Madras High Court

M/S.Sri Sarada Textiles ... vs The Assistant Commissioner on 24 February, 2021

                                                                              WA.No.627 of 2021


                                         In the High Court of Judicature at Madras

                                                    Dated : 24.2.2021

                                                         Coram :

                                       The Honourable Mr.Justice T.S.SIVAGNANAM

                                                           and

                                         The Honourable Ms.Justice R.N.MANJULA

                                   Writ Appeal No.627 of 2021 and CMP.No.2800 of 2021


                     M/s.Sri Sarada Textiles Processors
                     (P) Ltd., rep.by its Managing
                     Director Dr.P.Madalaimuthu                                 ...Appellant
                                                            Vs
                     The Assistant Commissioner,
                     Bhavani Assessment Circle,
                     Bhavani, Erode District.                                   ...Respondent

APPEAL under Clause 15 of the Letters Patent against the order

dated 15.10.2020 made in W.P.No.5407 of 2017.

For Appellant : Mr.K.Soundararajan For Respondent : Mr.R.Swarnavel, GA (T)

Judgment was delivered by T.S.SIVAGNANAM,J

We have elaborately heard Mr.K.Soundararajan, learned counsel

for the appellant and Mr.R.Swarnavel, learned Government Advocate

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(Taxes) accepting notice for the respondent.

2. The writ petitioner, which is a registered dealer on the file of

the respondent under the provisions of the Tamil Nadu Value Added

Tax Act, 2006 (for brevity, the VAT Act) and the Central Sales Tax Act,

1956, has filed this writ appeal being aggrieved by the order dated

15.10.2020 passed in W.P.No.5407 of 2017 filed by them challenging

the assessment order dated 15.9.2016 passed under the provisions of

the VAT Act for the year 2012-13.

3. The learned Single Judge did not go into the merits of the

matter, but rejected the said writ petition on the ground that there has

been an alternate remedy available under the provisions of the the

VAT Act, that the said writ petition was filed beyond the maximum

time limit stipulated under the VAT Act for filing the appeal and that

therefore, it was not maintainable.

4. An identical issue was considered by us in W.A.No.493 of

2021 dated 18.2.2021 [Mahindra & Mahindra Ltd. Vs. Joint

Commissioner (CT) Appeals, Chennai-6 and another] wherein we

dealt with the issue as to whether the decision of the Hon'ble Supreme

Court in the case of ACCT, LTU, Kakinada Vs. Glaxo Smith Kline

Consumer Health Care Ltd. [reported in 2020 (36) GSTL 305],

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which was relied upon by the learned Single Judge, laid down the

proposition that there has been absolute bar for entertaining a writ

petition, which had been filed beyond the statutory period of limitation

prescribed under the Act for preferring a statutory appeal before the

Appellate Authority.

5. The relevant portions in the decision rendered by us in the

case of Mahindra & Mahindra Ltd., read thus :

“4. The learned Single Judge placed reliance on the decision of the Hon'ble Supreme Court in the case of ACCT, LTU, Kakinada Vs. Glaxo Smith Kline Consumer Health care Ltd. [reported in 2020 (36) GSTL 305] and in the said decision, it was emphatically laid down that the High Court, in exercise of power under Article 226 of The Constitution of India, ought not to have entertained the writ petition assailing the order passed by the Statutory Authority, which was not appealed against within the maximum period of limitation before the concerned Appellate Authority.

5. In our respectful view, the decision of the Hon'ble Supreme Court in the said decision has not held that a writ petition under Article

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226 of the Constitution of India is an absolute bar. We are of the said view after noting the observations/findings rendered by the Hon'ble Supreme Court in the following paragraphs :

“11. In the backdrop of these facts, the central question is: whether the High Court ought to have entertained the writ petition filed by the respondent? As regards the power of the High Court to issue directions, orders or writs in exercise of its jurisdiction under Article 226 of the Constitution of India, the same is no more res integra. Even though the High Court can entertain a writ petition against any order or direction passed/action taken by the State under Article 226 of the Constitution, it ought not to do so as a matter of course when the aggrieved person could have availed of an effective alternative remedy in the manner prescribed by law (see Baburam Prakash Chandra Maheshwari vs. Antarim Zila Parishad now Zila Parishad, Muzaffarnagar [AIR 1969 SC 556] and also Nivedita Sharma vs. Cellular Operators Association of India & Ors. [2011 (14) SCC 337]. In Thansingh Nathmal & Ors. vs. Superintendent of Taxes, Dhubri & Ors. [AIR 1964 SC 1419], the Constitution Bench of

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this Court made it amply clear that although the power of the High Court under Article 226 of the Constitution is very wide, the Court must exercise self imposed restraint and not entertain the writ petition, if an alternative effective remedy is available to the aggrieved person.....

15. ........ The High Court may accede to such a challenge and can also non suit the petitioner on the ground that alternative efficacious remedy is available and that be invoked by the writ petitioner. However, if the writ petitioner chooses to approach the High Court after expiry of the maximum limitation period of 60 days prescribed under Section 31 of the 2005 Act, the High Court cannot disregard the statutory period for redressal of the grievance and entertain the writ petition of such a party as a matter of course. Doing so would be in the teeth of the principle underlying the dictum of a three Judge Bench of this Court in Oil and Natural Gas Corporation Limited (supra). In other words, the fact that the High Court has wide powers, does not mean that it would issue a writ which may be inconsistent with the legislative intent

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regarding the dispensation explicitly prescribed under Section 31 of the 2005 Act. That would render the legislative scheme and intention behind the stated provision otiose. ......

19........ Pertinently, no finding has been recorded by the High Court that it was a case of violation of principles of natural justice or non compliance of statutory requirements in any manner. Be that as it may, since the statutory period specified for filing of appeal had expired long back in August, 2017 itself and the appeal came to be filed by the respondent only on 24.9.2018, without substantiating the plea about inability to file appeal within the prescribed time, no indulgence could be shown to the respondent at all.”

6. On a reading of the above extracted paragraphs, it is seen that the Hon'ble Supreme Court, after referring to the decision of the Constitution Bench in the case of Thansingh Nathmal, held that although the power of the High Court under Article 226 of the Constitution is very wide, the Court must exercise self imposed restraint and not entertain the writ petition. Further, in

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paragraph 15, the Hon'ble Supreme Court observed that the High Court may accede to such a challenge and can also non suit the petitioner on the ground that alternative efficacious remedy is available and that be invoked by the writ petitioner. In addition, in paragraph 19, the Hon'ble Supreme Court took note of the fact that when the High Court refuses to exercise the jurisdiction under Article 226 of The Constitution of India, it would be necessary for the Court to record that there was no case of violation of the principles of natural justice or non compliance of statutory requirements in any manner.

7. Therefore, there are certain broad parameters, within which, the Court has to exercise its jurisdiction under Article 226 of The Constitution of India, which read as hereunder :

(i) if there is unfairness in the action of the Statutory Authority;

(ii) if there is unreasonableness in the action of the Statutory Authority;

(iii) if perversity writs large in the action taken by the Authority;

(iv) if the Authority lacks jurisdiction to

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decide the issue and

(v) if there has been violation of the principles of natural justice, the Court will step in and exercise its jurisdiction under Article 226 of The Constitution of India.

8. Further, it would be highly beneficial to refer to the celebrated decision of the Constitution Bench of the Hon'ble Supreme Court in the case of Mafatlal Industries Ltd. Vs. Union of India [reported in 1997 (5) SCC 536] wherein it was held that the jurisdiction of the High Courts under Article 226 and that of the Hon'ble Supreme Court under Article 32 of The Constitution of India could not be circumscribed by the provisions of the Enactment (Central Excise Act) and they would certainly have due regard to the legislative intent evidenced by the provisions of the Act and would exercise their jurisdiction consistent with the provisions of the Act. Further, the Court directed that the writ petition would be considered and disposed of in the the light of and in accordance with the provisions of Section 11B of the Central Excise Tax Act and for such a reason, the power under Article 226

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of The Constitution of India has to be exercised to effectuate rule of law and not for abrogating it.

9. In the light of the above, we have no hesitation to hold that the observation of the learned Single Judge to the effect that there is absolute bar for entertaining a writ petition does not reflect the correct legal position. Hence, we are inclined to interfere with the observation made in the impugned order.”

6. In the light of the above decision wherein we have held that

there is no absolute bar for entertaining a writ petition, we are of the

view that the decision of the learned Single Judge in holding as if there

is a blanket ban for entertaining a writ petition cannot be

countenanced. Hence, we are inclined to interfere with the impugned

order.

7. Next, we move on to the merits of the matter. The Assessing

Officer proposed to revise the assessment, which was initially

completed by issuance of a notice under Section 27 of the VAT Act.

The following nine defects were pointed out by the Assessing Officer :

“1. Difference of purchase turnover of dyes and chemicals noticed between Annexure I and Form – I returns for February 2013;

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2. Difference of taxable turnover noticed between Annexure II and Form-I return for February 2013;

3. ITC reversal under Section 19(9) of the TNVAT Act, 2006 on invisible loss @ 10% on Rs.5,14,595/-;

4. Sale of plant and equipments taxable @ 5%;

5. Deemed sale value of taxable goods declared as exempted purchases in the monthly returns;

6. TDS not deducted on the addition of buildings @ 2% under Section 13;

7. TDS not deducted on the dyeing contract charges @ 5% under Section 13;

8. Dyeing charges received in the course of inter-state trade not covered by 'C' declaration warrants reversal of ITC under Section 19(5)(c); and

9. No recorded evidence produced for sales return of Rs.80,827/- taxable @ 5%.”

8. The appellant submitted their reply as well as additional reply

both dated 09.11.2015. Thereafter, it appears that the Assessing

Officer did not call for the book of accounts of the appellant, but

proceeded to complete the assessment. In so far as defect Nos.1, 2, 3,

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6 and 9 are concerned, the proposal made in revision notice was

dropped by the Assessing Officer on being satisfied with the

explanation offered by the appellant. This would prima facie show that

there had been application of mind by the Assessing Officer.

9. So far as defect Nos.4, 5 and 7 are concerned, the Assessing

Officer confirmed the proposal made in the revision notice. With regard

to defect No.8, the proposal was confirmed by the Assessing Officer

and the appellant accepted the same and was agreeable to remit the

amount of tax called upon to be paid. Hence, the contest in the said

writ petition was only with regard to defect Nos.4, 5 and 7.

10. From the counter filed in the said writ petition, we find that

the Assessing Officer confirmed the proposal on the above three

defects primarily for the reason that the appellant did not produce any

evidence to substantiate their claim.

11. Our attention is drawn to a certificate issued by the

Chartered Accountant dated 16.2.2017, which is as follows :

“This is to certify that in the financial statements of M/s.Sri Sarada Textile Processors (P) Ltd., having its registered office at No.707, Urachikottai, Bhavani-638302 for the year ended 31.3.2013, an amount of

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Rs.3,55,741/- disclosed as deletion under Note 11, Part B “Capital WIP' was actually an R.O. Plant held as capital WIP, which was later capitalized on 01.9.2012. Hence, the said transaction did not involve a real deletion of capital asset but a capitalization of work-in- progress only.

This certificate is issued upon express request by the client and to be used for the purpose of producing to VAT Authorities and not for any other purpose without our written consent.”

12. No doubt, the said certificate dated 16.2.2017 is much after

the assessment order dated 15.9.2016. Nevertheless, had an

opportunity been granted to the appellant to produce the books of

accounts and other records, in all probabilities, the dispute would have

been resolved. Thus, considering the peculiar facts and circumstances

of the case, we are of the considered view that one more opportunity

can be granted to the appellant to go before the Assessing Officer and

place all records so as to enable the Assessing Officer to complete the

assessment in accordance with law after taking note of the relevant

factors.

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13. For the above reasons, the writ appeal is allowed and the