2017 (8) TMI 627 - HC - VAT and Sales Tax

Jurisdiction - assessment - whether notices of default assessment of the tax and interest under Section 32 of the Act dated 15th May 2017 have been issued by the concerned VATO exercising jurisdiction on the Petitioner? - Held that - Under Section 66 the powers of the Commissioner have been delegated to the Special Commissioner VATO and to such other person as the Government thinks necessary. Thus the notice under Section 32 of the Act can only be issued by the VATO who exercises jurisdiction on a party on the concerned date. The Court merely directed that the OHA shall decide the objections of the Petitioner after the concerned VATO has passed the order in respect of the 1st and 2nd quarters of 2015-16 within a period of two months from 15th March 2017. The presumption by the Respondent that this direction should be deemed to be considered as acceptance by this Court that the AVATO Ward-72 had jurisdiction is not borne out from the order. In any event the question of jurisdiction goes to the root of the matter specifically when the imposition of tax and penalty thereupon are concerned and hence the issue of jurisdiction ought to have been decided by the Respondent before proceeding further. The stand of the Respondent that it could not have waited for a decision on jurisdiction first before passing the assessment orders as the time period fixed as per the order dated 15th March 2017 also appears to be clearly an attempt to cover up its own delay inasmuch as after the said order which prescribed two months for the entire exercise to be completed the Respondent waited till 9th May 2017 to issue even the first notice under Section 59 of the Act. Ward No.69 being the correct Ward from where the Petitioner carries on its business and this fact already being well within the knowledge of the authorities since 22nd January 2016 the AVATO Ward-72 clearly lacked the jurisdiction to pass the impugned orders. Petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Jurisdiction of AVATO Ward-72.
2. Validity of notices of tax, interest, and penalty.
3. Compliance with statutory obligations by the Petitioner.
4. Requirement of pre-deposit condition for filing appeals.
5. Timeliness and procedural fairness in the issuance of notices.

Issue-wise Detailed Analysis:

1. Jurisdiction of AVATO Ward-72:
The Petitioner challenged the jurisdiction of AVATO Ward-72, arguing that their business premises at Gujrawala Town falls under the jurisdiction of AVATO Ward-69, not Ward-72. The court found that the AVATO Ward-72 lacked jurisdiction to issue the impugned notices as the correct jurisdictional office for Gujrawala Town is Ward-69. The court referenced the circular delineating the jurisdiction of various wards, which clearly placed Gujrawala Town under Ward-69.

2. Validity of Notices of Tax, Interest, and Penalty:
The Petitioner sought the quashing of notices of tax, interest, and penalty issued for the 1st and 2nd quarters of 2015-16 by AVATO Ward-72. The court held that since the AVATO Ward-72 lacked jurisdiction, the notices were invalid. The court also noted that the Respondent's assumption that the High Court had confirmed the jurisdiction of AVATO Ward-72 in a prior order was incorrect.

3. Compliance with Statutory Obligations by the Petitioner:
The Petitioner argued that it had been complying with all statutory obligations and had regularly filed its returns. The court did not delve into the merits of this argument, focusing instead on the jurisdictional issue. However, it was noted that the Petitioner had a reasonable explanation for its transactions and had reversed certain credits in the 4th quarter of 2015-16.

4. Requirement of Pre-deposit Condition for Filing Appeals:
In a previous order dated 15th March 2017, the court had directed that the Petitioner should not be required to fulfill any pre-deposit condition for filing appeals. This was reiterated in the current judgment, emphasizing that the Petitioner should not be exposed to immediate liability while the jurisdictional issue remained unresolved.

5. Timeliness and Procedural Fairness in the Issuance of Notices:
The court criticized the Respondent for the delay in issuing the notice under Section 59 of the DVAT Act, which was issued almost at the end of the two-month period prescribed by the court. The court found that the Respondent's failure to address the jurisdictional objection before proceeding with the assessment was unacceptable. The court also noted that the Petitioner was given an insufficient time frame to produce the required documents, further questioning the procedural fairness.

Conclusion:
The writ petition was allowed, and the impugned orders dated 15th May 2017 for the 1st and 2nd quarters of 2015-16 were set aside. The court directed that the Respondent could issue fresh notices through the correct jurisdictional VATO within four weeks, to be decided in accordance with the law. The court clarified that it had not examined the merits of the substantive issues raised by the Petitioner.