2021 (4) TMI 403 - HC - VAT and Sales Tax

High Court analyzes jurisdictional challenges in Gujarat VAT case, questions notice validity

RAJENDRA JETHABHAI KESHWANI Versus STATE OF GUJARAT

The High Court of Gujarat considered jurisdictional challenges in a case involving a show-cause notice for the assessment period between April and August ... Seeking to be impleaded as one of the party-respondents - SCN issued for the period of assessment between 01.04.2015 and 31.08.2015 - HELD THAT:- We would not have entertained this writ application as the subject matter of challenge is a show-cause notice. However, there are few jurisdictional issues raised and argued by the learned counsel appearing for the writ applicant going to the root of the matter. Prima facie, it appears that the authority seeks to invoke Section 34 (8A) and Section 50 respectively of the Gujarat Value Added Tax Act, 2003. One of the jurisdictional issues involved in the present litigation is that Section 50 could not have been invoked for assessing a commission agent as liability has to be first determined by framing an assessment. Section 50 can be invoked to recover the “tax due” either from the commission agent or the principal. Section 50 is not a substantive provision, but is an enabling provision to recover the tax due once the assessment is framed. The matter deserves consideration. Rule returnable on 6th May, 2021. Issues:Challenge to show-cause notice for assessment period between 01.04.2015 and 31.08.2015; Jurisdictional issues raised regarding Sections 34(8)(A) and 50 of Gujarat Value Added Tax Act, 2003 (GVAT Act, 2003); Applicability of Section 50 in absence of specific reference in show-cause notice.Analysis:The High Court of Gujarat heard arguments from counsels representing the writ applicant, State-respondents, and an applicant seeking to be impleaded in the matter. The challenge pertained to a show-cause notice issued for the assessment period between April and August 2015. The notice raised concerns about the exclusion of a specific amount in the assessment, leading to potential tax liabilities for the parties involved. The notice invoked Sections 34(8)(A) and 50 of the GVAT Act, 2003 to assess tax, interest, and penalties on the mentioned transactions. The applicant, M/s. D.S. Cheving Products (LLP), sought to be impleaded as a party-respondent due to potential legal implications. The Court noted jurisdictional issues raised by the applicant's counsel, focusing on the invocation of Section 34(8)(A) and Section 50 of the GVAT Act, 2003.The Court highlighted the absence of a specific reference to Section 50 in the show-cause notice, leading to arguments about the applicability of this provision. The notice itself referenced Section 50, emphasizing the joint and several responsibilities of the principal and agent for tax payments. The applicant and another individual were implicated for alleged tax evasion through fabricated documentation and non-existent consignment sales agents. The Court acknowledged the applicant's concerns regarding the applicability of Section 50 without a formal assessment of liabilities. Section 50 was seen as an enabling provision for tax recovery post-assessment, rather than a standalone substantive provision.Considering the complexity of the issues raised, the Court deemed the matter worthy of further consideration and scheduled a returnable date for the ruling. The interim order was to remain in effect until the final disposal of the main matters. Despite reservations about the necessity of the applicant in a connected civil application, the Court decided to hear the civil application alongside the main matters for a comprehensive resolution. The judgment reflected a meticulous analysis of the jurisdictional challenges and legal implications surrounding the show-cause notice and the invoked provisions of the GVAT Act, 2003.