2022 (2) TMI 136 - HC - VAT and Sales Tax

Validity of assessment order - time limitation - notice for assessment is rightly treated to have been served on the applicant or not - applicant unit having closed business on 06.11.2003 for A.Y. 2003-04 - service of notice on Naresh Agarwal was sufficient or not - section 21(6) of the U.P. Trade Tax Act - HELD THAT - From bare perusal of the provisions of Rule 77(3) of the Rules and rule 72(g), it is evidently clear that if the noticee refuses to accept notice, the process server has not only to submit his report, but such report shall also be verified on oath. The assessing authority concerned, thereafter, in the facts circumstances and after making such further inquiry in the matter, if any, as it deems fit, consider such refusal to be proved serviced. Under the VAT Act, a further caution/condition has been imposed that the process server is required to file an affidavit or verification. In absence of such an affidavit/verification, the process server shall be examined by another authority. This, in itself, shows the intention of the Legislature that the power of the assessing authority through process server may not be misused - In the case in hand, all the authorities have just relied upon the report of the process server and failed to note that such report of the process server was required to be examined on oath. The said primary duty required by the assessing authority is missing. From perusal of the assessment order, it reveals that the first appellate order had only relied upon the report of process server, which is bad in view of rule 77 of the U.P. Value Added Tax Rules. Further, Tribunal, by its order dated 29.05.2014, being last Court of fact, has recorded a finding of fact in favour of the applicant that the notice served upon Mr. Naresh Agarwal was not proper, but still remanded the matter. By this, the Tribunal tried to give second inning to the Revenue. In other words, a thing cannot be done directly was permitted to be done indirectly - The affidavit is also of no help to the Department as, even assuming Naresh Agarwal was authorized on behalf of the Company, even though the Company was closed down on 06.11.2003. Once a stand clearly taken by the Department that there was refusal of service, then the provisions provide under the Rules have to be complied with in its totality, but case in hand, process server was not verified as required under rule 77(3) of the U.P. Trade Tax Rules read with rule 72(9) of the Value Added Rules - the authorities are not permitted to improve their version, which was not in original proceedings. Once it has come on record that there was neither proper service, nor verification on oath of the process server, which is mandatory, the whole proceedings are rendered vitiated and are liable to be set aside. The impugned orders passed by the Tribunal as well as the assessment orders are hereby set aside - revision allowed.

Summary

Issues Involved:
1. Whether the assessment order dated 02.04.2012 for the A.Y. 2002-03 is time-barred.
2. Whether the notice for assessment was rightly treated to have been served on the applicant.
3. Whether the service of notice was sufficient under Sub Rule (3) of Rule 77 of the Rules.
4. Whether the Tribunal was correct to review its order dated 29.05.2014.
5. Whether the assessment order dated 02.04.2012 is time-barred as per section 21(6) of the U.P. Trade Tax Act.

Issue-wise Detailed Analysis:

1. Time-barred Assessment Order:
The applicant argued that the assessment order dated 02.04.2012 was time-barred. The limitation for completing the assessment proceedings was up to 31.03.2005, but due to an interim order staying the proceedings, the limitation period extended. The stay was vacated on 11.08.2011, and the assessment order was passed within the extended period. However, the court found that the assessment order was not time-barred, considering the exclusion of the stay period.

2. Service of Notice:
The applicant contended that the notice was not properly served. The notice was allegedly served on Naresh Agarwal, who refused to accept it and directed it to be served on the owner. The court examined whether this constituted proper service under the law. The Tribunal initially found the service on Naresh Agarwal insufficient but later reversed its decision. The court emphasized the requirement for the process server's report to be verified on oath, which was not done, rendering the service of notice improper.

3. Sufficiency of Notice Service:
The court scrutinized the sufficiency of the notice service under Rule 77(3) of the Rules. The rule mandates that if a noticee refuses to accept the notice, the process server must submit a verified report on oath. The authorities failed to comply with this requirement, making the service of notice insufficient and invalid.

4. Review of Tribunal's Order:
The Tribunal reviewed its order dated 29.05.2014, which initially found the service of notice on Naresh Agarwal improper but later remanded the case. The court criticized the Tribunal for giving a second chance to the Revenue, which was not permissible. The Tribunal's review and remand were deemed unjustified.

5. Time-barred Assessment Order as per Section 21(6):
The court reiterated that the assessment order was not time-barred, considering the stay period. However, the improper service of notice and lack of verification on oath by the process server vitiated the entire proceedings.

Conclusion:
The court allowed the revisions, setting aside the impugned orders passed by the Tribunal and the assessment orders. The questions of law were answered in favor of the applicant, emphasizing the mandatory nature of proper notice service and verification under the rules.