Court upholds VAT audit under TNVAT Act, dismisses challenge. Respondents directed to complete proceedings within 6 months.

The court concluded that the VAT Audit was authorized by the Commissioner in compliance with Section 64(4) of the TNVAT Act, 2006. Procedural irregularities did not invalidate the audit as the Commissioner had identified dealers and authorized the audit. The petitioner's challenge was dismissed, and the respondents were directed to issue a notice and complete proceedings within six months, ensuring the petitioner had an opportunity to be heard. The Writ Petition was disposed of with no costs.

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Issues Involved:

1. Jurisdiction and authorization under Section 64(4) of the Tamil Nadu Value Added Tax Act, 2006.
2. Validity of VAT Audit conducted by the second respondent.
3. Compliance with principles of natural justice.
4. Authority of the Commissioner to delegate audit powers.
5. Impact of procedural irregularities on the validity of the audit report.

Detailed Analysis:

1. Jurisdiction and Authorization under Section 64(4) of the Tamil Nadu Value Added Tax Act, 2006:

The petitioner challenged the VAT Audit Report dated 14.03.2014, arguing that the audit was conducted by the second respondent based on the authorization of the first respondent, which was impermissible under Section 64(4) of the TNVAT Act, 2006. The petitioner cited a decision from W.P.No.7564 of 2015, where it was held that the Joint Commissioner’s authorization for audit was not stipulated under Section 64(4). The provision specifies that the Commissioner may order an audit by an officer not below the rank of Deputy Commercial Tax Officer, indicating that the Commissioner himself must apply his mind and cannot delegate this power.

2. Validity of VAT Audit Conducted by the Second Respondent:

The petitioner argued that the second respondent's audit was without jurisdiction and contrary to Section 64(4). The petitioner relied on a Division Bench decision in W.A.No.1757 of 2019, which underscored that the Commissioner must apply his mind and pass a quasi-judicial order for each individual case, and cannot issue a general order for a group of dealers. The audit must comply with principles of natural justice, including notice and an opportunity of hearing.

3. Compliance with Principles of Natural Justice:

The Division Bench in W.A.No.1757 of 2019 emphasized the necessity for a quasi-judicial order by the Commissioner, requiring prior notice and a reasoned order. The petitioner contended that the impugned audit did not comply with these principles, as it was based on an unauthorized delegation.

4. Authority of the Commissioner to Delegate Audit Powers:

The respondents argued that the Commissioner’s authorization merely identified officers to carry out the audit and did not delegate the power itself. The Commissioner’s letter dated 21.08.2013 instructed Joint Commissioners to arrange for VAT audits, identifying specific dealers. The respondents contended that this was within the Commissioner’s administrative powers and did not contravene Section 64(4).

5. Impact of Procedural Irregularities on the Validity of the Audit Report:

The Government Advocate cited several cases, including M/s.Devashi Enterprises and M/s.Empress Audio, to argue that procedural irregularities do not invalidate an audit if the Commissioner authorized it. In Pooran Mal Vs The Director of Inspection (Investigation), the Supreme Court held that even if procedures were violated, the findings remain valid. The respondents argued that the audit was authorized by the Commissioner and conducted with the help of the second respondent, thus complying with Section 64(4).

Conclusion:

The court concluded that the VAT Audit was authorized by the Commissioner and conducted in compliance with Section 64(4). The audit’s procedural aspects did not invalidate it, as the Commissioner had identified the dealers and authorized the audit. The petitioner’s challenge was dismissed, and the respondents were directed to issue a notice and complete proceedings within six months, ensuring the petitioner had an opportunity to be heard. The petitioner was instructed to respond within 30 days of receiving the notice. The Writ Petition was thus disposed of with no costs.

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