Madras High Court
M/S.V.R.Muthu & Bros vs The State Tax Officer on 28 April, 2021
W.A.(MD) Nos.910 to 913 of 2021
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 28.04.2021
CORAM
THE HON'BLE MR.JUSTICE T. S. SIVAGNANAM
and
THE HON'BLE MRS.JUSTICE S.ANANTHI
W.A.(MD)Nos.910 to 913 of 2021
and C.M.P.(MD)Nos.4152, 4153, 4156 & 4157
M/s.V.R.Muthu & Bros.
Rep. By its Partner
No.443, Main Bazaar
Virudhunagar. ... Appellant in
all W.As.
-Vs-
The State Tax Officer-1
Virudhunagar-I Assessment Circle
Virudhunagar. ... Respondent in
all W.As.
COMMON PRAYER: Writ Appeals filed under Clause 15 of Letter
Patent against the order dated 04.03.2021, made in W.P.(MD)Nos.11991
to 11994 of 2018.
For Appellant : Mr.R.L.Ramani, Senior Counsel
(In all W.As) for Mr.S.Raja Jeya Chandra Paul
For Respondent : Mrs.J.Padmavathi Devi,
(In all W.As) Special Government Pleader.
https://www.mhc.tn.gov.in/judis/
W.A.(MD) Nos.910 to 913 of 2021
COMMON JUDGMENT
[Judgment of the Court was made by T. S. SIVAGNANAM, J.,]
Heard Mr.R.L.Ramani, Senior Counsel for Mr.S.Raja Jeya
Chandra Paul, learned counsel appearing for the appellant in all the Writ
Appeals and Mrs.J.Padmavathi Devi, learned Special Government
Pleader appearing for the respondent in all the Writ Appeals.
2. With the consent on either side, these Writ Appeals are taken up
for final disposal.
3. The appellant is a registered dealer on the file of the respondent
under the provisions of the 'Tamil Nadu Value Added Tax Act,
2006' ('TNVAT Act' for brevity). The appellant had filed the Writ
Petitions challenging the pre-revision notices issued by the respondent
for the Assessment Years 2011-12 to 2014-15.
4. Principally, the challenge to the pre-revision notices thereon, on
the ground that the respondent Assessing Officer failed to take note of
the specific direction issued by the Commissioner of Commercial Taxes
in Circular dated 04.11.2013, as to how the operation of Section 19(20)
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W.A.(MD) Nos.910 to 913 of 2021
of the Act should be adopted. Secondly, in spite of specific direction
issued by the Hon'ble Division Bench, in an earlier round of litigation
filed by the appellant, wherein, they had challenged the vires of Section
19(20) of the Act in W.P.(MD)No.20118 of 2014, dated 01.02.2017,
where, the Hon'ble Division Bench, following a decision of the Hon'ble
Supreme Court in Jayam & CO. Vs. Assistant Commissioner [1996
VST 1 (SC)], held that the said statutory provision is valid prospectively
and that the Assessing Officer should proceed based upon the Circular
issued by the Commissioner dated 04.11.2013. Furthermore, the
appellant contended that though there was another circular issued by the
Principal Secretary, Commissioner of Commercial Taxes in Circular No.
1/2009, dated 30.11.2009, the said Circular was withdrawn by the
Commissioner in Circular No.29/2015, dated 11.08.2015, thereby
emphasizing the need to follow the Circular instructions dated
04.11.2013.
5. Further, the appellant contended that the Assessing Officer
cannot mechanically follow the proposal given by the enforcement wing
and there cannot be any average/ad-hoc reversal of input tax credit
without examining the records. It appears that the appellant had
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W.A.(MD) Nos.910 to 913 of 2021
demonstrated the learned Writ Court that the proposal in the pre-revision
notices for ad-hoc reversal is without any basis, as the sale price was
never lower than the purchase price except for one item, viz., Sweetened
Gingelly Seed, which is also a very negotiable amount and in all other
cases, invariably price is much higher than the purchase price. The
department appears to have restrained the prayer contending that the pre-
revision notices cannot be put to challenge and the appellant should
submit their objections.
6. On a reading of the impugned orders passed in the Writ
Petitions, we find that the substantial portion of the contention advanced
by the appellants were accepted and found favour with the learned Writ
Court. However, ultimately, the learned Writ Court sustained the
objection raised by the learned Additional Government Pleader and
directed the assessee to submit their objections, after the Assessing
Officer issued a supplemental show cause notice. The correctness of this
direction is called in question before us.
7. Firstly, we need to point out that the proposal given by the
Enforcement Wing is not binding on the Assessing Officer, as he is an
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W.A.(MD) Nos.910 to 913 of 2021
independent authority, who has to complete the assessment based on the
books of accounts and the returns filed after opportunity to the assessee.
In the event, the assessee does not co-operate, it would be well open to
the Assessing Officer to complete the assessment on best of judgment
basis.
8. In the instant case, the pre-revision notices were triggered on
account of the inspection conducted by the Enforcement Wing. As
pointed out by the learned Writ Court, this can be at best cause of action
to reopen the assessment by invoking power under Section 27 of the Act,
but while issuing pre-revision notices, assessee cannot straightaway
make a proposal for ad-hoc reversal of the input tax credit, when the
appellant assessee would state that they have got sufficient records to
prove that no such reversal can be done, much less ad-hoc reversal on
input tax credit. Therefore, the appropriate procedure that should have
been followed by the respondent Assessing Officer, on receipt of the
proposal by the enforcement wing, is to issue a notice to the assessee to
produce all records to examine as to whether there has been any huge
accumulation of input tax credit on account of lesser sale price than
purchase price. This required to be mandatorily done by the Assessing
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W.A.(MD) Nos.910 to 913 of 2021
Officer in the light of the Circular dated 04.11.2013. The circular
instructions cannot bind the assessee, but it binds the Assessing Officer,
who is the subordinate authority in the hierarchy of authority in the
Commercial Tax Department. Therefore, the pre-revision notices
straightaway proposing the ad-hoc reversal is not sustainable in law.
9. For the above reasons, these Writ Appeals are allowed. The
orders passed in the Writ Petitions are set aside. Consequently, the pre-
revision notices are set aside and these matters are remanded to the
respondent. The respondent is directed to issue a show cause notice to
the appellant directing them to produce all their books of accounts and
other records to examine them in the light of the direction issued in the
Circular, dated 04.11.2013 and ascertain as to whether there is any
accumulation of input tax credit on account of lesser sale price than the
purchase price. On perusal of the records and books of accounts and
other documents, the Assessing Officer shall form a prima facie opinion
and thereafter, issue revision notice, cause sufficient opportunity to the
appellant to submit their objections and thereafter, after affording an
opportunity of personal hearing, complete the assessment. In the event,
the assessing officer is satisfied on perusal of the records produced by
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W.A.(MD) Nos.910 to 913 of 2021
the assessee before them by examining it in terms of the Circular issued
by the Commissioner, then, it is well open to the Assessing Officer to
complete the assessment based on such records and discussions with the
assessee. The above direction be complied with by the respondent within
four weeks from the date of receipt of a copy of this judgment.
10. These Writ Appeals are allowed with the above directions. No
costs. Consequently, connected miscellaneous petitions are closed.
[T.S.S. J.,] [S.A.I. J.,]
28.04.2021
Index : Yes/No
Internet : Yes
vsm
Note: In view of the present lock down owing to COVID-19
pandemic, a web copy of the order may be utilized for
official purposes, but, ensuring that the copy of the order
that is presented is the correct copy, shall be the
responsibility of the advocate/litigant concerned.
https://www.mhc.tn.gov.in/judis/
W.A.(MD) Nos.910 to 913 of 2021
T. S. SIVAGNANAM, J.,
and
S.ANANTHI, J.,
vsm
To
The State Tax Officer-1
Virudhunagar-I Assessment Circle
Virudhunagar.
W.A.(MD)Nos.910 to 913 of 2021
and C.M.P.(MD)Nos.4152, 4153,
4156 & 4157
28.04.2021
https://www.mhc.tn.gov.in/judis/
