2022 (9) TMI 1274 - HC - VAT and Sales Tax

Jurisdiction - delegation of power to an Officer not below the rank of Deputy Commissioner (CT) and to conduct the enquiry - Section 64 (4) of the TNVAT Act - HELD THAT - The issue that has been raised in the present appeal is no longer res integra and the Division Bench of this Court has settled the issue in Joint Commissioner (CT), Chennai and others Vs. M/S. Original Vel Sporting News, Rep. by its Manager, Mr. Dinesh Kumar Soman 2019 (6) TMI 1586 - MADRAS HIGH COURT , where it was held that the order of the learned Commissioner under Section 64(4) of the Act is a quasi-judicial order, requiring a prior notice of hearing to the assessee and passing of a reasoned speaking order in individual cases of registered dealers for conducting audit by the specified Authority as directed by the Commissioner. Thus, it is clear from the above that under Section 64(4) of the Act, it does not empower the Commissioner to delegate the power and to pass orders to any lower authority and the Commissioner himself will have to pass orders. Appeal allowed.

Summary

Issues:
Challenge to order allowing writ petition but granting liberty to delegate power for enquiry.

Analysis:
The writ appeal challenged the order allowing a writ petition but granting liberty to delegate power for an enquiry. The impugned proceedings required the petitioner to prepare for a proposed VAT audit and cooperate with audit officers by providing necessary documents. The Single Judge concluded that the Joint Commissioner did not have the necessary approval to issue the proceedings, directing the Commissioner to delegate power as per Section 64(4) of the TNVAT Act.

The Division Bench previously settled a similar issue in a different case, emphasizing the importance of Section 64(4) of the TNVAT Act. This section empowers the Commissioner to order an audit of a registered dealer's business by an officer not below the rank of Deputy Commercial Tax Officer. The criteria for selecting dealers for audit include those who have not filed returns, claimed excessive tax refunds, or whose returns are deemed incorrect. The Commissioner must individually assess each case and issue specific orders for audit, ensuring compliance with natural justice principles.

The Court clarified that the Commissioner cannot delegate the power to pass audit orders to lower authorities. Each order under Section 64(4) must reflect the Commissioner's evaluation of the dealer's default and the need for an audit. The audit process is crucial, not just under the TNVAT Act but also possibly under other relevant statutes like the Companies Act or Income Tax Act. The audit report can be used as evidence during assessment proceedings, making it a serious matter that requires due process and careful consideration.

Therefore, the Court held that the Commissioner must personally exercise the powers under Section 64(4) without delegation. The direction given by the Single Judge to delegate power was deemed unsustainable, and the order was interfered with in line with the earlier Division Bench decision. The Commissioner was advised to follow the principles outlined in the previous judgment when exercising powers under Section 64(4) of the Act. The writ appeal was allowed accordingly, with no costs incurred.