Limitation and natural justice in VAT assessments: adverse inspection material must be disclosed, and time-barred assessments cannot stand.

Scrutiny assessments under the Andhra Pradesh Value Added Tax Act must be completed within four years from the end of the relevant assessment period, and the extended period for willful evasion applies only where the statutory basis is made out. Adverse vigilance or enforcement material used to support an assessment must be supplied to the assessee, and failure to do so, along with non-consideration of a later inspection report, can amount to breach of natural justice. The availability of an appellate remedy does not bar writ jurisdiction where the challenge raises limitation and procedural fairness concerns.

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Issues: (i) Whether the assessment for the periods 2008-09 to 2012-13 was barred by limitation under the Andhra Pradesh Value Added Tax Act, 2005. (ii) Whether the assessment for 2013-14 was vitiated for breach of natural justice by non-furnishing of the vigilance and enforcement material and by non-consideration of the subsequent inspection report. (iii) Whether the availability of an appellate remedy barred exercise of writ jurisdiction.

Issue (i): Whether the assessment for the periods 2008-09 to 2012-13 was barred by limitation under the Andhra Pradesh Value Added Tax Act, 2005.

Analysis: Section 21(4) required scrutiny-based assessments to be completed within four years from the end of the relevant assessment period. The assessment order dated 11.01.2019 covered earlier assessment years for which the statutory period had already expired. The extended period for willful evasion under Section 21(5) did not save those earlier periods on the facts found in the order.

Conclusion: The assessment for 2008-09 to 2012-13 was barred by limitation and was set aside to that extent, in favour of the assessee.

Issue (ii): Whether the assessment for 2013-14 was vitiated for breach of natural justice by non-furnishing of the vigilance and enforcement material and by non-consideration of the subsequent inspection report.

Analysis: The assessment was founded on the vigilance and enforcement inspection report dated 21.05.2013, yet that material was not furnished despite a request. The later inspection report said to have reduced the alleged evasion was also not considered. Since the adverse material formed the basis of the assessment, denial of those reports and of an effective opportunity to respond amounted to breach of natural justice.

Conclusion: The assessment for 2013-14 was liable to be set aside and remanded for fresh consideration after supplying the material and granting opportunity of hearing, in favour of the assessee.

Issue (iii): Whether the availability of an appellate remedy barred exercise of writ jurisdiction.

Analysis: The writ court entertained the petition because the case involved breach of natural justice and part of the assessment was held to be time-barred. In such circumstances, the alternative remedy rule did not operate as an absolute bar.

Conclusion: The objection based on alternative remedy was rejected, in favour of the assessee.

Final Conclusion: The assessment was partly annulled for limitation and partly set aside for procedural unfairness, and the matter for the surviving period was directed to be reconsidered afresh after compliance with natural justice.

Ratio Decidendi: When an assessment is founded on adverse inspection material, that material must be supplied to the assessee before finalisation, and assessments beyond the statutory limitation period are unenforceable notwithstanding the availability of an appellate remedy.

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