2016 (1) TMI 997 - HC - VAT and Sales Tax

Court sets aside unjustified distraint order under TNVAT Act for 2014-15, emphasizes due process in tax recovery.

The court set aside the distraint order issued under the TNVAT Act for the assessment year 2014-15, ruling that the action was unjustified as no ... Recovery proceedings under TNVAT - Revenue neither accepting nor rejecting the reply filed by the petitioner, passed a distraint order for recovery, without passing any order of assessment for the year in question. - Held that:- Admittedly, the provisional assessment order has been passed by the respondent, but the same has not been served on the petitioner. In such circumstances, the action of the respondent by issuing distraint order for recovery of tax, cannot be justified and the same is liable to be set aside. Since the assessment period relating to the months in question was already over, this Court directs the Assessing Officer concerned to pass assessment order for the whole year, after following the procedure prescribed under the Act. the distraint order in Form No.I dated 15.09.2015 issued by the respondent set aside - The respondent is directed to pass assessment order for the year 2014-15 on merits and in accordance with law, after issuing proper notice and after affording due opportunity of personal hearing to the petitioner. - Decided in favor of assessee. Issues: Challenging distraint order under TNVAT Act for assessment year 2014-15 without passing assessment order.Detailed Analysis:Issue 1: Challenging the distraint orderThe petitioner challenged a distraint order issued by the respondent under the TNVAT Act for the assessment year 2014-15. The petitioner, a registered dealer, filed its return and responded to a notice calling for objections regarding purchases from registration-cancelled dealers. The respondent neither accepted nor rejected the petitioner's reply but issued the distraint order for recovery without passing any assessment order for the year.Issue 2: Legal ArgumentsThe petitioner's counsel argued that the respondent's actions were arbitrary and against natural justice. They contended that the notice calling for objections was issued after the assessment year had ended, and the distraint order was unjustified. The petitioner had also made tax payments for certain months via demand drafts, which could be adjusted against the balance tax.Issue 3: Respondent's SubmissionThe Additional Government Pleader for the respondent acknowledged that a provisional assessment order had been passed but not served on the petitioner yet.Judgment and AnalysisThe court noted that the provisional assessment order had been passed but not served on the petitioner. Consequently, the court deemed the respondent's action of issuing the distraint order for tax recovery unjustified. The court directed the Assessing Officer to pass a comprehensive assessment order for the entire year 2014-15, following due procedure under the Act. The court set aside the distraint order and instructed the respondent to pass a lawful assessment order within eight weeks, affording the petitioner a fair opportunity for a personal hearing.This judgment highlights the importance of following due process and natural justice principles in tax recovery matters under the TNVAT Act. It emphasizes the necessity for proper assessment orders before resorting to distraint actions and ensures that taxpayers are given a fair chance to respond and rectify any tax discrepancies.