2022 (6) TMI 203 - SC - VAT and Sales Tax

High Court Invalidates Assessment Orders and Recovery Proceedings for Improper Notice Service

The High Court set aside ex parte assessment orders and recovery proceedings due to improper notice service. The Court directed refund of withdrawn funds ... Service of notice - ex parte assessment - absence of malice / good faith - imposition of costs - annulment of departmental strictures - quasi-judicial functions - statutory protection for acts done in good faithService of notice - ex parte assessment - absence of malice / good faith - annulment of departmental strictures - Whether the adverse observations, strictures and directions recorded against the appellant by the High Court were justified and should be sustained - HELD THAT: - The Court accepted the High Court's findings on the procedural infirmities in the assessment process but held that errors, irregularities or even illegal or perverse actions by themselves do not necessarily establish malice or want of good faith. Having regard to the belated application by the dealer for change of address, the rejection of that application by the Registering Authority (not the appellant), and the appellant's conduct in proceeding on the record then available and attempting service at the alleged new address, there was insufficient material to infer deliberate or mala fide conduct by the appellant. The Court observed that imputing motives requires something more than mere error or fault; in the facts of the case the strictures and personal observations directed against the appellant were unwarranted and were accordingly expunged and set aside. [Paras 15, 16, 17, 22, 24]The questioned parts of the High Court orders containing adverse observations and strictures against the appellant are annulled and expunged.Imposition of costs - annulment of departmental strictures - Disposition of costs awarded by the High Court and the direction for payment of the same - HELD THAT: - The respondent No. 1 (writ petitioner) took a fair stand before this Court and agreed not to retain the costs awarded by the High Court. In view of that stance and the overall disposal, the Court directed that the amount awarded by the High Court as costs shall be deposited with the Uttar Pradesh State Legal Services Authority. The Court thereby provided a remedial destination for the costs while annulling the personal strictures against the appellant. [Paras 21, 22]The costs awarded by the High Court shall be deposited by respondent No. 1 with the Uttar Pradesh State Legal Services Authority.Final Conclusion: The appeals are allowed to the extent indicated: the personal observations, strictures and directions against the appellant in the impugned High Court orders are annulled and expunged; the costs awarded by the High Court are directed to be deposited with the Uttar Pradesh State Legal Services Authority; other findings of the High Court on the merits of the assessment proceedings are left undisturbed. Issues Involved:1. Legality of ex parte assessment orders and recovery proceedings.2. Proper service of notice for assessment orders.3. Rejection of application for change of business address.4. Imposition of costs and personal liability on the appellant.5. Departmental action and competence of the appellant to discharge quasi-judicial functions.Detailed Analysis:1. Legality of Ex Parte Assessment Orders and Recovery Proceedings:The appellant, functioning as the Deputy Commissioner, Commercial Tax, had passed ex parte assessment orders and initiated recovery proceedings under the UP VAT Act. The High Court found that these orders were issued without proper service of notice to the writ petitioner, who had shifted its place of business from Noida to Ghaziabad. The High Court set aside the ex parte assessment orders dated 15.12.2015 and quashed the recovery proceedings, directing the refund of Rs. 49,82,01,250/- withdrawn by the department from the writ petitioner’s account, with interest as per Section 40 of the UP VAT Act.2. Proper Service of Notice for Assessment Orders:The High Court determined that the department was aware of the writ petitioner’s change of address but failed to serve notice properly. The service of notice at the Noida address was deemed insufficient and in violation of Rule 72 of the Rules. The High Court emphasized that the department's actions were deliberate and aimed at withdrawing money from the petitioner’s bank account through dubious means.3. Rejection of Application for Change of Business Address:The writ petitioner’s application for registering the changed address, filed on 05.12.2013, was rejected by the Registering Authority on 02.09.2014. The High Court set aside this rejection, directing the Registering Authority to process the application after permitting the writ petitioner to deposit the requisite fees. The appellant, acting as the Assessing Authority, had no other registered address on record at the time of drawing up the assessment orders.4. Imposition of Costs and Personal Liability on the Appellant:The High Court imposed costs of Rs. 2,00,000/- on the department and left it open for the Commissioner, Commercial Tax, Lucknow, to institute an inquiry and fix responsibility on the erring officer. In a subsequent order dated 02.08.2016, the High Court imposed additional costs of Rs. 50,000/- personally on the appellant for passing another assessment order on 04.05.2016, which was not in conformity with the earlier High Court order. The appellant's actions were viewed as harassment and lacking in good faith.5. Departmental Action and Competence of the Appellant to Discharge Quasi-Judicial Functions:The High Court directed the Principal Secretary, Trade Tax, U.P. Government, to consider whether the appellant was fit to discharge quasi-judicial functions and to take appropriate disciplinary action. The Supreme Court, however, found that the High Court’s strictures and observations against the appellant were unwarranted, as there was no concrete evidence of malice or want of good faith on the appellant’s part. The Supreme Court annulled the questioned parts of the High Court’s orders, including the imposition of costs and the remarks regarding the appellant’s competence.Conclusion:The Supreme Court allowed the appeals to the extent of expunging the strictures and observations against the appellant in the High Court’s orders dated 29.02.2016 and 02.08.2016. The Court ordered the respondent No. 1 to deposit the amount of Rs. 2,00,000/- awarded as costs with the Uttar Pradesh State Legal Services Authority. Any action taken or contemplated pursuant to the impugned orders was rendered redundant.