Madras High Court
M/S.F.L.Smidth Private Limited vs The Assistant Commissioner (Ct) on 19 November, 2014
Author: T.S.Sivagnanam
Bench: T.S.Sivagnanam
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 19.11.2014 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM Writ Petition No.4166 of 2014 and M.P.No.1 of 2014 M/s.F.L.Smidth Private Limited Rep. By its Chief Financial Officer No.180, Kodambakkam High Road Chennai-600 034 Now at FLSmidth House 34, Egatoor, Kelambakkam Rajiv Gandhi Salai, Chennai. ..Petitioner -Vs- The Assistant Commissioner (CT) (FAC), Valluvar Kottam Assessment Circle Chennai-600 006 ..Respondent Writ Petition filed praying to issue a writ of Certiorari to call for the records of the respondent in the impugned order in CST/773780/2010-11 dated 24.01.2014 and quash the same as it is against the principles of natural justice and violative of Article 286(1)(b) of the Constitution; Section 5(1), Section 5(2), Section 5(3), Section 6(2) of the CST Act, 1956. For petitioner : Mr.Arvind P.Datar , Senior Counsel for Mr.K.Vaitheeswaran For respondent : Mr.Manokaran Sundaram, Addl.Govt.Pleader ORDER
The petitioner seeks for issuance of a writ of Certiorari to quash the order dated 24.01.2014, which is an assessment order under the provisions of Tamil Nadu Value Added Tax Act, 2006 and Central Sales Tax Act, 1956 for the year 2010-11.
2. The petitioner is a company engaged in execution of comprehensive turnkey contracts involving engineering, procurement and commission of projects in cement and mineral industries and doing business at Chennai. They filed their returns for the year 2010-11 in Form I for the year 2010-11 under the CST Act, 1956 reporting a total and taxable turnover of Rs.1550,85,43,209/- and Rs.312,64,44,311.
3. The place of the business of the assessee was inspected by the Enforcement Wing officials on 10.12.2012 and 17.12.2012 and alleged that during the course of inspection, the petitioners have claimed exemption on a turnover of Rs.1037,60,44,966-00 during the year 2010-11 as transit sales under Section 6(2)(b) of the CST Act. Further, it is stated that the petitioners had placed orders with their job workers for fabrication of goods that were ultimately delivered to their customers for whom the dealers were executing works contracts involving engineering, procurement and commissioning of cement or mineral production/processing plant projects. After discussing about the manner of movement of goods, a notice was issued on 08.11.2013 proposing to disallow the claims of exemption as transit sales either on the grounds of discrepancies in vehicle numbers and description of goods in invoices of subsequent sales or on the grounds of handling of the finished goods by the petitioner by way of inspection before the delivery of the goods to the customers' site from the job workers' premises. The petitioner was granted 15 days time to respond to the notice and the petitioner made a request for extension of time by their letter dated 10.12.2013. However, without either accepting the request for extension or rejecting the request, the respondent proceeded to pass the impugned assessment order.
4. Learned Senior counsel appearing for the petitioner, after elaborately referring to the factual matrix submitted that the impugned order is passed in violation of principles of natural justice and shows clear arbitrary exercise of power and the impugned order is bad in law having not afforded opportunity of hearing. In this regard, reliance was placed on the decision of the Supreme court in the case of Automotive Tyre Manufacturers Association Vs. Designated Authority (2011) 263 ELT 481. Further, it is submitted that the impugned order travels beyond Article 286(1)(b) of the Constitution of India and as per Section 5(2) of the CST Act, 1956, imports are not taxable. Further, it is submitted that the impugned order has been passed travelling beyond the scope of the notice and thereby contrary to the law laid down by the Supreme Court in the case of CCE Vs. Gas Authority of India (2008) 323 ELT 7; Commissioner of Customs Vs. Toyo Engineering India Ltd., (2006) 201 ELT 513 and Saci Allied Products Ltd., Vs. Commissioner of Central Excise (2005) TIOL 73. Further, it is submitted that respondent ought to have appreciated that the high sea sales agreement contemplates endorsement of bill of lading in favour of the petitioner and the bill of entry has been filed by the customer and goods were cleared on payment of customs duty. Further, it is submitted that the contract with the customer clearly stipulated that there would be imported materials and the buyer was clearly aware that the materials would be imported by the petitioner and sold under Section 5(2) of the CST ACt. Further, several other contentions have been raised on the merits of the assessment. Therefore, the learned Senior counsel would submit that the impugned order of assessment deserves to be quashed.
5. Learned Additional Government Pleader produced before this court a copy of an additional written instructions given by the respondent on 17.03.2014, from which it is seen that the Authority has taken the following stand:-
The notice was issued on 08.11.2013 and the dealers has been granted 15 days time from 11.12.2013 in response to their letter dated 10.12.2013 requesting for time to file their objections. Though over a month has passed by, they have not filed any objection or reply till date. It is now seen that the dealers has nothing to file before the undersigned and also accept the proposals as narrated above.
6. The above stand has been repeated as para wise comment in respect of all the paragraphs in the affidavit filed in support of the writ petition. The manner in which, written instructions have been given by the respondent is deprecated. The respondent, being a quasi judicial authority has to furnish para wise remarks to the Government Counsel by dealing with the merits of the objections raised. In the instant case, para wise remarks, clearly shows non-application of mind, in fact, the same contention has been reiterated in all the paragraphs including the grounds raised. Therefore, the para wise remarks given by the respondent deserves to be outrightly rejected. The Principal Secretary/Commissioner of Commercial Taxes, Chepauk, Chennai-5 is directed to take note of the observations made by this Court for suitable instructions to the concerned officer and give clear instructions as to the manner in which para-wise comments/instructions to be given to the Government Counsel by dealing with each and every factual contention raised by the petitioner/dealer in the writ petitions. This shall be also intimated to all assessing officers in the State, so as to enable the Department to appropriately defend cases filed against the Department.
7. Be that as it may. In the impugned order, it has been accepted that the petitioner prayed for extending time to submit their objections. However, the request made by the petitioner was neither rejected nor accepted by passing an order but the assessing officer merely confirmed the proposal made in the show cause notice/pre-assessment notice.
8. In the light of the above, the impugned order is held to be illegal as it is violative of the principles of natural justice.
9. As regards the merits of the assessment and the other contentions raised by the learned Senior counsel for the petitioner, this Court is of the view that at this stage of the matter, this Court need not go into those aspects and has not considered as to whether the show cause notice is founded on any legal premise, since such jurisdictional issues can be urged by the petitioner in their objections and adjudicated by the assessing authority, who has issued the notice. (See Special Director and another Vs. Mohd.Ghulam Ghouse (2004) 3 SCC 440). Further, the First Bench of this Court in the case of Muthuraja Traders Vs. Deputy Commercial Tax Officer, Park Road Assessment Circle, Erode reported in 106 STC 283 held that the reasons which weigh with the authority concerned to come to the conclusion stated in the show cause notice, as also the reasons for arriving at such a prima facie conclusion and it is only a proposal and the authority could not be accused of or attributed with any pre-conceived ideas or notions about the merits of the claims of the case and the assessee has to submit the reply along with evidence.
10. In the light of the above observation of the Division Bench of this Court, there is no basis to hold that the authority has prejudged the matter by issuing a show cause notice. After-all, the respondent has issued only show cause notice and it is always open to the petitioner to raise all contentions including jurisdictional issues. This Court is of the view that the assessment order has to be set aside on the ground that the impugned order has been passed in violation of the principles of natural justice as the petitioner was not afforded opportunity of personal hearing despite that being a statutory requirement.
11. In the light of above all, the Writ Petition is allowed and the impugned order is set aside and the matter is remanded to the respondent for fresh consideration. The petitioner is directed to submit their reply to the show cause notice within a period of six weeks from the date of receipt of a copy of this order. Thereafter, the respondent shall afford an opportunity of personal hearing to the petitioner and examine the objections raised and the documents produced and pass a reasoned order within eight weeks after the conclusion of personal hearing. No costs. Connected MP is closed.
19.11.2014 Index:Yes Internet:Yes nvsri To The Assistant Commissioner (CT) (FAC), Valluvar Kottam Assessment Circle Chennai-600 006 T.S.SIVAGNANAM, J.
nvsri Writ Petition No.4166 of 2014 19.11.2014