2023 (3) TMI 228 - HC - VAT and Sales Tax

Violation of principles of natural justice - denial of opportunity to cross-examine the third party whose papers constitutes the basis of assessment - HELD THAT - In the present case the computer records which reflect the name of a dealer which is identical to that of the Petitioner. However, in view of the plea of the Petitioner that he did not indulge in those purchases, the Petitioner ought to have been given the chance of cross-examining the alleged sellers in order to defend itself effectively in the assessment proceedings. The justification put forth by the STO that such an exercise would result in squandering away of the time or that would to prolong the proceedings, appears not to be justified since the STO could have made the entire exercise of summoning those selling dealers and allowing an opportunity to the Petitioner to cross-examine them, time bound. This is not practical or realistically feasible considering the long lapse of time. At the same time there has clearly been denial of an effective opportunity to the Petitioner-dealer by refusing it the right to cross-examine the selling dealers. While in similar cases it might have been possible for the Court to remand the matter to the STO to complete the above exercise, in the present case, considering that more than two decades have elapsed since those transactions, an opportunity being provided at this stage to the Petitioner to cross-examine the selling dealers might not even be practical. There was no requirement of the selling dealers to preserve any records or to produce such records even if summoned. The entire exercise would certainly at this stage be a pointless one. The Court is unable to sustain the impugned order of the Tribunal and the corresponding orders of the JCST and STO - the revision petition is disposed off.

Summary

Issues involved:
1. Delay in filing appeal and condonation of delay.
2. Denial of opportunity to cross-examine the third party.
3. Assessment order based on purchase suppression.

Analysis:

Issue 1: Delay in filing appeal and condonation of delay
- The judgment addresses the delay in filing the appeal and condones the delay in I.A. No.237 of 2018, allowing the appeal to proceed despite the delay.

Issue 2: Denial of opportunity to cross-examine the third party
- The Petitioner-dealer sought to cross-examine selling dealers regarding alleged purchases, but the request was denied by the STO, JCST, and Tribunal based on computer records from border check gates.
- The Court found that when the dealer denies involvement in purchases, the burden shifts to the Department to prove otherwise, citing a similar case precedent.
- Despite computer records showing the Petitioner's name as the purchaser, the Court held that the Petitioner should have been given the chance to cross-examine the alleged sellers for an effective defense.
- The Court criticized the delay in providing this opportunity, stating that after more than two decades, it would be impractical and pointless to allow cross-examination at this stage.

Issue 3: Assessment order based on purchase suppression
- The revision petition challenged an order raising a tax demand and surcharge for the Assessment Year 2001-02 due to alleged purchase suppression.
- The Court set aside the Tribunal's order, along with corresponding orders of JCST and STO, holding that the denial of an effective opportunity to cross-examine selling dealers was unjustified.
- Consequently, the assessment was to stand completed at the figure disclosed in the returns filed by the Assessee, ruling in favor of the Petitioner-dealer against the Department.

This detailed analysis of the judgment highlights the key issues addressed by the High Court and the reasoning behind the decision in each aspect of the case.