High Court allows petition challenging default tax notices, sets aside penalties, grants fresh determination

The Delhi High Court, in a judgment by Hon'ble Mr. Justice Vibhu Bakharu and Hon'ble Mr. Justice Amit Mahajan, allowed the petition challenging default assessment and penalty notices under the Central Sales Tax Act, 1956 and Delhi Value Added Tax Act, 2004. The impugned notices dated 22.05.2019 and 02.08.2018 were set aside, and the matter was remanded to the assessing authority for a fresh determination within three months, granting the petitioner a fair opportunity to present its case.

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Issues Involved:
1. Impugning notice of default assessment and penalty under Section 9(2) of the Central Sales Tax Act, 1956.
2. Challenge to levy of penalty under Section 86(10) of the Delhi Value Added Tax Act, 2004 in conjunction with Section 9(2) of the Central Sales Tax Act, 1956.
3. Denial of concessional rate of duty on inter State turnover.

Comprehensive details of the judgment for each issue involved:

1. The petitioner challenged the notice of default assessment and penalty dated 22.05.2019 and 02.08.2018 under Section 9(2) of the Central Sales Tax Act, 1956. The adjudicating authority had raised a demand of &8377;6,51,132/- on the ground that certain transactions were not proven to be covered under Section 3 of the Central Sales Tax Act, 1956, resulting in additional tax liability at 12.5% instead of the concessional rate of 2%. The petitioner contested the notices for the second, third, and fourth quarters of the financial year 2016-17.

2. Following the default assessment notices, penalty notices were issued under Section 86(10) of the Delhi Value Added Tax Act, 2004, along with Section 9(2) of the Central Sales Tax Act, 1956. The petitioner objected to these notices challenging the assessment and penalty for the three quarters of the financial year 2016-17.

3. The petitioner's claim for the concessional rate of duty on inter State turnover was rejected by the Special Objection Hearing Authority (SOHA) in orders dated 22.05.2019. The petitioner failed to produce documents regarding transactions with a specific entity, leading to the denial of the concessional rate. The petitioner contended non-receipt of the notice under Section 59(2) of the DVAT Act, which affected its ability to present relevant documents.

The judgment by the Delhi High Court, delivered by Hon'ble Mr. Justice Vibhu Bakharu and Hon'ble Mr. Justice Amit Mahajan, allowed the petition, setting aside the impugned notices of penalty and assessment dated 22.05.2019 and 02.08.2018. The matter was remanded to the assessing authority for a fresh determination in light of relevant court decisions. The assessing authority was directed to complete the proceedings within three months, providing the petitioner with a fair opportunity to present its case.

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