2020 (7) TMI 471 - HC - VAT and Sales Tax

Assessment order quashed, case remanded for review. Authority to provide docs, ensure due process. Respondent given 6 months.

M/s. B.K. Traders Through Its Proprietor Viralbhai Vinodbhai Karia Versus State Of Gujarat

The court quashed the assessment order dated 24.03.2020 and remanded the case for reconsideration, directing the authority to provide necessary documents ... Principles of Natural Justice - legality and the validity of the assessment order - challenge is made essentially and predominantly on the grounds that, without assigning any reason or availing any opportunity and in complete breach of the principles of natural justice, the impugned order came to be passed by the respondent No.2 - HELD THAT:- In the instant case, since there is violation of principles of natural justice, more particularly, when the petitioner chose to approach the respondent-authority on 13.03.2020 and requested for relevant and vital documents, in response to the notice issued by it, without supplying the same, respondent-authority has imposed the petitioner with not only the heavy penalty but also interest by the order dated 24.03.2020, which is impugned in this petition, we, therefore, deem it appropriate to entertain this petition and at the joint request made by both the sides, matter deserves to be remitted, quashing and setting aside the impugned order of assessment. The period prescribed for reassessment of five years has already been concluded on 31.03.2020. However, since, the petitioner has moved this Court questioning the action of the respondent authority and as it has submitted through the learned Sr. Advocate representing its case that no contention, with regard to period of limitation shall be raised, the same shall not be treated as a ground to hamper the proceedings before the tax authority for its fresh consideration of the show-cause notice issued to the present petitioner. It would be of utmost necessary for the adjudicating authority to independently examine the material, which has been/ shall be placed on record before it by the petitioner and assess the same, on the strength of the substantiating documents, rather than basing its decision, solely on the cancellation of the registration of M/s. Maa Oil Mills, ab initio from the year 2007. This petition succeeds and is PARTLY ALLOWED - The impugned order dated 24.03.2020 is QUASHED and set aside and the matter is REMANDED to the competent authority for its consideration afresh, on merits, the case of the petitioner of ITC, after availing due opportunity to the petitioner, herein. Issues Involved:1. Legality and validity of the assessment order dated 24.03.2020.2. Notice dated 24.03.2020 issued under Section 35 of the Gujarat Value Added Tax Act, 2003.3. Breach of principles of natural justice.4. Denial of Input Tax Credit (ITC) due to cancellation of vendor's registration.5. Availability and efficacy of alternative remedy under Section 73 of the VAT Act.6. Necessity of cross-examination of the vendor's representative.7. Limitation period for reassessment.Detailed Analysis:1. Legality and Validity of the Assessment Order:The petitioner challenged the assessment order dated 24.03.2020 and the accompanying notice issued under Section 35 of the VAT Act, asserting that the order was passed without assigning any reason, availing any opportunity, or adhering to the principles of natural justice. The petitioner argued that the assessment was conducted in violation of the established legal norms and without proper consideration of the self-assessment reports furnished by the petitioner.2. Notice Issued Under Section 35 of the VAT Act:The petitioner received a notice on 23.12.2019 for reassessment under Section 35(1) of the VAT Act. The petitioner contended that no reasons were provided in the notice for the reassessment. Despite furnishing a detailed reply and requesting relevant documents on 13.03.2020, the respondent proceeded to pass the impugned order on 24.03.2020, raising dues amounting to Rs. 1,27,45,512/-.3. Breach of Principles of Natural Justice:The petitioner claimed that the impugned order was passed without providing the necessary documents or an opportunity to cross-examine the responsible employee of M/s. Maa Oil Mills, whose registration cancellation was the basis for denying ITC. The court noted the glaring and blatant act of denial of the basic document of cancellation of the registration of M/s. Maa Oil Mills, which constituted a breach of the principles of natural justice.4. Denial of Input Tax Credit (ITC):The denial of ITC was based on the cancellation of the registration of M/s. Maa Oil Mills, with whom the petitioner had transacted during 2014 and 2015. The court emphasized that the individual merits of the case should be determined by the authority based on the materials furnished and not solely on the cancellation of the vendor's registration.5. Availability and Efficacy of Alternative Remedy:The respondent argued that an alternative remedy was available under Section 73 of the VAT Act, which provides for an appeal. However, the court observed that the appellate authority under the VAT Act does not have original powers of assessment or further inquiry. Given the breach of principles of natural justice, the court found it necessary to invoke writ jurisdiction under Article 226 of the Constitution of India.6. Necessity of Cross-Examination:The petitioner argued that cross-examination of the owner or designated officer of M/s. Maa Oil Mills was necessary to establish the genuineness of the transactions, as all dealings were through banking channels. The court acknowledged the importance of such cross-examination in determining the truth.7. Limitation Period for Reassessment:The court noted that the period prescribed for reassessment had concluded on 31.03.2020. However, the petitioner assured that no contention regarding the period of limitation would be raised, allowing the reassessment proceedings to continue without hindrance.Conclusion:The court quashed the impugned order dated 24.03.2020 and remanded the matter to the competent authority for fresh consideration on merits, ensuring due opportunity to the petitioner. The respondent-authority was directed to supply the requested documents, including the order of cancellation of registration of M/s. Maa Oil Mills. The entire exercise was to be completed within six months from the date of receipt of the order. The court emphasized that the findings and observations made were solely for addressing the breach of principles of natural justice and did not prejudice the merits of the case.