2022 (12) TMI 967 - HC - VAT and Sales Tax

Court Invalidates Assessment Order & Demand Notice Over Procedural Lapse, Raises Questions on TNVAT Act

The court set aside the assessment order due to the failure to consider the dealer's reply, emphasizing the necessity of granting a reasonable opportunity ... Validity of assessment order - Short reporting resulting in purported short levy relatable to difference in sales turnover and sale of assets - reasonable opportunity to show cause provided or not - violation of principles of natural justice - HELD THAT:- This Court refrains itself from expressing any opinion or view on this submission as it is statutorily imperative for the respondent to give a reasonable opportunity to the dealer before the impugned assessment order was made. Though a show cause notice was issued, there is nothing that is articulated in the impugned assessment order to show that the reply was considered. As there is no mention about the reply, this Court is of the considered view that the statutorily imperative requirement does not stand satisfied in the case on hand qua impugned assessment order and that calls for interference. Impugned assessment order is set aside solely on the ground that there is nothing in the impugned assessment order to show that the writ petitioner's reply dated 07.03.2018 (reply to 05.02.2018 show cause notice) has been considered whereas it is statutorily imperative to give the dealer a reasonable opportunity to show cause - respondent is directed to consider the reply dated 07.03.2018 given by the dealer and make an assessment order afresh. Impugned demand notice dated 04.11.2022 is set aside for the self-same reasons qua setting aside of the impugned assessment order - petition disposed off. Issues Involved:1. Interpretation of Section 27 of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act).2. Consideration of dealer's reply in the assessment order.3. Validity of demand notice based on the assessment order.4. Availability of Section 84 of TNVAT Act to an Assessee.5. Determining if financial mismatches qualify as an error apparent on the face of the record under Section 84 of TNVAT Act.Interpretation of Section 27 of TNVAT Act:The judgment delves into the interpretation of Section 27 of the TNVAT Act, emphasizing the requirement to provide the dealer with a reasonable opportunity to show cause before making an assessment order. Reference is made to a previous case law involving the State Bank of India officers, clarifying that such an opportunity may not necessarily include a personal hearing and is at the discretion of the Assessing Officer. The judgment highlights the importance of complying with the statutory mandate of granting a reasonable opportunity to the dealer.Consideration of Dealer's Reply in the Assessment Order:The court notes that the impugned assessment order lacked any mention or consideration of the dealer's reply dated 07.03.2018, which was in response to a show cause notice issued earlier. Highlighting the statutory requirement for the reply to be taken into account before making an assessment order, the court finds the omission to be a failure in meeting the essential procedural requirement. Consequently, the court sets aside the assessment order and directs the respondent to reconsider the dealer's reply while conducting a fresh assessment.Validity of Demand Notice Based on the Assessment Order:The judgment further invalidates the demand notice issued by the respondent on 04.11.2022, citing the same reasons for setting aside the impugned assessment order. The court emphasizes the interconnectedness between the assessment order and the demand notice, indicating that the validity of the latter is contingent upon the proper consideration of the dealer's response in the former.Availability of Section 84 of TNVAT Act to an Assessee:The court acknowledges the need for clarification on the availability of Section 84 of the TNVAT Act to an Assessee, raising questions about its applicability and whether it is a provision accessible to the Assessee or the Assigning Officer. The judgment leaves these questions open for further examination and determination in subsequent proceedings, underscoring the significance of resolving the ambiguity surrounding the interpretation and scope of Section 84.Determining Financial Mismatches as Error Apparent:Lastly, the judgment contemplates whether issues such as financial mismatches and short payment of tax qualify as an 'error apparent on the face of the record' under Section 84 of the TNVAT Act. This query seeks to ascertain whether discrepancies in financials that lead to underreporting or errors in tax payment can be categorized as apparent errors warranting rectification under the said provision. The court leaves this issue open for future deliberation and resolution in the ongoing legal dispute.In conclusion, the judgment addresses multiple facets of procedural and substantive considerations under the TNVAT Act, emphasizing the importance of adherence to statutory requirements, due process, and the need for clarity on interpretative aspects of key provisions within the tax legislation.