2020 (3) TMI 144 - HC - VAT and Sales Tax

Court dismisses some petitions, quashes orders, and sets deadlines for objections and reconsideration.

The court dismissed certain writ petitions as infructuous and quashed impugned orders in others, remitting them back to the respondent for ... Deemed assessment - re-opening of assessment under Section 27 - maintenance of records under Section 64 - provisional nature of input tax credit under Section 19 - scope of show cause notice and limitation on adjudication beyond proposal - remand with direction to treat impugned order as show cause noticeDismissal as infructuous - Certain writ petitions challenging notices dated 28.07.2016 were dismissed as infructuous because subsequent orders superseded them. - HELD THAT: - The Court found that orders dated 28.10.2016 impugned in W.P.Nos.42543, 42545, 42547, 42549 and 42552 of 2016 were passed pursuant to the earlier notices challenged in W.P.Nos.42544, 42546, 42548, 42550 and 42551 of 2016. Since the subsequent orders rendered the earlier writ petitions ineffective at the time of filing, nothing survived in those petitions. [Paras 10]W.P.Nos.42544, 42546, 42548, 42550 and 42551 of 2016 are dismissed as infructuous.Deemed assessment - re-opening of assessment under Section 27 - scope of show cause notice and limitation on adjudication beyond proposal - Notices dated 28.07.2016 and the impugned orders issued on 28.10.2016 and 31.10.2016 were validly issued within the period for re-opening assessments and could not be quashed solely because assessments had been deemed completed in 2012. - HELD THAT: - The Court explained that the amendment to Section 22 effected a concept of deemed assessment for returns that remained unassessed, with deemed completion occurring on 31st October of the succeeding year (and for the earlier unassessed returns, deemed as of 30.6.2012). However, the power to re-open assessments under Section 27 remained available within the prescribed limitation period (six years after assessment, five years prior to amendment). Because the Enforcement Wing's inspection occurred on 07.01.2016 and notices were issued within the limitation period under Section 27, neither the notices nor the consequential orders could be quashed on the ground that assessments were deemed to have been completed earlier. [Paras 24, 25, 27, 35, 36]Notices and impugned orders issued within the period permitted by Section 27 are not vitiated by the fact of deemed assessment; the reopening was within limitation and valid.Maintenance of records under Section 64 - provisional nature of input tax credit under Section 19 - A registered dealer is obliged to retain records until the expiry of the period during which reassessment is possible; Section 64 does not permit destruction of records to defeat reassessment and input tax credit is provisional under Section 19. - HELD THAT: - The Court held that the expression 'ordinarily' in Section 64(2) contemplates retention of records for the period necessary for assessment and for the period in which reassessment under Section 27 may be effected. Amendment to Section 22 to deem assessments did not entitle dealers to destroy records earlier; records must be retained until the expiry of the reassessment period. Further, input tax credit under Section 19 is provisional and may be revoked if found incorrect or unsupported, hence the assessee must produce documents to substantiate credits. [Paras 31, 32, 33, 34, 38]The petitioner's plea that documents need not be produced by reason of Section 64 is not tenable; the petitioner must produce records to substantiate input tax credit which is provisional under Section 19.Scope of show cause notice and limitation on adjudication beyond proposal - remand with direction to treat impugned order as show cause notice - Impugned orders that went beyond the scope of the proposals in the revision notices were quashed and the matters remitted to the assessing authority to be treated as show cause notices, with opportunity to the petitioner to file objections and produce documents. - HELD THAT: - Although the impugned orders expanded upon the proposals in the revision notices, the Court noted that the expanded matters were intertwined with the power to deny credit for non-compliance with Section 19. The assessing authority had not articulated proposals clearly due to lack of cooperation during inspection. In consequence, the Court quashed the impugned orders (not as a finding on merits) and remitted the cases for fresh consideration, directing that the impugned orders be treated as show cause notices, the petitioner be permitted to file objections and produce documents within fixed time, and the respondent to pass fresh orders after hearing within six months. [Paras 40, 41, 42, 43, 44]Impugned orders are quashed and remitted; they shall be treated as show cause notices and respondent directed to afford opportunity and pass fresh orders within six months after hearing the petitioner.Final Conclusion: The Court dismissed certain writ petitions as infructuous; upheld the validity of reopening assessments where notices were issued within the limitation under Section 27 despite deemed assessment; held that dealers must retain records until expiry of reassessment period and that input tax credit is provisional; and quashed the impugned orders that exceeded the notice proposals, remitting the matters for fresh adjudication treating those orders as show cause notices with directions to the petitioner to file objections and produce documents and to the respondent to pass fresh orders within six months. Issues Involved:1. Validity of Writ Petitions for Prohibition against Notices.2. Challenge against Impugned Orders due to Variance with Show Cause Notices.3. Compliance with Document Production Requirements.4. Principles of Natural Justice and Variance in Demand.5. Statutory Interpretation of TNVAT Act Provisions.6. Limitation Period for Re-assessment and Penalty Imposition.Issue-wise Detailed Analysis:1. Validity of Writ Petitions for Prohibition against Notices:The petitioner sought a Writ of Prohibition to prevent the respondent from proceeding with specific notices issued for various assessment years. The court noted that these writ petitions became infructuous as the impugned orders were already passed pursuant to the notices. Therefore, W.P.Nos.42544, 42446, 42448, 42550, and 42551 of 2016 were dismissed as infructuous.2. Challenge against Impugned Orders due to Variance with Show Cause Notices:The petitioner argued that the impugned orders for assessment years 2006-07 to 2015-16 were in variance with the proposals in the Show Cause Notices, constituting a violation of the Principles of Natural Justice. The court acknowledged this argument but also noted that the orders were not independent and new issues but intertwined with the powers to deny credit due to non-compliance with Section 19 of the Act.3. Compliance with Document Production Requirements:The petitioner contended that they were not required to maintain documents beyond a period of 5/6 years as per Section 64 of the TNVAT Act, 2006. However, the court emphasized that the petitioner was required to retain records until the expiry of the period prescribed for re-assessment under Section 27 of the Act. The court held that the petitioner must produce the necessary documents to substantiate the input tax credit availed during the disputed period.4. Principles of Natural Justice and Variance in Demand:The court referred to the principle that an assessing officer cannot traverse beyond the scope of the Show Cause Notice, citing precedents like Hindustan Polymers Co. Vs Collector of Central Excise and Thirumurugan Enterprises Vs The Customs, Excise & Service Tax Appellate Tribunal. The court found that the impugned orders did not consider the implications of amendments to Section 19 of the TNVAT Act, 2006, and thus, quashed the orders, treating them as Show Cause Notices.5. Statutory Interpretation of TNVAT Act Provisions:The court analyzed various provisions of the TNVAT Act, including Sections 22, 27, and 64. It clarified that the amendment to Section 22 introduced deemed assessment for returns filed in time where no assessment orders were passed. The court held that the petitioner was required to maintain records for 5/6 years after the assessment was deemed completed on 30.06.2012. The court rejected the petitioner's interpretation that Section 64 allowed them to destroy or plead loss of documents.6. Limitation Period for Re-assessment and Penalty Imposition:The court noted that the notices and impugned orders were issued within the limitation period prescribed under Section 27 of the TNVAT Act, 2006. It also addressed the imposition of a 300% penalty under Section 27(4), which came into force on 29.01.2016. The court found that the penalty was not applicable to the case and directed the respondent to reconsider the orders without the penalty.Conclusion:The court dismissed the writ petitions listed in Table-1 as infructuous. It quashed the impugned orders in the remaining writ petitions and remitted the cases back to the respondent for reconsideration. The petitioner was directed to file objections and produce necessary documents within 60 days. The respondent was instructed to pass appropriate orders within six months, ensuring the petitioner is heard before the final orders are passed. No costs were imposed, and connected miscellaneous petitions were closed.