2019 (3) TMI 1210 - HC - VAT and Sales Tax

Sales Tax Waiver Scheme - Interest Free Sales Tax Deferral Scheme - applicability for eligibility certificate - principles of natural justice - Held that - In the case on hand, the respondents have already assessed the petitioner based on the returns submitted by them. All the transactions pertain to the period 1993 to 2001, whereas the impugned demand notice has been made by the respondent only in the year 2016, without furnishing a copy of the Auditor General s Report - this Court is of the considered view that the second respondent has violated the principles of natural justice by not furnishing the details sought for by the petitioner which includes furnishing of copies of Auditor General s Report as well as other documents. Therefore, this Court is of the considered view that the impugned demand notice has to be quashed - petition allowed.

Summary

Issues:
Challenge to impugned demand notice based on Auditor General's Audit Report without furnishing a copy, Violation of principles of natural justice in issuing demand notice.

Analysis:
The petitioner challenged the demand notice issued by the second respondent based on the Auditor General's Audit Report dated 14.09.2016. The petitioner claimed to have availed Sales Tax Waiver Scheme and Interest Free Sales Tax Deferral Scheme, complying with all requirements and submitting returns without suppression. However, the second respondent demanded payment of ?92,20,930 without providing the requested documents like waiver agreement, assessment orders, and eligibility certificates. The petitioner argued that after years of compliance, sudden demands without sharing the audit report violated principles of natural justice.

The second respondent, in their counter affidavit, acknowledged being audited by the Accountant General Office and the Comptroller and Audit General of India. They admitted audit objections regarding excess waiver allowed to the petitioner without protecting the revenue based on 'Base Protection Volume.' Despite objections, the Joint Commissioner later clarified the misconceptions regarding the waiver schemes before the Public Accounts Committee.

During the hearing, it was noted that the petitioner had paid taxes as per the waiver scheme and the returns submitted were accepted by the respondent. The demand made in 2016 was based on audit objections without providing a copy of the draft CAG report. The court observed that demands must comply with statutory provisions and be supported by relevant documents.

The court found that the respondent's failure to furnish the Auditor General's Report and other requested details violated natural justice. Consequently, the demand notice was quashed, but the respondents were granted liberty to raise demands if statutory violations were proven post-receipt of the final Auditor General's Audit Report. The direction to the Sub-Registrar under the impugned demand was also quashed.

In conclusion, the writ petition was disposed of without costs, emphasizing the importance of adhering to principles of natural justice and providing necessary documents to support any tax demands.