2019 (5) TMI 709 - HC - VAT and Sales Tax

Validity of assessment order - difference of sales turnover between returns and Profit Loss Account - Wrong claim of Input Tax Credit on inter state purchases - Purchases from RC cancelled dealers - TNVAT Act - HELD THAT - This Court is of the considered view that the observation of the respondent that the petitioner has not produced any documentary evidence in support of the contention is totally absurd and has been made by total non- application of mind. Insofar as the claim relating to purchases from R.C. cancelled dealers is concerned, the respondent while reversing the input tax credit has observed that the petitioner has accepted the wrong claim of Input Tax credit from the non-existing TIN numbers of the other end sellers, which is totally incorrect. Even in the replies dated 12.10.2015 and 08.02.2016 to the pre-revision notice dated 09.09.2015, they have categorically denied that their wrongly claimed input tax credit for non-existing other side canceled dealers - Even before assessment proceedings, they have disclosed the correct TIN numbers of all other end sellers which is also extracted in the impugned assessment order. This being the case, the observation made by the respondent that the petitioner has accepted the wrong claim of ITC from the non-existing TIN Numbers i.e from cancelled dealers is absolutely incorrect. Mismatch claim - HELD THAT - Since according to the respondent, the original tax invoices were not produced by the petitioner, the respondent has come to a wrong conclusion that the input tax credit has to be reversed on the ground of mismatch between the purchases reported by the petitioner and sales reported by the other end sellers - Under the impugned assessment order, a sum of ₹ 29,32,343/- towards reversal of input tax credit on account of mismatch was assessed by the respondents, which according to the considered view of this Court has been assessed by total non-application of mind - a penalty has also been assessed under Sections 27(3) and 27(4) of the TN VAT Act, 2006, which according to the considered view of this Court has also been passed by total non-application of mind. The impugned assessment order dated 30.11.2016 has been passed by the respondent by total non-application of mind and the same will have to be quashed - the matter is remanded back to the respondents for fresh consideration and the respondent shall pass final orders after giving adequate opportunity to the petitioner - Petition allowed by way of remand.

Issues Involved:

1. Validity of the assessment order dated 30.11.2016.
2. Reversal of input tax credit (ITC) based on discrepancies in sales turnover, discount details, interstate purchases, purchases from RC canceled dealers, and annual cross-verification.
3. Imposition of penalties under Sections 27(3) and 27(4) of the TN VAT Act, 2006.
4. Non-application of mind by the respondent in passing the assessment order.
5. Adequacy of the opportunity provided to the petitioner to present their case.

Detailed Analysis:

1. Validity of the Assessment Order Dated 30.11.2016:

The petitioner challenged the assessment order dated 30.11.2016 for the assessment years 2010-11 to 2013-14, arguing that it was contrary to the judgment in Infiniti Wholesale Limited Vs. Assistant Commissioner (CT) Koyambedu Assessment Circle, Chennai (2015) 82 VST 457. The petitioner requested a fresh assessment after being provided with the requested records and an opportunity for cross-examination.

2. Reversal of Input Tax Credit (ITC):

The respondent proposed to revise the assessment and reverse the ITC claimed based on several grounds:
- Sales Turnover Discrepancies: The respondent noted differences between the returns and the Profit & Loss Account.
- Discount Details: The petitioner was taxed at 4% due to a lack of details regarding discounts received.
- Wrong Claims on Interstate Purchases: The petitioner was accused of wrong ITC claims on interstate purchases.
- Purchases from RC Canceled Dealers: As per section 19(16) of the TN VAT Act, 2006, ITC claims from RC canceled dealers were liable to be taxed.
- Annual Cross Verification: The respondent found discrepancies in the annual cross-verification report.

The petitioner provided detailed replies on 13.10.2015 and 08.02.2016, denying discrepancies and providing supporting documents. They argued that there was no difference in sales turnover and that relevant documents were submitted. They also contended that the tax paid by the selling dealer was not disturbed, and discounts were not included in the sales turnover as per the law.

3. Imposition of Penalties:

The respondent imposed penalties under Sections 27(3) and 27(4) of the TN VAT Act, 2006, which the petitioner requested to be dropped, arguing there was no suppression or wrong availment of ITC.

4. Non-Application of Mind by the Respondent:

The court found that the respondent had not applied his mind in passing the assessment order. The petitioner had submitted all necessary documents, including original tax invoices and correct TIN numbers of sellers. The observation that the petitioner accepted wrong ITC claims from non-existing TIN numbers was deemed incorrect. The respondent's conclusion on ITC reversal due to mismatch was also found to be based on non-application of mind.

5. Adequacy of Opportunity Provided to the Petitioner:

The petitioner argued that despite providing detailed replies and documents, the assessment order was passed eight months later without proper consideration. The court agreed that the respondent failed to adequately verify the details from the other end sellers and did not follow the necessary cross-verification process.

Conclusion:

The court quashed the impugned assessment order dated 30.11.2016, finding it was passed by total non-application of mind. The matter was remanded back to the respondent for fresh consideration, with directions to provide the petitioner with an adequate opportunity to present their case and a personal hearing. The respondent was instructed to pass final orders within eight weeks, following the judgments in Infiniti Wholesale Limited Vs. Assistant Commissioner (CT) Koyambedu Assessment Circle, Chennai and JKM Graphics Solutions Private Limited vs. Commercial Tax Officer, Vepery Assessment Circle, Chennai. The writ petitions were disposed of with no costs, and connected miscellaneous petitions were closed.

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