Mandatory pre-assessment notice and assessment procedure required before VAT recovery; collected amounts had to be refunded.

Under the Tamil Nadu Value Added Tax Act, 2006, tax dues cannot be enforced by collection during audit or inspection unless the mandatory pre-assessment notice, opportunity to object, and assessment order are first completed. Because no assessment order had been passed for the relevant years, the collection was unsustainable in law. The court therefore directed refund of the amounts already collected, while leaving the authority free to complete assessment in accordance with law.

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Issues: Whether tax collected from the dealer during audit/inspection without issuing a pre-assessment notice and without passing an assessment order under the Value Added Tax regime was legally valid, and whether the collected amount was liable to be refunded.

Analysis: The assessment scheme under the Tamil Nadu Value Added Tax Act, 2006 requires the authority to proceed by issuing a pre-assessment notice and thereafter passing an assessment order after affording the assessee an opportunity to object and be heard. The materials showed that no assessment order had been passed for the relevant years. In the absence of the mandatory assessment process, collection of the alleged tax dues during audit or inspection could not be sustained in law. While the respondents retained liberty to complete assessment in accordance with law, the amounts already collected could not be retained without following the statutory procedure.

Conclusion: The collection was held invalid and the respondents were directed to refund the tax amounts collected from the assessee. The result was in favour of the assessee.

Ratio Decidendi: Tax liability under the Tamil Nadu Value Added Tax Act, 2006 cannot be enforced by collection during audit or inspection unless the statutory pre-assessment notice and assessment procedure is first followed and the assessee is given an effective opportunity of hearing.

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