Case Law Details
Vivaa Tradecom Pvt. Ltd. Vs State of Gujarat (Gujarat High Court)
The Gujarat High Court quashed the order and the demand notice passed by the respondent authority because of the procedural lapses and remitting the matter back to the respondent authority for fresh hearing.
The first writ applicant, M/s Viva Tradecom Pvt. Ltd is a company inter alia engaged in the business of manufacturing and sale of readymade garments and fabrics. The writ applicant No.1 is duly registered under the Value Added Tax Act. The second writ applicant carried out the assessment proceedings under Sub-section (2) of Section 34 of the VAT Act for the period 2015-16.
The respondent authority assessed total dues of Rs.56,12,988/-, which includes the value-added tax (VAT) to the tune of Rs.17,43,164/-, interest of Rs.12,55,078/- thereon and the penalty of Rs.26,14,746/- imposed at the rate of 150% under Section 34(12) of the VAT Act vide the impugned assessment order passed in form No.304 under Section 34 of the VAT Act.
The writ applicants argued that the respondent authority failed to provide the copies of assessment orders including the order of cancellation of registration of vendors from whom the writ applicants purchased the goods. In such circumstances, his clients had no opportunity to prove the genuineness of such a transaction.
It was further argued that the disallowance of Input Tax Credit without providing a copy of the order of cancellation of the registration certificate of the vendor is in gross violation of the principles of natural justice.
The respondents have vehemently opposed this writ application and has raised a preliminary objection with regard to the maintainability of the present writ application on the ground that the writ applicants have an alternative efficacious remedy of preferring an appeal against the impugned order under Section 73 of the Gujarat Value Added Tax Act, 2003.
The division bench headed by Chief Justice Vikram Nath while going root to the matter noted many procedural lapses on the part of the respondent authority.
“There is no escape from the fact that the hearing for the purpose of imposing penalty under the Act, 2003 pursuant to the notice issued in that regard in Form No.309 was fixed on 24th March 2020. The notice in Form No.309 is dated 17th March 2020. However, it appears that when the representative of the writ applicants appeared before the respondent No.2 on 17th March 2020, a copy of the Form No.309 was served upon him and on the very next date i.e. 18th March 2020, the hearing was undertaken and the order also came to be passed on the very same date including the order of penalty,” the bench observed.
Therefore, the bench quashed the order and remitted the matter to the respondent authority for its fresh consideration, on merits. The claim of Input Tax Credit shall be considered fresh after giving due opportunity of hearing to the writ applicants.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
By this writ application under Article 226 of the Constitution of India, the writ applicants have prayed for the following reliefs:
“(a) The Hon’ble Court be pleased to quash and set aside the impugned Order dated 18.03.2020 and the demand notice dated 18.03.2020 issued by the Respondent No. 2 and annexed hereto as Annexurc A (Colly.) to the extent the impugned order disallow the claim of input tax credit;
(b) and Pending admission and final bearing of this Petition this Hon’ble Court be pleased to by way of ad interim and/or interim relief stay the operation, implementation and recovery under the impugned order dated 18.03.2020 and demand notice dated 18.03.2020 annexed as Annexure A (Colly) hereto;
(c) and Ex parte ad-interim relief in term of paragraph 9(b) be granted; and
(d) For Costs; and
(e) That this Honorable Court be pleased to grant such other and further reliefs as are deemed just and proper in the facts and circumstances of this case.”
2. The facts in brief giving rise to this litigation are stated thus:
2.1 The writ applicant No.1 is a company inter alia engaged in the business of manufacturing and sale of ready made garments and fabrics. The writ applicant No.1 is duly registered under the Value Added Tax Act.
2.2 The writ applicant No.2 carried out the assessment proceedings under Sub-section (2) of Section 34 of the VAT Act for the period 2015-16. The respondent No.2 assessed total dues of Rs.56,12,988/-, which includes the value added tax to the tune of Rs.17,43,164/-, interest of Rs.12,55,078/- thereon and the penalty of Rs.26,14,746/- imposed at the rate of 150% under Section 34(12) of the VAT Act vide the impugned assessment order dated 18th March 2020 passed in form No.304 under Section 34 of the VAT Act.
3. In such circumstances referred to above, the writ applicants are here before this Court with the present writ application.
- SUBMISSIONS ON BEHALF OF THE WRIT APPLICANTS:
4. Mr. Parikh, the learned counsel appearing for the writ applicants vehemently submitted that the impugned order dated 18th March 2020 is ex-facie illegal. He would submit that in such circumstances, the action of demanding assessed dues vide Notification in form No.305 is also illegal.
5. The principal argument of Mr. Parikh is that the respondent No.2 failed to provide the copies of assessment orders including the order of cancellation of registration of vendors from whom the writ applicants purchased the goods. Mr. Parikh would argue that in such circumstances, his clients had no opportunity to prove the genuineness of such transaction. It is sought to be argued that the copy of order cancelling the registration certificate of the vendor is required to be provided to the purchaser to enable the purchaser to rebut the allegations in relation to the transaction. In short, the argument is that such documents are required to be furnished to the writ applicants to establish the genuineness of the purchase from the vendor. The disallowance of Input Tax Credit without providing the copy of the order of cancellation of registration certificate of the vendor is in gross violation of the principles of natural justice. The second argument of Mr. Parikh is that the impugned order has been passed by the respondent No.2 without affording any opportunity of hearing to his clients. Mr. Parikh pointed out that the notice in Form No.309 for the purpose of imposition of penalty was issued on 17th March 2020 intimating the writ applicants to appear on 24th March 2020. It is being argued that despite the same, the respondent No.2 proceeded to assess the dues and imposed penalty vide impugned order dated 18th March 2020.
6. Mr. Parikh, in support of his above noted submissions, has placed reliance on the following two orders passed by this Court:
[1] Order dated 3rd July 2020 passed in Ms. B.K. Traders through its proprietor Viralbhai Vinodbhai Karia vs. State of Gujarat [Special Civil Application No.7944 of 2020]
[2] Order dated 26th March 2015 passed in Shree Bhairav Metal Corporation vs. State of Gujarat [Special Civil Application No.2149 of 2015]
7. In such circumstances referred to above, Mr. Parikh prays that there being merit in his writ application, the same be allowed and the impugned order dated 18th March 2020 as well as the demand Notification dated 18th March 2020 be quashed and set aside.
- SUBMISSIONS ON BEHALF OF THE RESPONDENTS :
8. Ms. Manisha Lavkumar Shah, the learned Government Pleader appearing on behalf of the respondents has vehemently opposed this writ application. Ms. Shah has raised a preliminary objection with regard to the maintainability of the present writ application on the ground that the writ applicants have an alternative efficacious remedy of preferring an appeal against the impugned order under Section 73 of the Gujarat Value Added Tax Act, 2003 (for short, ‘the Act, 2003’). In such circumstances, Ms. Shah would submit that this writ application may not be entertained and the writ applicants may be relegated to exhaust the alternative remedy available to them in law.
9. Ms. Shah further submitted that without prejudice to her preliminary objection as regards the maintainability of the present writ application even otherwise the writ applicants have no case on merits. Ms. Shah would submit that a reasonable opportunity of hearing was given to the writ applicants by the respondent No.2, and thereafter, the order came to be passed on 18th June 2020. Ms. Shah pointed out that all necessary information with regard to the vendors from whom the writ applicants purchased the goods had been furnished, and therefore, no prejudice could be said to have been caused to the writ applicants in the absence of such information.
10. Ms. Shah placed reliance on the following averments made in the affidavit-in-reply filed on behalf of the respondent No.2. We quote the relevant averments as under:
“4 The petitioner in the present writ petition has prayed for quashing and set aside of the impugned order and demand notice dated 18/03/2020 to the extent of disallowance of Input Tax Credit. It is further submitted by the petitioner before this Hon’ble Court that the respondent authorities have neither provided copies of the assessment order nor have they provided the orders of cancellation of registration of vendors from whom the petitioner has purchased goods at the relevant point of time. It is the case of the practitioner that for disallowance of lnput Tax Credit as claimed by the petitioner. the respondent authorities were under a statutory obligation to provide the copies of assessment orders of those vendors whose registration numbers were cancelled by the respondent authorities. Accordingly, the petitioner has assailed the action of respondent authorities on the ground of violation of principle. of natural justice. It is also argued by the petitioner that though the show-cause notice dated 17/03/2020 issued in statutory Form No. 309 for imposing of penalty under the Gujarat Value Added Tax Act, 2003 had called the petitioner˙ for making appropriate submission. on 24/03/2020. the respondent authorities in sheer haste had proceeded with passing of the assessment order for assessment period 2015-2016 on 18/03/2020 itself. Accordingly, the petitioner has prayed that the impugned actions of the respondent authorities is a clear example of breach of principles of natural justice and therefore the petitioner has prayed before this Hon’ble Court that such impugned actions of the respondent authorities deserves to be quashed and set aside by this Hon’ble Court.
5 In this regard it is most respectfully submitted that the petitioner has suppressed vital facts from this Hon’ble Court while filing the present writ petition. It is pertinent to note here that the authorized representative of the petitioner had personally appeared in the assessment proceedings before the assessing authority on 17/03/2020 and on a specific request of the authorized representative who appeared before the assessing authority, one final opportunity for production of relevant documents was granted by assessing authority on 17/03/2020. Thereafter the authorized representative again appeared before the assessing authority on 18/03/2020 and submitted bills for consideration of the assessment authority. It is further submitted that before this Hon’ble Court that on 18/03/2020 itself the authorized representative of the petitioner has stated that no additional documents are now required to be submitted by the petitioner and therefore no further hearing is contemplated in the assessment proceedings. Hence the respondent authority passed the assessment order on 18/03/2020 as the bearing on the assessment proceedings has already concluded on 8/03/2020. A copy of the order-sheet evidencing the said aspect is annexed hereto and marked Annexure A.
6 The next contention of the petitioner with regard to non-submission of the details of parties whose registration numbers were cancelled by the respondent authorities is also without any basis and contrary to the documents available on record. In this regard the attention this Hon’ble Court is drawn to a communication dated 04/10/2019 addressed by respondent authorities to the petitioner wherein the name: of the parties whose registration numbers have been cancelled were already provided to the petitioner. In the said communication, it was informed to the petitioner that the Input Tax Credit as availed by the petitioner from the vendors whose registration numbers were cancelled is liable to be disallowed. It is further submitted before this Hon’ble Court that the said communication dated 04/ 10/2019 was with regard to the benefit of remission of penalty and interest that was available under if the petitioner opted for the Settlement Scheme of 2019. Therefore, the petitioner was aware since October 2019 about the details of vendors whose registration numbers were cancelled. Hence now it is not open for the petitioner to contend that the petitioner was absolutely unaware about the vendors whose registration numbers was cancelled. A copy of communication dated 04/10/2019 annexed hereto and marked as Annexure B.”
11. Ms. Shah, in the last, submitted that the reliance placed by the learned counsel appearing for the writ applicants on above two decisions of this Court are completely misplaced as those decisions were rendered in the peculiar facts of those case.
12. In such circumstances referred to above, Ms. Shah prays that there being no merit in this writ application, the same may be rejected.
- ANALYSIS :
13. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether the impugned order passed by the respondent No.2 is tenable in law.
14. We are of the view that the issue raised in the present writ application is identical to the issue which was raised before the Coordinate Bench in the Special Civil Application No.7944 of 2020. We quote the relevant observations as under:
“6.1 Noticing the provision of Section 73 of the VAT Act, which provides for appeal before the Assessing Officer against the impugned order, submissions of alternative remedy may look attractive on the face of it, however,it can be noticed that the appellate authority under the VAT Act does not have original powers of assessment or of further inquiry. Again, noticing the glaring and blatant act of denial of the very basic document of cancellation of the registration of M/s. Maa Oil Mills, being No. 240942971,which is the edifice for denying ITC to the petitioner, this court finds the request of invocation of Writ jurisdiction for the purpose of setting aside the impugned order necessary without entering into the merits, on the grounds of non supply of basic documents and non consideration of the case of the Petitioner independently,on its own merits. In absence of pleadings of fraud in the notice and with specific and categorical averment made in the reply to the notice of the transactions made through the banking channels, coupled with the procurement of goods for transportation, receipts for payment of GST and selling of the very goods to the other parties, make us believe that the order passed by respondent No.2 is in breach of principles of natural justice. The individual merits on the basis of materials furnished are to be determined by the authority and not simply because the registration of M/S. Maa Oil Mills was cancelled ab initio. That being the case, we have chosen to entertain this writ-petition under Article 226 of the Constitution of India.
6.2 Here, apt would be to refer to the decision in ‘VINOD ARVIND VS. INCOME TAX OFFICER’, (2011) GLH 2255, where, this Court has held that the writ-jurisdiction is essentially a discretionary jurisdiction. A writ may not be issued, just because it may be lawful to so do it. Further, merely because an alternative, efficacious remedy is available statutorily that would not mean that the writ jurisdiction cannot be exercised. It is held that it is a self-imposed restriction and such restriction, however, may not apply, if, the alternative remedy is found to be illusory or burdensome, then, the Court may entertain the writ jurisdiction for breach of the principles of natural justice or for Protection of the fundamental rights or when the action of the authority is arbitrary or is lacking jurisdiction.
6.3 In the instant case, since, we find that there is violation of principles of natural justice, more particularly, when the petitioner chose to approach the respondent-authority on 13.03.2020 and requested for relevant and vital documents, in response to the notice issued by it, without supplying the same, respondent-authority has imposed the petitioner with not only the heavy penalty but also interest by the order dated 24.03.2020, which is impugned in this petition, we, therefore, deem it appropriate to entertain this petition and at the joint request made by both the sides, matter deserves to be remitted, quashing and setting aside the impugned order of assessment.
6.4 In our view, we are also supported by the decision of this Court (Coram: Mr. M.R. Shah, Mr. S.H. Vora, J.J.) (Croam: in the case of ‘SHREE BHAIRAV METAL CROPORATION VS. STATE OF GUJARAT’, Dated: 26.03.2015, rendered in Special Civil Application No. 2149 of 2015, wh, the petitioner had purchased the material from one M/s. Lucky Enterprise. The petitioner also had produced the bills, with regard to the goods purchased by it from M/s. Lucky Enterprise and the petitioner had claimed certain amount of total ITC on the purchase, allegedly made to have been from M/s. Lucky Enterprise. The Assessing Officer passed the assessment order, allowing ITC claim made by the petitioner in respect of the goods purchased from M/s. Lucky Enterprise. However, later on, the registration of the M/s. Lucky Enterprise came to be cancelled ab initio from 22.02.2006 on the ground that M/s. Lucky Enterprises is not a genuine dealer and had indulged into billing activities only, and therefore, all the transactions made by M/s. Lucky Enterprises were found to be bogus and non-genuine. Thereafter, the order passed by the Assessing Officer, allowing ITC claimed by the petitioner – dealer of Rs.6,49,561/-, came to be taken under suo motu revision by the first Revisional Authority, i.e. Deputy Commissioner of Commercial Tax, Audit-1, Ahmedabad. Then, the petitioner dealer was served with the show-cause notice and was also called upon to show reason, as to why ITC claimed by the petitioner- assessee on the purchases alleged to have been made from M/s Lucky Enterprises may not be denied or cancelled.”
15. In Shree Bhairav Metal Corporation (supra), this Court observed as under:
“9.1 That the Assessing Officer allowed the ITC claimed by the petitioner – dealer on the purchases made by the petitioner alleged to have been made from one M/s Lucky Enterprises. That in exercise of revisional jurisdiction, the first revisional authority disallowed the ITC of Rs.6,49,561/- claimed by the petitioner – dealer on the purchases made by it from one M/s Lucky Enterprises and the said order has been confirmed by the learned Tribunal.
9.2 From the order passed by the first revisional authority as well as from the impugned judgment and order passed by the learned Tribunal, it appears and it is not in dispute that the first revisional authority disallowed the ITC of Rs.6,49,561/-claimed by the petitioner – dealer on the purchases alleged to have been made/purchased from M/s Lucky Enterprises on the ground that the registration certificate in the case of M/s Lucky Enterprises has been cancelled ab initio from 22.2.2006 and the transactions/purchases made by the petitioner from M/s Lucky Enterprises are during the interregnum period. That while disallowing the ITC to the petitioner on the purchases from M/s Lucky Enterprises, the first revisional authority has observed that the registration certificate in the case of M/s Lucky Enterprises has been cancelled ab initio from 22.2.2006 by observing and holding that all the transactions by M/s Lucky Enterprises are bogus and not genuine and that said M/ s Lucky Enterprises indulged in billing activities only and therefore, even the transactions between the petitioner and M/s Lucky Enterprises are also bogus and non-genuine. To some extent, the first revisional authority can be said to be justified in drawing inference and/or in holding so and/or presuming so. However, the petitioner – dealer – purchaser was required to be served with the order in case of M/s Lucky Enterprises cancelling its registration certificate ab initio and the findings recorded by the appropriate authority in case of M/s Lucky Enterprises holding the transactions by M/s Lucky Enterprises including the transaction with the petitioner – dealer as bogus and non-genuine and the finding recorded that M/s Lucky Enterprises had indulged into the billing activities only. After giving an opportunity to the petitioner – dealer – purchaser and confronting it with the findings recorded by the appropriate authority cancelling the registration certificate ab initio in case of seller – M/s Lucky Enterprises, the claim of the purchaser like the petitioner – dealer of the ITC on the purchases made from such seller, whose registration certificate has been cancelled ab initio on the ground that such seller had indulged into billing activities only, is required to be considered. However, an opportunity is required to be given to such dealer/purchaser to prove the genuineness of the transaction and/or to justify its claim of ITC. In the present case, the first revisional authority had disallowed the ITC claimed of Rs.6,49,561/- on the purchases alleged to have been made from M/s Lucky Enterprises relying upon the order passed by the appropriate authority in the case of M/s Lucky Enterprises cancelling its registration certificate ab initio from 22.2.2006 and the finding recorded by appropriate authority while cancelling the registration certificate of M/s Lucky Enterprises ab initio from 22.2.2006 that the transactions by M/s Lucky Enterprises are bogus and non-genuine. However, the petitioner dealer was not served with the copy of the order in the case of M/s Lucky Enterprises cancelling its registration certificate ab initio from 22.2.2006.
9.3 Now, so far as contention of the petitioner that the petitioner produced necessary documentary evidence such as bills, vouchers, weigh bills/slips and the payments were made by cheques and therefore, the first revisional authority ought not have disallowed the ITC is concerned, as such, it cannot be accepted. As held by Division Bench of this Court in case of Madhav Steel Corporation (supra) in which the Division Bench of this Court had also considered the decision in case of Giriraj Sales Corporation (supra), that while claiming ITC on the purchases made by a dealer, a dealer is also required to prove and establish the actual movement of goods and is required to prove the genuineness of the transaction and then and then only, the ITC can be allowed. Therefore, along with such documents like bills, vouchers, weigh bills/slips etc., a dealer is also required to prove and establish the actual movement of goods from the place of the seller to the place of the purchaser by leading cogent evidence and mere production of the bills, vouchers etc. is not sufficient to claim the ITC.
9.4 As observed earlier, the impugned order has been passed by the adjudicating authority denying the ITC claimed by the petitioner on the alleged purchases made by the petitioner from M/s Lucky Enterprises on the ground that the registration certificate of M/s Lucky Enterprises on the ground that the registration certificate of M/s Lucky Enterprises – seller has been cancelled ab initio on the ground that the seller had involved into the billing activities only and all the transactions by M/s Lucky Enterprises are held to be bogus. The petitioner has been denied the ITC on the ground of the aforesaid activities/alleged transactions between the petitioner and M/s Lucky Enterprises. However, as observed herein above, the petitioner was not served with the copy of the order in the case of M/s Lucky Enterprises. Now, the copy of the order passed in the case of M/s Lucky Enterprises is available with the petitioner. Therefore, after giving an opportunity to the petitioner with respect to observations made in the case of M/ s Lucky Enterprises insofar as the alleged transactions between the petitioner and M/s Lucky Enterprises and after giving an opportunity to the petitioner to prove the genuineness of the transaction between the et and M/s Lucky Enterprises in light of the observations made herein above, therefore, the matter is required to be remanded to the adjudicating authority to consider the claim of the petitioner for ITC on the alleged purchases made by the petitioner from M/s Lucky Enterprises.
9.5 While passing the impugned order, the learned Tribunal has not properly appreciated and consider the aforesaid aspect. Under the circumstances, the impugned judgment and order passed by the learned Tribunal is required to be quashed and set aside on the aforesaid ground alone and the matter is required to be remanded to the adjudicating authority to consider the claim of the petitioner of ITC on the alleged purchases made by the petitioner from M/s Lucky Enterprises.”
16. In both the above referred decisions of this Court, emphasis has been placed on furnishing of the necessary and relevant documents to the party concerned in the form of assessment order including the order of cancellation of registration of the vendors. Although Ms. Shah, the learned Government Pleader tried her best to convince us that all necessary information was furnished to the writ applicants, yet we are not convinced with such a stance of the State. We take notice of many procedural lapses on the part of the respondent No. 2 going to the root of the matter. There is no escape from the fact that the hearing for the purpose of imposing penalty under the Act, 2003 pursuant to the notice issued in that regard in Form No.309 was fixed on 24th March 2020. The notice in Form No.309 is dated 17th March 2020. However, it appears that when the representative of the writ applicants appeared before the respondent No.2 on 17th March 2020, a copy of the Form No.309 was served upon him and on the very next date i.e. 18th March 2020, the hearing was undertaken and the order also came to be passed on the very same date including the order of penalty.
17. To put it in other words, we are not convinced with the manner in which the proceedings have been dealt with by the respondent No.2. It would have been very easy for us to decline to entertain this writ application on the ground that the remedy of appeal is available to the writ applicants, but we believe that justice should not only be done, it should manifestly appear to have been done.
18. There is one another aspect of the matter. It is not even the case of the respondent No.2 that the vendors from whom the goods were purchased by the respondent No.2 had not paid tax on the transaction on which the writ applicants claimed the Input Tax Credit. It is also not the case of the respondent No.2 that the writ applicants purchased the goods from such vendors after their registrations were cancelled.
19. We are of the view that the impugned order deserves to be quashed and set aside and the matter should be remitted to the respondent No.2 for fresh hearing.
20. In the result, this writ application succeeds in part. The impugned order dated 18th March 2020 including the demand notice dated 18th March 2020 is hereby quashed and set aside. The matter is remitted to the respondent No.2 for its consideration a fresh, on merits. The claim of Input Tax Credit shall be considered a fresh after giving due opportunity of hearing to the writ applicants. The respondent No.2 shall provide to the writ applicants the copies of the assessment orders and the order of cancellation of registration of the vendors from whom the writ applicants purchased the goods.
21. If, any fresh evidence is needed to be furnished by the writ applicants, let the same be done within a period of two weeks from the date of receipt of the documents requisite by the writ applicants from the respondent No.2.
22. Let the entire exercise be completed, if possible, within a period of three months from the date of receipt of the writ of this order.
