2019 (3) TMI 342 - HC - VAT and Sales Tax

Court Quashes Order, Emphasizes Purchaser Non-Liability

The court quashed the impugned order revising the deemed assessment under Section 27 of the TNVAT Act, 2006, emphasizing the purchaser's non-liability for ... Input Tax Credit (I.T.C.) - liability of purchaser for non-reporting by seller - revision of assessment under Section 27 of the TNVAT Act, 2006 - right to personal hearing - remand for fresh considerationInput Tax Credit (I.T.C.) - liability of purchaser for non-reporting by seller - Whether a purchaser can be held liable and have I.T.C. reversed where the seller has not reported the sale or remitted tax to the department. - HELD THAT: - The Court applied the Division Bench precedent cited by the petitioner and held that where a seller has not disclosed the sales in its returns or has not remitted the tax collected, the corrective action lies against the defaulting seller and not against the purchaser who has claimed I.T.C. based upon invoices. The genuineness of the purchase in the present case was not disputed by the respondent, and therefore the error was not attributable to the petitioner. On these facts, the impugned revision proposing reversal of I.T.C. against the purchaser lacked a sustainable basis and was quashed. [Paras 9]The purchaser cannot be held liable for non-reporting by the seller; the impugned revision to reverse I.T.C. on that basis is unsustainable and is quashed.Revision of assessment under Section 27 of the TNVAT Act, 2006 - right to personal hearing - remand for fresh consideration - Whether the impugned order under Section 27 should be quashed and the matter remanded for fresh consideration with opportunity to be heard. - HELD THAT: - The Court found the impugned order defective inasmuch as the purchaser's position, supported by invoices and objections, required fresh consideration. Rather than finally adjudicating the matter on the present record, the Court quashed the impugned order and remanded the case to the assessing officer for de novo consideration on merits. The respondent was directed to afford the petitioner sufficient opportunity, including the right of personal hearing, and to pass a final order under Section 27 in accordance with law within a specified short period. [Paras 13]Impugned order dated 08.10.2015 quashed; matter remanded to the respondent to afford opportunity including personal hearing and to pass final order under Section 27 on merits within four weeks.Final Conclusion: The Writ Petition is allowed to the extent that the impugned order dated 08.10.2015 is quashed; the matter is remanded to the assessing authority for fresh consideration and disposal under Section 27 of the TNVAT Act, 2006 after affording the petitioner adequate opportunity including personal hearing, within four weeks; petition disposed of with no costs. Issues:Challenge to order revising assessment under Section 27 of TNVAT Act, 2006 without considering objections raised by petitioner.Analysis:The petitioner challenged an order passed by the respondent revising the deemed assessment under Section 27 of the TNVAT Act, 2006 without considering objections raised. The petitioner contended that purchases were duly reported to the respondent, and although copies of invoices from the seller were provided, the assessment was revised. The petitioner argued that the respondent should take action against the seller for not reporting sales. A detailed reply with records was submitted to the respondent, but it was allegedly not considered in the impugned order. The petitioner sought to quash the order based on these grounds.The petitioner's counsel highlighted that objections raised were not considered by the respondent in the impugned order. Reference was made to a Division Bench judgment which emphasized that action should be taken against defaulting sellers, not purchasers, in cases where sales are not disclosed. The petitioner maintained that being a purchaser, providing seller invoices, they were not at fault, and any action should be against the seller. The respondent argued that the petitioner should have pursued an appellate remedy under Section 51 of the TNVAT Act before approaching the court under Article 226 of the Constitution of India.The court noted that the petitioner reported purchases to the respondent, and invoices were submitted, but the seller did not report the sales. Citing the Division Bench judgment, the court held that action should be against the defaulting seller, not the purchaser claiming Input Tax Credit. The court found the petitioner not liable for the seller's non-reporting of sales and quashed the impugned assessment order. The matter was remanded back to the respondent for fresh consideration, with directions to provide the petitioner an opportunity for a personal hearing and pass a final order within four weeks.In conclusion, the court quashed the impugned order and remanded the matter for fresh consideration, emphasizing the purchaser's non-liability for the seller's actions. The court directed the respondent to reevaluate the matter in accordance with the law and provide the petitioner with a fair opportunity for a hearing.