TaxTMI 
TaxTMI 
2021 (5) TMI 706
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....j Tiwari i/b. The Laureate for Petitioner in WP (St.) No.94223 of 2020. Ms. Varsha Palav, Mr. Ajinkya Palav, Mr. Anuj Tiwari i/b. The Laureate for Petitioner in WPST/94222/2020. Mr. V. Sridharan, Senior Advocate a/w. Ms. Smita Durve, Mr. Aman Anand, Ms. Parisha Shah, Mr. V. Thakar, Ms. Sneha Vani i/b. Mr. Arshil Shah for Petitioner in WPST/94113 of 2020. Mr. H. S. Venegaonkar a/w. Mr. Saurabh Kshirsagar for Respondents in all the Petitions. JUDGMENT and ORDER : (Per Ujjal Bhuyan, J.) Subject matter and reliefs sought for in all the writ petitions being identical, those were heard together and are being disposed of by this common judgment and order. 2. We have heard Mr. Rafiq Dada, Mr. Vijaysinh Thorat and Mr. V. Sridharan, learned senior counsel for the petitioners; and Mr. H. S. Venegaonkar, learned counsel for the respondents in all the writ petitions. 3. For the sake of convenience, we have divided the bunch of cases into three groups; one argued by senior counsel Mr. Dada, the other by senior counsel Mr. Thorat and the last group by Mr. Sridharan, learned senior counsel. 4. The group of cases argued by Mr. Dada comprises of the following:- Writ ....
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.... judgment of the Deputy Commissioner without any further notice. 7. Upon receipt of the said notice, petitioner replied to the Deputy Commissioner vide letter dated 30.09.2020 stating that petitioner's outlet was already assessed for the period 2010-11, 2011-12 and 2012-13. Pointing out that petitioner's tax consultant is based at Vapi, Gujarat, petitioner stated that because of restrictions due to Covid-19 pandemic, some time would be required to trace out the papers. Therefore, time was sought for. However, without reference to the aforesaid reply of the petitioner, Deputy Commissioner informed the petitioner vide letter dated 05.10.2020 that time was extended till 12.10.2020 for production of documents in terms of the notice dated 25.09.2020. 8. On 12.10.2020, petitioner submitted the following documents to the Deputy Commissioner:- i. Assessment orders for the three years; ii. Audit report and balance sheet; iii. Returns and challans; iv. Summary statement of sale and purchase; and v. 'C' Form, summary statement and photocopy. 9. Petitioner has stated that it had already been assessed for the financial years 2010-11 ....
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....ive to collect revenue and to scrutinize the accounts of the dealers of petroleum products. In the course of the drive, VAT Department scrutinized the figures submitted by the petroleum dealers in Form DVAT-16. VAT Department found variation in the figures submitted by the petroleum dealers and in 'C' Forms issued by the VAT Department for the dealers. A list of 28 petroleum dealers has been furnished in the reply affidavit which includes the petitioner. 15.2. During the assessment for the years 2013-14 to 2015-16 carried out during the year 2017, it was found that the most of the dealers were indulging in the practice of evading VAT by manipulating the figures while submitting returns to the VAT Department for assessment. 15.3. Such evasion by the petroleum dealers caused alarm in the mind of the VAT Department which led to enquiry / investigation. VAT Department had called for information from various refineries vide office letter dated 09.06.2020 (sic) whereafter VAT Department received data from the oil refineries in the month of July, 2020 (though copy of the letter dated 09.06.2020 (sic) and replies of the refineries are stated to be annexed to the reply affidav....
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....t been filed by the petitioners. Since rejoinder affidavits have been filed in the above two writ petitions, we may briefly refer to the same to complete the narrative. 17. On the question of maintainability of the writ petition as contended by the respondents, it is submitted that existence of an alternate remedy does not alter or affect exercise of writ jurisdiction of the High Court nor does it creates a legal bar for the High Court to exercise its writ jurisdiction. If the impugned notice and the consequential orders are without jurisdiction as in the present bunch of cases, the affected party can certainly invoke the writ jurisdiction of the High Court. 17.1. Referring to the drive undertaken by the VAT Department in the year 2017, it is stated that the same was without knowledge of the petitioner. Petitioner has not been informed about any such drive undertaken in the year 2017 till date. It is pointed out that the impugned notice and audit reports (orders) pertained to the financial years 2010-11, 2011-12 and 2012-13 and not for any other period including the year 2017. 17.2. Petitioner has denied that there was any variation in the figures submitted by it and in th....
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....nsequential audit reports (orders) are, therefore, without jurisdiction being beyond the period of limitation. Respondent No.2 has abused the process of law. That being the position, writ petition is liable to be allowed with costs. 18. Mr. Rafiq Dada, learned senior counsel opening his arguments submits that the gravamen of discord in all the writ petitions arises from a notice for audit of business affairs for the periods 2010-11, 2011-12 and 2012-13 issued on 25.09.2020 calling for various documents for the purpose of audit. Despite providing the required details and documents in the case of petitioner M/s. Shubham Petroleum on 12.10.2020, best judgment orders under section 58 of the VAT Regulations were passed for all the three periods on the same day i.e., on 12.10.2020. He submits that all the notices and all the orders under section 58 are identically worded except variation in figures. Referring to section 58 of the VAT Regulations more particularly to sub-section (4) thereof, he submits that only two actions are possible after audit. Under section 58, Commissioner can either confirm the assessment if made or serve a notice for assessment if not made or re-assessment pur....
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.... proceeding. In the instant case, no proceedings were pending against the petitioner. Therefore, the time-limit for preserving accounts and records i.e., seven years had also elapsed. In such circumstances, initiation of audit after the expiry of all periods of limitation would be wholly arbitrary and capricious, besides the entire proceeding under section 58 being barred by limitation under section 34 read with section 48(6). As a matter of fact, respondents in their reply affidavit have admitted in paragraph 12 that the time-limit for assessment and re-assessment under section 34 is four years but since the present is a case of audit under section 58, the aforesaid period of limitation under section 34 would not be applicable. 18.4. Another submission made by Mr. Dada is that the audit orders are purported to be based on enquiry made by the VAT Department in July, 2020 for the periods under consideration. However, this aspect was not stated in the impugned notice. Such information were also not made available to the petitioner. Though information received from the refineries were stated to be annexed to the reply affidavit of the respondents, the same was conspicuously not ann....
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....titioners. Despite best efforts, the old documents which were more than seven years old could not be traced out though these documents were already submitted by the petitioners to the VAT Department at the time of filing of returns. Therefore, certified copies of those documents were sought for but were not made available. In the written submissions, petitioners placed reliance on section 48(6) of the VAT Regulations as per which an assessee is required to retain and preserve accounts and records for a period of seven years. Petitioners also referred to section 58(1) of the VAT Regulations which speaks about assessment and re-assessment following audit and that if it is a case of assessment and re-assessment, section 34(1) would come into play which provides a limitation period of four years for making of assessment or re-assessment. However, without considering such written submissions, the impugned reports (orders) of audit were made. 19.1. Referring to the audit reports, Mr. Thorat submits that as mentioned therein, respondent No.2 had called for information from various refineries for those three years vide letter dated 29.06.2020 and the information was allegedly made avail....
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.... to the White Paper published by the Empowered Committee of State Finance Ministers on State-level Value Added Tax which provides useful guidance on implementation of VAT. From the White Paper, he submits that authority had found that there was no need for compulsory assessment at the end of each year as was prevalent before introduction of VAT. Accordingly, the scheme provided that all returns filed by the dealer would be deemed to have been assessed. The scheme also provided for departmental audit of books of accounts etc. of the dealer within the time-limit specified. However, audit is nothing but scrutiny assessment which is well known in income tax legislation. 20.2. Mr. Sridharan has referred to sections 26, 27, 31, 32, 33 and 34 of the VAT Regulations which provide the broad scheme of assessment and re-assessment thereunder with section 34 providing for the time-limit for assessment and re-assessment. Referring to section 58 of the VAT Regulations, he submits that it is a provision related to audit of the affairs of the business of a dealer. This section empowers the Commissioner to call upon a dealer to produce the books of accounts and all other evidence on which the de....
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....section 34. Therefore, the limitation prescribed for assessment and re-assessment under section 34 cannot be read into section 58. Mr. Venegaonkar's further submission is that petitioners had committed fraud and thereby had deprived the State of its lawful revenue which was clearly borne out by the information furnished by the oil refineries. Analysis of such information revealed discrepancies in the facts and figures submitted by the petitioner at the time of filing returns and from the 'C' Forms submitted by the VAT Department. He submits that fraud vitiates all proceedings and when it is a question of fraud, question of limitation will not arise. 21.2. In support of his submissions, Mr. Venegaonkar has placed reliance on the following decisions:- a. P. P. Abdulla Vs. Competent Authority, (2007) 2 SCC 510; b. Commissioner of Central Excise Vs. Kalvert Foods India Private Limited, (2011) 12 SCC 243; c. Commissioner of Customs Vs. Candid Enterprises, (2002) 9 SCC 764; d. Grasim Industries Limited Vs. Collector of Customs, (2002) 4 SCC 297; and e. A Canadian decision in Girox Estate Vs. Trillium Health Centre decided on 27.....
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....the VAT Regulations. Even then a close look at sub-section (8A) would show that it starts with the expression "during the course of any proceedings under this Act" which may include a proceeding under section 35 of the said Act. The judgments in H. Tribhovandas (supra) and Samay Sales (supra) differed on the applicability of limitation and, therefore, it has been referred to the Larger Bench. According to the respondents, like sections 34(8A) and 35 of the Gujarat Value Added Tax Act, 2003 operating in different fields, section 58 on the one hand and sections 32, 33 and 34 on the other hand of the VAT Regulations operate in different fields. However, learned senior counsel asserts that it is not so and that, sections 58 and sections 32 and 33 are interlinked which would be clear from section 58(4) itself. Reference to Canadian judgment is totally uncalled for as the facts are completely unrelated. Reliance placed on Ram Chandra Singh (supra) is also misplaced. Allegation of fraud has been raised for the first time in the reply affidavit by the respondents and at the time of hearing. 23. Similarly, Mr. Thorat, learned senior counsel referring to the two conflicting decisions of t....
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....s without jurisdiction? (5) Whether the impugned notices dated 25.09.2020 and the consequential orders of audit dated 12.10.2020 and 13.10.2020 are liable to be interfered with by this Court or not? Fraud 27. We take up issue No.(2) i.e., the issue relating to fraud for consideration as the first item. 28. In the affidavit in reply filed by the respondents it is stated in paragraph 2(iii) that the VAT Department found variation in the figures submitted by the petroleum dealers and in the 'C' Forms issued by the VAT Department to the respective dealers. VAT Department made an assessment for the years 2013-14, 2014-15 and 2015-16 and it was found that there was tax evasion of crores of rupees by the petroleum dealers. In paragraph 2(iv), it is stated that during such assessment made in the year 2017 it was found that most of the dealers were indulging in the practice of evading payment of VAT by manipulation of figures while submitting returns. Information collected from the oil refineries also revealed evasion of payment of tax by the petroleum dealers whereafter it was decided to conduct audit. VAT Department had initiated audit proceedings as discrepancie....
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.... Dictionary, 8th Edition, 'fraud' has been defined to mean the crime of cheating in order to get money or goods illegally. 17.1. Black's Law Dictionary, 9th Edition defines 'fraud' to mean a knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment; a misrepresentation made recklessly without belief in its truth to induce another person to act. 17.2. Section 25 of the Indian Penal Code, 1860 has defined the word 'fraudulently'. It says that a person is said to do a thing fraudulently if he does that thing with intent to defraud but not otherwise. 17.3. Under the Indian Contract Act, 1872, 'fraud' has been defined under section 17. As per this definition, fraud means and includes the acts mentioned thereunder committed by a party to a contract or with his connivance or by his agent with the intent to deceive another party thereto or his agent or to induce him to enter into the contract. The acts mentioned in section 17 includes active concealment of a fact by one having knowledge or belief of the fact. While we are in the Contract Act, we may also mention that misrepresentation is separately d....
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....impact and thereafter observed that it is a settled proposition of law that fraud vitiates every solemn act. An order or decree or benefit obtained by fraud is a nullity and that such an order, decree or benefit can be challenged at any time in any proceeding. Relevant portion in Essel Propack Limited (supra) is extracted hereunder:- "19. In Bhaurao Dagdu Paralkar Vs. State of Maharashtra, (2005) 7 SCC 605, Supreme Court dealt with the expression 'fraud' and its impact. It was held as under: "9. By "fraud" is meant an intention to deceive; whether it is from any expectation of advantage to the party himself or from the ill will towards the other is immaterial. The expression "fraud" involves two elements, deceit and injury to the person deceived. Injury is something other than economic loss, that is, deprivation of property, whether movable or immovable or of money and it will include and any harm whatever caused to any person in body, mind, reputation or such others. In short, it is a noneconomic or non-pecuniary loss. A benefit or advantage to the deceiver, will almost always call loss or detriment to the deceived. Even in those rare cases where there is a benef....
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....ut proof and intent to deceive would not render a decree obtained by a party fraudulent. Fraud has a definite meaning in law. It must be proved and not merely alleged and inferred. On the above basis, this Court held that to constitute fraud there must be an intent to deceive. When an allegation of fraud is made, it must be enquired into. Enquiry would necessarily mean granting reasonable opportunity of hearing to the party accused of committing fraud. Evidence must be led and thereafter fraud must be proved. No conclusion of fraud can be drawn on mere allegation and by way of inference. It was held thus:- 21. However, in Harjas Rai Makhija Vs. Pushparani Jain, (2017) 2 SCC 797, Supreme Court highlighted that there must be a specific allegation of fraud. When there is an allegation of fraud, it must be enquired into. It is only after evidence is led coupled with intent to deceive that a conclusion of fraud could be arrived at. A mere concealment or non-disclosure without intent to deceive or a bald allegation of fraud without proof and intent to deceive would not render a decree obtained by a party as fraudulent. To conclude in a blanket manner that in every case where relevant ....
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.... (VAT) Dadra and Nagar Haveli Silvassa " 31.1. From a perusal of the notice as extracted above, it is crystal clear that there was no allegation of fraud against the petitioner. All that was noted was that the Deputy Commissioner was satisfied that an audit of the business affairs of the petitioner was required to be undertaken for the period under consideration. 32. In the audit report (order) dated 12.10.2020 for the year 2010-11 passed under section 58 of the VAT Regulations which is identical to all the audit reports in this bunch of cases except difference in figures, it is stated that VAT Department had called for information for the financial years 2010-11, 2011-12 and 2012-13 from various refineries i.e., Indian Oil Corporation Limited, Bharat Petroleum Corporation Limited etc. who had supplied oil to retail outlets in Dadra and Nagar Haveli. It is stated that the information was sought for vide office letter dated 29.06.2020 and the information was received through email dated 11.08.2020. On comparison of the data received from refineries and the returns furnished by the retailers, differences were found. Therefore, VAT Department decided to conduct audit in re....
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....ffice and to produce documents and evidence. 36. In the audit report / audit order dated 12.10.2020, it is stated that VAT Department had called for information from various refineries vide office letter dated 29.06.2020 which were received through email dated 11.08.2020, whereafter the petitioner was directed to pay tax, interest and penalty. 37. In the reply affidavit filed by the respondents, the same has been referred to in paragraph 2(iv) with the further statement that copies of the letter and reply have been annexed to the reply affidavit but copies of neither the letter dated 29.06.2020 nor the email dated 11.08.2020 have been annexed to the reply affidavit. Those were also not filed in the Court in the course of the hearing. Learned counsel for the petitioners contended that copies of the same were not furnished to them as well. 38. It is a cardinal principle of the rules of natural justice that whatever materials are relied upon against an affected party, those are required to be made available to the affected party or at least the gist of the same is to be made available to enable it to put up an effective defence; otherwise, it will be a violation of the princi....
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....der the VAT Regulations and as a result of such mistake or error has paid less tax than due, he shall within one month after such discovery furnish a revised return and pay the balance tax with interest thereon. Sub-section (2) deals with a situation where as a result of such mistake or error any person pays more tax than due; in such a case, the limitation continues to remain four years of the making of the assessment and the remedy is filing of appeal under section 74. 43. Chapter VI comprising of sections 30 to 42 deals with assessment and payment of tax, interest and penalties and making refunds. As per section 30, the Commissioner shall direct any person to pay any amount of tax, interest or penalty or other amount due under the VAT Regulations after making of an assessment for such amount payable by such person. 44. Section 31 deals with assessment. Sub-section (1) says that where a return is furnished by a person as required under section 26 or section 27 and which contains the prescribed information accompanied by the relevant documents and such person has complied with the necessary requirements, an assessment of the tax payable of the amount specified in the return ....
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....n 28; or (b) the date on which the Commissioner made an assessment of tax under section 32, whichever is the earlier: Provided that where the Commissioner has reason to believe that tax was not paid by reason of concealment, omission or failure to disclose material particulars on the part of the person, the assessment or re-assessment may be made by the Commissioner within six years from the dates specified in clause (a) or clause (b), as the case may be. (2) Notwithstanding anything contained in subsection (1), the Commissioner may make an assessment of tax within one year from the date of any decision of the Appellate Tribunal or court where the assessment is required to be made in consequence of, or to give effect to, the decision of the Appellate Tribunal or court which requires the re-assessment of the person." 47.1. From the above, it is evident that there is a clear bar of limitation in making assessment or re-assessment. No assessment or re-assessment shall be made after expiry of four years from the date on which the return is furnished by the registered dealer under section 26 or under sub-section (1) of section 28 or the date of making of as....
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....the accounts and records shall be preserved till the final decision in those proceedings. 51. Before adverting to section 58, we may refer to section 86 which deals with imposition of penalty in the event of tax deficiency. As per sub-section (9), any person who knowingly furnishes a return which is false, misleading or deceptive in material particulars or omits any material particular or claims tax credit in excess of the tax credit to which he is entitled, shall be liable to pay by way of penalty a sum of ten thousand rupees or the amount of the tax deficiency whichever is higher. 52. That brings us to section 58 forming part of Chapter X dealing with audit, investigation and enforcement. Since the entire dispute centers around interpretation of section 58, the same is extracted hereunder:- "58.(1) The Commissioner may, serve on any person in the prescribed manner, a notice informing him that an audit of the affairs of his business shall be conducted and in a case where an assessment had already been concluded under this Regulation, reassessment may be made or assessment already made may be confirmed. Explanation.- A notice may be served notwithstanding th....
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.... or confirmation of the assessment already made. Therefore, the natural corollary of sub-section (1) would be that in a case where assessment has not been made, such a notice of audit may lead to assessment. As already noticed, where assessment had already been made such a notice may lead to confirmation of the assessment made or may lead to reassessment. This is made more explicit in sub-section (4). But before adverting to sub-section (4), we may mention that under sub-section (2), the noticee should attend the place specified and produce or cause to be produced books of accounts and such other evidence as may be specified in the notice or on which the person relies upon in support of his return. In terms of sub-section (3), the noticee is required to provide all cooperation and reasonable assistance. 52.2. Sub-section (4) makes it clear that the Commissioner shall after considering the returns and the evidence furnished along with the returns or the evidence acquired in the course of the audit or any information otherwise available to him either confirm the assessment or serve a notice of assessment or re-assessment of the amount of tax, interest and penalty, if any, pursuant....
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....ave to fall back upon sections 31 and 32 for which limitation of four years is prescribed in section 34. Therefore, section 58 of the VAT Regulations cannot be construed or interpreted in isolation or as a stand alone provision. Having regard to the consequences following invocation of section 58, it has to be read with sections 31 and 32 of the VAT Regulations and consequently section 34. 53. In the instant case, the notice of audit pertains to three years i.e., 2010-11, 2011-12 and 2012-13. We find that for these years the assessments were already made on 25.10.2013. As per section 34, limitation period is four years from the date of filing the return or from the date of assessment, whichever is earlier, which is extendable for a further period of two years in a case of concealment or omission or failure to disclose material particulars. Since the assessments were made on 25.10.2013, certainly the returns were filed much before this date, and it is the earlier date, which is to be taken into consideration for determination of limitation. Even if the later date of 25.10.2013 is taken, the four year limitation period had expired on 25.10.2017. If we add two more years to this, t....
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.... under sub-section (1) after expiry of five years from the end of the year in respect of which or part of which the tax is assessable. 55.2. In H. Tribhovandas (supra), a Division Bench of the Gujarat High Court was examining challenge to a notice issued under section 34(8A) of the Gujarat Value Added Tax Act, 2003. In that case, already assessment was made. The Division Bench examined jurisdiction of the assessing authority to re-examine the issue vis-a-vis contours of the powers of the assessing authority under sub-section (8A) of section 34. Division Bench found that under section 35 a completed assessment can be reopened only within five years but no such time-limit is provided for exercising power under sub-section (8A) of section 34. It was in that context, view was taken that to hold that even in a case where period of limitation to re-assess under section 35 has expired, the revenue can still invoke powers under section 34(8A) would go against the principles of harmonious construction of statutory provisions. As a matter of fact, the Division Bench noticed that the impugned notice was issued well beyond five years' period. In such circumstances, the impugned notice w....
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....tion raised by the respondents that the writ petitions should not be entertained as the petitioners have not availed of the alternative remedy provided under the statute. In support of this contention, reference has been made to section 74 of the VAT Regulations which provides for appeal. As per sub-section (1), any person who is aggrieved by an assessment under the VAT Regulations or any other order or decision made under the said Regulations may prefer appeal before the hierarchy of authorities as mentioned therein. 59. We have already held the impugned notices dated 25.09.2020 to be barred by limitation and consequently, the orders of audit dated 12.10.2020 and 13.10.2020 are also time barred. It is a settled proposition of law that question of limitation involves a question of jurisdiction. A plea of limitation is a plea of law which concerns the jurisdiction of the Court trying the proceeding. Consequently, when an impugned notice or an impugned order is held to be beyond limitation, needless to say it becomes a notice or an order which is without jurisdiction. 60. In Whirlpool Corporation Limited Vs. Registrar of Trade Marks, (1998) 8 SCC 1, Supreme Court has held that ....