2016 (2) TMI 1055 - HC - VAT and Sales Tax

Challenged letter = tax notice. Penalties pending decision. Petitioner granted hearing opportunity. Coercive recovery on hold.

The court ruled that the challenged 'order-cum-show cause type letter' under the Jharkhand Value Added Tax Act, 2005, should be considered a notice for ... Scope and validity of order cum-show cause type letter, which is at Annexure-2 - it is the case of petitioner that Annexure-2 should be given effect to only as a notice and the direction given in the last paragraph of Annexure-2, may not be treated as a concluded amount to be paid by this petitioner - Held that: - it appears that Annexure-2 is merely a notice given to the petitioner for payment of taxes under Jharkhand Value Added Tax Act, 2005 and for curtailment of the Input Tax Credit as well as for the penalty - The amount mentioned in Annexure-2 is not a final figure at all, the decision inclusive of penalty shall be taken after hearing the petitioner - Till Annexure-2 notice is decided by the Competent Authority under the Jharkhand Value Added Tax Act, 2005, no coercive steps for recovery of the said amount, which is referred to in Annexure-2, shall be initiated against the petitioner - petition allowed - decided in favor of petitioner. Issues:Challenge to order-cum-show cause letter under Jharkhand Value Added Tax Act, 2005.Analysis:The petitioner challenged an 'order-cum-show cause type letter' in the writ petition, mainly contesting the retrospective effect of an amendment to Section 18(8) of the Jharkhand Value Added Tax Act, 2005. The amendment prohibited claiming or allowing Input Tax Credit to a registered dealer. The petitioner argued that between 01.04.2015 and 23.09.2015, they had availed Input Tax Credit on significant raw material purchases. The petitioner's counsel contended that the amendment should be treated as a notice only, and the direction in the letter should not be considered a final amount due. Additionally, the imposition of penalties under Section 40(2) was disputed, with the petitioner highlighting incorrect calculations by the respondent and providing correct figures.The respondent, represented by the State, asserted that the letter should be considered a notice for tax payment and penalty imposition under Section 40(2) of the Act. The Competent Authority had initiated proceedings under Section 70(1) and decided to proceed with penalties under Section 40(2) and related actions. The respondent urged that all arguments raised in the writ petition could be presented before the Competent Authority for consideration.After hearing both parties, the court determined that the letter (Annexure-2) was a notice for tax payment, Input Tax Credit curtailment, and penalties under the Act. The Competent Authority would make the final decision on Annexure-2 after hearing the petitioner's contentions. No coercive recovery actions were to be taken until the Competent Authority's decision. The petitioner was granted the opportunity to present all arguments, including those related to penalties, before the Competent Authority. The writ petition was disposed of based on these directions, with other contentions from the petition left open for future consideration.