2023 (11) TMI 213 - HC - VAT and Sales Tax

Recovery notice issued without serving assessment order violates natural justice principles in tax evasion case

M/s. Shewil Trading Company, Represented by its Proprietor, M.V. Lawrence Versus The Commissioner of Commercial Taxes, The Assistant Commissioner (CT), The State Tax Officer (FAC), The Inspector of Police

The Madras HC disposed of a writ petition challenging a recovery notice issued without serving the assessment order, violating natural justice principles. ... Validity of recovery notice - notice issued seeking recovery without even serving a copy of the assessment order - violation of principles of natural justice - availing of ineligible Input Tax credit - Evasion of tax - HELD THAT:- Almost an identical issue came up before this Court in W.P.Nos.37044 & 37045 of 2016 in the case filed by M/s.Hansa Enterprises, Park Town Chennai, from a same location in Parrys Corner, in Chennai [ [2020 (6) TMI 357 - MADRAS HIGH COURT] . There also, the petitioner therein had similarly alleged that the petitioner's login ID was misused by a third party, who filed returns and had passed on huge Input Tax credit to third party. The Court after considering the submission of the petitioner therein and the learned Government counsel, directed the Commercial Tax Officer to pass a proper order after thorough investigation with the help of Economic Offence and Cyber Crime Wing of the State as to whether indeed there was a misuse of login ID or whether the petitioner therein was masquerading as an unknown person to make it seem as if the said login ID was misused by an unknown person facilitating availing of ineligible Input Tax credit and to evade tax - In the present case, the petitioner has also filed a complaint before the Cyber Crime in FIR.No.100 dated 06.04.2017 for the alleged misuse of the login ID of the petitioner from 01.01.2014 to 31.08.2015. The status of the investigation pursuant to the above FIR registered based on the complaint of the petitioner is not known. Considering the above fact and to balance the interest of the parties, Court is inclined to suo motu implead The Inspector of Police, Cyber Crime Cell, Central Crime Branch, Vepery, Chennai – 600 007 is impleaded as the 4th respondent in this Writ Petition to carryout thorough investigation on the complaint filed by the petitioner as to whether the complaint filed by the petitioner was genuine or not or whether the petitioner was facilitating a third party to use his login ID to evade tax and to pass an ineligible Input Tax credit to unknown persons or whether the petitioner was himself masquerading as an unknown person to evade tax. Writ petition disposed off. Issues:The petitioner challenged an impugned recovery notice seeking to recover a substantial sum without serving a copy of the assessment order.Details:The petitioner, a dealer in curtains, mattresses, and pillows, faced login issues in filing returns electronically, leading to manual filing and complaints to the authorities. Allegations of misuse of the petitioner's TIN number were made, resulting in a cybercrime complaint and subsequent investigation.The respondents argued that the petitioner failed to participate in assessment proceedings despite prior notices. Attempts to serve the assessment order were unsuccessful, and the petitioner's business registration was canceled after the GST Act came into force.In a similar case, the court directed a thorough investigation into alleged misuse of login IDs for tax evasion. In the present case, the court decided to implead the Cyber Crime Cell for investigation and ordered a halt to revenue recovery proceedings pending investigation.The Commercial Tax Department was instructed to coordinate with relevant parties for the investigation, with a timeline of 18 months for completion. If the complaint was found to be false or intended to facilitate fraud, the petitioner's assets would be subject to sale. Until the investigation's conclusion, the petitioner's assets would remain attached by the respondents.The court aimed for a resolution within 18 months and disposed of the writ petition with these directives, closing the related miscellaneous petitions without costs.