2016 (8) TMI 176 - HC - VAT and Sales Tax

Court finds Department of Trade & Taxes violated DVAT Act, imposes costs on officials.

Teleworld Mobiles Pvt. Ltd. Versus Commissioner Of Trade & Taxes

Teleworld Mobiles Pvt. Ltd. Versus Commissioner Of Trade & Taxes - [2016] 94 VST 358 (Del) Issues Involved:1. Violation of statutory provisions by the Department of Trade & Taxes (DT&T).2. Delay in processing and issuing refunds under the DVAT Act.3. Improper issuance of notices and default assessments by the AVATO.4. Contravention of principles of natural justice.5. Conduct and accountability of DT&T officials.Detailed Analysis:1. Violation of Statutory Provisions by DT&T:The court noted that the Department of Trade & Taxes (DT&T), Government of NCT of Delhi, acted in blatant violation of the statutory provisions of the Delhi Value Added Tax Act, 2004 (DVAT Act) and the decisions of the Courts. The Petitioner, a registered dealer under the DVAT Act, was engaged in the sale and purchase of mobile phones and had been paying taxes and claiming input tax credit under Section 9(1) of the DVAT Act. Despite this, the DT&T failed to issue the refund due to the Petitioner for the fourth quarter of 2013-14.2. Delay in Processing and Issuing Refunds:The court emphasized the mandatory nature of the time limits under Section 38 of the DVAT Act for processing and issuing refunds. It was observed that numerous judgments and circulars had been issued emphasizing the need for timely refunds, but the problem of delayed refunds persisted. The court cited its recent order in Prime Papers and Packers vs. Commissioner of VAT, which summarized the legal principles regarding the timely processing of refunds.3. Improper Issuance of Notices and Default Assessments by the AVATO:The Assistant Value Added Tax Officer (AVATO) issued multiple notices under Section 59(2) of the DVAT Act, requiring the Petitioner to produce documents for various periods. Despite the Petitioner’s compliance, the AVATO proceeded to issue default assessments of tax, interest, and penalty without proper authorization (DVAT-50) and without adhering to the principles of natural justice. The AVATO’s actions were deemed illegal and in violation of the statutory provisions.4. Contravention of Principles of Natural Justice:The AVATO failed to inform the Petitioner of the adjourned hearing date and took up the matter on a holiday without issuing further notice. This conduct was deemed unacceptable and a violation of the principles of natural justice. The default assessments issued on 12th July 2016 were found to be patently illegal and in contravention of the legal requirements.5. Conduct and Accountability of DT&T Officials:The court expressed concern over the conduct of DT&T officials, particularly Mr. O. P. Singh, the AVATO, and Mr. Pravesh Ranjan Jha, the Joint Commissioner, who endorsed the AVATO’s illegal actions. The court imposed exemplary costs on the DT&T for unnecessarily increasing litigation and directed the Commissioner (VAT) to issue notices to the concerned officials to explain why the costs should not be recovered from their salaries and an adverse entry made in their Annual Confidential Reports.Judgment:The court set aside the notices of default assessment of tax, interest, and penalty dated 12th July 2016 issued by the AVATO. The DT&T was directed to pay costs of Rs. 20,000 in each petition to the Petitioner within one week. The Commissioner (VAT) was instructed to ensure the refund due to the Petitioner for the fourth quarter of 2013-14, along with interest, was credited to the Petitioner’s account by 8th August 2016. The Commissioner was also required to file an affidavit of compliance by 10th August 2016. The court allowed WP (C) Nos. 6746/2016 and 6747/2016 and disposed of WP (C) No. 5584/2016 with the above directions.