2017 (2) TMI 180 - HC - VAT and Sales Tax

Whether the assessment orders, which are based on a VAT Audit triggered by a Joint Commissioner, could be sustained, in view of the provisions of Section 64(4) of the 2006 Act? Held that - after the audit was conducted and the statement of the petitioner was recorded, it was placed before him and the petitioner appears not to have signed the statement. There is, in that sense, no acquiescence on the part of the petitioners, though, based on the VAT audit report, respondent No.3, proceeded to pass the assessment orders. The jurisdiction to conduct VAT audit, which was authorised by the Joint Commissioner was not accepted by the petitioner and therefore, the assessment orders passed were also without jurisdiction. The assessment orders and the VAT Audit reports are set aside - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to Assessment Orders based on VAT audit authorization by Joint Commissioner under Section 64(4) of the Tamil Nadu Value Added Tax Act, 2006.

Analysis:
The petitioner challenged five Assessment Orders for different Assessment Years, contending that the orders were based on a VAT audit authorized by the Joint Commissioner, who lacked the necessary power under Section 64(4) of the 2006 Act. The petitioner, a registered dealer, claimed regular compliance with tax filings and payments. The audit was conducted by the Enforcement Wing Group I based on authorization from the Joint Commissioner. The petitioner argued that the Joint Commissioner lacked the authority to order the VAT audit against a registered dealer.

The respondents argued that the Commissioner had authorized the audit, leaving the execution to the Joint Commissioners of the Enforcement Wing. The petitioner relied on previous court orders and legal provisions to support their contention that the power to order an audit could only be vested in the Commissioner, not delegated to the Joint Commissioner. The court examined Section 64(4) of the Act, which specifies the criteria for selecting dealers for audit and mandates that the audit be ordered by an officer not below the rank of Deputy Commercial Tax Officer.

The court found that the audit in question was authorized by the Joint Commissioner, contrary to the statutory provisions. The court noted discrepancies in the proceedings dated 16.05.2014, where the power to authorize VAT audits was seemingly delegated to the Joint Commissioners of the Enforcement Wing. The court concluded that the Joint Commissioner's authorization for the audit was not accepted by the petitioner, rendering the assessment orders without jurisdiction.

As a result, the court allowed the prayer in the writ petition, setting aside the assessment orders and VAT audit reports. The respondents were granted liberty to conduct a fresh VAT audit if necessary, ensuring compliance with the law. The writ petitions were closed with no order as to costs.