TaxTMI 
TaxTMI 
2021 (5) TMI 706
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 Petition (St.) Nos.94450, 93644, 94449, 93648, 93646, 93649 and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 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 on 25.10.2013, 2011-12 on 25.10.2013 and 2012-13 on 22.01.2014. 10. However, Deputy Commissioner passed audit reports (orders) under section 58 of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itted 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 affidavit, those have not been annexed and were also not submitted before the Court even during the hearing). Be that as it may, during investigation, glaring facts of tax ev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 the figures incorporated in 'C' Forms issued by the VAT Department. In so far the period 2013-14 to 2015-16 is concerned, VAT Department had carried out assessments and had passed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion 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 pursuant to sections 32 and 33 and that brings in section 34 which prescribes a period of limitation of four years for assessment and re-assessment. Every action of audit, enforcement and investigat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nces, 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 annexed; neither furnished to the petitioner nor produced before the Court. Therefore, not even a notional opportunity of rebutting the so called information on the basis of which the impugned notice was is....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 available to respondent No.2 via email dated 11.08.2020. Neither a copy of letter dated 29.06.2020 and email dated 11.08.2020 were made available to the petitioners. Those are not even being produced before the Court. Therefore, petitioner....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 dealer relies in support of his returns or to produce such evidence as is specified in the notice. He submits that this section confers similar powers to the Commissioner as to an assessing officer in section 142 of the Act. Section 58 of the V....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rly 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 27.01.2005. 21.3. Mr. Venegaonkar has referred to section 34 of the Gujarat Value Added Tax Act, 2003 which deals with audit assessment, more particularly to sub-section (8A) thereof and submits that the said provision is pari materia to section 58 of the VAT Regulations. While in the case of H. Tribhovandas Vs. State of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ore, 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 the Gujarat High Court submits that one has to take into consideration that provisions of section 34(8A) of the Gujarat Value Added Tax Act, 2003 cannot be treated at par with the provisions of section 58 of the VAT Regulations. Referring to section 17 of the Contract Act, 1872, he submits that a bald allegation of fraud will not suffice; that too, w....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 discrepancies were found on a comparison of the records of the oil companies and sale shown by the dealers in their returns. Thus the petroleum dealers had wrongly caused loss to the public exchequer. 29. In the course of the hearing, Mr. Venegaonkar, learned counsel for the respondents developed on these averments and argued that it was a case of fraud committed by the petitioners leading to loss of revenue w....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 defined thereunder. As per section 18, representation means and includes- (1) the positive assertion in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true; (2) any breach of duty which without an intent to deceive gains an advantage to the person committing it or any one claiming under him by misleading another to his prejudice or to the prejudice of a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpact. 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 benefit or advantage to the deceiver, but no corresponding loss to the deceived, the second condition is satisfied. ... 10. A "fraud" is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating intended to get an advantage. ... 11. "Fraud" as is well known vitiates every solemn act. Fraud and justice never dwell together. Fraud is a conduct either by letter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 facts are not disclosed, the decree obtained would be fraudulent would be stretching the principle to a vanishing point. Referring to the decision of the Supreme Court in Bhaurao Dagdu Paralkar (supra) and other cases, Supreme Court held that it is clear that fraud has a definite meaning in law. It must be proved and not merely alleged and inferred. 22. Takeaway from the above decision is that to constitute fraud there must be an intent to deceive. When an allegation of fraud is made, it must be enquire....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment 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 respect of all petroleum dealers. It is stated that notice dated 25.09.2020 was issued, whereafter dealer had submitted the documents after seeking an adjournment. Thereafter Department had made audit of the business affairs of the petitioner for the period under consideration to the best of judgment without any further notice. On reconciliation of returns, tax deficiency of Rs. 25,25,695.00 was found, whereafter it was held as under:- " From the record as available with department during the audit, there is violation found under sub-section (9) of Section 86 of DNH VAT Regulation, 2005 and therefore dealer is li....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 principles of natural justice. Way back in 1955, Supreme Court in Dhakeshwari Cotton Mills Limited (supra) held that it was necessary for the Tribunal to have disclosed to the assessee what information was supplied to it by the departmental representative. Tribunal did not give any opportunity to the assessee to rebut the material furnished to it by the departmental representative and that it declined to take all the materials that the assessee wanted to produce in support of its case. The result was that assessee had not had a fair hearing. 39. It is evident from a perusal of the impugned order of audit that it was based on the information f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct 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 shall be deemed to have been made under the VAT Regulations on the day on which such return was furnished. As per subsection (2), no assessment shall be deemed to have been made under sub-section (1) if the Commissioner has already made an assessment of tax in respect of the same tax period under any other provision of the VAT Regulations. 44.1. Thus, what section 31 provides is acceptance of return filed by the concerned person by the Commissioner which would be construed to be an assessment on the date when the return was furnished. However, if an assessment has already been made for the said tax period, no such assessment shall be deemed to have b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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 assessment under section 32, whichever is earlier. As per the proviso, 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 concerned person, the assessment or re-assessment may be made within six years from the dates as specified in sub-section (1). Therefore, what the proviso says is that in a case of concealment or omission or failure to disclose material particulars on the part of the concerned person, the limitation of four years gets extended by another two years, to six years. 47.2. Sub-section (2) of section 34 is not relevant for the present discourse. 48. Refund of tax paid in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tire 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 the fact that the person may already have been assessed under section 31 or section 32 or section 33. (2) A notice served under sub-section (1) may require the person on whom it is served, to appear on a date and place specified therein, which may be at his business premises or at a place specified in the notice, to either attend and produce or cause to be produced the books of account and all evidence on which the dealer relies in support of his returns (including tax invoices, if any), or to produce such evidence as is specified in the notice. (3) The person on whom a notice is served under sub-section (1) shall provide all co-operation and reasonable assistance to the Commissioner as may be required to conduct the pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 to sections 32 and 33. Finally, as per sub-section (5), any assessment made pursuant to an audit of the affairs of the business of the person shall be without prejudice to prosecution for any offence under the VAT Regulations. 52.3. Therefore, a conjoint reading of the various sub-sections of section 58 would reveal that there is a purpose for issuing a notice informing the person concerned that an audit of the affairs of his business shall be conducted. 52.4. The word 'audit' is not defined in the VAT Regulations. As per the Concise Oxford Dictionary, Indian Edition, 'audit' means an official inspection of an oraganization's accounts, typically by an independent body. Black's Law Dictionary, Eighth Edition has explained the word 'audit' to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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, the extended period of limitation had expired on 25.10.2019. The impugned notice of audit under section 58 of the VAT Regulations is dated 25.09.2020 which is certainly beyond the period of limitation. It goes without saying that when the notice is barred by limitation, any proceeding or order pursuant to such time barred notice would also be barred by limitation. 54. In Shreyans Industries Limited (supra), Supreme Court has held that once the period of limitation has expired, the immunity against being subject to assessment sets in and the right to make assessment gets extinguished. A valuable right also accrues in favour of the assessee when the period of limitation expires. 55. Before proceeding to the next issue, it would be apposite to deal with the two decisions of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at 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 was quashed on the ground of being beyond the prescribed period of limitation. 55.3. In the subsequent case of Samay Sales (supra), another Division Bench of the Gujarat High Court doubted the correctness of the decision rendered in H. Tribhovandas (supra) by opining that powers under section 34(8A) and under section 35 operate in different fields and under different circumstances. Applying the limitation prescribed under section 35 to proceedings under section 34(8A) would be re-writing section 34(8A) and to provide limitation which is not there in the said section. Therefore, the subsequent Division Bench while not agreeing with the view taken by the earlier Division Bench had requested the matter to be referred to a Full Bench on the question as to whether the period of limitation....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n. 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 under Article 226 of the Constitution, the High Court has a discretion to entertain or not to entertain a writ petition. High Court has imposed upon itself certain restrictions, one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in at least three contingencies, viz., - (1) where the writ petition has been filed for the enforcement of any of the fundamental rights; or (2) where there has been a violation of the principles of natural justice; or (3) where the order or proceedings are wholly without jurisdiction or the vires of an act is challenged. It has been held as under:- "15. Under Article 226 of the Constitution,....