2021 (3) TMI 963 - HC - VAT and Sales Tax

Levy of Compounding Fee - detention of goods - Section 72(1)(a) of the Tamil Nadu Value Added Tax Act, 2006 - HELD THAT - The perversity writs large on the face of the order dated 06.2.2017. The second respondent has virtually abdicated his power as a Revisional Authority and all that he has done was extracting the entire objections filed by the appellant and held that the Roving Squad Officer collected one time compounding fee under Section 72(1)(a) of the Act and that therefore, the correct compounding fee had to be fixed and accordingly remitted the matter back to the first respondent. There is absolutely no discussion as to how the grounds raised by the appellant were not tenable and as to how the documents, which were filed by the appellant, were not admissible or sustainable. We have also seen the order of detention passed by the first respondent, in which, one of the grounds of detention was that the goods were transported from Mumbai to Chennai in the name of stock transfer 'with defective documents'. The first respondent did not state as to why, in his opinion, the documents produced by the appellant were defective. The first respondent has not recorded as to why the documents produced by the appellant cannot be accepted. If any clarification is required, the same could have been called for. Therefore, it is clear that the compounding notice dated 13.3.2016 is not only a non-speaking notice, but a notice in violation of the principles of natural justice, as the grounds raised by the appellant have not been considered by the first respondent - The same mistake was committed by the second respondent the Revisional Authority, who is in the cadre of Joint Commissioner. A revisional power cannot be akin to appellate power and at best, the Revisional Authority can consider as to whether there was any procedural error committed by the Lower Authority, but would not be justified in re-appreciating the entire facts - This issue can never be set right by the Second Revisional Authority, who appears to be an officer in the cadre of Additional Commissioner. Having been satisfied with the facts and circumstances of the case, the order passed by the second respondent dated 06.2.2017 and the demand notice dated 03.3.2017 issued by the first respondent are unsustainable - petition allowed.

Issues Involved:
1. Maintainability of the writ petition under Article 226 of the Constitution of India.
2. Validity of the order passed by the second respondent dated 06.2.2017.
3. Validity of the demand notice dated 03.3.2017 issued by the first respondent.
4. Violation of principles of natural justice by the statutory authorities.

Detailed Analysis:

1. Maintainability of the writ petition under Article 226 of the Constitution of India:
The learned Single Judge dismissed the writ petition on the ground that the appellant had not exhausted the alternative remedy of filing a second revision before the Additional Commissioner (CT) (RP) within the prescribed time limit of 30 days. The Judge relied on the Supreme Court decision in Assistant Commissioner (CT), LTU, Kakinada Vs. Glaxo Smith Kline Consumer Health Care Limited, which emphasized that the High Court should not entertain a writ petition if an alternative remedy was available and not availed within the statutory period.

However, the Division Bench referred to its prior decision in Mahindra & Mahindra Ltd. Vs. Joint Commissioner (CT) (Appeals), where it was held that there is no absolute bar to entertaining a writ petition under Article 226. The Supreme Court's observations in various cases, including Baburam Prakash Chandra Maheshwari vs. Antarim Zila Parishad and Thansingh Nathmal vs. Superintendent of Taxes, were cited to emphasize that while the High Court's power under Article 226 is wide, it should exercise self-imposed restraint if an alternative effective remedy is available.

The Court outlined broad parameters for exercising jurisdiction under Article 226, including unfairness, unreasonableness, perversity, lack of jurisdiction, and violation of natural justice. The Court concluded that the writ petition was maintainable as the appellant's case involved unreasonableness and violation of natural justice by the statutory authorities.

2. Validity of the order passed by the second respondent dated 06.2.2017:
The second respondent, acting as the Revisional Authority, remanded the matter to the first respondent to fix the correct compounding fee under Section 72(1)(a) of the Tamil Nadu Value Added Tax Act, 2006. The Division Bench found that the second respondent had abdicated his power by merely extracting the appellant's objections and remanding the matter without any substantive discussion or reasoning. The order was deemed perverse and arbitrary, lacking any analysis of the grounds raised by the appellant or the admissibility of the documents submitted.

3. Validity of the demand notice dated 03.3.2017 issued by the first respondent:
The first respondent's order detaining the goods and issuing the demand notice was based on the ground that the goods were transported with "defective documents." The Division Bench found that the first respondent failed to specify why the documents were considered defective and did not address the appellant's objections adequately. The compounding notice was deemed non-speaking and violative of the principles of natural justice, as it did not provide reasons for rejecting the appellant's explanations.

4. Violation of principles of natural justice by the statutory authorities:
Both the first and second respondents were found to have violated principles of natural justice. The first respondent did not provide adequate reasons for rejecting the appellant's documents and objections, while the second respondent failed to exercise his revisional powers properly by not addressing the substantive issues raised by the appellant. The Court emphasized that a revisional authority's role is not akin to an appellate authority and should focus on procedural errors rather than re-appreciating facts.

Conclusion:
The Division Bench allowed the writ appeal, set aside the impugned order of the learned Single Judge, and quashed the orders passed by the first and second respondents. The Court directed the first respondent to refund the sum of ?6,50,000 paid by the appellant at the time of release of goods within two months, with an option to adjust the amount against any other tax liability of the appellant. The connected CMP was also closed.

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