2017 (12) TMI 684 - HC - VAT and Sales Tax

Levy of penalty u/s 27(3)(c) of TNVAT Act - the respondent alleged that there is sales suppression (stock difference) and computed the tax payable by the petitioner - Held that - the respondent being an independent Statutory Authority in the capacity of Assessing Officer of the petitioner is required to examine the objections filed by the petitioner on merits and in accordance with law. However the respondent did not do so but completed the assessment and passed the impugned assessment order solely on the ground that the petitioner has already accepted the omission at the time of inspection. The manner in which the petitioner completed the assessment is a clear abdication of the statutory duty cast upon the respondent. Merely because there is a proposal from the Enforcement Wing Officials that cannot be as a gospel truth to accept as it is and has to consider the objections of the assessee and then take a decision. It was found that the Assessing Officer had acted on the basis of the direction of the higher authorities and accordingly the assessment order was quashed - the impugned assessment is illegal devoid of reasons and liable to be set aside - petition allowed - matter is remitted back to the respondent for a fresh consideration - petition allowed by way of remand.

Summary

Issues involved: Incorrect assessment order based on inspection, alleged sales suppression, proposal for penalty under Section 27(3)(c) of the Tamil Nadu Value Added Tax Act, 2006, failure to examine objections filed by the petitioner, abdication of statutory duty by the respondent, judicial precedents regarding quasi-judicial functions, independent application of mind by the Assessing Officer, levy of penalty, lack of basic ingredients for penalty invocation, legal principles for assessment validity.

Analysis:

1. Incorrect Assessment Order and Alleged Sales Suppression: The petitioner received a notice based on an inspection alleging sales suppression and tax computation. The petitioner submitted explanations challenging the inspection findings, claiming inaccuracies in the Enforcement Wing's recording of findings. The assessment order was completed without proper examination of the petitioner's objections, solely relying on the petitioner's acceptance during inspection, which was deemed a failure of the respondent's statutory duty.

2. Quasi-Judicial Functions and Precedents: The judgment referred to previous cases emphasizing that Assessing Officers are not bound by higher authorities' directions and must exercise independent judgment. Citing the case of Madras Granites (P) Ltd., it was highlighted that acting on higher authority directions, as done by the respondent, is impermissible and can lead to the quashing of assessment orders. The case of Narasus Roller Flour Mills further stressed the necessity of independent application of mind by Assessing Officers to adhere to statutory duties.

3. Penalty Levying and Legal Principles: The petitioner argued against the levy of penalty under Section 27(3)(c) citing the lack of essential ingredients for penalty invocation. Legal precedents from cases like Nokia India Private Ltd. and M/s.Amutha Metals were referenced to support the argument that assessments solely based on Enforcement Wing proposals without independent assessment are invalid. The judgment concluded that the impugned assessment lacked legality, reasons, and needed to be set aside.

4. Remittal and Fresh Consideration: The writ petition was allowed, the impugned order was set aside, and the matter was remitted back to the respondent for a fresh consideration. The respondent was directed to provide a personal hearing to the petitioner, review documents independently, and complete the assessment in accordance with the law, without solely relying on the Enforcement Wing's report. The judgment emphasized the importance of following legal principles for a valid assessment process.