2018 (10) TMI 1455 - HC - VAT and Sales Tax

Validity of assessment order - time limitation - it is also alleged that the first respondent failed to appreciate the specific stand raised by the petitioner that the business was sold as a whole and there was no sale of plant and machinery - TNGST Act. Held that - The respondent, though has referred to the Memorandum of Understanding in the impugned Assessment Order, has failed to render any finding as to the effect of transaction, which has been recorded in the Memorandum of Understanding. The respondent was duty bound to record whether the transaction was akin to a slump sale or a sale of plant and machinery - Without rendering such a finding and without passing a speaking order, the respondent could not have brushed aside the Memorandum of Understanding dated 10.03.2006. Apart from this, when the sworn statement was recorded, the petitioner has elaborately stated about the nature of transaction. This aspect has also been ignored by the second respondent. Time Limitation - Held that - The respondents in the counter affidavit would state that the Registration Certificate of the petitioner was cancelled on 31.03.2005. The effect of such cancellation on the petitioner s business has to be considered. While considering the said issue, the point pertaining to limitation for reopening the assessment is also required to be considered. Since the effect of the Memorandum of Understanding has not been considered by the respondent and not even a finding has been recorded by the respondent in the impugned Assessment Order, the assessment has to be necessarily redone. The matter is remanded to the first respondent for fresh consideration - petition allowed by way of remand.

Summary

Issues:
1. Challenge to Assessment Order under TNGST Act for the year 2005-06.
2. Grounds of challenge: Limitation and nature of transaction.
3. Validity of collection of cheques by Enforcement Wing.
4. Effect of cancellation of Registration Certificate on assessment.
5. Reopening of assessment beyond the limitation period.

Analysis:
1. The petitioner challenged the Assessment Order under the TNGST Act for the year 2005-06, seeking waiver of penalty, which was rejected by the respondent. The court held that the petitioner has the right to challenge the entire Assessment Order, despite any alleged admission during inspection, as it cannot create an estoppel against challenging the order.

2. The petitioner raised two grounds of challenge: limitation and the nature of the transaction. The court found that the Assessment Order was not accompanied by a proper finding on the transaction recorded in the Memorandum of Understanding, which indicated a transfer of the company. The court emphasized that without a proper finding and a speaking order, the Assessment Order could not be upheld.

3. The court highlighted the illegal collection of cheques amounting to ?17,17,582 by the Enforcement Wing during inspection, stating that such actions were beyond their jurisdiction and could not strengthen the hands of the Assessing Officer. This collection was deemed illegal and raised concerns about the validity of the assessment based on it.

4. Regarding the cancellation of the petitioner's Registration Certificate on 31.03.2005, the court noted that the impact of this cancellation on the business needed consideration. The petitioner argued that the reopening of the assessment in 2015 was beyond the five-year limitation period prescribed by the Act, emphasizing the need for a reevaluation of the assessment in light of the Memorandum of Understanding.

5. As the Assessment Order failed to consider the effect of the Memorandum of Understanding and lacked a proper finding, the court allowed the writ petition, quashed the order, and remanded the matter for fresh consideration. The respondent was directed to reevaluate the assessment, considering the Memorandum of Understanding, the sworn statement, the plea of limitation, and the cancellation of the Registration Certificate. A fresh notice was required for any decision based on the certificate cancellation to proceed in accordance with the law.