2023 (5) TMI 1330 - HC - VAT and Sales Tax

AP HC remits VAT assessment after finding Article 226 restraint but gross natural justice violation in Rule 64 notice service

The AP HC held that while Article 226 jurisdiction is wide, it should be exercised with restraint and cannot entertain challenges to assessment orders ... Jurisdiction - Assessment Order is barred by limitation or not - power of the High Court to exercise jurisdiction under Article 226 of the Constitution of India in a case where the appeal is filed beyond the condonable period of limitation asper the statute - HELD THAT:- It is profitable and relevant to refer the judgment of the Hon’ble Supreme Court in Assistant Commissioner (CT) LTU, Kakinada and others v. M/s. Glaxo Smith Kline Consumer Health Care Limited [2020 (5) TMI 149 - SUPREME COURT]. The question before the Hon’ble Supreme Court emanated from the judgment and order passed by the High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh in [2018 (11) TMI 1780 - TELANGANA HIGH COURT] is whether the High Court, in exercise of its writ jurisdiction under Article 226 of the Constitution of India, can entertain a challenge to the assessment order on the ground that the statutory remedy of appeal against that order stood foreclosed by the law of limitation. In the light of the observations made by the Hon’ble Apex Court in M/s. Glaxo case, the question was answered in negative taking a view that the High Court cannot exercise its jurisdiction under Article 226 of the Constitution of India to attend the cause where the statutory appeal filed beyond the condonable period of limitation as a matter of course. The powers of High Court under Article 226 of the Constitution of India though wide, should be exercised with self-imposed restraint, and as such the Court cannot issue any writ which is inconsistent with the legislative intent regarding the prescribed period of limitation under Section 31 of the VAT Act, 2005, thereby making the legislative scheme and intention behind the proviso futile. The party who approaches the court under writ jurisdiction, has to substantiate the plea of “inability” to file appeal within the prescribed time. Furnishing ‘C’ forms after passing assessment order - HELD THAT:- In the instant case, the First Appellate Authority and Second Appellate Authority did not make any attempt to refer and consider whether the service of pre-assessment notice, notice for personal hearing and service of assessment order before the Assessing Authority were made in accordance with the statute and if not, the resultant violation of principles of natural justice. They have not considered the case of the petitioner in right perspective as to the service of notice as per Rule 64 of the AP VAT Rules. Under these circumstances, there is no option for the petitioner except to seek indulgence of this Court under Article 226 of the Constitution, on the ground of gross violation of principles of natural justice - in the peculiarity of the present case, since the pre-assessment notice was not served as per the procedure, we deem it fit that an opportunity shall be given to the assessee to place the material supporting direct export sales under Section 5 (1) of the C.S.T Act for claiming exemption. The matter is remitted to the Assessing Authority for fresh consideration within a period of three months from the date of receipt of a copy of this order. Consequently, the garnishee notice issued by the 2nd respondent to the 5th respondent is set aside subject to the petitioner maintaining Rs. 38,03,561/- i.e., the balance of the disputed tax in the bank account, till disposal of the Assessment Order. Petition is allowed by way of remand. Issues Involved:1. Barred by Limitation2. Violation of Principles of Natural Justice3. Validity of Assessment Order and Service of Notice4. Jurisdiction of High Court under Article 226Summary:Barred by Limitation:The petitioner argued that the assessment order dated 19.03.2019 is barred by limitation for the tax period from April 2014 to January 2015 as per sub-rule (5A) of Rule 14A of the CST (AP) Rules, 1957. The appeal was filed with a delay of 11 months and 21 days, which was beyond the condonable period of sixty days as per Section 31 (1) of the A.P. VAT Act, 2005. The appellate authorities rejected the appeal on this ground.Violation of Principles of Natural Justice:The petitioner claimed that the assessment proceedings were conducted without granting a personal hearing and that the assessment order was allegedly e-mailed, which is a violation of principles of natural justice. The High Court noted that the pre-assessment notice was not served according to law, as required by Rule 64 of the AP VAT Rules, 2005.Validity of Assessment Order and Service of Notice:The petitioner contended that the service of the assessment order on Sri P. Sarath Chandra, who was not the Managing Partner, was invalid. The High Court found that serving notice on an unauthorized person is not valid service under law. The assessment order was found to be in contravention of Rule 64 of the AP VAT Rules and violative of principles of natural justice.Jurisdiction of High Court under Article 226:The High Court referred to the judgment in the 'Glaxo case' (2020) 19 SCC 681, which held that the High Court cannot entertain a writ petition challenging an assessment order if the statutory appeal is filed beyond the condonable period of limitation. However, the High Court can exercise its jurisdiction under Article 226 in cases where the order is passed without jurisdiction, in excess of jurisdiction, in flagrant disregard of law, or in violation of principles of natural justice.Conclusion:The High Court allowed the writ petition, setting aside the garnishee notice and remitting the matter to the Assessing Authority for fresh consideration within three months. The court emphasized that the service of notice should comply with Rule 64 of the AP VAT Rules, 2005, and reiterated that the High Court's jurisdiction under Article 226 should be exercised with self-imposed restraint, consistent with the legislative intent regarding the prescribed period of limitation.