2021 (11) TMI 110 - HC - VAT and Sales Tax

Service of assessment order - invocation of the provisions of RR Act for recovery of tax dues on the ground of non-payment - assessment orders for the periods 2005-06 to 2008-09 and 200910 and 2010-11 - HELD THAT - It is a trite law that no liability can be fastened on a person without communicating the proceeding or order under which such liability is claimed as having arisen or being claimed as due. Any such action initiated would be contrary to the basic canons of justice and in violation of principles of natural justice and cannot stand the judicial scrutiny - In the facts of the present case, since the respondents are unable to show to this Court as to when and how the service of orders of assessment for the year 2009-10 and 2010-11 giving rise to a demand of ₹ 2,38,84,812/- and ₹ 1,21,83,884/- respectively has been effected on the petitioner, the resort made by the respondent in issuing notices in Form IV and V of RR Act, claiming arrears of ₹ 5.58 crores covering the period 2005-06 to 2008-09 and 2009-10 to 2010-11 cannot be held to be valid. The impugned proceedings initiated by invoking the provisions of Section 27 of VAT Act and issuance of notices in Form IV and V under RR Act, attaching the properties of the petitioner by showing the arrears of tax due for the period 2009-10 and 2010-11, cannot be sustained - the impugned notice of attachment issued in Form V dated 20.02.2018 for recovery of a sum of ₹ 5,59,58,758/- is hereby set aside. Petition allowed.

Summary

Issues Involved:
1. Whether the orders of assessment as claimed to have been passed by the respondents are served on the petitioner.
2. The validity and justification of the respondents' action in invoking the provisions of the Revenue Recovery Act (RR Act) for recovery of tax dues on the ground of non-payment.

Detailed Analysis:

Issue 1: Service of Assessment Orders
The petitioner contends that the assessment orders for the periods 2005-06 to 2008-09, 2009-10, and 2010-11 were not served, preventing them from verifying the correctness of the assessments and availing statutory remedies. The respondents, however, claim that the orders were served.

The Telangana VAT Act and Rule 64 of the Telangana VAT Rules prescribe the methods of serving notices and orders. For companies, Rule 64(1)(b) outlines that service can be valid if the order is:
1. Personally served on the nominated person.
2. Left at the registered office or address for service.
3. Sent by registered post to any office or place of business.
4. If returned unserved, put on the board in the office of a local chamber of commerce or traders association.

For the period 2005-06 to 2008-09, the assessment order dated 31.03.2011 was served on the petitioner’s Director, Pankaj Agarwal. The petitioner did not deny the receipt of this order specifically and instead questioned the authority of the respondent in passing the order. The court found that the service of this order was valid and the petitioner’s contention lacked merit.

For the periods 2009-10 and 2010-11, the respondents failed to provide evidence of service of the assessment orders. The respondents' counter affidavit lacked specifics on the mode and timing of service, and no material was provided to demonstrate service. The court noted that the respondents claimed the records were not traceable, which undermined their position. Consequently, the court found the petitioner’s claim of non-service justified.

Issue 2: Invocation of the RR Act
The respondents issued attachment orders under the RR Act for recovery of tax dues, claiming arrears of ?5.59 crores for the periods 2005-06 to 2008-09, and 2009-10 to 2010-11. The petitioner argued that without valid service of assessment orders, the respondents could not claim these arrears or invoke the RR Act.

The court emphasized that no liability can be imposed without communicating the proceedings or orders under which such liability arises. The respondents failed to demonstrate the service of assessment orders for 2009-10 and 2010-11, making their invocation of the RR Act invalid for these periods. The court held that the respondents' actions were contrary to the principles of natural justice and could not withstand judicial scrutiny.

Judgment:
The court allowed the writ petition, setting aside the impugned notice of attachment dated 20.02.2018 for recovery of ?5,59,58,758/-. The court clarified that the respondents could initiate recovery proceedings afresh only for the arrears due for the period 2005-06 to 2008-09 as crystallized under the order dated 31.03.2011, excluding the tax arrears for 2009-10 and 2010-11. Pending miscellaneous petitions were closed in light of this final order.