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2021 (9) TMI 720 - HC - VAT and Sales TaxReversal of exemption availed - deduction on 2nd sales of clothes, which was allowed - denial on the ground that appellant has effected the purchase of Yarn from unregistered dealers or Registration Certificate canceled dealers - proposal to revise the turnover and assess the Tax at 4%, after adding 10% towards Freight and Gross Profit - ppellant had challenged the Assessment Order on the ground of unfairness in the action of the statutory authority and on the other grounds of violation of principles of natural justice and non-consideration of the documents which were placed before the authority. HELD THAT - If these were the grounds raised by the appellant, then it goes without saying that the correctness of the Assessment Order could be tested in a writ petition under Article 226 of the Constitution of India. Thus, we hold that the writ petition was maintainable. Reversal of deduction claimed - HELD THAT - The Assessing Officer continues to maintain the stand that the whereabouts of the selling dealer are not known and sale bills alone have been issued. This finding is not supported by any document or any report, which was called for and obtained by the Assessing Officer. In such circumstances, it has to be held that the Assessing Officer did not enquire into the matter, particularly, with regard to the aspects pointed out by the appellant that the selling dealer's registration was valid and sale bills have been issued and payments have also been effected by the appellant - If such is the factual position, we need to take note of the legal position as to whether, the appellant is required to prove that the selling dealer had paid taxes. The Hon'ble Division Bench pointed out that, admittedly, the Registration Certificates of the selling dealers were in force and their services were not canceled and there is no explanation on the side of the Revenue for not examining the selling dealers. Further, dealing with the issue that the bills were bogus, the Division Bench pointed out that, in the bills, the Registration Number and names of the sellers were given, but the Department failed to identify the sellers and make them available for cross-examination. In the case on hand also, the Assessing Officer took no steps to enquire into the matter, pursuant to the objections filed by the appellant. Also, in the present case, the Assessing Officer took no steps to enquire into the matter, pursuant to the objections filed by the appellant - the revision of assessment made on the appellant is not sustainable in law - petition allowed.
Issues Involved:
1. Whether the writ petition could be rejected on the grounds mentioned by the learned Writ Court. 2. Whether there is an absolute bar for the Writ Court to entertain a challenge to an Assessment Order. 3. Whether the appellant is required to prove that the selling dealer had paid taxes. 4. Whether the Assessing Officer's actions were fair and within jurisdiction. 5. Whether there was a violation of principles of natural justice. Issue-wise Detailed Analysis: 1. Rejection of Writ Petition by the Learned Writ Court: The Writ Appeal was filed against the dismissal of the writ petition by the learned Writ Court, which relied on the decision in Glaxo Smith Kline Consumer Health Care Limited. The Writ Court dismissed the petition on the grounds that it was filed beyond the period of limitation stipulated under Section 31(1) of the Tamil Nadu General Sales Tax Act, 1959. The appellant argued that the decision in Glaxo Smith Kline was distinguishable and that the Writ Court should have considered their case on merits. 2. Absolute Bar for Writ Court to Entertain Challenge to Assessment Order: The court examined whether the Writ Court has an absolute bar to entertain a writ petition challenging an Assessment Order. It referred to the decision in Mahindra & Mahindra Ltd. v. The Joint Commissioner (CT) Appeals, Chennai, where it was held that the High Court, in exercise of power under Article 226 of the Constitution of India, should not entertain a writ petition as a matter of course when an effective alternative remedy is available. However, it was also noted that the High Court's power under Article 226 is very wide and should be exercised with self-imposed restraint, especially when there is an alternative remedy available. 3. Requirement for Appellant to Prove Selling Dealer Paid Taxes: The appellant contended that they should not be held liable for the non-payment of tax by the selling dealer. The court referred to earlier decisions, such as Govindan and Co. v. State of Tamil Nadu, which held that the purchasing dealer need not show that the sellers have in fact paid tax. It is sufficient for them to show that the earliest sales are taxable sales and that the tax is really payable by their sellers. The appellant had produced documents to prove that the selling dealer was an existing dealer with a valid Registration Certificate. 4. Fairness and Jurisdiction of Assessing Officer's Actions: The appellant argued that the Assessing Officer's actions were unfair and lacked jurisdiction. The Assessing Officer did not accept the documents provided by the appellant, which included the renewal of the Registration Certificate, bill copies, and payment details. The court found that the Assessing Officer did not conduct a proper inquiry into the matter and did not provide any supporting documents or reports for their findings. It was held that the Assessing Officer's actions were not justified. 5. Violation of Principles of Natural Justice: The appellant claimed that there was a violation of principles of natural justice as the Assessing Officer did not consider the documents submitted by them. The court noted that the appellant's grounds included unfairness in the action of the statutory authority and non-consideration of the documents. It was held that the correctness of the Assessment Order could be tested in a writ petition under Article 226 of the Constitution of India. Conclusion: The court concluded that the writ petition was maintainable and that the revision of assessment made on the appellant was not sustainable in law. The Writ Appeal was allowed, the order passed in the writ petition was set aside, and the revision of assessment by the respondent was also set aside.
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