2016 (12) TMI 564 - HC - VAT and Sales Tax

Validity of assessment order - input tax credit - acceptance of C Forms - principles of natural justice - Held that - a notice dated 19.08.2016 was issued to the petitioner proposing to reverse the Input Tax Credit as per Section 19(5)(c) of the Tamil Nadu Value Added Tax Act, 2006. The reason for making such proposal is that the petitioner has not filed the declaration in Form C , for a period of three months. The petitioner received the Show-Cause Notice on 06.10.2016. The Show-Cause Notice grants 15 days time to the petitioner to file their objections. However, well before the expiry of 15 days period, the impugned assessment order has been passed on 30.09.2016. It is admitted by the learned Additional Government Pleader that the impugned assessment order has been passed well before the expiry of 15 days period. This is sufficient to set-aside the impugned order. One more ground on which the impugned order has to be held bad is on the ground that impugned order proceeds to reverse the Input Tax Credit, on other grounds as well, other than the ground pointed out in the Show Cause Notice, dated 19.08.2016. Therefore, in respect of those issues which are pointed out in the impugned order, the petitioner did not have adequate opportunity. Thus, the impugned order having been passed in total violation of principles of natural justice, calls for interference. The impugned order is set-aside and the respondent is directed to issue fresh Show-Cause Notice to the petitioner, clearly setting out as to what is the proposal being made against the petitioner. Before doing so, the respondent shall accept the C Forms and verify the same - petition allowed - decided in favor of petitioner-assessee.

Summary

Issues:
Challenge to assessment order under CST Act for the year 2015-16 based on violation of principles of natural justice.

Analysis:
The petitioner, a dealer in automobile components registered under the CST Act, challenged an assessment order for the year 2015-16, not on merits but on grounds of violation of natural justice principles. The impugned order proposed to reverse Input Tax Credit due to the petitioner's failure to file declaration Form 'C' for three months. Despite receiving a Show-Cause Notice on 06.10.2016 granting 15 days to respond, the assessment order was passed prematurely on 30.09.2016, breaching the time limit. This premature action alone warranted setting aside the impugned order.

Analysis:
Another reason for holding the impugned order invalid was that it reversed Input Tax Credit on grounds not mentioned in the Show Cause Notice dated 19.08.2016. This deprived the petitioner of a fair opportunity to address those issues, constituting a severe violation of natural justice principles. Additionally, the petitioner submitted Form 'C' declarations after the impugned order, with some being accepted and some refused by the respondent, creating further procedural irregularities.

Analysis:
The petitioner argued that dealing with large corporate entities like Mahindra and Mahindra, Ford India, caused delays in obtaining Form 'C' declarations. They contended that the law allows for a three-month period for submission, and even beyond that, with proper reasons, if condonation of delay is sought. Despite delays in furnishing Form 'C', the respondent prematurely proposed to reverse Input Tax Credit, overlooking the statutory provisions and precedents allowing for reasonable delays.

Analysis:
Consequently, the High Court allowed the Writ Petition, setting aside the impugned order and directing the respondent to issue a fresh Show-Cause Notice to the petitioner, specifying the proposals clearly. The respondent was instructed to accept all Form 'C' submissions made by the petitioner and verify their validity. Only after granting any applicable concessional rates and ensuring compliance should further actions be taken, emphasizing adherence to due process and natural justice. No costs were awarded in this matter, bringing the case to a close.