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TMI Blog2024 (10) TMI 783X X X X Extracts X X X X X X X X Extracts X X X X ..... ) only on 1 July 2023, after 15 months. In the Affidavit filed on behalf of the 3rd Respondent, there is no explanation for this inordinate delay in communicating or serving the impugned assessment order dated 14 March 2022. The impugned assessment order refers to notice being served upon the Petitioners and the Petitioners filing their reply to the show cause notice. However, in the Affidavit, it is admitted that no show cause notice was ever served upon the Petitioners, and therefore, the Petitioners had no opportunity to file any reply. Section 23 (4) of the MVAT Act provides for the issue of a notice followed by a reasonable opportunity to be heard before assessing any assessee to the best of his judgment. Since neither any notice was issued to the Petitioners nor that the Petitioners granted any opportunity of being heard, the impugned assessment order is liable to be set aside for failure of natural justice and breach of the provisions of Section 23 (4) of the MVAT Act. The impugned assessment order is vitiated by legal mala fides - the impugned assessment order dated 14 March 2022 is entirely unsustainable and is required to be quashed and set aside for gross failure to comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Indian Companies Act of 1956. 5. Petitioners 1 and 2 had, inter alia, granted the 3rd Petitioner the right to use their IPR in India. In that sense, Petitioners Nos.1, 2, and 3 are group companies. By a product license agreement effective from 1 April 2013, the right to use such IPR in India was also extended to M/s. Imsofer Manufacturing India Pvt Ltd. A product license agreement effective from 1 January 2013 was also entered into between the 2nd Petitioner and MPG Multi Production Group India Pvt Ltd concerning IPRs. 6. On 5 May 2023, the Petitioner No. 3 in Pune, India, received a notice dated 3 May 2023 in Form 301 for assessment for FY 2015-2016, addressed to the 1st and 2nd Petitioners seeking to levy VAT on the value of royalty payments made by the 3rd Petitioner against the license to use IPRs and technical know-how granted by 1st and 2nd Petitioner by treating the same as a sale of goods . 7. The Petitioners have pleaded that Form 301, dated 3 May 2023, was the first time that any of the Petitioners had received an intimation as to the assessment of the 1st and 2nd Petitioners under the Maharashtra Value Added Tax Act, 2002n ( MVAT Act ) for any period. 8. Under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure to issue a show cause notice and grant an opportunity of hearing infringes Section 23 (4) of the MVAT Act and Rule 21 of the MVAT Rules. Accordingly, he submitted that the impugned assessment order dated 14 March 2022 was null and void and ought to be so declared by this Court. 15. Mr Shah submitted that the impugned assessment order dated 14 March 2022 refers to some show cause notice and replies on behalf of the Petitioners. He pointed out that the impugned assessment order also refers to Shri Vikas Gattani attending the personal hearing, making submissions, furnishing the balance sheet and agreement copy, etc. However, Mr Shah pointed out that since no show cause notice was ever served upon the Petitioners, the Petitioners did not file any reply. Similarly, since no notice of any personal hearing was served upon the Petitioners, there was no question of the Petitioners or any of their representatives attending any personal hearing. Accordingly, Mr Shah submitted that this was a complete non-application of mind and legal mala fides. 16. Mr Shah then referred to the impugned assessment order and pointed out that the same relates to agreements or some circumstances concerning s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during this judgment and order. 22. Mr Shah submitted that the impugned assessment order dated 14 March 2022 ought to be set aside on all the above grounds that were urged without prejudice to one another. 23. Ms Vyas learned that the Additional Government Pleader referred to the Affidavit in Reply of Rajendra D Adsul (R3) and submitted that since the 1st and 2nd Petitioners were not based in India, the notices issued to them remained unserved. She submitted that the impugned assessment order was made to protect the interest of revenue by following best judgment assessment principles. She submitted that the impugned assessment order was issued on 14 March 2022, and the statutory limitation period for FY 2013-2014 ended on 31 March 2022. Therefore, the impugned assessment order was issued within the statutory limitation period. 24. Ms Vyas submitted that the errors in the impugned assessment order or the issuance of the common assessment order were careless mistakes on the part of the assessing officer. She submitted that departmental proceedings have already been ordered to be initiated against the assessing officer. She submitted that those mistakes cannot be rectified or reviewed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termination. 30. As noted above, the challenge is to the impugned assessment order dated 14 March 2022, which confirmed the VAT demand on the 1st and 2nd Petitioners for FY 2013-2014. 31. In the gross facts of the present case, there is no question of relegating the Petitioners to the alternate remedy of appeal under the provisions of the MVAT Act. In a case where the violation of the principles of natural justice is apparent, the objection based upon the non-exhaustion of alternate remedies is rarely entertained. In this case, the Respondents did not even raise or, in any event, press the objection based upon the non-exhaustion of the alternate remedies. 32. Though the impugned assessment order is dated 14 March 2022, the same was served upon the 3rd Petitioner (though it relates to the 1st and 2nd Petitioners) only on 1 July 2023, after 15 months. In the Affidavit filed on behalf of the 3rd Respondent, there is no explanation for this inordinate delay in communicating or serving the impugned assessment order dated 14 March 2022. 33. In Bachhittar Singh Vs State of Punjab Anr. 1962 SCC OnLine SC 11, the Constitutional Bench of the Hon ble Supreme Court has held that to make the op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr Shah s contention. Firstly, the impugned assessment order dated 14 March refers to allegedly hearing Mr Gattani, an employee of the 3rd Petitioner, on 23 May 2023. This is not a slip, but prima facie appears to be an attempt at manipulation. Secondly, the impugned assessment order dated 14 March 2022, if indeed made on 14 March 2022, was admittedly communicated to the 3rd Petitioner only on 1 July 2023, 15 months from the date of its alleged issue. 38. In the two affidavits filed on behalf of the 3rd Respondent, there is no explanation on the aspect of Mr Gattani being heard on 23 May 2023, and yet such hearing finding reference in the impugned assessment order dated 14 March 2022 and the unreasonable delay of about 15 months in communicating the impugned assessment order to the 3rd Petitioner. 39. In R S Garg vs State of UP Ors. 2006 6 SCC 430 , the Hon ble Supreme Court explained the differences between malice in law and malice in fact . Any action resorted to for an unauthorised purpose would constitute malice in law. The Court explained that malice in its legal sense means malice such as may be assumed for a wrongful act done intentionally but without just cause or excuse or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der was made and issued beyond the statutorily prescribed limitation period. The proviso to Section 23 (4) of the MVAT Act provides that no assessment under this sub-section shall be made after the expiry of eight years from the end of the said financial year containing the said period. 45. Since the impugned assessment order concerns FY 2013-2014, this eight-year period would expire on 31 March 2022. The impugned assessment order is dated 14 March 2022 but refers to some alleged personal hearing of 23 May 2023. Besides, the impugned assessment order was served on the 3rd Petitioner only on 1 July 2023, viz, 15 months after the date of its alleged making. These two circumstances strongly suggest that the impugned assessment order was not made before 31 March 2022, though an attempt is made to show that it was made on 14 March 2022. Therefore, a strong prima facie case suggests the impugned assessment order was made beyond the statutorily prescribed period under the proviso to Section 23 (4) of the MVAT Act. 46. In this Petition, we do not propose to address Mr Shah s contention about the impugned assessment order being vulnerable on merits because, according to him, the view taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en, notwithstanding anything contend in this Section, such assessment shall be made within 24 months if the said order is made by the Appellate Authority in the First Appeal and in any other case, within 36 months from the date of communication of such finding or direction contend in the said order to the Assessing Authority or, as the case may be, to the Commissioner. 53. This is a matter where the Respondents flagrantly breached the statutory provisions in Section 23 (4). Principles of natural justice and fair play were also observed only in breach. The impugned order is vitiated by total non-application of mind. As if all this was insufficient, a strong prima facie case is made out about manipulating the date of the impugned assessment order. The manipulation was to create an impression that the order was made within the prescribed statutory period of limitation, which ended on 31 March 2022. In such gross circumstances, an order of demand thereby extending the statutorily prescribed period of 8 years to 11 years would not be appropriate. A remand in this case's gross facts would grant the third respondent a premium for its gross illegalities. 54. Ms Vyas, referring to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere furnished by the appropriate authority to the appellant, nor was any sufficient time granted to reasonably enable the appellant to oppose the notice of compulsory purchase. 58. The Hon ble Supreme Court held that there was a gross breach of principles of natural justice because no adequate opportunity to meet the case out in the notice was granted to the appellant. Further, no remand was ordered having regard to the statutory limit within which the appropriate authority had failed to act and its failure to act in conformity with the principles of natural justice. Only the impugned order was set aside. 59. The facts in the present case are much more egregious than those before the Hon ble Supreme Court. Any indulgence by way of remand would not only reward the respondents with an enhanced limitation period to complete the FY 2013-2014 assessment proceedings but embolden unscrupulous tax officials to manipulate orders or otherwise mistreat the assessees. 60. For all the above reasons, and in the peculiar facts and circumstances of the present case, we decline to remand the matter to the assessing authority after quashing and setting aside the impugned assessment order purportedly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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