2021 (10) TMI 432 - HC - VAT and Sales Tax

Validity of assessment order - escaped turnover - wrong availment of input tax credit - final order passed without issuance of SCN, on the basis of the pre-assessment notice - HELD THAT - On reading of the notice/summon there can be no doubt that it is only a summon to the petitioner to appear for a personal hearing, this should have been proceeded by a proper show cause notice. However, no such show cause notice, admittedly had been given by the respondent, therefore, the present move, by issuing this notice, dated 11.02.2019 for personal hearing followed by the impugned order dated 09.09.2020, cannot be permitted to stay, as it would run contra to the procedure established under Section 27 of the Act and also the order passed by this Court. In that view of the matter, this Court has no hesitation to hold that the impugned order does not stand in the legal scrutiny. The impugned order is quashed and the matter is remitted back to the respondent for reconsideration, while reconsidering the same, a proper show cause notice as per proviso to Section 27 of the Act, indicating the circumstances, under which, the respondent found that there is an alleged escaped turnover within the meaning of Section 27 or wrong availment of input tax credit and the rate of tax to be levied on this alleged escaped turnover, shall be properly issued - Petition allowed by way of remand.

Summary

Issues Involved:

1. Legality of the assessment order dated 09.09.2020.
2. Compliance with the procedural requirements under Section 27 of the Tamil Nadu Value Added Tax Act, 2006.
3. Adequacy of the show cause notice issued by the respondent.

Issue-wise Detailed Analysis:

1. Legality of the Assessment Order Dated 09.09.2020:

The petitioner, an EPC Contractor engaged in infrastructure projects, challenged the assessment order dated 09.09.2020, claiming it was arbitrary and illegal. The petitioner had been regularly filing returns, and for the Assessment Year 2011-2012, a self-return under Section 22 of the TNVAT Act was filed and accepted, which, according to the petitioner, should be deemed final. However, the respondent reopened the case under Section 27 of the Act, alleging escaped turnover and wrong availment of input tax credit.

2. Compliance with Procedural Requirements under Section 27 of the TNVAT Act:

The respondent issued multiple pre-assessment notices, which the petitioner replied to promptly. Despite this, the respondent passed a reassessment order on 27.02.2018, demanding a tax payment of ?3,64,92,113/-. This order was challenged, and the court concluded that the pre-assessment notice dated 12.12.2017 was not a proper show cause notice under Section 27(2) of the Act. The court set aside the reassessment order and remitted the matter back to the respondent, directing them to issue a proper show cause notice and provide an opportunity for a personal hearing.

Despite the court's clear directive, the respondent proceeded to pass the assessment order dated 09.09.2020 without issuing a proper show cause notice. The petitioner argued that the notice dated 11.02.2019 was not a proper show cause notice but merely a summon for a personal hearing. The court agreed, stating that the notice lacked the necessary details and procedural compliance required under Section 27 of the Act.

3. Adequacy of the Show Cause Notice Issued by the Respondent:

The court emphasized that a proper show cause notice should clearly outline the alleged escaped turnover, the reasons for reopening the assessment, the proposed tax rate, and the total tax to be levied, including any penalties. The notice dated 11.02.2019 issued by the respondent did not meet these requirements and was merely a summon for a personal hearing. The court held that this did not comply with the procedural requirements under Section 27 of the Act and the earlier court order.

Conclusion:

The court quashed the impugned assessment order dated 09.09.2020 and remitted the matter back to the respondent for reconsideration. The respondent was directed to issue a proper show cause notice as per the proviso to Section 27 of the Act, detailing the alleged escaped turnover, the reasons for reopening the assessment, and the proposed tax rate. The petitioner must be given an opportunity to respond, and after verifying any further documents and providing a personal hearing, the final assessment order should be passed. The entire process should be completed within three months, with the petitioner cooperating fully. The writ petition was disposed of with these directions, and there was no order as to costs.