2020 (3) TMI 144 - HC - VAT and Sales Tax

Input Tax Credit (ITC) - Seeking information within 6 years from the date of completion of assessment - Deemed assessment where no assessment has been done - Pnciples of Natural Justice - Failure to produce the documents called for - TNVAT Act - petitioner submits that the impugned orders therein are liable to be quashed on the ground that the demands confirmed were in variance with the proposals in the respective Show Cause Notices and therefore there is a manifest violation of Principles of Natural Justice. HELD THAT - Section 22 of the Tamil Nadu VAT Act, 2006 which was amended with effect from 19.6.2012 vide Tamil Nadu Act 23 of 2012 introduced the concept of deemed assessment. For returns filed in time where no assessment orders were passed, assessment was deemed to have been completed for that year on the 31st October of the succeeding year - Therefore, from 2012 upto the repeal of TNVAT Act, 2006, the assessment was deemed to have been made on 31st day of October of the succeeding year. Under Section 27(1) of the said TNVAT Act, 2006, an assessing authority may subject to provisions of the sub-Section (3) may at any time within a period of 6 years 5 years prior to 19.6.2012 from the date of assessment determine to the best of his judgment the turnover which escaped assessment and assess the tax payable on such turnover after making such enquiry as may be considered necessary - Under Section 27(2) of the TNVAT Act, 2006, an assessing officer is empowered to re-open the assessment if he finds that input tax credit has been wrongly availed or where any dealer produced false bills, vouchers, declaration certificate or any other document with a view to support his claim of input tax credit or refund. As per the provision, the assessing authority shall at any time within a period of 5 years from the date of assessment order reverse input tax credit availed and determine the tax due after making such an enquiry, as may be considered necessary. As there was scope for reopening the assessment under Section 27 of the TNVAT Act, 2006, it was incumbent on the part of a registered dealer to retain records until the expiry of period prescribed therein. As the assessment has been deemed to have been completed only on 13.6.2012, the powers of the assessing authority under Section 27 cannot be curtailed by giving a skewed interpretation of Section 64(2) Of the Tamil Nadu VAT Act, 2006 - If the petitioner wants to justify the input tax credit availed by it during the period in dispute, it has to produce documents called for to substantiate it. Further, under Section 19(5) of the Tamil Nadu VAT Act, 2006, there were certain restrictions for goods cleared as such or which were used in the manufacture of other goods and sold in the course of interstate trade or commerce falling under sub-Section (2) of Section 8 of the Central Sales Tax Act, 1956. Further, there were few intervening amendments to these provisions and this court has clarified the position - This aspect has not been discussed in the impugned order. There are no grounds to sustain the impugned orders for it has not considered implication of the amendment to Section 19 of the Tamil Nadu VAT Act, 2006 - petitioner is therefore relegated back to the respondent to answer the issues. The petitioner is therefore directed to file its objection and produce documents that are required for scrutiny before the respondent within a period of 60 days from the date of receipt of copy of this order. Petition allowed by way of remand.

Issues Involved:
1. Validity of Writ Petitions for Prohibition against Notices.
2. Challenge against Impugned Orders due to Variance with Show Cause Notices.
3. Compliance with Document Production Requirements.
4. Principles of Natural Justice and Variance in Demand.
5. Statutory Interpretation of TNVAT Act Provisions.
6. Limitation Period for Re-assessment and Penalty Imposition.

Issue-wise Detailed Analysis:

1. Validity of Writ Petitions for Prohibition against Notices:
The petitioner sought a Writ of Prohibition to prevent the respondent from proceeding with specific notices issued for various assessment years. The court noted that these writ petitions became infructuous as the impugned orders were already passed pursuant to the notices. Therefore, W.P.Nos.42544, 42446, 42448, 42550, and 42551 of 2016 were dismissed as infructuous.

2. Challenge against Impugned Orders due to Variance with Show Cause Notices:
The petitioner argued that the impugned orders for assessment years 2006-07 to 2015-16 were in variance with the proposals in the Show Cause Notices, constituting a violation of the Principles of Natural Justice. The court acknowledged this argument but also noted that the orders were not independent and new issues but intertwined with the powers to deny credit due to non-compliance with Section 19 of the Act.

3. Compliance with Document Production Requirements:
The petitioner contended that they were not required to maintain documents beyond a period of 5/6 years as per Section 64 of the TNVAT Act, 2006. However, the court emphasized that the petitioner was required to retain records until the expiry of the period prescribed for re-assessment under Section 27 of the Act. The court held that the petitioner must produce the necessary documents to substantiate the input tax credit availed during the disputed period.

4. Principles of Natural Justice and Variance in Demand:
The court referred to the principle that an assessing officer cannot traverse beyond the scope of the Show Cause Notice, citing precedents like Hindustan Polymers Co. Vs Collector of Central Excise and Thirumurugan Enterprises Vs The Customs, Excise & Service Tax Appellate Tribunal. The court found that the impugned orders did not consider the implications of amendments to Section 19 of the TNVAT Act, 2006, and thus, quashed the orders, treating them as Show Cause Notices.

5. Statutory Interpretation of TNVAT Act Provisions:
The court analyzed various provisions of the TNVAT Act, including Sections 22, 27, and 64. It clarified that the amendment to Section 22 introduced deemed assessment for returns filed in time where no assessment orders were passed. The court held that the petitioner was required to maintain records for 5/6 years after the assessment was deemed completed on 30.06.2012. The court rejected the petitioner's interpretation that Section 64 allowed them to destroy or plead loss of documents.

6. Limitation Period for Re-assessment and Penalty Imposition:
The court noted that the notices and impugned orders were issued within the limitation period prescribed under Section 27 of the TNVAT Act, 2006. It also addressed the imposition of a 300% penalty under Section 27(4), which came into force on 29.01.2016. The court found that the penalty was not applicable to the case and directed the respondent to reconsider the orders without the penalty.

Conclusion:
The court dismissed the writ petitions listed in Table-1 as infructuous. It quashed the impugned orders in the remaining writ petitions and remitted the cases back to the respondent for reconsideration. The petitioner was directed to file objections and produce necessary documents within 60 days. The respondent was instructed to pass appropriate orders within six months, ensuring the petitioner is heard before the final orders are passed. No costs were imposed, and connected miscellaneous petitions were closed.

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