2023 (6) TMI 1237 - HC - VAT and Sales Tax

Rejection of rectification of assessment order - admission of Appeal without any pre-deposit - case of petitioner is that impugned orders are passed without giving opportunity of hearing insofar as, disallowance of input tax credit qua all the parties is concerned - violation of principles of natural justice - HELD THAT - The Petitioner has approached this Court under Article 226 of the Constitution of India, in order to bypass the mandatory provision under the MVAT Act, 2002 which required pre-deposit of 10% of the tax for entertaining the appeal. In the facts of the present case, this approach of the Petitioner cannot be accepted moreso because against order rejecting the rectification, it had filed an appeal because according to the Petitioner against such rejection of rectification order no pre-deposit is required to be made. This clearly shows that the present petition is filed to bypass the mandatory pre-deposit provision in entertaining the appeal . The issue raised in the assessment order interalia qua circular trading requires factual determination which this Court cannot go into in exercise of its jurisdiction under Article 226 of the Constitution of India. It is also important to observe that by various show cause notices, the Petitioner was called upon to file all the evidences in support of its return of income and furthermore order sheet annexed to the Petition records that the Petitioner s accountant refused to sign the proceedings sheet in relation to the circular transaction query raised by Respondent No. 2. Therefore, prima facie, the contention of the Petitioner that opportunity of hearing was not given may not be correct. The decision of the Supreme Court in the case of State of Tripura Vs. Manoranjan Chakraborty Ors. 2000 (11) TMI 1079 - SUPREME COURT relied upon by the Petitioner does not assist the case of the present Petitioner in the facts of the present case. The decision of the Supreme Court was in connection where there is a high ended assessment and gross injustice done. Therefore, the decision of the Supreme Court is not applicable to the facts of the present case. The issue raised in the present petition qua opportunity of hearing would require examination of the factual matrix in the complexion of the proceedings as they stand, which can be effectively adjudicated more appropriately by the Appellate Authority - the Petitioner relegated to avail the alternative remedy of an appeal - petition disposed off.

Summary

Issues involved:
The judgment deals with a challenge to an assessment order for the period 2014-15 and the rejection of a rectification application, along with a prayer for a writ of mandamus to admit an appeal without pre-deposit.

Assessment Order Challenge:
The Petitioner challenged an assessment order dated 5th March 2019 for the period 2014-15, where a demand of Rs. 8,77,37,738/- was raised due to disallowance of input tax credit related to circular transactions. The Petitioner did not appeal the assessment order but applied for rectification on 23rd February 2021, which was rejected by Respondent No. 2. The Petitioner contended that the orders were passed without giving a proper opportunity of hearing, violating the principles of natural justice. However, the Court declined to entertain the writ petition, noting that the Petitioner was attempting to bypass the mandatory pre-deposit provision for filing an appeal under the MVAT Act, 2002. The Court held that the issue of circular trading required factual determination beyond the scope of Article 226 jurisdiction, and the Petitioner had been given opportunities to present evidence.

Rectification Application Rejection:
The rectification application filed by the Petitioner in response to the assessment order was rejected by Respondent No. 2 on the grounds that there was no apparent mistake on the face of the assessment record. The Petitioner then filed an appeal, which was dismissed by the appellate authority on the basis that the rectification order had merged with the assessment order, and the Petitioner had failed to deposit 10% of the tax along with the appeal, as mandated. The Court found that the Petitioner's approach in filing the writ petition was an attempt to avoid the pre-deposit requirement for appeals, and the issue of opportunity of hearing could be more appropriately adjudicated by the Appellate Authority. The Court directed the Petitioner to avail the alternative remedy of filing an appeal within two weeks, complying with the mandatory provisions under the MVAT Act, 2002.

Supreme Court Precedent:
The Petitioner relied on the decision of the Supreme Court in the case of State of Tripura Vs. Manoranjan Chakraborty & Ors., reported in ((2001) 10 SCC 740), to support the contention that the Court should entertain the petition despite the appealable nature of the assessment order. However, the Court held that the Supreme Court decision was not applicable to the facts of the present case, as it pertained to high-ended assessments and gross injustice, which were not present in this matter. The Court emphasized that the issue of opportunity of hearing required factual examination best suited for the Appellate Authority, rather than the writ jurisdiction.

Conclusion:
The High Court of Bombay declined to entertain the writ petition challenging the assessment order and the rejection of the rectification application, directing the Petitioner to pursue the remedy of filing an appeal within the specified timeframe and complying with the statutory provisions. The Court clarified that it had not expressed any opinion on the merits of the case and kept all contentions of the parties open. The petition was disposed of with no costs awarded.