2021 (5) TMI 561 - HC - VAT and Sales Tax

Violation of principles of natural justice - validity of revision of assessment orders - change of opinion - alleged purchase suppression - HELD THAT - Admittedly, in all these cases, penalty has been imposed vide separate orders. It has been held that when imposing penalty under Section 27 of the Act, the same will have to form part of the assessment order and they cannot be levied though a separate order. Therefore, imposition of penalty in these cases is bad in law. Likewise, the petitioners being works contractors engaged in civil construction, cannot be levied with purchase tax. Therefore, levying purchase tax also will have to go. But then, this Court accepts the submission of the petitioner's counsel that the impugned proceedings will have to be questioned on the ground of change of opinion. The impugned orders would indicate that the revision is an outcome of the verification of the assessment records. It is also a fact that the assessing officer proceeded based on the web report which indicates mismatch. Therefore, the impugned proceedings cannot be characterized as being grounded only on change of opinion. The matter is remitted to the file of the second respondent to pass orders afresh in accordance with law - Petition allowed by way of remand.

Summary

Issues Involved:
Challenging impugned Revision of Assessment orders under TNVAT Act for work contractors regarding adhoc addition for defects in accounts without new facts or materials, based on change of opinion, and lack of detailed intra-department enquiry following web report. Imposition of penalty separately under TNVAT Act. Levying purchase tax on works contractors. Grounds for quashing impugned orders based on change of opinion, verification of assessment records, and purchase omission.

Detailed Analysis:

1. Revision of Assessment Orders:
The petitioners, work contractors registered with the second respondent, sought to quash the impugned Revision of Assessment orders under Section 27 of the TNVAT Act. They argued that the orders were passed without new facts or materials, solely on a change of opinion, which contravenes the provisions of the TNVAT Act. The petitioners contended that the assessing officer did not conduct a detailed intra-department enquiry following the web report, as required by legal precedent. They relied on previous judgments to support their claim that the web report should only serve as a starting point for enquiry, emphasizing the need for a thorough investigation before making an assessment based on such a report.

2. Imposition of Penalty:
The Special Government Pleader defended the imposition of penalties by referring to the counter affidavit and a circular issued by the Office of the Principal Secretary/Commissioner of Commercial Taxes. However, the court highlighted that penalties can only be imposed under specific sections of the TNVAT Act and not through separate orders. Citing legal precedents, the court set aside the penalty orders, emphasizing that penalty imposition must form part of the assessment order and cannot be levied independently.

3. Levying Purchase Tax:
The court addressed the issue of levying purchase tax on the petitioners, who were works contractors engaged in civil construction. Referring to relevant legal provisions and case law, the court concluded that the petitioners, having already been taxed on other grounds, should not be additionally burdened with purchase tax. Consequently, the court set aside the orders imposing purchase tax on the petitioners.

4. Grounds for Quashing Impugned Orders:
The court acknowledged the petitioners' argument regarding the change of opinion as a ground for challenging the impugned proceedings. However, the court noted that the revision was not solely based on a change of opinion but also on the verification of assessment records and a web report indicating a mismatch. The court emphasized that while addressing purchase omission disclosed by the web report, the assessing officer must adhere to the procedure outlined in a specific circular issued by the Office of the Principal Secretary/Commissioner of Commercial Taxes.

5. Final Decision:
Ultimately, the court allowed the Writ Petitions, setting aside the impugned orders and remitting the matter to the second respondent for fresh orders in compliance with the law. The court did not impose any costs on the petitioners and closed the connected miscellaneous petitions.