Madras High Court
Nokia India Private Limited vs Deputy Commissioner (Ct) on 29 April, 2014
Author: B. Rajendran
Bench: B. Rajendran
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 29-04-2014 Coram THE HONOURABLE MR. JUSTICE B. RAJENDRAN Writ Petition Nos. 9077, 9078, 9079, 9725, 9726 and 9727 of 2014 and M.P. Nos. 1, 1, 1, 2, 2, 2, 3 3, and 3 of 2014 Nokia India Private Limited No.A-1, Nokia Telecom SEZ SIPCOT Industrial Park Phase III, Sriperumbudur, Kancheepuram represented by its Authorised Signatory .. Petitioner in all the Mr. Varun Menon Writ Petitions Versus 1. Deputy Commissioner (CT) Office of the Deputy Commissioner (CT) Enforcement (South) PAPJM Building, 2nd Floor Greems Road, Chennai 600 006 2. Joint Commissioner (Appeals) PAPJM Building, 2nd Floor Greems Road, Chennai 600 006 3. State of Tamil Nadu through the Secretary Ministry of Finance Secretariat, Fort St. George .. Respondents in all the Chennai 600 009 Writ Petitions WP No. 9077 of 2014:- Petition filed under Article 226 of The Constitution of India praying for a Writ of Certiorari calling for the records comprised in the impugned order in form 021 and the consequent impugned notice of demand Form 3, both issued by the first respondent for the assessment year 2009-2010 dated 28.02.2014 and all proceedings pursuant thereto and quash the same as unconstitutional. For Petitioners : Mr. Aravind P. Datar, Senior Counsel for Mr. Prahlad Bhat in all the Writ Petitions For Respondents : Mr. AL. Somayaji, Advocate General assisted by Mr. Kanmani Annamalai Additional Government Pleader in all the Writ Petitions COMMON ORDER
As the issues involved in all these writ petitions are identical, common and inter-related, the petitioner in all the writ petitions as well as the respondents are one and the same, besides common arguments have been advanced by counsel for both sides, by consent of counsel for both sides, the writ petitions are taken up together for hearing and are disposed of by this common order.
2. WP No. 9077 to 9079 of 2014 have been filed by the petitoiner challenging the validity of the orders of assessment dated 28.02.2014 for the assessment years 2009-2010, 2010-2011 and 2011-2012 respectively, while WP Nos. 9725 to 9727 of 2014 have been filed praying for a Writ of Mandamus directing the second respondent to hear and decide the appeals filed by the petitioner without insisting on the condition of pre-deposit of any part of the demand confirmed by the first respondent or furnishing of any security and without in any manner seeking to enforce the notice of demand issued by the first respondent dated 28.02.2014 for the assessment years 2009-2010, 2010-2011 and 2011-2012 respectively.
3. For the purpose of disposal of these writ petitions, first let me deal with the WP Nos. 9077 to 9079 and if they are decided, it will also cover the disposal of the other three writ petitions in WP Nos. 9725 to 9727 of 2014.
4. The petitioner company is engaged in the manufacture of mobile phones and its accessories. The petitioner unit is located in a Special Economic Zone and the products manufactured therein were either exported out of India or sold in the Domestic Tariff area. During the course of such business, the petitioner was also exporting goods out of the territory of India and executing inter-state sales from the SEZ Unit to dealers located outside the State against Form 'C'. The goods manufactured by the petitioner were also transferred to the branches of the petitioner company situate in other States against form 'F'.
5. On 22.01.2012, the petitioner received a notice from the respondents under Tamil Nadu Value Added Tax (TNVAT Act) for conducting audit for the assessment years 2006-2007 to 2011-2012 and the petitioner also produced all the records sought for by the audit team. While so, on 23.12.2013, the petitioner received a notice indicating that the exemptions claimed by them on account of interstate sales, export sales and stock transfer were rejected and it was proposed to levy tax thereon. On 21.02.2014, the petitioner sought extension of time to file their reply. On 24.01.2014, the petitoiner's consultant filed original Form 'F' amounting to Rs.74,71,31,674/- indicating the details of the outward stock transfers made by the petitoiner and also requested time by one month for filing the balance forms. Inspite of the same, on the very same date viz., 24.01.2014, a notice was issued to the petitioner proposing to impose tax demand under the Central Sales Tax Act ('CST Act') in relation to the following three subjects viz., (a) interstate sales executed against form 'C' (b) stock transfer of products against form 'F' and (c) export sales executed by the petitioner. On receipt of the notice, the petitioner's consultant filed original Form 'F' amounting to Rs.1713,41,80,856/- and original form 'C' amounting to Rs.753,92,54,674/- and requested one month time for filing the balance forms. On 13.02.2014, the petitioner also filed objections against the notice dated 24.01.2014 and specifically stated that the documents which they sought to produce are voluminious running to several pages and therefore requested the first respondent to afford an opportunity of personal hearing before passing any adverse order against them. The petitioner also, along with the objections dated 13.02.2014, filed sample documents such as invoice, shipping bill and packing list. On 27.02.2014, it is stated that the petitioner company was called upon by the first respondent to produce the copy of the export register for the assessment years 2009-2010, 2010-2011 and 2011-20-12. While so, on 28.02.2014, without taking note of the objections raised by the petitioner or without even giving an opportunity of personal hearing, the impugned orders have been passed by the first respondent in respect of the three assessment years. However, the fact that the first respondent has passed the orders dated 28.02.2014 came to be known to the petitioner company only when the representative of the petitioner company went to the office of the first respondent to submit certain documents. In the order dated 28.02.2014, the first respondent has indicated that already more than two months time was given to the dealer from the date of original notice viz., 22.12.2013 and after giving sufficient time, again another notice dated 24.01.2014 was issued to the petitioner but the dealer has not utilised those opportunities. Instead, the dealer requested for personal hearing. Submission of documents as proof of exemption alone will be the answer for their claim of exports to allow exemption and giving an opportunity of personal hearing will not result in any relief to the dealer. It is against this order for the three assessment years noted above, the petitioner company has filed WP Nos. 9077 to 9079 of 2014.
6. The learned senior counsel for the petitioner would vehemently contend that the first respondent, in the impugned order, went to the extent of indicating that the dealer has not produced any document to substantiate their claim. Such an observation is unwarranted, besides it is baselesss. According to the learned senior counsel for the petitioner, since the documents sought to be produced are voluminious, running to 16,09,190 pages of photocopied documents, the petitioner has produced sample documents. Such voluminious document cannot be looked in to by the first respondent in a single day. Thus, it is evident that the first respondent, without looking into the documentary evidence filed by the petitioner or without even affording an opportunity of hearing, has passed the impugned orders, which are per se in violation of the principles of natural justice.
7. The learned senior counsel for the petitioner would contend that majority of the transaction done by the petitioner are export transactions, however, the first respondent, without any basis, treated it as an internal sale or inter state sale especially when in respect of foreign transactions, money has come through Reserve Bank of India channel to indicate that the sale is only an export sale. Similarly, in respect of the orders passed under TNVAT Act also, the assessment orders have been passed without taking into consideration that there are 58000 shipping bills alone in possession of the petiitoner and therefore only certain sample documents have been given by the petitioner. Even in the pre-assessment notice or the assessment orders, the petitioner was not called upon to produce any further document. In the show cause notice dated 24.01.2014, the first respondent did not say anything about the alleged notice given on 24.09.2012 or the time granted thereon to the petitioner. It is not part of the show cause notice dated 24.01.2014. During the course of audit, the entire records relating to the period from 01.01.2007 to 31.03.2012 were scrutinised and whatever queries raised during the course of audit have been answered by the petitioner. In the normal circumstances, the assessment is deemed to have taken place during October itself, but the assessment is deemed to take effect only on production of document or the assessment is complete on proof of payment of tax. In this case, the first respondent would contend that the petitioner has not produced any documentary proof to substantiate their claim, while so, the assessment is not complete as contemplated under Section 22 (2) of the TNVAT Act. As contemplated under Section 22 (4) of TNVAT Act, the petitioner should have been given an opportunity of personal hearing and only thereafter, the assessment order has to be passed. If it is escaped assessment, Section 27 of the TNVAT Act can be invoked and even in that case, an opportunity of hearing is mandatory.
8. The learned senior counsel for the petitioner relied on the Division Bench decision of this Court in the case of (Tvl.SRC Projects Private Limited, rep. By its Chief Executive Officer, Salem vs. Commissioner of Commercial Taxes, Ezhilagam, Chepauk, Chennai and another) reported in 2010 33 VST 333 to contend that the old Section 16 of the TNGST Act is in para materia with Section 27 of the New Act. In the above decision of the Division Bench, it was also held that personal hearing is mandatory under Section 27 (1) of the Act. It was further held that Section 88 of TNVAT Act is a saving clause and Section 86 and 88 of TNVAT Act will also come to the rescue of the petitioner as it saves all the rules and regulation which remain in force till it is amended.
9. The learned senior counsel also relied on the decision of this Court in the case of (M/s. Ramsays Corporation Private Limited vs. Assistant Commissioner (CT) reported in 2012 (12) TMI 851 wherein this Court held that whether or not statute or statutory provisions/rules provides for affording an opportunity of hearing, such personal hearing is a must as otherwise it would violate Article 14 of the Constitution of India.
10. Reliance was also placed on the decision of the Honourable Supreme Court in the case of (Kesar Enterprises Limited vs. State of Uttar Pradesh and others) reported in (2011) 13 SCC 733 by the learned senior counsel for the petitioners to contend that notwithstanding that there is no express provision to give a personal hearing, adherence to such principle is mandatory.
11. With these submissions, the learned senior counsel for the petitioner prayed this Court to allow the writ petitions as prayed for.
12. On the contrary, the learned Advocate General appearing for the respondents, relying on the counter affidavit filed by the first respondent in WP Nos. 9077 to 9079 of 2014, would contend that by virtue of administrative instructions, the first respondent finalised the assessment of the petitioner company for the assessment years 2009-2010, 2010-2011 and 2011-2012 under the Central Sales Tax Act (hereinafter called as CST Act) and such orders of assessment are challenged in WP Nos. 9077 to 9079 of 2014. The petitioner company has filed monthly returns under the CST Act for all the three assessment years before the assessing officer reporting different type of transactions, including inter state sale, inter state stock transfer to other branches and also exports. After introduction of TNVAT Act, by introducing Section 22 (2) of the said Act, when returns were filed on proof of payment of tax and prescribed documents, the assessment orders are deemed to have been passed on 30th October of succeeding year. Therefore, for the assessment year 2006-2007 to 2010-2011, assessment orders are already passed prior to that date and the date of deemed assessment shall be 30.06.2012. Therefore, effective 19.06.2012, if no return is filed or the return is incorrect or incomplete or it is not accompanied by proof of payment of tax or documents required thereon, the assessing officer shall assess and pass a best of judgment and it can be passed after affording an opportunity of hearing. Further, as required under Section 22 (4) of TNVAT Act, the petitioner company failed to file their return or paid the tax under the CST Act but claimed certain exemptions on export transaction, stock transfer etc., against 'F' Forms and concessional levies against 'C' forms. Under Section 6A of CST Act, in relation to stock transfers, form ' F' declaration are prescribed documents and in relation to inter state sales at concessional tax rate under Section 8 (1) of the said Act, form C declaration are the prescribed documents and are required to be filed along with the monthly return in form I under Rule 10 (2) of the Central Sales Tax (Tamil Nadu) Rules, 1957 or any time before the final assessment of the year. However, in terms of Rule 12 (7) of the CST (Regulation and Turnover) Rules, 1957, the declaration in Form C or Form F shall be furnished to the assessing authority within three months after the end of the period to which the declaration relates. Further, under the proviso contained in Rule 10 (2) of the CST (Tamil Nadu) Rules, 1957, the petitioner, as a dealer, is permitted to retain the forms in their custody on condition that those forms relating to the year at any time before the final assessment of that year has to be produced. As per Rule 10 (2) of the CST (Tamil Nadu) Rules, 1957, the dealer is given the option of filing the forms C and F at the time of final assessment and the non-production of documents or declaration will not entitle a dealer from questioning the assessment on deemed basis under Section 22 (2) of the Act. The mere failure to file the declaration either with monthly returns or before the date of final assessment will not vitiate the deemed assessment under Section 22 (2) of the Act. Therefore, according to the learned Advocate General, best of judgment assessment under Section 22 (4) of the Act cannot be invoked for non-filing of the statutory declarations by the petitioner.
13. The learned Advocate General further submits that the notice for revision for failure to file prescribed documents and other records was issued on 21.08.2012 and 23.12.2013 respectively and therefore the petitioner has been demed to have been assessed for the assessment years 2009-2010 to 2011-2012 on the basis of returns relating to their turnovers under the CST Act after the deemed assessment on prescribed dates i.e., 30.06.2012 for 2009-201 and 31.10.2012 for 2011-2012, while so, the assessing authority is not under any obligation to issue any notice or afford a personal hearing.
14. The learned Advocate General further submits that the petitioner reported turnover of direct exports, however, no documents have been submitted, therefore, the assessing officer had proposed to assess the said turnover to tax and such an assessment of turnover that had escaped assessment to tax can be made beyond the deemed date of assessment only under Section 27 (1) (a). Similarly, for reported turnover of stock transfers and interstate sales, the exemption claim on stock transfer not covered by form F and the concessional tax claim on CST sales not covered by form C was also to be disallowed and assessed at a higher rate of tax as against the exemption/ tax rate allowed in the deemed original order of assessment. Therefore, in such circumstances, the only recourse is revision under Section 27 (1) (b). Accordingly, the notices dated 21.08.2012 in respect of assessment years 2009-2010 and 23.12.2013 in respect of 2011-2012 were issued for revision under Section 27 of TNVAT Act read with Sec. 9 (2) of CST Act. Therefore, according to the learned Advocate General, the assessment was made under Section 27 (1) (a) of the Act and no original order of assessment based on returns was passed upto 30.06.2012 and by virtue of the amendment made to Section 22 (2) from 19.06.2012, the assessment for the assessment year 2010-2011 was deemed to have been finalised on 30.06.2012. However, as an abundant caution, another notice dated 24.01.2014 was issued for all the assessment years in compliance with principles of natural justice calling upon the petitioner to produce the documents.
15. The learned Advocate General submitted that even as on 21.08.2012, a notice was issued to the petitioner for the assessment year 2009-2010, which was not disputed by the petitioner in the writ petition or it was challenged. On receipt of the said notice, a reply dated 24.09.2012 was sent by the petitioner and it was received on 01.10.2012. In the reply, the petitioner prayed for 3 weeks time to file the relevant declarations. Similarly, for the assessment year 2010-2011 also, a notice dated 22.12.2013 was issued to the petitioner. Therefore, the learned Advocate General would submit that every stage, the petitioner was given adequate opportunity to putforward their submission but the petitioner did not avail of those opportunities. Therefore, under Section 22 (4) of the Pre-amended Act, the best of judgment could be made in cases where no return is filed by the dealer and it is valid. The question of personal hearing, as contemplated under Section 22 (4) of the pre-amended Act is also contemplated in the amended Act under Section 27 (1) (b). However, it is not a statutory requirement as adequate and reasonable opportunity to file the documents and declarations had already been provided to the dealer. In this context, the learned Advocate General relied on the decision of the Division Bench of this Court in the case of (Dinod Cashew Corporation vs. The Deputy Commercial Tax Officer and another) reported in 1986 Volume 61 SC page No.1 wherein the scope of Section 16 of the Tamil Nadu General Sales Tax Act, 1959 was considered. The Division Bench held that it is competent for the assessing officer in a re-assessment proceeding to assess an item of turnover which had been omitted to be taxed earlier for any reason and the authority has, therefore, power to re-assess a turnover even though in the return that turnover was included and the officer then thought that it was exempt. Relying on the aforesaid decision, the learned Advocate General would contend that the assessing officer has even power to re-assess an escaped turnover which was earlier exempted by him. The learned Advocate General brought to my notice the provisions of Rule 7 of CST Rules and Rule 10 (2) of TNVAT Rules, in support of his contentions.
16. The learned Advocate General would contend that the petitioner has not complied with the requirements in producing the documents even after sufficient notices have been issued to him at every stage. From the year 2011, notices have been issued to the petitioner and opportunity was afforded at every level. Therefore, it cannot be said that the impugned orders are in violation of the principles of natural justice when the petitioner was given adequate and reasonable opportunity.
17. By way of reply to the submissions of the learned Advocate General, the learned senior counsel for the petitioner would point out that even according to the respondents, the first notice was issued on 12.10.2011, which is as per the mandate provided under Section 22 (2) of the Act, however, the respondents did not comply with the provisions of Section 22 (4) of the Act which was also accepted by them by stating that an opportunity of personal hearing was not afforded to the petitioner.
18. I heard the learned senior counsel for the petitioner and the learned Advocate General appearing for the respondents. The counsel for both sides did not vehemently argue regarding the alternative prayer to grant permission to the petitioner to file an appeal without insisting on the mandatory deposit, as sought for by the petitioner in WP Nos. 9725, 9726 and 9727 of 2014. According to the learned senior counsel for the petitioner, such an alternative prayer was sought for as an abundant caution.
19. The short point for consideration in these writ petitions is as to whether the first respondent has passed the order under Section 22 (2) or 27 (2) of TNVAT Act and whether the requirement to afford an opportunity of personal hearing is different from issuing a show cause notice as contemplated under Section 27 (2) of the said Act. It is also required to be decided as to whether issuing a show cause notice would amount to sufficient opportunity of hearing.
20. The first respondent passed the impugned orders of assessment for the three assessment years. According to the respondents, the petitioner did not respond to the notices sent to them from the year 2011 or produced documentary evidence to substantiate their claim for exemption, whether it relates to export sale directly made or inter state sale covered under form C or in respect of inter-departmental transfer covered in form F. The first respondent, in the impugned assessment orders, has clearly stated three things (i) As far as export sale is concerned, no documentary evidence has been produced much less relevant document such as purchase order, invoices, bill of lading, packing list etc., Therefore, the first respondent levied tax at 4% and 14.3% respectively on the tax amount determined. Similarly, in respect of stock transfer of IT products against form F, though exemption claimed they produced form F for the value of Rs.747,71,31,674/- which is only found to be eligible. For the remaining turn over it was chargeable at 14.5%. It was further stated that as the dealer has not filed form F to the tune of Rs.3563,98,84,006/- the entire turnover was proposed to be taxed at 15%. In other respects, the inter state sale against form C, they contain rate of tax at 2% of turnover of Rs.3817,67,42,375/- but the dealer has produced 'C' forms for the value of Rs.363,81,57,044/- and therefore for the remaining turnover of Rs.763,85,85,321/- dealer has not filed form C. The dealer has to file the forms within three months after the end of the quarter. The form C and F has not been given by the dealer inspite of giving sufficient time. As per the provision to Rule 12 of CST Act, it was proposed to assess the rate of tax at 14.5% in the absence of forms and it was also proposed to be treated under Section 8 (2) of the CST Act.
21. For the assessment order relating to the year 2010-2011, in respect of export sale, it was indicated that even after issuing notice on 12.11.2011, the dealer has not taken steps to file copies of documents in respect of claim for exemption. The officer has stated that filing of sample documents for claim of exemption for a huge turnover of Rs.13920,49,14,632/- is not acceptable. According to the first respondent, the dealer has not even given the detailed list as to when the goods were exported, to whom it was exported, the number and date of bill of lading etc., which would prove that the dealer is not having sufficient proof in support of claim of exemption. The order also further states that even though letter dated 12.02.2014 was given by the petitioner seeking opportunity of personal hearing before passing any order adverse to them, it was stated that as the original notice was issued as early as on 12.10.2011 and after giving sufficient time another notice was also issued on 24.01.2014, the dealer has not utilised those opportunities given. It was also clearly stated that the submissions of document as proof of exemption alone will be the answer for their claim of exports to allow exemption and giving an opportunity of personal hearing will not results in any relief to the dealer. Therefore, the exemption sought for by the petitioner was disallowed.
22. Similarly, in respect of declaration form C, the assessing officer has stated that the original form C for the value of Rs.76,00,03,318/- has been filed on 10.02.2014 and a second copy of duplicate form C was filed for the value of Rs.77,55,04,377/- as against the original form C for the value of Rs.77,71,28,195/- said to have been filed and lost the acknowledgment in transit. According to the first respondent, since there were discrepancies relating to the value mentioned in the C forms, the respondent rejected it and assessed the value as mentioned therein.
23. In so far as stock transfer is concerned, though the dealer filed form F for the value of Rs.77,27,510/-, on verification, it was found that form F has been wrongly submitted. It is further stated that the dealer did not correct the discrepancy in the monthly return and therefore he is not entitled to the relief claimed thereunder.
24. As per the submission of the learned senior counsel for the petitioner, it is clear that the main dispute is in respect of export sales, which runs in to several crores of rupees. According to the learned Senior counsel for the petitioner, if it is export sale, it is exempted from the purview of tax. The petitioner company has documents such as bill of lading, vouchers etc., but since the transaction is voluminious running in to 16,09,190 pages, such documents could not be produced at one single stroke. Therefore, the petitioner had produced sample documents for scrutiny. However, the assessing officer is not satisfied with the way in which the sample documents have been produced. In such view of the matter, the assessing officer should have called upon the petitioner to produce the entire documents or in the alternative, he should have laid criteria for scrutiny of the documents for every 100 or 500 or 1000 transactions by fixing a date and time for production of the documents. The assessing officer did not do so thereby he contravened the principles of natural justice. This is more so that the petitioner has specifically sought for a personal hearing and inspite of the same, the impugned assessment orders have been passed. For all the three assessment years, the assessing officer, at his whims and fancy, culled out the transactions that took place during January 2013 and arrived at the tax amount. The assessment officer, instead, could have very well inspected the documents at the place of business of the petitioner company or atleast a personal opportunity of hearing could have been given as pleaded by the petitioner so as to enable the petitioner to produce the voluminious documents.
25. It is seen from the materials placed on record that an audit was conducted in the business premises of the petitioner company from January 2013 to February 2013 for about 10 days, during which time, all the documents were made available by the petitioner. Nothing prevented the first respondent or his officiers from demanding for production of copies of documents to satisfy themselves as to whether the petitioner had made export sale or not. In the impugned orders of assessment, no explanation has been given by the first respondent in so far as it relates to money received by sale of goods to foreign countries. All these things could have been averted by the first respondent if a personal hearing is given during which time the first respondent could very well cross-check the documents with the relevant documents. Now, the learned senior counsel for the petitioner submits that such foreign sale cannot be treated as an inter-state sale and to levy tax thereon. It is further submitted that there was no indigeneous transaction made by the petitioner within India and the exemption claimed is only relating to foreign sale. This vital point was not considered by the first respondent while passing the impugned orders of assessment for the assessment years in question. It is also admitted by the first respondent that no personal hearing was given to the petitioner or any notice was issued calling up them to produce any further document for their consideration.
26. According to the learned senior counsel for the petitioner, for the assessment year 2011-2012, when notice was given to the petitioner, they sought time for production of the documents. Subsequently, documents have been produced even as per the impugned order. Therefore, the contention of the assessing officer that because of the delay in producing the documents the assessment orders have been passed for the cannot be accepted. In fact, audit was done in the business place of the petitioner and at that time, there was no specific document sought for by the assessing officer. The fact remains that the petitioner was ready and willing to produce the documents but only sought time. In fact, the petitioner also produced sample documents, but they were not considered by the assessing officer, before passing the impugned orders of assessment. In any event, in the absence of affording a personal hearing, the impugned orders cannot be sustained.
27. With this background, it is worthwhile to analyse the case in the legal parlance. Section 22 (2) of the TNVAT Act, after amendment clearly indicate as follows:-
22 (2). The assessing authority shall accept the returns submitted for the year, by the dealer, if the returns are in the prescribed form and accompanied with the prescribed documents and proof of payment of tax. Every such dealer shall be deemed to have been assessed for the year on the 31st day of October of the succeeding year.
Provided that in respect of such returns submitted for the years 2006-07, 2007-08, 2008-09, 2009-10 and 2010-11, on which assessment orders are not passed shall be deemed to have been passed on the 30th day of June 2012.
28. In this case, as stated by both sides, cerain documents were produced by the petitioner and certain documents have not been produced as per the statement of the respondents. The petitioner also not paid tax as there is a dispute as to whether at all tax is payable by them inasmuch as they claim exemption for export sale. Further, original notice emanated from the respondents even during the year 2011 itself before amendment. Therefore, according to the learned senior counsel for the petitioner, when the then prevailing Section 22 (4) of the Act mandatorily provides for affording a personal hearing or in the alternative, since the respondents contend that the petitioner did not furnish the relevant document, there cannot be a deemed assessment. Therefore also, the provisions contemplated under Sections 22 (2) and 22 (4) have to be mandatorily followed by the respondents by giving a personal hearing, which was not done in this case. In such event, the orders of assessments, as passed by the first respondent, are liable to be set aside. It is further stated that if it is a re-assessment, as contended by the respondents, taking into consideration that they have now passed a deemed assessment pursuant to the returns filed by the petitioner, as per Section 27 (1) and (2) of the Act, notice of hearing means not a mere show cause notice but affording a personal hearing as enunciated by the Division Bench of this Court mentioned supra.
29. The decision of the Division Bench of this Court mentioned supra in the case of (Tvl.SRC Projects Private Limited, rep. By its Chief Executive Officer, Salem vs. Commissioner of Commercial Taxes, Ezhilagam, Chepauk, Chennai and another) reported in 2010 33 VST 333 arose out of the pre-amended Act which is equivalent to Section 16, which is in para materia to Section 27 of the amended Act. Even as per the decision of the Division Bench of this Court, it was held that as per the Circular issued by the Commissioner, the obligation on the part of the assessing officer to afford a personal hearing is mandatory. In this case, inspite of a specific request made by the petitioner to afford such opportunity of personal hearing, that was not given and it is contrary to the principles of audi alteram partem. The Division Bench of this Court, by relying on the decision of the Honourable Supreme Court in the case of (Travancore Rajons vs. Union of India) reported in (1971 AIR SC 862) observed as follows:-
.....(iii) Whether the provisions of Section 16 (1) (a) of the said Act which admittedly governs the field describing the procedure for assessment of the taxable turnover should be read with the Commissioner's Circluar dated April 20, 2001 (referred to in para 9 of the petitioner's representation) which casts an obligation on the assessing authority to give a personal hearing, when such a hearing is specifically asked for particularly taking into consideration the application of the principle of contemporanea exposito in the facts of the case.
30. The Division Bench of this Court also, referring to the Circular dated April 20, 2001 of the Commissioner, held as follows:-
....Fair opportunity is to be given to the assessee and judicial consideration to the representations, evidences and materials furnished by him. But personal hearing need not be given unless the statute requires it (e.g. Section 22 (2) of the assessee asks for it.
Since the questions overlap, all of them are discussed together.
.....Before dealing with those questions, this Court proposes to consider a few authorities on the content of the expression 'reasonable opportunity to show cause'. It may be true if the provision of reasonable opportunity to show cause is considered bereft of the circular, then it may not be held that it includes an opportunity of personal hearing. But then in a case where the question involved is one of determination of certain factual disputes, which are a bit complex and not free from controversy, the Court has to consider whether principles of fairness would encompass personal hearing within.
.....The Court therefore holds that the provision of Section 16 (1) (a) of the said Act has to be construed in accordance with the said circular which is by way of contemporanea expositi. So when a specific demand is made for personal hearing the reasonable opportunity of showing cause should include the same in the interest of fairness in procedure.
....It is well settted that existence of an alternative remedy does not oust the jurisdiction of a writ court under the article 226 of the Constitution. Such jurisdiction is plenary in nature. But the existence of alternative remedy operates as an automatic restrain on the discretion of the writ court in the exercise of its jurisdiciton. But law in this aspect is well-settled and there are well known exceptions where a writ petition is entertained.
31. Thus, it is seen that the Division Bench of this Court distinguished the word opportunity to show cause has to be treated as an opportunity of hearing by relying on the circular dated 20.04.2001 of the Commissioner.
32. Further, a learned single Judge of this Court in the case of ( Shri Mariammal Fire Works vs. Commissioner of Commercial Taxes, Chepauk, Chennai and another) by relying on the decision of the Division Bench of this Court mentioned supra and also the Circular issued by the Commissioner, held that subsequent to inspection of the business premises, a pre-assessment notice was issued based on the report given by the enforcement officials. The petitioner therein also given a reply with a request to provide an opportunity of hearing. However, notwithstanding such request, an order of assessment dated 30.07.2007 was passed without providing an opportunity of hearing. In such event, this Court held that the right of an assessee is protected under the circular, and following the above Division Bench Judgment of this Court, the impugned order was set aside and remanded the matter to the assessing officer.
33. In the decision of this Court in the case of (Tvl. Sendamarai Steels vs. The Commercial Tax Officer) reported in 2013 61 VST 463 (Madras) this Court pointed out that though the earlier Section 16 (1) (a) of Tamil Nadu General Sales Tax Act, 1969 was challenged, by interpreting the words 'reasonable opportunity to show cause in certain contingencies' and 'reasonable opportunity of being heard in certain contingencies' held that wherever statute used wordings of resonable opportunity of hearing, then the Department is bound to give an opportunity of personal hearing. It was further held that Seciton 16 (1) (a) of the Act does not use the words 'reasonable opportunity of being heard' but only uses wordings such as 'reasonable opportunity to show cause'. Therefore it was held that for not providing an opportunity of personal hearing, the impugned orders are quashed.
34. In yet another decision of this Court in the case of (M/s. Ramsays Corporation Private Limited vs. The Assistant Commissioner (CT)/The Commissioner of Commercial Taxes) reported in (2012) (12) TMI 851, which arise out of an identical situation, this Court held that before passing an order under Section 27 (1) (a) of the TNVAT Act held that personal hearing is a must before imposition of penalty, whether or not statute or statutory provisions/rules provides for it, as otherwise it would violate Article 14 of the Constitution. In that case, this Court relied on the decision of the Honourable Supreme Court in the case of (Kesar Enterprises Limited vs. State of Uttar Pradesh) 2011 13 SCC 733 wherein, the Honourable Supreme Court, relying on yet another decision in Sahara India vs. CIT, 2008 14 SCC 151 held that in the absence of a provision in the Income Tax Act, 1961, an opportunity of hearing was required to be given to an assessee before an order under Section 142 (2-A) Act directing special audit of his accounts was passed. It was further held that the it is trite that unless a statutory provision either specifically or by necessary implication excludes the application of principles of natural justice, because in that event the Court would not ignore the legislative mandate, the requirement of giving personal opportunity of being heard before an order is made, is generally read into the provision of a statute, particularly when the order has adverse civil consequences for the party affected. The principle will hold good irrespective of whether the power confered on a statutory body or tribunal is administrative or quasi-judicial.
35. In the decision of the Honourable Supreme Court in the case of (Kesar Enterprises Limited vs. State of Uttar Pradesh and others) reported in (2011) 13 SCC 733 which was relied on by the learned senior counsel for the petitioners it was held that notwithstanding that there is no express provision to give a personal hearing, adherence to such principle is mandatory. In Para No.24 and 29 of this decision, the Honourable Supreme Court held as follows:
24. Rules of 'natural justice' are not embodied rules. The phrase 'natural justice'is also not capable of a precise definition. The underlying principle of natural justice, evolved under the common law, is to check arbitrary exercise of power by the State or its functionaries. Therefore, the principle implies a duty to act fairly i.e., fair play in action.
29. A Bench of three judges, speaking through one of us (D.K. Jain, J) explaning the concept of natural justiceand the principles governing its application, summed up the legal position as under: (Sahara India case) SCC p.163, paras.19-20.
19. Thus, it is trite that unless a statutory provision either specifically or by necessary implication excludes the application of principles of natural justice, because in that event the court would not ignore the legislative mandate, the requirement of giving reasonable opportunity of being heard before an order is made, is generally read into the provisions of a statute, particularly when the order has adverse civil consequences for the party affected. The principle will hold good irrespective of whether the power conferred on a statutory body or tribunal is administrative or quasi-judicial.
20. We may, however, hasten to add that no general rule of universal application can be laid down as to the applicability of the principle audi alteram partem, in addition to the language of the provision. Undoubtedly, there can be exceptions to the said doctrine. Therefore, we refrain from giving an exhaustive catalogue of the cases where the said principle should be applied. The question whether the principle has to be applied or not is to be considered bearing in mind the express language and the basic scheme of the provision conferring the power; the nature of the power conferred and the purpose for which the power is conferred and the final effect of the exercise of that power. It is only upon a consideration of all these matters that the question of application of the said principle can be properly determined."
36. As per Section 88 (3) (i) of the TNVAT Act, which deals with repeal and saving, it was provided that the amendment or repeal shall not affect the previous operation of the said Act or 1970 Act, as the case may be, or any right, privilege, obligation or liability already acquired, accrued or incurred thereunder and subject thereto, anything done or any action taken including any appointment made, any notification, notice or order issued, any rule or regulation framed or forms prescribed and any certificate, licence, or permit granted in exercise of any power conferred by or under the said Act or 1970 Act, as the case may be, shall be valid and always as deemed to have been valid, during the period the said Act or 1970 Act, as the case may be was in force notwithstanding the repeal of the said Act or 1970 Act as the case may be. Therefore, even the Circular issued by the Commissioner will be applicable in this case. Thus, Section 16 (1) is in para materia of Section 27 of TNVAT Act. Even if the argument advanced on behalf of the respondents is accepted that personal hearing need not be given, when such an opportunity of hearing is specifically sought, it has to be extended to the petiitoner.
37. The learned Senior counsel for the petitioners relied on the decision of this Court reported in (M/s. Esteem Alloy Costings Pvt Ltd., vs. Commercial Tax Officer) 2014 12 TMI 1134 in which the assessing officer disallowed the Input Tax Credit on the ground that objections have not been filed by the assessee. In that case, this Court, notwithstanding the fact that the assessee has not filed the objections, directed the respondents therein to give opportunity to the petitoiner to file objections and the respondent was also directed to afford opportunity of hearing and pass orders in four weeks.
38. The learned Senior counsel for the petitioner further relied on the decision of this Court in the case of (M/s. M.M. Engineering (P) Ltd., vs. Commercial Tax Officer, Coimbatore) reported in (2013) 62 VST 306 (Madras) wherein the assessee sought time for filing objections to the revision of assessment under Section 27 and inspite of extension of time, the assessee did not file objections. However, this Court, in the interest of justice, directed the respondents therein to give one more opportunity to the petitioner to putforth his objections and thereafter to pass orders after affording an opportunity of personal hearing to the assessee
39. The learned Advocate General relied on the decision of the Honourable Supreme Court in the case of (Union of India vs. Jesus Sales Corporation) 1996 (83) E.L.T. 486 (SC) to contend that the discretion to grant a personal hearing exercisable by the assessing officer in an unfettered manner is also applicable to adminsitrative discretion in certain situations. Such unfettered discretion is to be exercised in a reasonable and rational manner free from the whims, vagaries and arbitrariness. Relying on this decision, the learned Advocate General pointed out that in this case, the assessing officer found that the petitoiner was given sufficient opportunity and was issued notice at every stage. However, for one reason or the other, the assessee has taken time to produce the relevant documents. In such circumstances, the assessing officer thought it fit that a personal hearing is not necessary and the documents already on record are sufficient to pass an assessment order. Theefore, the learned Advocate General would submit that such a discretion exercised by the assessing officer need not be interfered with by this Honourable Court. This decision was distinguished by the learned senior counsel for the petitioner by contending that the decision in that case related to whether affording a personal hearing was necessary before disposal of an application by the appellate authority for pre-deposit under the Import and Exports (Control) Act, 1947 and it does not relate to passing of final assessment order. In fact, that decision was distinguished by this Court in the decision reported in (ITC Limited case 2001 127 ELT 338 (Madras) wherein it was held that the judgment of the Apex Court has to be confined to facts of that case and nowhere the Apex Court in that case has ruled that principles of natural justice or audi alter partem will have no application in respect of an application for stay/exemption before the appellate authority.
40. In yet another decision of this Court in the case of (M/s. Rajam Offset Printers vs. The Commercial Tax Officer) reported in 1995 (8) M.T.C.R. 55 this Court had an occasion to consider that when a statute requires that a particular thing is to be done in a particular manner, it shall be done in that manner as enunciated by the Honourable Supreme Court in Shiv Kumar Chadha vs. Municipal Corporation and others (1993) 3 SCC 161. In that case, notices were given by the assessing authority calling upon the petitioner to file objections, if any on or before a given date. That notice did not remotely indicate the opportunity of personal hearing. In such event, it was held that may be there are cases where the parties may satisfy the authorities at the hearing, if an opportunity of personal hearing is given. It was further held that mere giving of notice calling for objections can be neither considered as adequate opportunity in terms of the language of Section 22 (2) of the Tamil Nadu General Sales Tax Act nor it can be substituted for personal hearing.
41. A cumulative reading of all the above decisions would indicate that the quasi judicial powers conferred on the assessing officer has to be exercised in a judicious, fair and objective manner without arbitrariness and subject to the rules of natural justice, including grant of personal hearing and recording of reasons for conclusions ultimately arrived at before rejection of an application for exemption or waiver or stay and the non-adherence to the aforesaid principle will offend Article 14 of the Constitution of India and also renders the very remedy available to the assessee a nugatory.
42. As discussed above, it is very clear that whether it is application of Section 22 (2) or 27 (1) of the Act, the petitioner ought to have granted an opportunity of personal hearing, when he has specifically sought for the same. Inasmuch as such principle was not adhered to in this case, the impugned orders in WP Nos. 9077 to 9079 of 2014 cannot be sustained. It is also to be mentioned that according to the petitioner, they are in possession of voluminious documents running to 16,09,190 pages of photostat copies and therefore they have produced some sample documents. At least, at that stage, the assessing officer ought to have afforded an opportunity of hearing to the petitioner for perusal of such volumnious documents. The non-consideration of the same vitiates the impugned orders.
43. In the result, the orders which are impugned in WP Nos. 9077 to 9079 of 2014 are set aside. WP Nos. 9077 to 9079 of 2014 are allowed. In view of the order passed in WP Nos. 9077 to 9079 of 2014, no order is required to be passed in WP Nos. 9725 to 9727 of 2014 and they are accordingly dismissed. No costs. Consequently, connected miscellaneous petitions are closed. The matter is remanded back to the first respondent for fresh consideration. The first respondent is directed to afford an opportunity of personal hearing to the petitioner, peruse the documents that may be produced by the petitioner and then pass orders on merits and in accordance with law.
44. Even though the impugned orders are quashed, this Court, taking into consideration the demand notices issued by the first respondent are still valid, the effect of quashing the assessment orders will not totally take away the right of the first respondent to proceed further in the matter. Further, taking note of the fact that the transaction reported by the petitioner is huge, pertaining to foreign sale, which according to the petitioner is totally exempted, the question of deposit of any amount will not arise. At the same time, in the impugned orders of assessment, it has been clearly stated that certain documents have been produced in form C and F in which there are lot of differences. In fact, an argument was advanced by the learned Advocate General in this regard. A feeble attempt was made by the learned Senior counsel for the petitioners that the payment of tax relating to Rs.14 crore alone may be due in respect of the above variation. Such an argument advanced on behalf of the petitioner will not by itself stops this Court to direct the petitioner to deposit some amount. If an appeal is filed against the impugned order, it will be a different aspect to be considered. Now, by virtue of this order, the first respondent is directed to re-consdier the entire matter afresh. At the same time, the revenue also has to be safeguarded to some extent. In that view of the matter, out of the demand of Rs.2,400/- crores made by the revenue in the impugned orders of assessment, the petitioner is directed to deposit 10% of the tax amount thereof as a pre-condition for reviving the orders of assessment. This amount shall be depsoited by the petitioner within a period of eight weeks. In the meantime, the petitioner is directed to submit all the documentary evidence for consideration of the first respondent.
29-04-2014 rsh Index : Yes Internet : Yes To
1. Deputy Commissioner (CT) Office of the Deputy Commissioner (CT) Enforcement (South) PAPJM Building, 2nd Floor Greems Road, Chennai 600 006
2. Joint Commissioner (Appeals) PAPJM Building, 2nd Floor Greems Road, Chennai 600 006
3. State of Tamil Nadu through the Secretary Ministry of Finance Secretariat, Fort St. George Chennai 600 009 B. RAJENDRAN, J rsh WP Nos. 9077, 9078, 9079, 9725, 9726 and 9727 of 2014 29-04-2014