2025 (3) TMI 896 - HC - VAT / Sales Tax

Appeal partially allowed for VAT proceedings under Section 27 - limitation period starts from re-assessment date, not original assessment

The State Tax Officer Versus Tvl. Pupa Lineraa, Rep. By its Partner, S. Pushpa Rajan

The Madras HC partially allowed an appeal regarding proceedings under Section 27 of the Tamil Nadu Value Added Tax Act, 2006. The court held that ... Time Limitation of proceedings initiated u/s 27 of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act) - HELD THAT:- For passing an order under Section 27(1)(a) of the TNVAT Act, 2006, the proceedings should have been initiated within a period of six years from the date of assessment. Since the learned Single Judge took 31.10.2013 as the starting point for limitation, it was concluded that proceedings under Section 27(1)(a) of the Act, 2006 should have been initiated prior to 29.10.2019. As the proceedings were initiated only on 22.02.2021, the learned Single Judge held that they were hit by limitation - The starting point for limitation cannot be 31.10.2013 but only 29.01.2016 as rightly contended by the assessing officer. The assessment order impugned in the writ petition was rightly set aside. This is because, the notices preceding the assessment order are delightfully vague. Vagueness is one of the recognized grounds for judicial review. Section 27(1)(a) of the TNVAT Act, 2006 which provides for revision of assessment contemplates issuing show cause notice, giving the dealer a reasonable opportunity and making enquiry. In other words, there has to be due compliance with the principles of natural justice. A show cause notice is like a charge. Unless it is precise, the person called upon to respond cannot defend himself. That is why, vagueness is a ground for interference by the writ court even at the notice stage. It would have been better if the writ petitioner had pointed this out earlier and demanded better particulars from the appellant. But the failure or omission on the part of the assessee cannot be taken advantage by the assessing officer. An order is like a superstructure. The show cause notice is the foundation. If the foundation is weak, the superstructure will fall at the slightest push. Conclusion - i) The proceedings were not time-barred, as the limitation period began from the date of re-assessment. ii) The quashing of the assessment order confirmed due to the vagueness of the notice, allowing the appellant to initiate fresh proceedings with adequate notice. Appeal allowed in part. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment include:Whether the proceedings initiated under Section 27 of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act) were time-barred.Whether the notice issued under Section 27(1)(a) of the TNVAT Act was sufficiently detailed to comply with the principles of natural justice.ISSUE-WISE DETAILED ANALYSIS1. Limitation Period for Initiating Proceedings under Section 27 of the TNVAT ActRelevant legal framework and precedents: The TNVAT Act provides that a dealer is deemed to have been assessed on the 31st day of October of the succeeding year as per Section 22(2). Section 27(1)(a) allows for revision of assessment within six years from the date of assessment. The court considered the interpretation of the term 'assessment' for computing the limitation period.Court's interpretation and reasoning: The Court examined whether the limitation period should commence from the date of deemed assessment (31.10.2013) or from the date of re-assessment (29.01.2016). The Court noted a previous Division Bench decision which clarified that there is no specific limitation period for re-assessment under Section 22(4), but it must be exercised within a reasonable period.Application of law to facts: The Court determined that the limitation period should start from 29.01.2016, the date of re-assessment, rather than 31.10.2013. Thus, the proceedings initiated on 22.02.2021 were within the permissible time frame.Conclusions: The Court concluded that the proceedings were not time-barred, as the limitation period commenced from the date of re-assessment, aligning with the Division Bench's interpretation.2. Adequacy and Specificity of the Notice Issued under Section 27(1)(a)Relevant legal framework and precedents: Section 27(1)(a) of the TNVAT Act requires issuing a show cause notice, providing a reasonable opportunity to the dealer, and ensuring compliance with the principles of natural justice. The Court referenced the decision in JKM Graphics Solutions Private Limited V. CTO, which emphasized the need for detailed particulars in show cause notices.Court's interpretation and reasoning: The Court found the notice issued to be vague and lacking in specific transactional details necessary for the assessee to mount an adequate defense. The use of the term 'proved' in the notice indicated a pre-determined conclusion by the assessing officer, undermining the fairness of the subsequent proceedings.Key evidence and findings: The notice failed to specify the number of purchases, the parties involved, and the dates of transactions, thereby not providing the assessee with sufficient information to respond effectively.Application of law to facts: The Court applied the principles of natural justice, determining that the notice's vagueness constituted a valid ground for judicial review and interference.Conclusions: The Court upheld the quashing of the assessment order due to the inadequacy of the notice, emphasizing the necessity for precise and detailed allegations in show cause notices.SIGNIFICANT HOLDINGSCore principles established:The limitation period for initiating proceedings under Section 27 of the TNVAT Act should be calculated from the date of re-assessment when applicable, rather than the date of deemed assessment.Show cause notices must contain sufficient details and particulars to enable the noticee to defend themselves adequately, in compliance with principles of natural justice.Final determinations on each issue:The Court determined that the proceedings were not time-barred, as the limitation period began from the date of re-assessment.The Court confirmed the quashing of the assessment order due to the vagueness of the notice, allowing the appellant to initiate fresh proceedings with adequate notice.The Court modified the order of the learned Single Judge, granting liberty to the appellant to proceed afresh as per law, provided action is initiated within two months, during which the plea of limitation cannot be raised by the assessee. The writ appeal was partly allowed with no costs, and the connected miscellaneous petition was closed.