2024 (8) TMI 197 - HC - VAT and Sales Tax

Challenge to assessment order - jurisdiction of Respondent No.2, the Deputy Commissioner of State Tax exercising the jurisdiction under the Maharashtra Value Added Tax Act, 2002 - HELD THAT - Under Section 23 (2) of the MVAT Act, the Commissioner should first form an opinion that it is necessary or expedient to ensure that return is correct and complete, and after he forms such an opinion he requires to produce any documents then he shall give notice describing therein the documents which are required to be produced. If one sees the show cause notice it does not mention which are the documents that are required to be produced. The show cause notice is issued in a printed format with only the period and the date and time filled up. It does not give details of the information or documents required to be furnished notwithstanding the fact that Petitioner has vide its letter dated 6th January 2024 furnished the documents. Without even referring to those documents, a letter has been issued on 11th March 2024, simply calling upon Petitioner to submit assessment compliance. What more was required to be furnished is not mentioned. Before passing best judgment assessment, Section 23 (2) provides that if the registered dealer fails to comply with the terms of any notice issued under the sub-section, the Commissioner shall assess to the best of his judgment the amount of tax due from the assessee. The impugned order only refers to the letter dated 11th March 2024 in which letter, as noted earlier and also in the show cause notice, no details of documents required to be produced have been given. Therefore, in the present case, pre-conditions required to pass best judgment assessment is not satisfied. The impugned order dated 28th March 2024 is not sustainable. The same is hereby quashed and set aside. Consequently, the demand notice also dated 28th March 2024 is quashed and set aside - Petition allowed.

Summary

Issues:
Impugning assessment order and notice of demand under MVAT Act based on jurisdiction and procedural grounds.

Analysis:
The petitioner challenged an assessment order and notice of demand dated 28th March 2024 issued by the Deputy Commissioner of State Tax under the Maharashtra Value Added Tax Act, 2002. The petitioner, engaged in the exploration of petroleum resources in specific fields off the coast of Mumbai, argued that the transfer of title in crude and natural gas to the Government nominee at the delivery point in the contract areas exempted them from the jurisdiction of the Deputy Commissioner of State Tax. The petitioner contended that a show cause notice issued lacked details, rendering them handicapped. Despite this, the petitioner submitted various financial and audit documents. Subsequently, another vague letter was sent, followed by the impugned order under Section 23 of the MVAT Act, passed without addressing the petitioner's submissions and solely on a best judgment basis.

The court examined Section 23 (2) of the MVAT Act, which outlines the assessment process for registered dealers. It mandates that if the Commissioner deems it necessary to ensure the correctness and completeness of a return, and further documents are required, a notice specifying the documents needed must be served. The court noted that the show cause notice and subsequent letter failed to specify the documents required, despite the petitioner having previously furnished relevant documents. The best judgment assessment under Section 23 (2) can only be made if the dealer fails to comply with the notice's terms, which was not the case here due to the lack of specific document requirements.

Consequently, the court held that the impugned order and demand notice were unsustainable due to the failure to meet the pre-conditions for a best judgment assessment. Therefore, the court quashed and set aside both the order and the demand notice, ruling in favor of the petitioner engaged in petroleum exploration activities.