2022 (6) TMI 280 - HC - VAT and Sales Tax

Levy of tax with penalty u/s 10A of the CST Act - transfer of right to use goods - revised show cause notice issued without meeting out the legal requirements - alleged misuse of 'C' Forms in respect of purchases made by the appellant - HELD THAT - It is evident that the respondent refused to examine the contentions raised by the appellant with respect to the control and possession over all goods at all times, but never parted with it, as the same are irrelevant. In any event, the respondent has already decided to conclude levy of tax and penalty against the appellant, without even waiting for the objections filed by them. While so, the revised notice issued by the respondent cannot be allowed to be sustained. The learned Judge failed to consider the same and erred in directing the appellant to file their objections to the impugned notice. Therefore, we are inclined to interfere with the order passed by the learned Judge. Misuse of C- Forms - HELD THAT - The appellant submitted that an opportunity may be given to the appellant to approach the appellate authority, in the event of passing an order under the CST Act, and to prove by documentary evidence that they have never misused the 'C' forms. This court finds some bona fide in the contention so raised on the side of the appellant. The revised notice issued by the respondent dated 30.08.2012 as well as the order of the learned Judge are set aside - the respondent to redo the entire exercise by issuing a fresh notice under the relevant enactments, to the appellant within a period of three weeks from the date of receipt of a copy of this order - appeal disposed off.

Summary

Issues:
Validity of order dated 08.07.2021 passed in W.P. No. 26423 of 2012 under TNVAT Act and CST Act.

Analysis:
The appellant challenged the validity of the order dated 08.07.2021 passed by the learned Judge in W.P. No. 26423 of 2012, contending that the notice was issued with a pre-determined mind and procedural irregularities were present as notices for several years were combined under TNVAT Act and CST Act. The appellant argued that they were engaged in providing passive telecom infrastructure support services and not involved in the transfer of right to use goods, thus not constituting a sale under TNVAT Act. The respondent proposed to levy tax and penalty under CST Act for alleged misuse of 'C' Forms, which the appellant disputed. The appellant filed a writ appeal to quash the order of the learned Judge.

The appellant's counsel argued that the revised show cause notice was issued with a pre-determined notion, and there was no physical transfer of goods or right to use equipment to customers in their business. The counsel contended that the respondent lacked jurisdiction to issue combined notices under TNVAT Act and CST Act as the proceedings were separate. The counsel requested to quash the order directing the appellant to respond to the notice and allow the writ appeal. The court heard the Additional Government Pleader for the respondent and reviewed the materials on record.

The court agreed with the appellant's submissions, noting that the revised show cause notice was issued with a pre-determined mind, disregarding the appellant's contentions regarding control and possession over goods. The court found that the respondent had decided on tax and penalty without waiting for the appellant's objections, leading to an unsustainable notice. The court decided to set aside the order of the learned Judge and the revised notice, directing the respondent to redo the process by issuing a fresh notice under relevant enactments to the appellant.

Regarding the alleged misuse of 'C' Forms, the court allowed the appellant to approach the appellate authority with documentary evidence to prove no misuse. The court set a timeline for the respondent to issue a fresh notice, for the appellant to file objections with evidence, and for the respondent to pass appropriate orders after a hearing. The court granted liberty to the appellant to seek remedy before the appellate authority in case of an assessment order by the respondent. The writ appeal was disposed of without costs, and the connected miscellaneous petition was closed.