2016 (6) TMI 391 - HC - VAT and Sales Tax

Validity of default notices of assessment of tax and interest issued u/s 32, 33 and 59(2) of DVAT - Availability of alternative remedy - Ex parte notices - notice deemed to be served - pasting of the notices on the web page of the dealer - Held that - the Court finds, that there are obvious glaring errors in each of the impugned orders which appear to system generated and issued without application of mind. In the circumstances relegating the Petitioner to the alternative remedy of going before the OHA would cause further delays in resolving the disputes that have arisen and would not be efficacious. Therefore, the above preliminary objection is rejected. Service of notices - Section 59 (2) DVAT Act - Held that - Unless it has been agreed to the contrary between the originator and the noticee, the service of an electronic record will occur only when it enters a computer resource outside the control of the originator. Section 100A of the DVAT Act, inserted with effect from 16th November 2005, enables the Commissioner to issue summons/notices/orders in electronic form. Section 100A of the DVAT Act appears to be in conformity and consistence with Sections 12 and 13 of the IT Act. The originator of the notices is a statutory authority, having the powers in terms of the DVAT Act read with the DVAT Rules to prescribe the manner of service of electronic orders, summons, notices etc. The Commissioner, as the originator of the notices under Section 59 (2) of the DVAT Act, has in terms of the order issued by him on 17th January 2014 deemed that pasting of the notices on the web page of the dealer would be deemed service of notice on the dealer. The Petitioner being a registered dealer under the DVAT Act ought to have been aware of the Order dated 17th January 2014 issued by the Commissioner. The Petitioner was required to go to its account on the DT&T website to view the notices posted on the said website. If the Petitioner had given the mobile phone details to the DT&T, it would have received SMS alerts as well. The failure by the Petitioner to go to the website to view the impugned notices, notwithstanding the order dated 17th January 2014 of the Commissioner, disables it from contending that there is no proper service on it of the said notices under Section 59 (2) of the DVAT Act. Issuance of notices by Record Keeper - Held that - while there is a noting signed by the Record Keeper that reads default assessment orders and penalty framed under Section 32 and 33 , there is nothing beyond that to suggest that it was the Record Keeper who framed such orders. It is plausible that the Record Keeper was merely noting the fact of the notices having been framed. From this it is not possible to infer that the impugned notices of default assessments of tax, interest and penalty were issued by the Record Keeper and not by the VATO. Validity of ex parte default notices of assessment of tax, interest and penalty - Section 32 & 33 of the DVAT Act - Inter-state sales - Held that - each of the impugned notices of default assessment of tax and interest reveal inter alia the tax period for which the demand has been raised. While Column 2 titled turnover reported by dealer contains a figure (presumably as shown in the return filed by the dealer), Columns 3 and 4 titled turnover assessed and tax paid are shown as 0 . The remaining Columns 5, 6, 7 and 8 titled tax assessed , additional tax due, interest and total amount due contain figures. If the turnover assessed is zero, it is not possible that the tax assessed is at a figure for e.g., of ₹ 14,43,938 for the first quarter of 2014. This sort of obvious error can only be explained by some defect in the system through which the said notices have been generated. No attempt has been made by the DT&T to explain the error. The second obvious error is that the impugned notices of default assessment claim that the Petitioner made inter-state sales to the dealer in Rajasthan who was found to be a suspicious/bogus dealer. The notices proceeds to state that since the dealer has made ISS of fabrics to the tune of. , he is being asked to pay additional tax and penalty under Section 86 (10) of the DVAT Act. If indeed the sale was an inter-state one, then only the CST Act would apply and not the DVAT Act. Therefore, each of the notices issued are set aside. Mr Narayan maintains that what the DT&T is seeking from the Petitioner is the information and documents mentioned in the notices dated 11th August 2015 issued under Section 59 (2) of the DVAT Act. Therefore, there is no need to issue fresh notices. - Petitions disposed

Summary

Issues Involved:
1. Validity of default notices of assessment of tax and interest under Section 32 of the DVAT Act.
2. Validity of default notices of assessment of penalty under Section 33 of the DVAT Act.
3. Legality of notices issued under Section 59(2) of the DVAT Act.
4. Jurisdiction and authority of the Record Keeper in issuing default assessment orders.
5. Efficacy of alternative remedy under Section 74 of the DVAT Act.
6. Proper service of electronic notices under the DVAT Act and IT Act.

Issue-wise Detailed Analysis:

1. Validity of Default Notices of Assessment of Tax and Interest under Section 32 of the DVAT Act:
The court examined the ex parte notices of default assessments of tax and interest dated 7th September 2015. It was found that each notice was identically worded except for the periods and figures. The notices directed the dealer to pay a sum as tax and furnish proof of such payment, but contained obvious errors, such as showing 'turnover assessed' as zero while simultaneously showing significant amounts under 'tax assessed'. This inconsistency indicated a system error and lack of application of mind by the VATO, rendering the notices invalid.

2. Validity of Default Notices of Assessment of Penalty under Section 33 of the DVAT Act:
The court noted that the impugned notices of default assessment of penalty also dated 7th September 2015 were flawed. The notices claimed that the petitioner made inter-state sales to a dealer in Rajasthan, who was found to be a 'suspicious/bogus' dealer. However, the court held that if the sales were indeed inter-state, they should be taxed under the CST Act and not the DVAT Act. This misapplication of the law further invalidated the penalty notices.

3. Legality of Notices Issued under Section 59(2) of the DVAT Act:
The petitioner contended that the notices under Section 59(2) of the DVAT Act were not properly served as they were only uploaded on the DT&T website and not delivered in terms of Rule 62 of the DVAT Rules. The court found that the order dated 17th January 2014 by the Commissioner, which deemed the uploading of notices on the website as proper service, was consistent with Section 13 of the IT Act. Therefore, the service of notices was deemed valid.

4. Jurisdiction and Authority of the Record Keeper in Issuing Default Assessment Orders:
The petitioner argued that the default assessment orders were issued by a Record Keeper and not the VATO, making them without jurisdiction. The court reviewed the notings on the file and found no evidence to support this claim. The notings merely indicated that the Record Keeper noted the fact of the orders being framed, but did not issue them. Thus, the court rejected this contention.

5. Efficacy of Alternative Remedy under Section 74 of the DVAT Act:
The court considered whether the petitioner should be relegated to the alternative remedy of challenging the impugned orders before the Objection Hearing Authority (OHA) under Section 74 of the DVAT Act. Given the glaring errors in the impugned orders, the court held that relegating the petitioner to the OHA would cause further delays and would not be efficacious. Therefore, the preliminary objection was rejected.

6. Proper Service of Electronic Notices under the DVAT Act and IT Act:
The court examined the provisions of Section 100A of the DVAT Act and Sections 12 and 13 of the IT Act, which govern the service of electronic notices. It found that the order dated 17th January 2014 by the Commissioner, which deemed the pasting of notices on the dealer's webpage as proper service, was legally valid and binding on registered dealers. The petitioner, being a registered dealer, was expected to regularly check the DT&T website for such notices.

Conclusion:
The court set aside each of the default notices of assessment of tax, interest, and penalty dated 7th September 2015 issued by the VATO under Sections 32 and 33 of the DVAT Act. The court directed the petitioner to appear before the VATO Ward 70 on 20th July 2016 to provide the required information and documents in response to the notices dated 11th August 2015. The VATO was instructed to pass appropriate orders after examining the information and complying with the principles of natural justice. The petitions and applications were disposed of with no orders as to costs.