2016 (9) TMI 518 - HC - VAT and Sales Tax

Validity of order of assessment - TNVAT Act, 2006 - FMCG products - stock transfers - maintenance of accounts - MFG-pro - SAP - audit by enforcement wing for 15 days - opportunity of personal hearing - Held that - the impugned assessment is a very complicated issue and this is all the more established from the fact that the enforcement officials namely, the second respondent had spent 15 days in the place of business of the petitioner gathering details and information. Therefore, there is absolutely no reason for the first respondent to complete the assessment in the manner done in the impugned order. He is required to take into consideration relevant factors and should not proceed to decide the matter based on irrelevant considerations, which are not germane for determining the disputed issues. Above all failure to consider the petitioner s explanation dated 30.09.2014, amounts to serious violation of principles of natural justice - assessment order requires interference - first respondent directed to redo the assessment in accordance with law, after affording an opportunity of personal hearing and adopt any one of the modes for verification of the data/records in terms of the observations contained in this order - petition allowed - decided in favor of petitioner.

Issues Involved:
1. Violation of principles of natural justice.
2. Non-application of mind by the Assessing Officer.
3. Failure to consider the petitioner's objections and documentary evidence.
4. Procedure and adequacy of maintaining accounts in electronic form.
5. Role and powers of the Assessing Officer versus the enforcement wing.

Detailed Analysis:

1. Violation of principles of natural justice:
The petitioner argued that the assessment order was passed in gross violation of principles of natural justice. The first respondent did not properly consider the objections and documentary evidence submitted by the petitioner, including a Chartered Accountant's certified trading account. The petitioner contended that their objections dated 02.05.2011 and 30.09.2014 were not adequately addressed, leading to a conclusion that the assessment was biased and predetermined. The court noted that the failure to consider the petitioner's detailed reply dated 30.09.2014 was sufficient to hold that there was a violation of principles of natural justice.

2. Non-application of mind by the Assessing Officer:
The petitioner claimed that the first respondent acted on the dictation of the second respondent (enforcement wing), thereby abdicating his quasi-judicial powers. The court observed that the impugned order suffered from non-application of mind as it did not deal with the various objections and documentary evidence filed by the petitioner. The court emphasized that the role of the Assessing Officer is to make an honest and fair estimate of the proper figure of assessment, considering all relevant materials and circumstances.

3. Failure to consider the petitioner's objections and documentary evidence:
The petitioner submitted that the first respondent ignored the objections and documentary evidence, including the Chartered Accountant's certificate, which is considered sacrosanct under Section 63A of the TNVAT Act. The court agreed that the Chartered Accountant's certificate carries significant weight and should not be outrightly rejected unless the department can establish that incorrect particulars were certified. The court found that the first respondent failed to objectively analyze the petitioner's explanations and materials, leading to a conclusion that the assessment was not conducted fairly.

4. Procedure and adequacy of maintaining accounts in electronic form:
The petitioner maintained their accounts through the MFG-pro/SAP system and offered to provide the accounts in CD format or allow the first respondent to inspect the accounts at their office. The court noted that the first respondent's predecessors had inspected the accounts in the petitioner's office and found no issues. The court held that the first respondent should have accepted the petitioner's offer to submit the accounts in CD format or inspect the accounts at their office, especially given the voluminous nature of the data.

5. Role and powers of the Assessing Officer versus the enforcement wing:
The court highlighted that the Assessing Officer must independently assess the materials and explanations provided by the dealer, without being influenced by the enforcement wing's observations. The court referred to the Supreme Court's observations in the case of C. Velukutty, emphasizing that the Assessing Officer must exercise judgment and not act dishonestly or capriciously. The court found that the first respondent acted as per the dictation of the enforcement wing, thereby abdicating his statutory duties.

Conclusion:
The court allowed the writ petitions, set aside the impugned assessment orders, and directed the first respondent to redo the assessment in accordance with law, after affording an opportunity of personal hearing to the petitioner. The court emphasized the need for the Assessing Officer to independently verify the data and records, considering all relevant factors and ensuring compliance with principles of natural justice.

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