2022 (7) TMI 86 - HC - VAT and Sales Tax

Validity of search and seizure proceedings - whether the inspection and investigation have been conducted by different officers in a wrong manner, resulting in misunderstanding of facts and misinterpretation of provisions? - Section 67 of the TNGST Act - HELD THAT - It is seen that there was a surprise inspection in the petitioner's showrooms, Office and Godown from 14.09.2021 to 16.09.2021 and certain defects were pointed out and thereafter, explanation sought for. Though the petitioner had sent their objections and their authorized representative/Chartered Accountant appeared before the respondent, but they were unable to give proper explanation with supporting documents. This is a merit of the case. It is seen that after issuance of notice in Form DRC-01A, dated 06.12.2021, the respondent has issued Form GST DRC-01A. Thereafter, if the petitioner has got any objection and not paid tax as ascertained, a show cause notice has to be issued under Section 74(1) of the TNGST Act and after receiving objections, giving personal hearing, the assessment order ought to have been finalised. In this case, procedure not followed. The assessment orders are hereby quashed. The consequential recovery notice, dated 10.06.2022, issued to the Branch Manager, Axis Bank, is also hereby quashed. The respondent is directed to issue notice after following the procedures prescribed under the TNGST Act and issue show cause notice and after giving an opportunity to file their objections, pass appropriate orders on merits and in accordance with law. Petition allowed.

Summary

Issues:
Challenging impugned assessment orders for multiple assessment years.

Analysis:
The petitioner, engaged in textile and garment trading, faced inspection leading to assessment orders for various years. The petitioner raised objections to the assessment, citing incorrect quantification and procedural irregularities. The petitioner argued that inspection and investigation were flawed, leading to unjust demands. The respondent issued notices and conducted personal hearings, but the petitioner's objections were dismissed without proper consideration. The respondent's actions were deemed unfair and in violation of natural justice principles.

The petitioner sought relief based on legal provisions and circulars, highlighting past court decisions supporting their stance. The respondent, however, contended that the notices and assessments were valid, emphasizing the burden of proof on the dealers to show tax compliance. The respondent defended the assessment process as per the law, including issuing proper notices and conducting personal hearings before passing orders.

Upon review, the court found discrepancies in the assessment process, noting failures to follow prescribed procedures and principles of natural justice. The court quashed the assessment orders and recovery notices, directing the respondent to reinitiate the process adhering to legal requirements and granting the petitioner a fair opportunity to present objections. The court emphasized expeditious completion of the revised assessment process.

In conclusion, the writ petitions were allowed, and no costs were imposed. The connected miscellaneous petitions were closed, signaling the resolution of the legal dispute.