2019 (12) TMI 1009 - HC - VAT and Sales Tax

Principles of Natural Justice - power vested in the Assessing Officer for the purposes of obtaining information from third parties in relation to finalisation of assessment - opportunity sought for cross-examination the officer negates the same, stating that such opportunity was only academic - HELD THAT - It appears very apparent that the principles of natural justice have been given a go-by in the present case. The extracts from the website relied upon by the Department no doubt reveal that Salsar was a trader and importer of yarn. However, this, by itself cannot lead to the inference of clandestine sales by the petitioner to the societies. An enquiry would have to be carried out in an appropriate manner after providing the material relied upon by the Department to the petitioner and soliciting its responses to the same, before any conclusion to this effect is arrived at - It is incumbent that a copy of such materials, including statements that are relied upon by the Assessing Officer be furnished to the petitioner, and an opportunity be grated to it to cross-examine the parties upon whose statement reliance is intended to be placed. Petition allowed by way of remand.

Summary

Issues:
Challenges to assessments under Tamil Nadu Value Added Tax, 2006 for periods 2011-12 and 2012-13 by National Handloom Development Corporation Ltd. (NHDCL) regarding purchases of silk yarn and tax liability on sales to co-operative societies.

Analysis:
The National Handloom Development Corporation Ltd. (NHDCL) challenged the assessments for the periods 2011-12 and 2012-13 under the Tamil Nadu Value Added Tax, 2006. NHDCL, established in 1983 as a Public Sector Undertaking, facilitates the development of the handloom sector by coordinating activities related to procurement, marketing, and technology upgradation. It operates on a no-profit-no-loss basis, facilitating transactions between its constituent units and co-operative societies.

The Assessing Officer observed purchases of silk yarn from Salsar Corporation, an importer and trader in Chinese Silk. Transactions between Salsar and NHDCL's units indicated the purchase of 'silk yarn in hank.' The Assessing Authority established a nexus between NHDCL's purchase of imported yarn from Salsar and sales to co-operative societies in Tamil Nadu, deeming it a first sale liable to tax within the state.

NHDCL contended that the yarn bought from Salsar was indigenous silk yarn in hank, denying any profit margin on sales to societies. Despite objections and requests for cross-examination of co-operative society representatives, the Assessing Officer proceeded with the assessment. NHDCL approached the Court, citing violation of natural justice principles.

The Court found a lack of adherence to natural justice principles in the assessment process. It emphasized the need for proper enquiry and provision of materials relied upon by the Department to NHDCL. The Court set aside the impugned orders, directing the furnishing of relevant materials, including statements from co-operative societies, to NHDCL. The Court mandated a de novo assessment, allowing NHDCL to present objections and cross-examine relevant parties within twelve weeks.

In conclusion, the Court allowed the writ petitions, emphasizing the importance of natural justice and fair assessment procedures in tax matters. The judgment highlighted the necessity of providing relevant materials to the assessee and ensuring a fair opportunity for response and cross-examination in tax assessments.