2021 (7) TMI 954 - HC - VAT and Sales Tax

Validity of assessment order - erroneous application of the provisions of the TNVAT Act and the assessment orders passed which resulted exercise of jurisdiction erroneously - input tax credit to be considered for the purpose of passing an assessment order or not - applicability of amendment as issued in the Tamil Nadu Act 13 of 2015 with effect from 29.01.2016 - HELD THAT - Usurping the powers of the appellate authorities by the High Court by invoking its powers under Article 226 of the Constitution of India is certainly unwarranted. The parties must be provided an opportunity to approach the appropriate authorities for redressal of their grievances in the manner known to law. In the event of entertaining all such writ petitions the High Court will not only be over-burdened but usurping the powers of the appellate authority which is certainly not desirable - Jurisdictional error should not result in exoneration of liability. Jurisdictional error if any committed is technical and thus rectifiable. In such circumstances the Courts are expected to quash the order passed by an incompetent authority and remand the matter back for fresh adjudication. The growing practice in the High Court is to file writ petitions under Article 226 of the Constitution of India without exhausting the statutory remedies provided under the Act. The points raised in this regard are statutory violations. However even such statutory violations can be dealt with by the Appellate authorities or the Appellate Tribunals. This apart in a writ petition if such orders are passed with jurisdictional errors and quashed without any remand then an injustice would be caused to the very spirit of the statute enacted for the benefit of the public at large. Thus Courts are expected to be cautious while granting exoneration of liability merely on the ground of jurisdictional errors if any committed by the authorities competent - review of such orders by the higher authorities are imminent to form an opinion that there is willful or intentional act for commission of such jurisdictional errors enabling the assesses to get exonerated from the liability. Liability and jurisdictional errors are distinct factors and therefore Courts are expected to provide an opportunity to the Department to decide the liability on merits and in accordance with law with reference to the provisions of the Act and Rules and guidelines issued by the Department. In the absence of exhausting such remedies High Court is losing the benefit of deciding the matter on merits as the High Court cannot conduct a trial or examine the original records in the writ proceedings under Article 226 of the Constitution of India. Thus the Courts shall not provide unnecessary opportunities to the assessee to escape from the liability merely on the ground of jurisdictional error which is rectifiable. This Court has no hesitation in arriving a conclusion that the petitioner is bound to exhaust the statutory appellate remedy as contemplated under the provisions of the TNVAT Act - the authorities competent are bound to consider the amended provision under Section 19 of the Tamil Nadu Act and pass the assessment orders on merits and in accordance with law and by affording opportunity to the assessee concerned. Petition disposed off.

Summary

Issues Involved:
1. Jurisdictional error in the application of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act).
2. Applicability of the amended Section 19 of the TNVAT Act.
3. Exhaustion of statutory appellate remedies before filing writ petitions.
4. Judicial review under Article 226 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Jurisdictional Error in the Application of the TNVAT Act:
The petitioners contended that the Assessing Officer erroneously applied the provisions of the TNVAT Act, leading to improper assessment orders. The core argument was that the assessment orders were passed without jurisdiction and authority of law. The petitioners sought to quash the surprise inspection reports and prevent their use for assessment/reassessment purposes.

2. Applicability of the Amended Section 19 of the TNVAT Act:
The petitioners argued that the amended Section 19 of the TNVAT Act, introduced by Tamil Nadu Act 13 of 2015 effective from 29.01.2016, should not be applied to assessment years prior to the amendment. They emphasized that the pre-amendment provisions should govern the assessment orders for those years. The pre-amendment Section 19 allowed input tax credit for tax paid on purchases of taxable goods, provided the registered dealer established that the tax due on such purchases had been paid.

3. Exhaustion of Statutory Appellate Remedies:
The court underscored the importance of exhausting statutory appellate remedies before approaching the High Court. Section 51 of the TNVAT Act provides an appeal mechanism to the Appellate Deputy Commissioner, detailing the procedures and powers of the appellate authority. Similarly, Sections 58 and 59 provide for appeals to the Appellate Tribunal and the High Court, respectively. The court highlighted that exhausting the appeal remedy is the rule, and dispensing with it is an exception. The court emphasized that only in cases of imminent urgency or irreparable damage should the extraordinary power be invoked to bypass the appellate remedy.

4. Judicial Review Under Article 226 of the Constitution of India:
The court clarified that the power of judicial review under Article 226 is to scrutinize the processes and procedures adopted by competent authorities, not to adjudicate the merits of the decision itself. The court reiterated that it cannot resolve disputed issues based on affidavits alone and that adjudication before the appellate authority is crucial for a thorough examination of facts and evidence. The court cited several judgments to support the principle that writ petitions should not be entertained if an effective alternative remedy is available, unless there are exceptional circumstances such as gross injustice or violation of fundamental rights.

Conclusion:
The court concluded that the petitioners must exhaust the statutory appellate remedy provided under the TNVAT Act. The court directed the authorities to consider the amended provision under Section 19 and pass assessment orders on merits, by affording an opportunity to the assessees. The writ petitions were disposed of with these directions, emphasizing the importance of institutional respect and adherence to statutory procedures. The court also highlighted that jurisdictional errors, if any, should be rectified through the appellate process rather than exonerating the assessees from liability.