2022 (7) TMI 873 - HC - VAT and Sales Tax

High Court declares TNVAT orders invalid due to procedural errors

The High Court of Madras quashed the impugned orders in a case involving the timeliness of orders under Section 27 of the TNVAT Act. The court found the ... Time Limitation - Validity of deemed assessment order - validity of total and taxable turnover reported through their returns - G.O.Ms.No.82 effective from 19.06.2012 - whether the notice has been sent through registered post as per Rule 19(c) and whether Section 27 has been complied with? - HELD THAT:- As could be seen, for the assessment year 2010-2011, it should have been done within a period of five years of filing. In this case, the five years' period gets over on 30.06.2018. The first notice, which is said to have sent on 27.02.2018, is by ordinary post. Hence, no cognizance can be taken. Thereafter, the subsequent notices dated 14.12.2020 and 16.02.2021 had been sent by RPAD. This service of notice is beyond the period of limitation as contemplated under Section 27 of the Act. Therefore, the respondent cannot reopen the case beyond the period of five years stipulated under Section 27 and no orders can been passed thereafter. In view of the same, the impugned orders are quashed. The Writ Petitions are allowed. Issues:1. Timeliness of the impugned orders under Section 27 of the TNVAT Act.2. Validity of the service of notices to the dealers.3. Compliance with Rule 19(c) regarding communication to dealers.4. Burden of proof on the dealer in case of revision of assessment.5. Legality of reversing Input Tax Credit (ITC) and levying interest.Analysis:Issue 1: Timeliness of the impugned orders under Section 27 of the TNVAT ActThe petitioners contended that the impugned orders, issued for the assessment year 2010-2011, were beyond the five-year limitation period prescribed under Section 27 of the TNVAT Act. The assessment should have been completed on or before 29.06.2017. The respondent's argument that the revision notice was issued within the limitation period was challenged based on the date of the first notice sent on 27.02.2018, which was via ordinary post. The subsequent notices sent by RPAD on 14.12.2020 and 16.02.2021 were also deemed untimely. Consequently, the impugned orders were quashed on the grounds of being beyond the statutory limitation period.Issue 2: Validity of the service of notices to the dealersThe petitioners argued that the notices dated 27.02.2018, sent by ordinary post, did not comply with Rule 19(c) of the TNVAT Rules, which mandates communication, including notices, to be sent via registered post. The subsequent notices sent by RPAD were also challenged for being beyond the limitation period. The court held that the service of notices was improper, and as a result, the impugned orders were liable to be quashed.Issue 3: Compliance with Rule 19(c) regarding communication to dealersThe petitioners emphasized the importance of adherence to Rule 19(c) of the TNVAT Rules, which requires communication to dealers to be sent via registered post. The respondent's argument that the notices were properly served was refuted by the petitioners, leading to the conclusion that the impugned orders were invalid due to non-compliance with the communication rules.Issue 4: Burden of proof on the dealer in case of revision of assessmentThe respondent argued that the burden of proof lies with the dealer to show no tax evasion and to provide documentary evidence to support their case. The court acknowledged this statutory requirement under Section 17 of the TNVAT Act, emphasizing the dealer's responsibility to demonstrate compliance with the law. However, in this case, the timeliness of the notices and orders took precedence, resulting in the quashing of the impugned orders.Issue 5: Legality of reversing Input Tax Credit (ITC) and levying interestThe respondent justified the reversal of ITC and levying of interest based on the provisions of the TNVAT Act. However, the court's decision to quash the impugned orders rendered this argument moot, as the orders were deemed invalid due to procedural irregularities, specifically the untimely issuance of notices. Consequently, the reversal of ITC and interest levied were invalidated alongside the quashing of the orders.In conclusion, the High Court of Madras allowed the Writ Petitions, quashed the impugned orders, and closed the connected miscellaneous petitions without costs.