2013 (5) TMI 259 - HC - VAT and Sales Tax

Suppression of turn over - Contention raised by assessee that Ext.P3 notice proposing suo motu revision was issued invoking power under Section 37 of the KGST Act thus if a penalty order issued under Section 45A is to be revised, the power that can be invoked is under Section 45A(5) only - Held that - Section 37 of the KGST Act empowers the Commissioner to suo motu call for and examine any order passed by any officer or authority subordinate to him other than Appellate Assistant Commissioner, which in his opinion is prejudicial to revenue and he may make such enquiy or cause such enquiry to be made and subject to the provisions of the Act, may pass orders thereon. An order passed under Section 37 is appealable to this Court under Section 40 of the Act also. In a proceedings under Section 45A, if the order is to be revised by the Commissioner suo motu. However, the fact a wrong provision has been quoted in Ext.P3 notice or Ext.P4 order, by itself, will not invalidate the proceedings conclude against the petitioner. In this case, the petitioner has not been able to prove before this court that any prejudice has been caused to him on account of the wrong quoting of the provision. If that be so, the fact that Section 37 has been mentioned in Ext.P3 or P4, does not result in nullification of the orders. Grounds mentioned in Ext.P4 are not the reasons mentioned in Ext.P3 notice therefore petitioner was incapacitated in producing the documents to substantiate his defence against the finding - Held that - A reading of Ext.P4 order shows that the petitioner has been found to have resorted to clandestine transactions mainly relying on delivery notes and relevant forest passes. None of these documents were relied on in Ext.P3 and therefore the findings in the aforesaid respect arrived at in Ext.P4 were without putting the petitioner on notice in respect of those issues. In such circumstances, counsel for the petitioner is justified in contending that the petitioner was seriously prejudiced in his defence. For that reason petitioner view is to be accepted and therefore set aside Ext.P5. However that will not absolve the petitioner from the liability to be proceeded against under Section 45A(5) of the Act. Ext.P4 will be treated as a notice and the petitioner will file his reply to Ext.P4 within 4 weeks from today and on filing reply as above, the first respondent will issue notice to the petitioner, afford him an opportunity of hearing and to produce documents.

Summary

Issues:
1. Jurisdiction of the Commissioner to revise orders under different sections of the KGST Act.
2. Discrepancies between the grounds mentioned in the notice and the final order leading to prejudice in defense.

Analysis:

Issue 1: Jurisdiction of the Commissioner to revise orders under different sections of the KGST Act

The petitioner challenged Ext.P4 order issued by the first respondent, which was passed under Section 37 of the KGST Act, invoking the power of suo motu revision. The petitioner contended that if a penalty order under Section 45A is to be revised, the correct power to be invoked is under Section 45A(5) only. The court referred to a Division Bench judgment in Bhima & Brother Jewellers and Diamond Merchants V. State of Kerala, which held that revision under Section 45A should be done under the same provision. However, the court noted that the wrong provision quoted in the notice or order does not invalidate the proceedings unless prejudice is proven. The court emphasized that the mentioning of Section 37 in the notice or order does not nullify the orders passed.

Issue 2: Discrepancies between the grounds mentioned in the notice and the final order leading to prejudice in defense

The petitioner raised a second contention regarding the discrepancies between the grounds mentioned in Ext.P3 notice and the final Ext.P4 order. The court observed that the petitioner was found to have engaged in clandestine transactions based on delivery notes and forest passes, which were not addressed in the notice. This lack of notice on critical issues prejudiced the petitioner's defense. The court agreed with the petitioner's counsel on this point and set aside Ext.P5. However, the court clarified that this does not absolve the petitioner from liability under Section 45A(5) of the Act.

In conclusion, the court directed that Ext.P4 should be treated as a notice, allowing the petitioner to file a reply within four weeks. The first respondent was instructed to provide an opportunity for the petitioner to be heard and to produce relevant documents. Fresh orders were to be passed under Section 45A(4) of the Act after considering the petitioner's response. The court also noted that the petitioner's registration under the KGST Act had been canceled, but depending on the outcome of the re-examination, modifications to this cancellation could be sought. The writ petition was disposed of accordingly.