Case Law Details
Supreme Trading House Vs Assistant Commissioner (ST) (Madras High Court)
Conclusion: In present facts of the case the Division Bench of the Hon’ble Madras High Court while allowing the writ appeals have provided one more opportunity to the main petitioners to make the reconciliation of which Assessing Officer make take note of it and complete the assessment.
Facts: The writ petitions were filed by the appellant challenging the Assessment Order under the provisions of the TNVAT for the Assessment Years 2011-12 to 2015-16. The writ petitions were dismissed on the ground that the petitioner have been dragging on the matter and the petitioner was unable to do the reconciliation and to reconcile the errors pointed out by the Department. Therefore, Petitioners filed Writ Appeals before the Division Bench.
It was observed that the allegations against the appellant is suppression of turnover. The appellant was issued notice dated 07.12.2016, and stating that no reply or objections were filed till 30.12.2016, the proposal was confirmed and the reassessment was completed. This was put to challenge in W.P.Nos.3951 to 3956 of 2017. The Court found that there has been violation of principles of natural justice, inasmuch as show cause notice was not received on time and accordingly, the writ petitions were disposed by the direction that if the appellant had sought for copies of documents or records which were taken away during the inspection, the same have to be provided where ever permissible and viable. Pursuant to the said order, the respondent officer had issued notices but adjournments were sought by the Petitioners.
It was further observed that the respondent had granted reasonable time to the appellant and the appellant had sought for adjournment on more than three occasions. But their contention is that the reconciliation would take certain time and they are required to explain to the Assessing Officer by comparing the slips along with the ledger. This according to them is a very cumbersome process, more particularly, when the assessment is for six years. When the writ petitions were entertained, it appears that the respondent was directed by the Court not to initiate any coercive action, not in written orders, but by making certain oral observations. Thus, the assessments have been kept pending since October, 2020. The writ petitions have now been dismissed by the impugned order and no liberty had been granted to the petitioner to file an appeal.
While allowing the Writ Appeals it was observed that the respondent shall fix the date for personal hearing during the second week of November, 2021 and on the date fixed, the appellant shall appear and no adjournment shall be granted. The appellant shall produce the necessary slips and records and give the required particulars in respect of D7 records as mentioned in the Assessment Order and the said particulars be verified by the respondent and the assessment be completed. If the appellant refuses to cooperate with the assessment proceedings, the benefit of this order will not enure to the appellant and the Writ Appeals will be dismissed automatically without reference to this Court, thereby, reviving the order passed in the writ petitions.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
These Writ Appeals are directed against the common order, dated 13.07.2021, in W.P.Nos.15687, 15680, 15688, 15682, 15693 & 15684 of 2020.
2. The writ petitions were filed by the appellant challenging the Assessment Order under the provisions of the Tamil Nadu Value Added Tax Act, 2006 (“the Act” for brevity) for the Assessment Years 2011-12 to 2015-16. The writ petitions were dismissed on the ground that the petitioner have been dragging on the matter and the petitioner was unable to do the reconciliation and to reconcile the errors pointed out by the Department. We are to test the correctness of the said observation in these appeals.
3. We have elaborately heard Mr.P.Rajkumar, learned counsel for the appellant and Mr.M.Venkateswaran, learned Government Counsel, appearing for the respondents.
4. The assessment for the subject Assessment Years were completed by order dated 30.12.2016, which was a revision of assessment, pursuant to an inspection conducted in the place of business of the appellant on 08.10.2015. The allegations against the appellant is suppression of turnover. The appellant was issued notice dated 07.12.2016, and stating that no reply or objections were filed till 30.12.2016, the proposal was confirmed and the reassessment was completed. This was put to challenge in W.P.Nos.3951 to 3956 of 2017. The Court found that there has been violation of principles of natural justice, inasmuch as show cause notice was not received on time and accordingly, the writ petitions were disposed of by order dated 17.02.2017, by issuing the following directions :
“8.Accordingly, the writ petitions are disposed of by directing the petitioner to treat the impugned orders as show cause notices and if the petitioner seeks copies of the documents or records, the first respondent shall provide copies of the same wherever it is permissible and viable. On receipt of the copies of documents, the petitioner is directed to submit their objections within a period of ten days therefrom and after receipt of the objections, the first respondent shall afford an opportunity of personal hearing and redo the assessments in accordance with law within 15 days thereafter. Till fresh orders of assessment are passed, no coercive action shall be initiated by the first respondent to recover tax as computed in the assessment orders. No costs. Consequently, the above WMPs are closed.”
In terms of the above directions, if the appellant had sought for copies of documents or records which were taken away during the inspection, the same have to be provided whereever permissible and viable.
5. Pursuant to the said order, the respondent officer had issued notice, dated 16.07.2019, directing the appellant to come over to the office of the respondent on 26.07.2019/30.07.2019, etc. The appellant had appeared pursuant to the notice and the representation of the appellant, dated 03.12.2019, states that they have received the account books records, along with the instructions and they have noted the contents and requested for 30 days’ time to submit their reply. The respondent had permitted 15 days’ time and stated that no further delay is permitted, which has been noted in the representation dated 03.12.2019. On 17.12.2019, the appellant had submitted a representation stating that, though they sought 30 days, they have been granted only 15 days’ time and it is not sufficient to file objections, as the assessment relates to six years and the recovery slips are voluminous and verification of the slips with the Books of Accounts is a cumbersome process and therefore, they requested time till 2nd week of January, 2020. This representation was given in the office of the respondent and received in the office on 17.12.2019, as per the endorsement in the Letter Delivery Book.
6. Thereafter, personal hearing notice, dated 14.01.2020, was issued, informing the appellant that copies of D7 records were given to the appellant on 20.11.2019 and the appellant was requested to appear for personal hearing on 24.01.2020/28.01.2020. By representation dated 20.01.2020, the appellant had submitted that they are required to appear before this Court in a Customs matter and requested to provide opportunity of personal hearing on 29.01.2020 or 30.01.2020. Further, the officer fixed the personal hearing on 28.01.2020. Subsequently, another representation dated 28.01.2020 was given, requesting for time. In the representation dated 21.02.2020, the appellant had pointed out as follows :
“The real fact in this case is that the entries in the slips relate only to the purchase of hosiery cloth, which was exempted by then. The quantity of hosiery cloth is weighed and referred in kilograms only and the variety is referred in counts like 20s, 40s, etc., as in the case of yarn. The quantity of inward cloth purchased from various cloth suppliers were recorded in the inward registers maintained by us was recovered by the Enforcement Wing Officers, by issuing D-7 receipt.
The process of converting yarn into cloth is very simple and it is called as knitting which is other form of weaving. Like in weaving process, no more material is added to the yarn knitted. In the process of weaving, the lengthy warp yarn is loomed through weft yarn in a crisscross manner. Whereas in knitting, vertical yarn is spirally knitted (like sweater knitting) in a knitting machine to produce tubular form of cloth like a hose pipe and that is why it is called a hosiery cloth. (hose-iery meaning hose like).
Therefore, if a bag of 40s yarn containing 50 kg is knitted into cloth, then the final output will be 50kgs of 40s knitted hosiery cloth. There is no variation in the quantity after the knitting process is over. As such, in order to identity the cloth purchased from other suppliers, in the inward registers, the quantity is mentioned in terms of number of bags and in terms of kgs. In consequence, the Enforcement wing Officers, mistook the units as referring to purchase of yarn and verified in our Balance Sheet the purchase of yarn and found that only very few purchases were available and proceed to propose assessment.
This proposal of assessment treating the purchase of cloth as purchase of yarn is not fair, legal or logical. Further, the Enforcement Wing Officers have not at all processed the slips by making deep scrutiny of slips and not at all verified the entries made in the slips with reference to our books of accounts. Had it been done, the Enforcement Wing officers would have found out that the actual purchases were only exempted commodity of hosiery cloth and the entries thereto in the slips refer and relate only to the purchase of Cloth.
Hence, when there was no proper scrutiny and verification of slips carried out by. the Enforcement Wing Officer, the assessment, if made, based on the Enforcement proposal would amount to denial of natural justice.
Therefore, we request to process the slips by verifying each and every entries in the slips with reference to our books of accounts to find out whether entries contained in the slips are duly reflected in the books of accounts. It is most incumbent to do so before arriving at any conclusion on this issue. We will be pleased to produce the books of accounts and all the relevant documents in this regard on hearing from you.”
The said representation has been received by the office of the respondent on 21.02.2020, as could be seen from the endorsement. Thereafter, the assessment has been completed by order dated 18.03.2020, which were impugned in the writ petitions.
7. It is no doubt true that the respondent had granted reasonable time to the appellant and the appellant had sought for adjournment on more than three occasions. But their contention is that the reconciliation would take certain time and they are required to explain to the Assessing Officer by comparing the slips along with the ledger. This according to them is a very cumbersome process, more particularly, when the assessment is for six years. When the writ petitions were entertained, it appears that the respondent was directed by the Court not to initiate any coercive action, not in written orders, but by making certain oral observations. Thus, the assessments have been kept pending since October, 2020. The writ petitions have now been dismissed by the impugned order. We also find that no liberty had been granted to the petitioner to file an appeal.
8. In our view, if the appellant has not made out a case for interference in a writ petition, it would be appropriate to leave it open to the appellant to avail the alternate remedy under the Act rather than foreclosing the issue. In any event, we are of the view that, one more opportunity can be granted to the appellant and nothing more. If the appellant is able to reconcile the slips with the ledger, then the Assessing Officer may take note of it and complete the assessment. Only for such reason, we are inclined to grant one more opportunity to the appellant, especially when in the Assessment Order, for the first time, the Assessing Officer has referred to D7 records, which are from Sl.Nos.1 to 15 and contained in the Books marked A to O. Therefore, to that extent at least, the appellant should be permitted to reconcile the slips with the ledger.
9. For the above reasons, these Writ Appeals are allowed and the order passed in the writ petitions is set aside and consequently, the matter stands remanded to the respondent for fresh consideration. The respondent shall fix the date for personal hearing during the second week of November, 2021 and on the date fixed, the appellant shall appear and no adjournment shall be granted. The appellant shall produce the necessary slips and records and give the required particulars in respect of D7 records as mentioned in the Assessment Order and the said particulars be verified by the respondent and the assessment be completed. If the appellant refuses to cooperate with the assessment proceedings, the benefit of this order will not enure to the appellant and the Writ Appeals will be dismissed automatically without reference to this Court, thereby, reviving the order passed in the writ petitions. No costs. Consequently, connected Miscellaneous Petitions are closed.
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