Madras High Court
M/S.V.R.Muthu & Bros vs The State Tax Officer – on 6 January, 2022
Author: C.Saravanan
Bench: C.Saravanan
W.P.(MD) Nos.4359 & 4365 of 2022
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
Reserved on 10.04.2024
Delivered on 30.04.2024
CORAM
THE HON'BLE MR.JUSTICE C.SARAVANAN
W.P.(MD) Nos.4359 & 4365 of 2022
and
W.M.P.(MD) Nos.3685 & 3689 of 2022
M/s.V.R.Muthu & Bros.,
Rep. by its Partner,
443, Bazaar,
Virudhunagar. ... Petitioner in
W.P.(MD) No.4359/2022
M/s.V.V.V. and Sons Edible
Oils Limited,
Rep. by its Director,
443, Bazaar,
Virudhunagar. ... Petitioner in
W.P.(MD) No.4365/2022
Vs.
The State Tax Officer – 1,
Virudhunagar. ... Respondent in both W.Ps.
Common Prayer: Writ Petitions filed under Article 226 of Constitution of
India for issuance of a Writ of Certiorari calling for the records of the
respondent in his proceedings in TIN 33175721640/Assessment Year
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https://www.mhc.tn.gov.in/judis
Page No. 1 of 18
W.P.(MD) Nos.4359 & 4365 of 2022
2015-16 and quashing the Form PP Summon dated 06.01.2022 issued
therein.
For Petitioner
in both W.Ps. : Mr.R.L.Ramani, Senior Counsel
for Mr.S.Raja Jeyachandra Paul
For Respondent
in both W.Ps. : Mr.J.K.Jeyaselan
Government Advocate
COMMON ORDER
By this common order, both these Writ Petitions are being disposed of.
2. In these present Writ Petitions, the petitioners have challenged the impugned summon issued in Form PP calling upon the respective petitioners to furnish the following documents:-
“1.Trading account, profit and loss account and balance sheet with schedules, Income Tax returns and audited statement in form 3CD of the Income Tax Act 1961.
2.Cash Book, Day book, Petty Cash Book, Bank Book,
3.Purchase account, Sales account, Consignment account, stock transfer account, Productions-cum-stock register/manufacturing account, _______________ https://www.mhc.tn.gov.in/judis Page No. 2 of 18 W.P.(MD) Nos.4359 & 4365 of 2022
4.Input Tax Adjustment account, Input Tax on Capital Goods adjustment account, Purchase register, purchase return register, debit notes,
5.Sales register, sales return register, credit notes, stock book register, delivery notes register, transit pass account register, Ledgers,
6.Purchase invoices, Sales Invoices
7.Copy of Delivery challan in form JJ along with register
8.Registers maintained under CST Act viz Form No. 8, Form No. 8-A, Form No. 10, Form No. 12 and form No. 13 with respect of utilization of declaration forms received from the assessing authorities / issued through electronic declaration forms.
9.Export Documents, declaration forms etc for proof of exemptions claimed, if any
10.Transport records and connected Proof for claim of E1 Sales / Form F exemption.”
3. The impugned summon has been issued to the respective petitioners under Rule 16(1) of the Tamil Nadu Value Added Tax Rules, 2007. Rule 16(1) is intended for implementing Section 81 of the TNVAT Act, 2006.
_______________ https://www.mhc.tn.gov.in/judis Page No. 3 of 18 W.P.(MD) Nos.4359 & 4365 of 2022
4. The specific case of the petitioner is that summon in Form PP under Rule 16(1) of the TNVAT Rules, 2007 applies only to a third party and not to an assessee. That apart, it is submitted that the petitioner had filed returns under Section 21 of TNVAT Act, 2006 and therefore, the assessment was deemed to have been completed on 31.10.2016 for the Assessment Year 2015-2016 in terms of Section 22(2) of the TNVAT Act, 2006.
5. The learned Senior counsel for the petitioners would therefore submit that the power to summon documents or information from an assessee, who has filed regular returns could be only in accordance with Section 22(3) of the TNVAT Act, 2006.
6. Hence, it is submitted that the impugned summon is liable to be quashed. A specific reference was made to a decision of this Court rendered on 19.05.2021 in the petitioner's own case in W.P.(MD) Nos. 11328 to 11335 of 2017, wherein, it was observed as under:-
_______________ https://www.mhc.tn.gov.in/judis Page No. 4 of 18 W.P.(MD) Nos.4359 & 4365 of 2022 “3. His core contention is that it is only the Commissioner of Commercial Tax who could have called upon the petitioner to produce the documents in question for detailed scrutiny and that the respondent herein is not possessed of the jurisdiction to do so. There can be no exception to his contention. In fact, the same is virtually conceded by the respondent. But then, the respondent would state that it was the Commissioner of Commercial Tax who had chosen the petitioner's assessment for random scrutiny and that pursuant to his proceedings dated 21.04.2017, the impugned summons came to be issued. However, in the impugned summons, there is no reference to the Commissioner's proceedings.
4. In any event, in view of the interim stay granted by this court, the summons have become virtually infructuous. Therefore, these Writ Petitions are disposed of by directing the respondent to issue a fresh summon in this regard.
When the respondent issues summons, the respondent will take care to make a clear reference to the proceedings of the Commissioner of Commercial Tax referred to in the counter. No costs. Consequently, connected miscellaneous petitions are closed.”
7. The learned Government Advocate for the respondent Commercial Tax Department would submit that the impugned summon has been issued in consonance of Rule 10(11) of the Tamil Nadu Value Added Tax Rules, 2007. Specifically, the learned Government Advocate _______________ https://www.mhc.tn.gov.in/judis Page No. 5 of 18 W.P.(MD) Nos.4359 & 4365 of 2022 for the respondent would draw attention to paragraphs 9, 13 and 14 of the counter affidavit, wherein, it is stated as under:
“9. In respect of averments contained in Para 5 and 6, I submit that the Commissioner of Commercial Taxes has issued instructions relating to finalization of accounts relating to dealers who have been selected for detailed scrutiny u/s.22(3) of the TNVAT Act 2006 vide Commissioner of Commercial Taxes letter in No.R5/4593/2017 dated 08.01.2021. In the Para 13.1.B of the letter the Commissioner of Commercial Taxes has given the following instructions-
"Where Pre-Assessment notice or Best Judgment notices already initiated consequent to field audit or surprise inspection proposals received from Enforcement Wing, to the selected tax payers, no summons or notice need to be issued to the tax payers requiring them to produce books of accounts for detailed check under section 22(3), if the related assessment years are already covered as it is presumed that detailed verification already been carried out during such inspection or audit of the premises of the tax payers".
10. ....
...
13. I further submit that knowing the fact that the assessment for the year 2015-16 have already been selected for detailed scrutiny u/s. 22(3) of TNVAT Act 2006 by the Commissioner of _______________ https://www.mhc.tn.gov.in/judis Page No. 6 of 18 W.P.(MD) Nos.4359 & 4365 of 2022 Commercial Taxes and that the Form-PP summon has been issued only in accordance with the rule 10(11) of TNVAT Rules 2007, the petitioner has filed this writ petition only in order to prolong or to dilute the proceedings, the petitioner has unwantedly filed this writ petition and thereby dragging on this issue. It is also evident from the conduct of the petitioner that they are not willing to produce the accounts to the department.
14. I further submit that the department's initiation of issuing summon in Form-PP for production of accounts based on the two grounds namely shop inspection coupled with selection of random scrutiny by the Commissioner of Commercial Taxes. The issuance of Form-PP by the department is well within the jurisdiction of the assessing officer along with complying the statutory provisions. The petitioner's contention of issuance of Form-PP is not in accordance with the law either by invoking section 81 or failure to invoke section 65(4) is not at all sustainable.
Being an assessing officer the respondent/assessing officer is having powers to verify the accounts of the dealer and to conduct any enquiry if required. The act of the respondent is only to discharge the official duty and well within the provisions of the statutory obligation.
8. Hence, it is submitted that the decision of this Court rendered on 19.03.2021 in W.P.(MD) Nos.11328 to 11335 of 2017 is not relevant and therefore, these Writ Petitions are liable to be dismissed. _______________ https://www.mhc.tn.gov.in/judis Page No. 7 of 18 W.P.(MD) Nos.4359 & 4365 of 2022
9. By way of rejoinder, the learned Senior Counsel for the petitioners reiterated that an identical issue was disposed of by this Court for the previous assessment year in W.P.(MD) Nos.11328 to 11335 of 2017 and therefore, the same order has to be followed.
10. That apart, the summons in Form PP under Rule 16(1) of the TNVAT Rules, 2007 can only apply to the proceedings under Section 81 of the TNVAT Act, 2006 and therefore, the machinery prescribed under Section 81 of the TNVAT Act, 2006 read with Rule 16(1) of the TNVAT Rules, 2007 read with Form PP prescribed will apply to a third party and not to an assessee like the petitioner whose assessment is deemed to be completed under Section 22(2) of the TNVAT Act, 2006. Hence, he prays for quashing the impugned summons issued by the respondent.
11. I have considered the arguments advanced by the learned Senior Counsel for the petitioners and the learned Government Advocate for the respondent.
12. For the purpose of proper and detailed discussion, the relevant provisions are extracted hereunder:-
_______________ https://www.mhc.tn.gov.in/judis Page No. 8 of 18 W.P.(MD) Nos.4359 & 4365 of 2022 ACTS RULES
22.Deemed Assessment and 10.Input Tax Credit procedure to be followed by the assessing authority.- (1) ....
(2) ....
(1) ...... ....
(2) ......
(11) The method of selection by the
(3) Notwithstanding anything Commissioner referred to in sub-section (3) contained in sub-section (2), not of section 22 shall be based on suitable exceeding twenty per cent of the stratified random sampling method and such total number of such assessments selection shall not exceed twenty per cent of shall be selected by the the cases assessed under sub-section (2) of Commissioner in such manner as section 22 and intimate the details of such may be prescribed for the selection to the assessing authority for purpose of detailed scrutiny detailed scrutiny of accounts. Such list shall regarding the correctness of the be exhibited on the Notice Board of the returns submitted by the dealer assessment circles and also in the website of and in such cases, revision of the department. The assessing authority shall assessment shall be made, call for the accounts of those assessees for wherever necessary. detailed scrutiny and pass appropriate orders. _______________ https://www.mhc.tn.gov.in/judis Page No. 9 of 18 W.P.(MD) Nos.4359 & 4365 of 2022
81. Power to summon 16.Miscellaneous:-
witnesses and production of documents.-- (1) The summons under Section 81 for the (1) An assessing authority, or production of a document or for the an appellate or revising authority appearance of any person shall be in Form including the Appellate Tribunal PP.
or any officer of the Commercial Taxes Department, not below the 2) Where a person to whom a notice under rank of an Deputy Commercial section 45 is served objects to it by a Tax Officer shall, for the statement under subsection (5) of section 45, purposes of this Act, have all the such statement shall be in Form QQ. powers conferred on a court by the Code of Civil Procedure, (3) A person other than the assessee or his 1908 (Central Act V of 1908), agent or representative who appears pursuant for the purpose of - to a summon under section 81 to give oral or documentary evidence shall be paid traveling
(a) summoning and allowance and bata at such rates as may be enforcing the attendance of fixed by the State Government from time to any person and examining time.
him on oath or affirmation;
and (4) The Government may, in the public
(b) compelling the interest or to mitigate hardship to the trade production of any document. remit the whole or any part of the tax or penalty or fee payable in respect of any (2) Without prejudice to the period by any dealer under section 31 subject provisions of any other law for to the condition that in respect of remission the time being in force, where a of tax the dealer had not collected tax on the person to whom a summon is turnover in respect of that period for which issued either to attend to give remission is sought to be granted. evidence, or produce accounts, registers, records or other (5) The notice for levy of penalty or documents at a certain place and interest will be issued in Form RR. time intentionally omits or fails to attend or produce accounts, (6) In the case of any guardian, trustee, or registers, records or other agent of any minor carrying on a business on documents at such place or time, behalf of and for the benefit of such minor, the authority or officer the tax shall be levied and collected from mentioned in sub-section (1) such guardian, trustee or agent, as if the may, after giving the person minor was conducting the business and all concerned a reasonable the provisions of the Act and Rules made opportunity of being heard, under shall apply accordingly. impose upon him by way of penalty a sum not exceeding (7) In the case of business owned by a _______________ https://www.mhc.tn.gov.in/judis Page No. 10 of 18 W.P.(MD) Nos.4359 & 4365 of 2022
13. The object of Section 22(3) of the TNVAT Act, 2006 is implemented by Rule 10 of the TNVAT Rules, 2007. As per Section 22(3) of the Act, not exceeding 20% of the total number of such assessments shall be selected by the Commissioner in such manner as may be prescribed for the purpose of detailed scrutiny regarding the correctness of the returns submitted by the dealer and in such cases, revision of assessment shall be made, wherever necessary.
14. As per Rule 10(11) of the TNVAT Rules, 2007, the method of selection by the Commissioner referred to in sub-section (3) of section 22 shall be based on suitable stratified random sampling method and such selection shall not exceed twenty per cent of the cases assessed under Section 22(2) of the TNVAT Act, 2006.
15. Wherever there is stratified random sampling method of selection, an assessee is required to be intimated the the details of such selection to the assessing authority for detailed scrutiny of accounts. Such list is to be exhibited on the Notice Board of the assessment circles and also in the website of the department. The assessing authority can call for _______________ https://www.mhc.tn.gov.in/judis Page No. 11 of 18 W.P.(MD) Nos.4359 & 4365 of 2022 the accounts of those assessees for detailed scrutiny and pass appropriate orders.
16. Section 81 of the TNVAT Act, 2006 is a generic provision. It is not confined merely to a third party. The power to issue summon to a witness and production of documents is very wide and would include a dealer. Under Section 81 of the Act, an Assessing Authority, or an Appellate Authority or a Revising Authority including the Appellate Tribunal or any Officer of the Commercial Taxes Department, not below the rank of an Deputy Commercial Tax Officer shall, for the purposes of the Act, have all the powers conferred on a Court by the Code of Civil Procedure, 1908, for the purpose of (a) summoning and enforcing the attendance of any person and examining him on oath or affirmation; and
(b) compelling the production of any document.
17. As per Sub-Section 2 to Section 81 of TNVAT Act, 2006, the Authority or Officer mentioned in Sub-Section 1 to Section 81 of the Act can impose penalty of a sum not exceeding Rs.500/- on a person who intentionally omits or fails to attend or produce accounts, registers, records or other documents at such place or time. _______________ https://www.mhc.tn.gov.in/judis Page No. 12 of 18 W.P.(MD) Nos.4359 & 4365 of 2022
18. As per Sub-Section 3 to Section 81 of TNVAT Act, 2006, any officer of the Commercial Taxes Department, not below the rank of an Deputy Commercial Tax Officer shall have powers to call for such information, particulars or records as he may require from any person for the purpose of assessment, levy and collection of tax under this Act.
19. Thus, the power under Section 81 of the TNVAT Act, 2006 is wide and is not eclipsed by the power vested under Section 22(3) of the TNVAT Act, 2006 read with Rule 10(11) of the TNVAT Rules, 2007.
20. The purpose of Section 22(3) of the TNVAT Act, 2006 read with Rule 10(11) of the TNVAT Rules, 2007 is to ensure that atleast 20% of the total number of such assessments are selected by the Commissioner in a manner as may be prescribed for the purpose of detailed scrutiny regarding the correctness of the returns submitted by the dealer. Wherever there is a stratified random sampling method of selection by the Commissioner, revision of assessment can be made, wherever necessary. This is in addition to the power to be exercised independently by an Assessing Officer under Section 81 of the TNVAT Act, 2006. _______________ https://www.mhc.tn.gov.in/judis Page No. 13 of 18 W.P.(MD) Nos.4359 & 4365 of 2022
21. Merely because assessment is deemed to be completed under Section 22 of TNVAT Act, 2006, ipso facto will not mean that an Assessing Officer cannot call for information from a dealer whose name features in the list under Section 22(3) of the Act.
22. To refuse to give particulars called for is to impede an assessment by an Assessing Officer. It is not contemplated. Section 22(3) of the TNVAT Act, 2006 is intended to ensure that even if the Assessing Officer does not intend to assess the return, by random stratified sampling, the Assessing Officer can be forced to look into the returns of those assesses whose returns would have otherwise escaped scrutiny.
23. In this case, it has been informed by the respondent Commercial Tax Department that the Commissioner of Commercial Taxes vide Letter dated 08.01.2021 bearing reference No.R5/4593/2017 has issued instructions relating to finalization of accounts relating to dealers who have been selected for detailed scrutiny under Section 22(3) of the TNVAT Act, 2006.
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24. The paragraph 13.1.B of the letter of the Commissioner of Commercial Taxes has been extracted in paragraph 9 of the counter affidavit, wherein, it has been stated that "Where Pre-Assessment notice or Best Judgment notices already initiated consequent to field audit or surprise inspection proposals received from Enforcement Wing, to the selected tax payers, no summons or notice need to be issued to the tax payers requiring them to produce books of accounts for detailed check under section 22(3), if the related assessment years are already covered as it is presumed that detailed verification already been carried out during such inspection or audit of the premises of the tax payers".
25. Thus, I see no embargo on the respondent Commercial Tax Department from summoning the respective petitioners to furnish the records. In fact, the assessment will be deemed to have been completed only if the petitioners had complied with all the requirements of Section 22(2) of the TNVAT Act, 2006. The return that was to be filed under Rule 7 of the TNVAT Rules, 2007 should be in the prescribed form and should accompany prescribed documents and proof of payment of tax. _______________ https://www.mhc.tn.gov.in/judis Page No. 15 of 18 W.P.(MD) Nos.4359 & 4365 of 2022
26. Merely because the assessment is deemed to have been completed on 31st October, 2016 in both cases would not mean that the officers are precluded from exercising the power under Section 27 of the TNVAT Act, 2006 or under Section 25 of the Act.
27. Issuance of summons is for ascertaining to produce information. Whether the petitioners have complied with all the requirements of Section 22(2) of the Act and whether the declarations in the returns filed by the petitioners are correct or not can be ascertained only if records are summoned. Therefore, there are no merits in the present Writ Petitions and these Writ Petitions are liable to be dismissed.
28. Accordingly, these Writ Petitions are dismissed. No costs. Consequently, connected Miscellaneous Petitions are closed.
30.04.2024 Index: Yes / No Neutral Citation: Yes / No Speaking Order / Non-Speaking Order JEN _______________ https://www.mhc.tn.gov.in/judis Page No. 16 of 18 W.P.(MD) Nos.4359 & 4365 of 2022 Copy To:
The State Tax Officer – 1, Virudhunagar.
_______________ https://www.mhc.tn.gov.in/judis Page No. 17 of 18 W.P.(MD) Nos.4359 & 4365 of 2022 C.SARAVANAN, J.
JEN Pre-Delivery common order made in W.P.(MD) Nos.4359 & 4365 of 2022 and W.M.P.(MD) Nos.3685 & 3689 of 2022 30.04.2024 _______________ https://www.mhc.tn.gov.in/judis Page No. 18 of 18