2016 (11) TMI 809 - HC - VAT and Sales Tax

Reversal of ITC - sales suppression - principles of natural justice - Held that - if the Assessing Officer was of the view that the part of the objections raised by the petitioner were reasonable, then it would have been appropriate for the first respondent to have issued a notice to the petitioner to appear in person along with the records and clarify all the issues. If that had been done, the present Writ Petition itself could have been avoided. At this juncture, this Court would point out that the orders of assessment are not to be passed for statistical purpose but to ensure that the correct rate of tax and the correct quantum of tax is recovered from the dealer. By passing the orders such as the one which is impugned notice in this Writ Petition, no purpose has been served, as it can at best be taken for statistical purpose that the Assessing Officer has completed the assessment. On account of the manner in which the impugned order has been passed, the matter is before this Court and the order has been challenged. Therefore, the Assessing Officer who is a Statutory Authority under the Act, is required to independently apply his mind to all the issues and pass such an order and it would be appropriate for the Assessing Officer to call upon the assessee and direct him to explain all the transactions and after considering the records produced by the dealer the Assessing Officer should pass a detailed order. This is sufficient to hold that the impugned order has been passed in violation of the principles of natural justice - appeal allowed - matter on remand.

Summary

Issues:
Challenge to assessment order under TNVAT Act and CST Act for the year 2014-15 based on sales suppression and excess Input Tax Credit.

Analysis:
The petitioner, a registered dealer in hides and skins, challenged the assessment order dated 06.10.2016 for the assessment year 2014-15 under the TNVAT Act and CST Act. The second respondent issued a pre-revision notice on 14.01.2016, alleging sales suppression after scrutinizing monthly returns. The notice detailed the discrepancies and proposed to reverse excess Input Tax Credit of ?16,26,753 and levy a penalty. The petitioner requested time to submit objections and sought a personal hearing to explain with original records. Despite submissions and representations, the first respondent issued an assessment order on 06.10.2016, without considering the petitioner's explanations fully.

The court observed that the Assessing Officer should have called the petitioner for a personal hearing to clarify all issues before passing the assessment order. The purpose of assessment orders is to ensure the correct tax rate and amount are recovered. Passing orders solely for statistical purposes serves no real purpose. The court emphasized that the Assessing Officer, as a Statutory Authority, must independently analyze all issues, call the assessee for explanations, and pass a detailed order. The impugned order was found to violate the principles of natural justice due to lack of detailed consideration and explanation.

In light of the above, the court allowed the Writ Petition, set aside the impugned order, and remanded the matter to the first respondent for fresh consideration. The first respondent was directed to provide a personal hearing to the petitioner, allow the submission of all records, request an explanation and reconciliation of facts and figures, and then redo the assessment by passing a reasoned order. No costs were awarded, and connected Miscellaneous Petitions were closed.