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TMI Blog2016 (2) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... - W. P. (C) 6656/2015 & CM 12140/2015, 13505/2015 - - - Dated:- 3-2-2016 - S. Muralidhar And Vibhu Bakhru, JJ. For the Petitioner : Mr. Rajesh Jain, Mr. Virag Tiwari and Mr. K.J. Bhat, Advocates For the Respondent : Mr. Avtar Singh, Advocate ORDER Dr. S. Muralidhar, J. Introduction 1. This writ petition by Brilliant Metals Private Limited seeks to challenge the impugned default assessment notices of tax and interest and penalty dated 13th January, 2015 and 19th June, 2015 respectively issued/uploaded on the website of the Department of Trade Taxes (DT T), Government of National Capital Territory of Delhi (GNCTD) as well as notice dated 19th June, 2015 issued under Section 59 (2) of the Delhi Value Added Tax Act, 2004 (DVAT Act). The petition points to the perils of an imperfectly configured computerised system of demand and assessment of value added taxes by the DT T. 2. On 24th July, 2015, this Court passed an interim order restraining the Respondent from taking steps pursuant to the impugned notice dated 19th June, 2015 under Section 59(2) of the DVAT Act and pursuant to the default assessment order of the same date. The Court further directed I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of ₹ 3,73,90,663/-. The said order, generated by the computer system, contained the name of the VATO but no signature. The first portion of the said order read: Whereas I am satisfied that the dealer has not furnished returns/ furnished incomplete returns or incorrect returns/ furnished a return that does not comply with the requirements of Delhi Value Added Tax Act, 2004/any other reason . None of these alternatives were tick marked or selected. So it is not possible to discern which of these reasons apply. 8. The next paragraph referred to the fact that the Authorised Representative (AR) of the Petitioner was present on 1st September, 2014 in response to the notice issued under Section 59(2) of the DVAT Act and on the subsequent dates, i.e., 8th 9th September, 2014. It noted that M/s. Classic Sales India (CSI) was a registered dealer of Ward 101 and when the premises of the said dealer were visited it was found that the firm was not found functioning. Subsequently the registration of CSI was cancelled by the concerned VATO and the returns of the said entity were also rejected. The VATO of the Petitioner was intimated by the VATO of Ward 101 by an order dated 25th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Annexure-2B filed by the selling dealers , the VATO had issued a notice of default assessment dated 1st March 2014 for the tax period of the first quarter 2013-2014. The order stated that he was suo moto reviewing the said assessment order dated 1st March 2014, in exercise of the power under Section 74B(5) of the DVAT Act since it was noted that the buyers/sellers had revised their 2A/2B data in view of the changed position. Therefore, the assessment for the said period i.e. the first quarter 2013-2014 was modified and hence the demand stands as nil. Likewise the penalty amount was revised by a separate order of the same date, i.e., 15th June, 2015 to nil. 12. On 19th June, 2015, a fresh notice of default assessment was issued under Section 59(2) on account of purchases made from suspicious dealer(s) for the fourth quarter of 2013-2014 . The transaction noted in the said notice and the name of the dealer was as under:- S. No. Party TIN Name Tax Period Turnover Rate of tax under Dvat ITC Interest Total amount due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... une, 2015. 16. Another notice under Section 59(2) dated 19th June, 2015 was issued in respect of two other purchases made from JBN Impex Private Limited (JBN) by the Petitioner in the second quarter of 2013. Apparently JBN was also part of the eight allegedly bogus firms in respect of which the order dated 13th January, 2015 was passed although the names of seven of the eight bogus firms were not mentioned in that order. Again on the same day the above notice was issued i.e. 19th June 2015, the orders of default assessment of tax under Section 32 and penalty under Section 33 in respect of the above notices were also passed. 17. A common thread running through the above orders was that they were system generated and uploaded on the website of the DT T. They gave no reasons and were mechanically issued without the orders even being signed. Also there was a confusion with the system, on the one hand, generating verification reports matching the Annexures 2A and 2B for the purchases made and, on the other hand, those very purchases being termed as suspicious/bogus purchases in the default notices. Thirdly, there was an overlap of the period for which notices were issued. The noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the Third Quarter return of the petitioner filed on 13-02-14 and the same was taken instantly by the system. 12. That the Verification Report of Annexure-2A and 2B of all four quarters (2013-14) has been filed online by the petitioner company. 20. It was stated by the DT T in para 13 of its short affidavit dated 22nd July 2015 that the notice (order) of default assessment dated 13th January, 2015 under Section 32 of the Act is a consolidated notice towards all four quarters (1st April, 2013 to 31st March, 2014) and the same has to be read exclusively as it pertains to purchases shown from bogus/non-functioning firms. It is acknowledged that the notices dated 19th June, 2015 were system generated notices and the same were inadvertently issued. However, when the said infirmity was brought to the notice of the Department, it has been decided to withdraw the said notices of default assessment and penalty. In fact by an order dated 17th July 2015, the DT T withdrew the default notice of interest and penalty uploaded on 19th June, 2015. This was done under Section 74B of the DVAT Act, 2004 observing that the same should be treated as non est. In the same order, the Pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al circumstances when the Department came to know about eight non-operational firms from which the Petitioner had shown purchases It was submitted that the DT T had to recover ₹ 3,73,90,663/- towards tax and interest and ₹ 3,34,45,882/- towards penalty pertaining to fictitious purchases made by the Petitioner during the period of 2013-14. It was reiterated that the notice dated 19th June, 2015 was issued due to the system error and the same stood withdrawn by the subsequent notice dated 17th July, 2015. 26. At this stage, it requires to be noticed that by an order dated 28th August, 2015 passed in W.P.(C) No. 7379/2015 (Bhumika Enterprises v. Commissioner, Value Added Tax) and a batch of writ petitions (including W.P.(C) No.6788/2015 by M/s. Hello Furniture), the Court quashed all the system generated notices issued on 19th June, 2015 under Section 59(2) of the Act and noted that the consequent orders passed thereon already stood withdrawn by the letters dated 17th July, 2015. The Court clarified that this would not come in the way of the DT T issuing fresh notices under Section 59(2) of the Act after application of mind by the concerned VATO and in accorda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite so as to enable the Petitioner to download the C forms for 2014-15 and 2015-16 respectively. It is the above request that has been rejected by the order dated 8th December 2015 passed by the VATO on the ground that there was no stay granted by the High Court and therefore, the Department was unable to allow the issuance of C forms. 5. A perusal of the impugned order shows that a reference is made to the earlier default assessment notice dated 13th January 2015. It is noted that the High Court had by its order dated 24th July, 2015 granted the Petitioner liberty to seek appropriate remedies in respect of the said order. 6. The Court is unable to appreciate how the Department can possibly reject the prayer for issuance of C forms without following the procedure outlined under Rule 5 (4) of the CST Delhi Rules which specifically requires the VATO to afford the applicant an opportunity of being heard before deciding to withhold the issuance of C forms for reasons to be recorded in writing . 7. The order dated 8th December, 2015 has been passed without giving any hearing to the petitioner despite the Petitioner making a specific request in that behalf by the letter d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed made bogus/suspicious purchases. He pointed out that as far as the notice dated 5th November, 2015 was concerned, a letter had been written on 19th November, 2015, informing the Petitioner that the notice dated 5th November, 2015 should be treated as non est and should be ignored in view of the order dated 13th January, 2015 under Section 32 of the DVAT Act and the notice of default assessment and penalty under Section 33 of the DVAT Act of the same date being sub-judice before this Court. 32. Mr. Avtar Singh further placed on record the profiles of the eight bogus firms including GSA, OSC and JBN, which indicated that their registrations had been cancelled either with effect from the date when they were originally registered or from some other date. The essential ground for cancellation was that the said firms were non-functional. 33. In response to the above submissions, it was pointed out by Mr. Rajesh Jain, the learned counsel for the Petitioner, that there was total confusion in the DT T as to what was owed by the Petitioner as tax for the various quarters of 2013-2014. While on the other hand in the short affidavit and the subsequent affidavit it was acknowledged th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raming the above assessment. Mr. Jain pointed out that as of date ₹ 60 lakhs deposited by the Petitioner was lying with the DT T. As regards the penalty orders, he pointed out that no allegation in terms of clauses (a) or (b) of Section 86(10) had been levelled and the penalty order itself was passed without affording the Petitioner a hearing. Reliance was placed on the decision in Bansal Dye Chem Pvt. Ltd. v. Commissioner, Value Added Tax (2016) 87 VST 58 (Del.). Discussion of reasons and decision of the Court 37. The above submissions have been considered. In the first place it requires to be noticed that there appears to be considerable confusion at the end of the DT T as regards framing of assessment in the case of the Petitioner for the FY 2013-2014. Although the DT T asserts that the order dated 13th January, 2015 should be treated as an order for the entire FY 2013-2014, a perusal of the order reveals that it is, in fact, issued only in respect of the fourth quarter of 2013. Even the notice of assessment of penalty under Section 33 of the DVAT Act issued on the same date pertains only to the fourth quarter of 2013. However, a reference is made in the order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame is considered and appreciated by the authority. In such an eventuality, relegating the Appellant to avail of the alternate remedy cannot be justifiable. 41. The fourth aspect is the violation of the principles of natural justice. The Petitioner was not confronted with the documents collected and the statements, if any, recorded during the course of investigation which enabled the VATO to come to the conclusion that the eight firms were bogus firms and that the purchases made from such firms were suspicious. Yet, the said material appears to have been relied upon for issuing the order dated 13th January, 2015. Further, as pointed out in Negolice India Ltd. (supra) it was essential for the Petitioner to be confronted with the evidence in the form of documents and statements if any recorded of persons which formed the basis of the order dated 13th January, 2015. 42. Fifthly, as held by the Supreme Court in Kundan Lal Shri Kishan (supra), once an order of re-assessment is passed in respect of the same assessment period, the initial order of assessment obviously cannot survive. In other words, the order dated 13th January 2015 would not survive in view of the orders dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heless, if there is a problem in the system where despite the cancellation of registration of some firms from whom such purchases had been made, the same was obviously reflected in the system. Once the registration of a firm is cancelled for whatever reason, the system ought not to verify matches of Annexures 2A and 2B in relation to the transactions involving such firms. 46. In another order passed today in W.P. (C) No. 7434 of 2015 (Progressive Alloys India Pvt. Ltd. v. Commissioner of Commercial Taxes), this Court noticed another instance of the avoidable confusion caused by system generated notices and the corresponding orders being issued on the same day. The relevant portions of the said order read thus: 13........The 'Verification Report ' of Annexures-2A and 2-B for the third quarter of the financial year 2013-14 produced before the Court shows that the very purchase transactions involving GSA and OSC had a corresponding match and this has been verified by the computerized system. In other words, in respect of the same purchase transaction, the Annexure-2A Form produced by the purchaser has matched the Annexure-2B Form produced by the seller and the system h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the DVAT Act in respect of the Petitioner for the tax period pertaining to the fourth quarter of 2013 is set aside. ii. The notice of default assessment of penalty dated 13th January, 2015 under Section 33 of the DVAT Act for the fourth quarter of 2013 is hereby set aside. iii. The order dated 29th January 2016 passed by the VATO declining to issue C Forms to the Petitioner is set aside. iv. The matter is remanded to the VATO Ward 77 to begin de novo assessment proceedings pursuant to the notice dated 26th August, 2014 issued under Section 59(2) of the DVAT Act. The VATO will also consider afresh the request of the Petitioner for issuance of C Forms in terms of the application dated 26th October 2015. v. Within a period of two weeks from today, the Respondent shall furnish to the Petitioner all the material gathered by it, which formed the basis of cancellation of the registration of the eight firms mentioned in the affidavit dated 22nd July, 2015 filed in this Court in the present writ petition. vi Any other material that has been gathered by the DT T, which forms the basis of the notice dated 26th August 2014 issued under Section 59 (2) of the DVAT Act, shall also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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