M/S.C2h, Network P Ltd, v. The Assistant Commissioner

IN THE HIGH COURT OF JUDICATURE AT MADRAS

Dated : 17.08.2017 Coram The Hon'ble Mr.Justice T.S.Sivagnanam Writ Petition No.19506 of 2017 and W.P.M.P.Nos.21060 & 21061 of 2017 M/s.C2H Network P Ltd., Represented by its Director, P.Cheran 9A, Habibullah Road, Sivasailam Street, Chennai-600 017.

...Petitioner

Vs.

The Assistant Commissioner (CT) Pondy Bazaar Assessment Circle, No.46, Greenways Road, R.A.Puram, Chennai-600 028.

...Respondent

Writ Petition, filed under Article 226 of the Constitution of India, for issuance of Writ of Certiorarified Mandamus, to call for the impugned proceedings of the respondent in TIN/33286252315/2014-2015 and quash the order dated 14.09.2015 as contrary to the provisions of the TNVAT Act and against the principles of natural justice and further direct the respondent to redo the assessment afresh after verifying the petitioner's books of accounts, invoices and credit notes raised by the petitioner by granting an opportunity to them. For Petitioner : Mr.P.Rajkumar For Respondent : Mr.K.Venkatesh Government Advocate

O R D E R

Heard Mr.P.Rajkumar, the learned counsel appearing for the petitioner and Mr.K.Venkatesh, the learned Government Advocate for the respondent.

2.

At the very outset, it has to be pointed out that the present attempt of the petitioner is highly belated in challenging the order of assessment, under the provisions of the

Tamil Nadu Value Added Tax Act (TNVAT Act, 2006) for the assessment year 2014-15, as the order was passed on 14.09.2015. 3.

Considering the submissions of the learned counsel appearing for the petitioner, and taking note of the factual position that the assessment was revised based on the details culled out from the Official Website of the respondent/Department, this Court entertained the Writ Petition and directed the learned Government Advocate for the respondent to get instructions in the matter. Accordingly, the learned Government Advocate has got instructions from the respondent, and this Court heard the submissions of the learned counsel on either side and perused the materials placed on record. 4.

The petitioner had filed monthly returns under the provisions of the TNVAT 2006, for the assessment year 2014-15 on a total and taxable turnover of Rs.8515544/-, and after adjusting Input Tax Credit (ITC) available, the petitioner had paid tax of Rs.674516/-, and the respondent issued a revised notice, dated 24.08.2015, stating that, on verification of the returns filed by the other dealer, it was noticed that the other dealer claimed ITC on the basis of the invoices issued by the petitioner, and the details of which were furnished. Further, it was stated that, on verification of the sales details, reported in Annexure II filed by the other end dealer, it is noticed that the petitioner issued invoices from C2H001 to C2H155, and not reported in the Annexure II filed by them.

Further, it was alleged that, on verification of the sales details filed in Annexure II with other dealer purchase details, it is seen that the petitioner has effected sales using the same tax invoice to different buyers, and thereby, maintained two sets of parallel bill books.

: 13192704/- Add:- 50% for probable omission for defects mentioned above :

10854124/- Total and taxable turnover proposed to be determined :

32562372/- It is proposed to assess the turnover of : Rs.32562372 at 14.5%.

5.

Further, with regard to ITC claimed by the petitioner, the respondent referred to Section 19 (1) of the TNVAT Act, and stated that, in terms of the said Section, person, who claims ITC, shall establish that the tax on such purchases has been paid by him, failing which, the claim for ITC will be reversed. Further, it is stated that the claim of ITC on the purchase of weighing scales and packing machine was proposed to be reversed as ineligible. The respondent proposed to levy penalty under Section 22 (5) of TNVAT Act at 150% of the difference of tax assessed and tax paid as per the returns after duly deducting the tax assessed as per the explanation to Section 22 (5) of the TNVAT Act. The petitioner was granted 15 days time to file their objections and personal hearing was fixed on 07.09.2015 at 11.30 a.m.

6.

It is an admitted fact that the petitioner did not file their objections within the time permitted. The petitioner would state that, they appeared before the respondent/Assessing Officer. However, the learned Government Advocate is instructed to state that the petitioner has never appeared before the assessing officer.

7.

Be that, as it may, this Court will test the correctness of the impugned order based on the legal position, which is laid down by this Court in certain decisions. The following decisions would be relevant for the purpose of the deciding the issue involved herein:- i) (Sri Vinayaga Agencies v. Assistant Commissioner (CT), Vadapalani-I Assessment Circle, Chennai and another) reported in [(2013) 60 VST 283 (Mad)].

ii) (Assistant Commissioner (CT) Thiruverkadu Assessment Circle, Vs. Infiniti Wholesale Ltd) reported in (2017) 99 VST 341 (Mad).

and iii) JKM Graphics Solutions Pvt. Ltd., Vs. Commercial Tax Officer, Vepery Assessment Cirlce, Chennai) reported in 2017 99 VST 343 (Mad) 8.

The decision of the Hon'ble Division Bench of this Court, in Infiniti Wholesale Ltd (supra) pertains to a case, where, the dealer was issued notice, stating that, upon verification of the returns, the dealer was found to have effected purchases from several dealers and availed input tax credit on such purchases, but the sellers had not disclosed the relevant turnover in their monthly returns or paid tax due and payable to the Department. The Writ Court accepted the plea of the dealer, and allowed the Writ Petition with certain directions, against which, the Revenue preferred Appeal before the Hon'ble Division Bench and the Appeal was dismissed holding

that the show cause notice issued by the Assessing Officer, proposing to reverse the input tax credit availed of by the dealer lacking valid or sustainable basis. If the sales effected to the dealer were not disclosed by such a seller, either in the form of returns filed monthly, or the tax collected from the dealer was not made over to the Department by such seller, action would lie against such defaulting seller and not against the purchaser. Instead of trying to cross verify the input tax credit availed of by the dealer with specific reference to each component, action was directed by the Assessing Officer against the dealer. Therefore, it is held that the learned Single Judge rightly set aside the order of the assessing officer, which was prima facie against the principles of law.

9.

If the above referred decision (viz., the decision rendered in Infiniti Wholesale Ltd)) is applied to the case on hand, the only conclusion that can be arrived at by this Court, is to hold that the impugned order is unsustainable. In the preceding para of this order, this Court has referred to the reasons assigned by the respondent while issuing the revised notice, dated 24.08.2015, stating that he proposed to reject the returns filed by the petitioner as incorrect and incomplete. Thus, the details culled out from the material available in the Official Website of the respondent/ Department has formed the basis for issuance of revised notice. If that is so, then, without cross-verification, the petitioner could not have been asked to prove the negative.

10. Further, the nature of verification/enquiry that has to be done by the Assessing Officer was considered by me, in the case of JKM Graphics Solutions Pvt. Ltd.(supra) and certain guidelines have been indicated, as to how the matter has to be dealt with. It may be true that the said decision in JKM Graphics Solutions Pvt. Ltd.(supra) was delivered only on 01.03.2017, much after the present impugned assessment order, but, however, it is clear that the assessment order has been passed confirming the proposal in the revision notice for the reason that the petitioner did not file their objections. In the revision notice, except for stating that the details have been culled out from the Official Website of the Department, there appears to have been no enquiry done by the Assessing Officer, before coming to the prima facie conclusion that the monthly returns filed by the petitioner is liable to be rejected as incorrect and incomplete.

11.

In Sri Vinayaga Agencies's case (supra) it is held that, if the selling dealer has not paid tax, liability has to be fixed on the selling dealer, however, it cannot be mulcted on the purchasing dealer, who had shown the proof of payment of tax

on purchase made.

12. The case on hand, is a converse case. According to the petitioner, whatever sales effected by them, i.e. substantial portion of the sales, which were in the form of DVDs have been returned to the petitioner, for which, the petitioner has given credit notes. The said credit notes have been placed in the typed-set of papers filed in support of this Writ Petition, to substantiate the case of the petitioner. Therefore, it is the case of the petitioner that the turnover, which was reported in the month of March, 2015, vide their returns, is the turnover, which was determined after giving due credit to the sales returns.

13.

The learned counsel appearing for the petitioner sought to demonstrate the factual position by referring to a tabulated statement filed in page No.22 of the typed-set of papers. However, even the tabulated statement was not placed before the Assessing Officer, and this fact is even admitted by the petitioner. In any event, since the legal position is in favour of the petitioner, this Court is of the view that, an opportunity can be granted to the petitioner to go before the Assessing Officer and contest the matter on merits by placing all records.

14.

Thus, considering the peculiar facts and circumstances, this Writ Petition is disposed of, by directing the petitioner to treat the impugned proceedings as show cause notice, and submit their objections within a period of 15 days from the date of receipt of a copy of this order. On receipt of the objections, the respondent shall fix a date for personal hearing and consider the objections and documents that the petitioner may produce and redo the assessment in accordance with law. In the meantime, the attachment of the petitioner's bank account shall continue, but, no amount shall be withdrawn or encashed by the respondent from the Bank. No costs. Consequently, connected Writ Miscellaneous Petitions are closed.

s/d- Assistant Registrar(CS VIII) True Copy Sub-Assistant Registrar sd

To The Assistant Commissioner (CT) Pondy Bazaar Assessment Circle, No.46, Greenways Road, R.A.Puram, Chennai-600 028.

+1 CC to Spl. Govt. Pleader sr 59118.

+1 Cc to Mr.P. Rajkumar, advocate sr 58905.

Writ Petition No.19506 of 2017 PVS(CO) sp(07/09/2017)