Case Law Details
B. G. Exploration and Production India Limited Vs State of Maharashtra (Bombay High Court)
Bombay High Court held that best judgment assessment u/s. 23(2) of the MVAT Act can be passed provided registered dealer fails to comply with the terms of any show cause notice. Since the pre-conditions are not satisfied, best judgement assessment passed is liable to be quashed.
Facts- Petitioner is in the business of exploration of petroleum resources in ‘Panna and Mukta’ and ‘Mid and South Tapti’ fields off the coast of Mumbai. The area where Petitioner operates is situated at a distance ranging from 60 to 120 nautical miles from the territorial baselines of India. Based on the exploration in the contract areas, Petitioner sells petroleum crude and natural gas to the nominated agencies of the Government of India. According to Petitioner, it will not fall within the jurisdiction of Respondent No.2, i.e., the Deputy Commissioner of State Tax exercising the jurisdiction under the Maharashtra Value Added Tax Act, 2002.
It is Petitioner’s case that a show cause notice dated 7th December 2023 without any details was issued calling upon Petitioner to attend the office of Respondent No.2. Respondent No.2 proceeded to pass the impugned order dated 28th March 2024 u/s. 23 of the MVAT Act. Respondent No.2 has passed order without dealing with any points and simply on the basis of best judgment basis u/s. 23(2) of the MVAT Act.
Conclusion- The show cause notice is issued in a printed format with only the period and the date and time filled up. It does not give details of the information or documents required to be furnished notwithstanding the fact that Petitioner has vide its letter dated 6th January 2024 furnished the documents mentioned above. Without even referring to those documents, a letter has been issued on 11th March 2024, simply calling upon Petitioner to submit assessment compliance. What more was required to be furnished is not mentioned.
Before passing best judgment assessment, Section 23(2) provides that if the registered dealer fails to comply with the terms of any notice issued under the sub-section, the Commissioner shall assess to the best of his judgment the amount of tax due from the assessee. The impugned order only refers to the letter dated 11th March 2024 in which letter, as noted earlier and also in the show cause notice, no details of documents required to be produced have been given. Therefore, in the present case, pre-conditions required to pass best judgment assessment is not satisfied. Therefore, in our view, the impugned order dated 28th March 2024 is not sustainable. The same is hereby quashed and set aside.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Rule. Rule made returnable forthwith. By consent of the parties, heard finally.
2. Petitioner is impugning an assessment order dated 28th March 2024 and the notice of demand also dated 28th March 2024 on various grounds.
3. Petitioner is in the business of exploration of petroleum resources in ‘Panna and Mukta’ and ‘Mid and South Tapti’ fields off the coast of Mumbai. The area where Petitioner operates is situated at a distance ranging from 60 to 120 nautical miles from the territorial baselines of India. Based on the exploration in the contract areas, Petitioner sells petroleum crude and natural gas to the nominated agencies of the Government of India. It is Petitioner’s case that title in respect of crude and natural gas is transferred in favour of the Government nominee at the delivery point in the contract areas of the oil fields. According to Petitioner, therefore, it will not fall within the jurisdiction of Respondent No.2, i.e., the Deputy Commissioner of State Tax exercising the jurisdiction under the Maharashtra Value Added Tax Act, 2002 (“MVAT Act”).
4. It is Petitioner’s case that a show cause notice dated 7th December 2023 without any details was issued calling upon Petitioner to attend the office of Respondent No.2. Petitioner was called to show cause as to (a) why Petitioner should not be assessed under Section 23(3) of the MVAT Act, (b) why Petitioner should not be assessed under Section 23(4) of the said Act, (c) why interest under Section 30 of the Act in respect of the period from 1st April 2019 to 31st March 2020 should not be imposed and (d) why penalty under sub-section (8) of Section 29 of the Act in respect of the same period should not be imposed. This show cause notice, as anybody could see, is in a printed format without any details. For ease of reference, the said show cause notice as scanned is re-produced below:-
5. Petitioner, though severely handicapped because the show cause notice did not contain any details, by its letter dated 6th January 2024 filed the annual financial statements for FY 2019-20, auditor’s report for FY 2019-20, copy of filed VAT and CST returns for FY 201920 and acknowledgment of audit report in Form 704.
6. Thereafter, Petitioner was issued a letter dated 11th March 2024 once again calling upon Petitioner to submit assessment compliance within 7 days. We find the letter to be as bald and vague as the show cause notice. In the said letter, there is not even a reference to the documents that Petitioner had, alongwith its letter dated 6th January 2024 submitted. Respondent No.2, thereafter, proceeded to pass the impugned order dated 28th March 2024 under Section 23 of the MVAT Act. Respondent No.2 has passed order without dealing with any points and simply on the basis of best judgment basis under Section 23(2) of the MVAT Act.
7. Section 23(2) of the MVAT Act reads as under:-
23. Assessment
(1)……
(2) Where the return in respect of any period is filed by a registered dealer by the prescribed date and if the Commissioner considers it necessary or expedient to ensure that return is correct and complete, and he thinks it necessary to require the presence of the dealer or the production of further documents, he shall serve on such dealer, a notice requiring him on a date and at a place specified therein, either to attend and produce or cause to be produced all documents on which such dealer relies in support of his return, or to produce such documents or evidence as is specified in the notice.
On the date specified in the notice, or as soon as may be thereafter, the Commissioner shall, after considering all the documents or evidence which may be produced, assess the amount of tax due from the dealer:
Provided that, if a registered dealer fails to comply with the terms of any notice issued under this sub-section, the Commissioner shall assess, to the best of his judgement the amount of tax due from him:
Provided further that, no order of assessment under this sub-section shall be made after the expiry of four years from the end of the year containing the period to which the return relates.”
Under Section 23(2) of the MVAT Act, where the return in respect of any period is filed by a registered dealer by the prescribed date, and admittedly in this case Petitioner has filed by the prescribed date, and if the Commissioner considers it necessary or expedient to ensure that return is correct and complete, and he thinks it necessary to require the presence of the dealer or the production of further documents, he shall serve on such dealer, a notice requiring him, on a date and at a place specified therein, either to attend and produce or cause to be produced all documents on which such dealer relies in support of his return, or to produce such documents or evidence as specified in the notice. Therefore, the Commissioner should first form an opinion that it is necessary or expedient to ensure that return is correct and complete, and after he forms such an opinion he requires to produce any documents then he shall give notice describing therein the documents which are required to be produced. If one sees the show cause notice it does not mention which are the documents that are required to be produced. The show cause notice is issued in a printed format with only the period and the date and time filled up. It does not give details of the information or documents required to be furnished notwithstanding the fact that Petitioner has vide its letter dated 6th January 2024 furnished the documents mentioned above. Without even referring to those documents, a letter has been issued on 11th March 2024, simply calling upon Petitioner to submit assessment compliance. What more was required to be furnished is not mentioned.
8. Before passing best judgment assessment, Section 23(2) provides that if the registered dealer fails to comply with the terms of any notice issued under the sub-section, the Commissioner shall assess to the best of his judgment the amount of tax due from the assessee. The impugned order only refers to the letter dated 11th March 2024 in which letter, as noted earlier and also in the show cause notice, no details of documents required to be produced have been given. Therefore, in the present case, pre-conditions required to pass best judgment assessment is not satisfied.
9. Therefore, in our view, the impugned order dated 28th March 2024 is not sustainable. The same is hereby quashed and set aside. Consequently, the demand notice also dated 28th March 2024 is quashed and set aside.
10. Rule made absolute.
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