2020 (8) TMI 223 - HC - VAT and Sales Tax

Best Judgement Assessment - incomplete or defective form-H - levy of penalty - reversal of input tax credit - levy of tax on certain export and pre-export sales - HELD THAT - When the first respondent had chosen to assess the petitioner to the best of Judgment under Section 27(1) of the Act, there is a duty cast on them to indicate the proposal to the assessee in the show cause notices. It is not in dispute that such proposals were not made in the prior notices. As such, the consequent impugned order itself cannot be sustained - Furthermore, when the first respondent was of the view that the Form-H submitted by the petitioner was incomplete or defective in nature, in all fairness, the first respondent ought to have returned the same to the petitioner for rectification instead of rejecting the same. The matter is remanded back to the first respondent for passing fresh orders, after giving due opportunity to the assessee - Petition allowed by way of remand.

Summary

Issues:
Assessment under Section 27(1) of TNVAT Act for the year 2013-14, reversal of input tax credit without prior proposal in show cause notices, rejection of Form-H as incomplete, duty to indicate proposal in show cause notices, fairness in dealing with incomplete forms.

Analysis:
The petitioner was assessed to the best of Judgment under Section 27(1) of the TNVAT Act for the assessment year 2013-14, with penalty under Section 27(3). The assessment was based on notices proposing reversal of input tax credit and levy of tax on certain sales. The petitioner objected to the reversal and levy, arguing that the notices did not contain proposals for the same. The Court observed that the impugned order levying tax and reversing input tax credit was not preceded by a proposal in the show cause notices, rendering the order unsustainable.

The first respondent also rejected the Form-H filed by the petitioner, deeming it incomplete, and proceeded to assess tax based on the turnover therein. The Court noted that when the form was considered incomplete, the respondent should have returned it to the petitioner for rectification instead of outright rejection. This failure to give an opportunity for rectification was deemed unfair by the Court.

Given the above, the Court quashed the impugned order dated 14.03.2017 and remanded the matter back to the first respondent for fresh orders. The respondent was directed to provide the assessee with an opportunity to respond and complete the proceedings within 60 days. Additionally, the respondent was instructed to return the Form-H to the petitioner for rectification and representation within one week. The Court emphasized the need for fairness and due process in dealings with taxpayers, especially during the COVID-19 pandemic, by extending the opportunity for a personal hearing through video conferencing.

Consequently, the Writ Petition was allowed with no costs, and the connected miscellaneous petition was closed. The judgment highlighted the importance of following due process and providing opportunities for rectification before making adverse assessments, ensuring fairness and procedural compliance in tax matters.