs imposed, and the connected writ miscellaneous petition was closed.