2019 (1) TMI 162 - HC - VAT and Sales Tax

Reversal of Input tax credit - mismatch of return particulars between Annexure I and Annexure II of selling and buying end dealers - opportunity of personal hearing not allowed - principles of natural justice - Held that - The show cause notices are bereft of particulars regarding the name and/or trade identification number (TIN) number of the dealer at the other hand. It is stated that cross verification of buyer and seller is made through Web. But, web report was not enclosed. Unless the intranet web report along with all details are furnished, the purchaser would not be in a position to reconcile the mismatch. Therefore, the manner on which the show cause notices issued deserves interference. It is very unfortunate that the assessing officers have either totally ignored the Circular issued by the Commissioner of Commercial Taxes and the procedures - If the selling dealer fails to pay tax, action has to be taken only against the selling dealer and not against the purchasing dealer. The web report or the data maintained by the Department is only a starting point, based on which, the authority has to enquire and proceed further. They have to call for objections by giving the requisite details, give an opportunity of personal hearing, verify the records maintained by the dealers on either side as well as the records of the Department. Without doing so, the Department cannot fasten the liability on any one of the arm of a sale proceeding. This Court is of the view that all the matters should be remanded for fresh consideration - petition allowed by way of remand.

Summary

Issues:
Challenging revised assessment orders reversing Input Tax Credit (ITC) claimed by petitioners based on discrepancies found by Department.

Analysis:
The judgment pertains to multiple writ petitions filed by dealers challenging revised assessment orders reversing Input Tax Credit (ITC) claimed under the Tamil Nadu Value Added Tax Act, 2006, and / or Central Sales Tax Act, 1956. The main issue in all cases was the reversal of ITC based on discrepancies identified by the assessing officers after comparing returns filed by dealers with the data maintained by the Department. The petitioners argued that show cause notices lacked necessary details for them to respond effectively, and some objections were not considered before passing the impugned orders.

The assessing officers issued show cause notices to the petitioners calling for objections before reversing the ITC. However, the notices were criticized for lacking essential details such as web reports and particulars necessary for reconciliation of mismatches. The judgment highlighted the importance of providing complete information to the petitioners to enable them to respond adequately. It referenced a circular directing the inclusion of invoice-wise data in notices for cases of return mismatches.

The judgment emphasized the need for a thorough enquiry by the Department before issuing show cause notices and highlighted the importance of following prescribed procedures. It underscored that discrepancies should not automatically lead to denial of credit to purchasing dealers, and action should be taken against the defaulting selling dealer. The assessing officers were instructed to conduct a detailed inquiry in consultation with the assessing officers of the other end dealer before issuing show cause notices with all necessary particulars.

In conclusion, the High Court quashed all impugned orders and remitted the matters back for fresh consideration. The assessing officers were directed to follow the prescribed procedures, issue detailed show cause notices, provide opportunities for objections and personal hearings, and pass reasoned orders within a specified timeframe. The judgment warned against delaying tactics and allowed the petitioners to raise all issues during the fresh consideration process. The writ petitions were disposed of with no costs, and connected miscellaneous petitions were closed.