2020 (6) TMI 681 - HC - VAT and Sales Tax

Court sets aside assessment orders for 2006-07 & 2007-08, instructs reevaluation. Assessing Officer must justify invisible loss % & reverse input tax credit. Liberty granted for show cause notices.

The court set aside the assessment orders for the years 2006-07 and 2007-08, directing the Assessing Officer to reconsider the issue after following due ... Reopening of assessment and validity of assessment orders - remand for fresh consideration with issuance of show cause notice - requirement of fact-finding by Assessing Authority before adopting invisible loss percentages - Section 18 claim for refund subject to restrictions in Section 19 - prohibition on adopting uniform/adhoc percentage for invisible lossReopening of assessment and validity of assessment orders - Section 18 claim for refund subject to restrictions in Section 19 - Challenge to the assessment orders dated 16.05.2012 for the assessment years 2006-07 and 2007-08 rejecting the petitioner's request to drop proposals levying tax on invisible loss and on sales of cutting waste and rejected export garments. - HELD THAT: - The High Court, applying the reasoning in Interfit Techno Products Ltd. (as relied upon by the petitioner), held that the impugned assessment orders could not be sustained in the facts of the present case. The Court recognised that claims under Section 18(2) are not standalone and must be examined against the restrictions and conditions contained in Section 19; consequently Assessing Authorities must undertake fact finding to verify the quantum of loss and whether the claim falls within the statutory restrictions. Having regard to those principles and the concession by the respondent, the Court set aside the assessment orders and directed fresh consideration rather than deciding the merits of the refund claim on the papers. [Paras 2, 4, 6, 7]The impugned assessment orders dated 16.05.2012 are set aside and the matters are remitted for fresh adjudication.Remand for fresh consideration with issuance of show cause notice - requirement of fact-finding by Assessing Authority before adopting invisible loss percentages - prohibition on adopting uniform/adhoc percentage for invisible loss - Procedure to be followed by the Assessing Officer on remand. - HELD THAT: - The Court directed that the Assessing Officer shall issue show cause notices to the petitioner clearly setting out the circumstances under which revision of refunds or reversal of input tax credit is proposed, thereby enabling the petitioner to file objections with supporting documents. The Court emphasised that Assessing Authorities must not mechanically adopt uniform or adhoc percentages for invisible loss but must embark upon the requisite fact finding exercise contemplated by the precedents and the statute. Timelines for issuance of notices, filing of objections, consideration and hearing were prescribed to ensure expeditious fresh decision on merits and in accordance with law. [Paras 4, 6]Respondent/Assessing Officer to issue show cause notices within four weeks, petitioner to file objections within two weeks, and respondent to decide afresh after personal hearing within four weeks thereafter.Final Conclusion: Writ petitions allowed to the extent that the assessment orders dated 16.05.2012 for AY 2006-07 and 2007-08 are set aside and the matters are remitted to the Assessing Officer to proceed afresh by issuing show cause notices, conducting necessary fact finding (including scrutiny of invisible loss claims) and passing appropriate orders on merits and in accordance with law within the timelines directed; no order as to costs. Issues:Challenge to assessment orders dated 16.05.2012 for the assessment years 2006-07 and 2007-08.Analysis:The petitioner challenged the orders passed by the respondent, which rejected the request to drop the proposal levying tax on specific items. The respondent, in response, stated that excess refund was obtained due to defects found during a visit to the petitioner's place of business. The assessment orders were passed based on this, and the respondent argued that they were in line with the relevant provisions of the Act.During the hearing, the petitioner's counsel cited a previous court decision to support their case. The court held that the Assessing Authorities cannot adopt a uniform percentage for invisible loss and reverse input tax credit without proper justification. The court set aside all notices issued for reopening and reversing input tax credit, granting liberty to the Assessing Officer to issue appropriate show cause notices and proceed in accordance with the law.The respondent's counsel agreed with the petitioner's submissions, leading to the court setting aside the impugned orders dated 16.05.2012. The court directed the Assessing Officer to decide the issue afresh for the years 2006-07 and 2007-08, after issuing show cause notices, receiving objections, and passing appropriate orders within specified timelines.In conclusion, both writ petitions were allowed, the impugned orders were set aside, and the Assessing Officer was directed to reconsider the issue after following due process. No costs were awarded, and the connected miscellaneous petitions were closed.