2023 (3) TMI 1065 - HC - VAT and Sales Tax

Court declares respondent's actions illegal, penalty improper. Revision application remanded for fresh decision.

The court found the notices and orders issued by the respondent to be illegal due to lack of proper consideration and exceeding the limitation period. The ... Time Limitation - Levy of penalty - suo-moto revision initiated by the respondent no. 3 was much after expiry of the period of limitation as prescribed under Sections 33 and 74 of the TVAT Act, 2004 - HELD THAT:- The respondent no. 4 after verification of the relevant documents of the petitioner had completed the assessment by assessment order dated 24.03.2015. From the face of the record, it is apparent that the respondent no. 4 on 10.07.2020 i.e. after elapse of more than five years had issued a notice under Section 70(1) of the TVAT Act, upon the petitioner wherein the petitioner was asked to appear in person or by his authorized representative and to explain as to why the assessment shall not be cancelled or modified. As per sections 33 of 74 of the TVAT Act, 2004, the issuance of notice after elapse of five years is barred by limitation. This court prima facie on perusal of the proceeding dated 27.10.2020, order which is impugned herein, this court expresses its concern that the revisional authority has not passed any speaking order and has not dealt with the issues allowing the discounts and to say that the amounts discounted are fictitious. Without entering into the merit of the case, the case is remanded back to the revisional authority to decide the matter afresh by passing a speaking order. It is also open for the petitioner to raise all his objections including the issue of jurisdiction and also to place any judgment in support of his contentions before the revisional authority. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether a revisional authority can initiate suo motu revision and issue a notice under its revisional powers after the expiry of five years from the end of the tax period, having regard to Sections 33 and 74 of the TVAT Act. 2. Whether issuance of a notice under Section 70(1) and consequential setting aside of an assessing authority's completed assessment without a reasoned/speaking order and without considering the assessee's written submissions is lawful. 3. Whether a revisional authority, in exercising power to rectify or revise, is required to deal with material pleas (including jurisdictional pleas and objections to discounts or adjustments) by passing a speaking order addressing the substance of those pleas. 4. Whether the impugned show-cause notice for imposition of penalty, issued after remand and re-assessment, is sustainable where the revisional order dismissing the revision application lacks consideration of the assessee's written statement. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Power to initiate suo motu revision after five years; interplay of Sections 33 and 74 Legal framework: Section 33 bars assessment under sections 31 and 32 after expiry of five years from the end of the tax period to which the assessment relates, subject to exception for prosecutions. Section 74 permits rectification of an order by an assessing, appellate or revisional authority within three years from the date of any order to rectify any error apparent on the face of the record, with safeguards where rectification enhances liability. Precedent treatment: No specific precedent was cited in the judgment; the Court examined the statutory text and record to determine applicability. Interpretation and reasoning: The Court observed that the assessing authority had completed assessment on 24.03.2015 and that the revisional authority issued notice under Section 70(1) on 10.07.2020 - more than five years later. On the face of the record, issuance of a notice to cancel or modify an assessment after the five-year period engages the bar in Section 33. Section 74, being a limited power to rectify errors apparent on the face of the record within three years of an order, does not operate as a general extension of the revisional power to permit assessments or cancellations beyond the five-year limitation in Section 33, and rectification that increases liability requires notice and opportunity to be heard. Ratio vs. Obiter: Ratio - the Court treated the five-year bar of Section 33 as relevant to the validity of late suo motu revision/notice; observed that rectification under Section 74 is time-bound and circumscribed. Obiter - no categorical determination was made on whether every suo motu revision after five years is per se void; the Court did not finally adjudicate the merits on limitation but flagged the limitation point as available for the revisional authority and parties. Conclusions: The limitation regime under Section 33 is material and cannot be ignored; rectification under Section 74 is not a blanket justification for late corrective action increasing liability without complying with provisos (notice and hearing). The Court, however, did not decide the ultimate effect of limitation on the impugned exercise and remitted the matter for fresh consideration including limitation objections. Issue 2 - Requirement of speaking order and consideration of written submissions before setting aside assessment Legal framework: Administrative law and statutory principles require that decisions affecting rights - including revisional orders cancelling or remanding assessments and imposing penalties - be reasoned and show application of mind; statutory safeguards (e.g., provisos to Section 74) require notice and opportunity where liability is to be enhanced. Precedent treatment: No case law was invoked; the Court relied on settled principles that revisional authorities must pass speaking orders addressing material submissions. Interpretation and reasoning: On perusal of the record the Court found the revisional authority's order did not engage with the central contention - that discounts claimed by the assessee were bona fide - and did not address the written statement placed before it. The impugned revisional order was therefore held to be non-speaking, reflecting a failure to apply mind to the objections and evidence tendered. The Court emphasized that dismissal of revision without dealing with material submissions and without elucidating reasons for rejecting claimed discounts or accepting the assessing authority's documentary conclusions is legally infirm. Ratio vs. Obiter: Ratio - a revisional authority must consider and deal with material written submissions and pass a speaking order; failure to do so warrants remand. Obiter - the Court did not finally resolve the factual contention (whether discounts were fictitious) and expressly refrained from entering into merits. Conclusions: The revisional order setting aside the assessment and later dismissing the revision without addressing the written statement was inadequate. Materially defective non-speaking orders cannot stand and require re-consideration by the revisional authority with reasons addressing the assessees' contentions. Issue 3 - Jurisdictional objections and right to press all contentions before revisional authority on remand Legal framework: Principles of natural justice and statutory appeal/revision regimes permit a party to raise jurisdictional and substantive objections before the revisional authority; the authority must consider such objections when deciding exercise of revisional power. Precedent treatment: None cited; Court applied statutory and procedural norms. Interpretation and reasoning: The Court held it is open to the petitioner on remand to raise all objections, including the issue of jurisdiction (which would encompass limitation under Section 33 and any procedural infirmity under Section 74), and to place authorities in support. The revisional authority is obliged to consider those objections and render a speaking decision. Ratio vs. Obiter: Ratio - parties are entitled to have jurisdictional and substantive objections considered; the revisional authority must expressly deal with those points. Obiter - the Court did not prescribe a particular outcome on jurisdictional objections. Conclusions: Remand ordered to permit full ventilation of jurisdictional and substantive objections and for the revisional authority to pass a reasoned order after considering all material and submissions. Issue 4 - Validity of post-remand show-cause notice for penalty where revisional decision is unspeaking Legal framework: Penal notices and enhancement of tax or penalty stemming from reassessment must comply with statutory safeguards (notice, opportunity, reasoned determination). Administrative action premised on an earlier non-speaking revisional order may be vitiated if the revisional process failed to address material submissions. Precedent treatment: No authority cited; Court focused on record. Interpretation and reasoning: The Court observed that the show-cause notice dated 27.10.2020 (seeking imposition of penalty) was issued subsequent to the remand and re-assessment, but since the revisional authority later dismissed the revision without considering the written submissions, the Court found it appropriate to set-aside that specific notice and remit the matter for fresh consideration. The Court did not adjudicate the correctness of the penalty on merits but treated the procedural defect as sufficient ground to quash the show-cause notice and require a fresh speaking order. Ratio vs. Obiter: Ratio - show-cause/penalty notices that derive force from a revisional process which did not address material submissions may be set aside; proper procedure requires fresh, reasoned consideration. Obiter - no final view on merits of penalty. Conclusions: The Court set aside the show-cause notice dated 27.10.2020 and remanded the matter for fresh decision by the revisional authority after affording opportunity to raise all objections; the revisional authority must pass a speaking order and complete the exercise expeditiously.