ASSESSMENT BASED ON AUDIT REPORT – PREVIOUS AUTHORISATION REQUIRED?

[DR.MARIAPPAN GOVINDARAJAN]

In M/S. SRI SRINIVASA LORRY TRANSPORT VERSUS THE ASSISTANT COMMISSIONER ST AND OTHERS - 2024 (9) TMI 1684 - ANDHRA PRADESH HIGH COURT the petitioner is carrying on lorry transport business in Andhra Pradesh.  The premises of the petitioner were inspected by the first respondent on 07.11.2019.  The petitioner was not a registered person at the time of inspection.   A show cause notice was issued on 17.12.2019 based on the inspection.  The said show cause notice was received by the petitioner on 26.12.2019.  On the receipt of the said notice the petitioner sent a letter to the Department on 04.01.2020 requesting to give time to file objections against the show cause notice.  The said letter was received by the Department on 21.01.2020.  The Department was silent on the request of the petitioner.  However, the Department passed an order of assessment on 21.09.2020.  The petitioner filed objections on the show cause notice during October, 2020 after the passing of the assessment order.  The Department also passed an order imposing penalty on the petitioner on 09.11.2020.

The petitioner, being aggrieved by the said order of assessment and penalty, filed two writ petitions before the High Court, one for challenging the assessment order and the other is for challenging the penalty imposed on the petitioner.  The petitioner raised the following grounds, common to both the two writ petitions-

• The petitioner was not granted am adequate opportunity to raise objections on the show cause notice.
• Further the Department passed the assessment order without providing a reasonable opportunity of being heard.
• Section 75 of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) requires giving of three adjournments before an order can be passed but in the case of petitioner no such adjournments was given.
• It is required that the Inspecting Officer is to get previous authorisation from the competent authority under 67 of the Act.
• A separate authorisation is required to take up the assessment proceedings if the inspecting officer is not the proper officer.
• In this case the respondent was the Assistant Commissioner, Addanki Circle whereas the petitioner is currently being assessed by Ongole Superintendent.  Therefore, the respondent has to obtain previous authorisation from competent authority before passing the assessment order.
• The assessment order and the penalty order both have not DIN numbers which is the fatal to the orders issued by the respondent.

Counter to the above grounds, the Department submitted the following before the High Court-

• Section 75 of the Act provides that more than 3 adjournments cannot be given.  It cannot be said that the three adjournments are compulsory and the orders can be passed only after giving 3 adjournments to the assessee.
• Section 67 of the Act provides that no inspection of any dealer can be carried out unless the previous authorisation is obtained from the Joint Commissioner or the Commissioner.
• In the present case authorisation was obtained from the competent authority on 05.11.2019.
• There is no provision for obtaining authorisation for connecting assessment proceeding arising out of such inspection, if the authority is the usual territorial assessing authority of a dealer.
• The petitioner was an unregistered dealer.
• The assessment of unregistered dealer is to be done under Section 63 of the Act by best of judgment.
• Section 63 does not contain any provision making mandatory to get authorisation for such type of assessment.
• In the assessment as well as penalty order the same contain DIN generated by the portal.

The High Court considered the contentions raised by the petitioner and the department.  The High Court analysed the provisions of Section 63 of the Act.  The High Court observed that section 63 authorises an officer to assess the tax liability of an unregistered dealer. This section does not provide prior authorisation for the assessment of the unregistered dealer.  Section 2(91) of the Act defines the expression ‘proper officer’ as an officer to whom any function to be performed under the Act is assigned by the Commissioner. 

According to the version of the Department the Adanki circle was the territorial circle for the area in which the petitioner was carrying business.  The said territorial jurisdiction and merged with Ongole – 1 circle vide order dated 01.07.2022 which was published in the Official Gazette on 05.07.2022.  Therefore, the High Court held that the first respondent, being the Assistant Commissioner (ST), Adanki circle was the appropriate assessing authority and the territorial assessing authority is not required any authorisation under Section 63 of the Act.

Then the High Court analysed the provisions of Section 75.  The High Court observed that the language in this section is clear and unambiguous.  This section only provides an outer limit on the number of adjournments that can be granted and the said language does not lend itself to an interpretation that a minimum of 3 adjournments have to be given before any order can be passed.  The High Court noted that the petitioner contended that he has not been granted an adequate opportunity to be heard.  The show cause notice was issued on 26.12.2019.  The petitioner gave a letter to the department seeking adjournment on 21.02.2020.  The petitioner has not shown any evidence that he has requested the Department to grant adjournments after 21.02.2020. 

However, the High Court observed that Section 75 requires an opportunity should be given if the Assessing Officer contemplates an adverse decision even if the person does not make any request for such hearing.  The show cause notice issued by the respondent on 17.12.2019 provides for filing written objections and no personal hearing has been granted.  Therefore, the High Court concluded that the assessment order and the penalty order are liable to be set aside. 

The High Court further held that it is open to the first respondent to undertake a fresh assessment proceeding and consequential proceeding, if any, after giving an opportunity of personal hearing to the petitioner.