2022 (6) TMI 857 - HC - VAT and Sales Tax

Validity of assessment order - no opportunity granted, prior to framing of the impugned assessments - violation of principles of natural justice - HELD THAT - After referring to the verification to be undertaken by the Assessing Authorities in regard to the materials in his possession, at paragraph 3.3.5, the Assessing Authority is required to issue notice along with all details connected to the assessment and seek objections from the assessee concerned. Thereafter, a personal hearing shall be afforded, either physically or virtually, granting adequate opportunity to the dealer to put forth its objections. The Circular bearing No.5/2021 also envisages a request of the assessee for cross examination of the third party dealer. It also provides for such an opportunity of cross examination to be granted suo motu, if the Assessing Authority believes that it would be so appropriate. The assessment will thereafter be concluded within a period of 180 days from date of issue of show cause notice. Let this procedure be followed in the present matters as well. Show cause notices, as indicated in the Circular will be issued to the petitioner within a period of four (4) weeks from today with all necessary enclosures - petition allowed.

Summary

Issues:
Challenge to assessment orders under Central Sales Tax Act, 1956 and Tamil Nadu Value Added Tax Act, 2006 for various periods without granting prior opportunity to the petitioner.

Analysis:
The petitioner, a dealer, contested the assessments primarily on the grounds of lack of opportunity before the assessments were finalized. The assessments were based on third-party dealer returns and data from check-posts and other records. The petitioner objected to the conclusions drawn by the Assessing Authority based on third-party material, which was not provided to the petitioner for review.

The impugned assessments were found to be based on discrepancies between the petitioner's returns and those of third-party dealers. The issue of mismatch in assessments has been a longstanding concern, prompting directives from the Special Commissioner/Commissioner of Commercial Taxes to address this issue effectively.

A Circular issued on 24.02.2021 outlined a comprehensive procedure to handle mismatch cases under the TNVAT Act, emphasizing reconciliation and resolution of discrepancies between purchasing and selling dealers. The Circular detailed categories of mismatch cases, reasons for discrepancies, and the procedures to be followed by the Assessing Authorities.

The Circular mandated the Assessing Authorities to list pending mismatch cases, verify data on the departmental website, issue notices to dealers for reconciliation, and conduct thorough enquiries. The Circular also provided for a structured process for show cause notices, personal hearings, and cross-examination of third-party dealers if necessary, ensuring completion of assessments within 180 days.

The Court directed the Assessing Authorities to follow the Circular's procedure in the present matters, issuing show cause notices to the petitioner within four weeks and completing assessments within 180 days after hearing the petitioner. The impugned orders were set aside, and the Writ Petitions were allowed without costs, with connected Miscellaneous Petitions closed.