2021 (5) TMI 360 - HC - VAT and Sales Tax

Demand of differential duty - variation in stock - Finalisation of deemed assessment - assessment years 2015-16 - Section 22(2) of TNVAT Act, 2006 - HELD THAT - A mere look at the impugned order would indicate that stock difference was arrived at on the basis of the trading account method - It is true that the petitioner has not maintained the stock register. The matter is remitted to the file of the second respondent to pass orders afresh in accordance with law. As per Rule 6 of TNVAT Rules, the assessee is bound to maintain the accounts - Petition allowed - decided in favor of petitioner.

Summary

Issues:
Assessment under TNVAT Act, 2006 for the year 2015-16; Maintainability of writ petition without availing appeal remedy; Stock difference determination without maintaining stock register; Application of formula method for stock variation.

Analysis:
The case involves the assessment for the year 2015-16 under the TNVAT Act, 2006, where the petitioner's business was inspected, and stock difference was noted leading to a tax demand. The petitioner challenged the order levying tax and penalty through a writ petition. The government advocate argued that the writ petition is not maintainable as the petitioner did not exhaust the appeal remedy. However, the court examined the impugned order and found that stock difference was calculated using the trading account method as the petitioner had not maintained a stock register.

The court referred to a previous decision in Tax Case (Revision) where it was held that authorities cannot use a formula method to determine stock variation if the assessee has not maintained a stock register. Following this precedent, the court quashed the impugned order, allowed the writ petition, and remitted the matter back to the second respondent for fresh orders in accordance with law. The court directed the assessing officer to determine stock difference in physical terms based on the relevant account books maintained by the petitioner, emphasizing the importance of maintaining accounts as per TNVAT Rules.

The court instructed the assessing officer not to rely on formula methods but to ascertain stock difference through physical verification, considering that the inspection had already taken inventory of the physical stock available. The petitioner was directed to cooperate in providing accurate stock information, which the assessing officer would verify. The judgment concluded by stating that no costs were awarded, and the connected miscellaneous petition was closed.