2021 (10) TMI 845 - HC - VAT and Sales Tax

Court sets aside order under TNVAT Act, emphasizes fair opportunity for response, directs fresh assessment.

The Court set aside the impugned order made under Section 27 of TNVAT Act as it failed to consider the cause shown by the writ petitioner and lacked ... Duty to consider cause shown in response to show cause notice - Requirement of reasoned order in best judgment reassessment - Re-assessment under Section 27 of TNVAT Act - Input Tax Credit assessment / escaped turnover - Imposition of penalty under Section 27(4) of TNVAT ActDuty to consider cause shown in response to show cause notice - Requirement of reasoned order in best judgment reassessment - Impugned reassessment order set aside for failure to consider the dealer's replies and for lack of reasons. - HELD THAT: - The Court found that, although show cause notices had been issued and replied to, the impugned order contains no reference to or consideration of the cause shown by the writ petitioner. Section 27 of the TNVAT Act contemplates re assessment by 'best of its judgment', which makes it imperative that the assessing authority state the reasons showing how objections were considered and why the dealer's contentions were not accepted. While reasons may be terse, they cannot be laconic or entirely absent. The impugned order's omission to record any consideration of the replies or any reasons for rejecting them vitiates the assessment and mandates setting aside on that short ground. [Paras 2, 6, 7, 8]Impugned order dated 27.08.2021 set aside solely because the objections/replies of the dealer were not considered and no reasons were given for rejecting the dealer's position.Re-assessment under Section 27 of TNVAT Act - Imposition of penalty under Section 27(4) of TNVAT Act - Matter remanded for de novo re-assessment/revision with direction to consider the cause shown and pass a reasoned order within a specified time; no view expressed on merits. - HELD THAT: - Having set aside the impugned order for want of consideration of the dealer's replies and absence of reasons, the Court directed the respondent to undertake de novo re assessment/revision under Section 27, considering the show cause replies and annexures already on record. The Court clarified that further opportunity to be heard was not necessary since SCNs had been issued and replied to. The respondent was directed to complete the fresh exercise expeditiously and in any event within six weeks from the date of the order. The Court expressly refrained from expressing any view on the merits of the underlying tax/ITC issues. [Paras 8, 9]Respondent to re do reassessment/revision under Section 27 of TNVAT Act de novo, considering the dealer's replies, and pass a fresh reasoned order within six weeks; no view on merits expressed.Final Conclusion: Writ petition allowed in part: impugned order set aside for failure to consider the dealer's replies and absence of reasons; matter remanded for de novo reassessment under Section 27 of TNVAT Act with directions to consider the cause shown and pass a reasoned order within six weeks; no adjudication on merits. Issues:Assailing an order made under Section 27 of TNVAT Act for not considering the cause shown by the writ petitioner and imposing penalty under Section 27(4) of TNVAT Act.Analysis:The main writ petition challenged an order dated 27.08.2021 made under Section 27 of TNVAT Act. The impugned order dealt with assessment of escaped turnover and wrong availment of Input Tax Credit (ITC). The Court noted that the impugned order did not mention the provision of law under which it was made but was informed that it was under Section 27 of TNVAT Act. The Court highlighted that under Section 27, an order should not be made without giving the dealer a reasonable opportunity to show cause. In this case, multiple show cause notices were issued, and the writ petitioner responded with detailed explanations and documents. Despite this, the impugned order was passed without considering the cause shown by the writ petitioner.The Court emphasized that the impugned order should have considered the objections raised by the writ petitioner, especially since it was made under the 'Best of its Judgment' provision of Section 27 of TNVAT Act. The Court found that the impugned order lacked reasoning and failed to show that the objections were duly considered. It was highlighted that an order can be brief but should not be devoid of reasons, especially when dealing with re-assessment or revision. The Court concluded that the impugned order was set aside solely because the cause shown by the writ petitioner was not considered, and no reasons were provided for rejecting the dealer's position.In the final order, the Court directed that the impugned order be set aside, and a fresh re-assessment/revision be done by the respondent under Section 27 of TNVAT Act. The respondent was instructed to consider the cause shown by the writ petitioner in response to the show cause notices and to issue a new order within six weeks. It was made clear that no view on the merits of the matter was expressed in the order, and further opportunities for response were deemed unnecessary as the writ petitioner had already responded to the show cause notices. The writ petition was disposed of with the specified directives, and no costs were awarded.