Unauthorised VAT audit vitiates consequential assessment, with remand for fresh proceedings after due authorisation.

Statutory VAT audit undertaken without the authorisation required by law vitiates the consequential inspection and assessment proceedings, as authorisation for audit alone does not empower completion of assessment. Applying that principle, the court held the departmental action defective at the threshold and set aside the impugned assessment. The matter was remitted to the stage of audit, with liberty to begin fresh proceedings after due authorisation and to examine the relevant contractual documents and books of account for reworking liability. The underlying tax liability was left open for fresh determination by the competent authority.

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Issues: (i) Whether the audit, inspection and assessment proceedings were vitiated for want of proper authorisation under the VAT regime. (ii) Whether, after setting aside the impugned assessment order on that ground, the matter had to be remitted to the stage of audit for fresh action in accordance with law.

Issue (i): Whether the audit, inspection and assessment proceedings were vitiated for want of proper authorisation under the VAT regime.

Analysis: The proceedings were attacked on the ground that the initial audit and the consequential inspection and assessment were undertaken without the authorisation required by the statute. The Court followed the earlier Division Bench view that authorisation for audit by itself does not empower the officer to complete assessment, and that proceedings originating from an unauthorised audit are legally infirm. On the admitted factual position, the Court found that the departmental action suffered from the same defect.

Conclusion: The proceedings were held to be vitiated for want of proper authorisation.

Issue (ii): Whether, after setting aside the impugned assessment order on that ground, the matter had to be remitted to the stage of audit for fresh action in accordance with law.

Analysis: Having held that the proceedings were vitiated at the threshold, the Court adopted the course of remitting the matter to the stage from which the defect arose. It left the department at liberty to initiate fresh proceedings in accordance with the VAT law after obtaining due authorisation, and also directed that the relevant contractual documents and books of account could be examined for reworking the liability.

Conclusion: The impugned order was set aside and the matter was remitted to the authority to proceed afresh from the stage of audit in accordance with law.

Final Conclusion: The writ petition succeeded on the ground of absence of proper authorisation, but the underlying tax liability issue was left open for fresh determination by the competent authority.

Ratio Decidendi: Where statutory audit is undertaken without the authorisation required by the VAT law, all consequential proceedings founded on that audit are liable to be set aside and the matter may be remitted for fresh action from the stage of the defect.

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