Allahabad High Court
M/S Nawla Ispat Pvt. Ltd. vs Additional Commissioner Grade-I And 2 ... on 1 March, 2019
Bench: Bharati Sapru, Piyush Agrawal
HIGH COURT OF JUDICATURE AT ALLAHABAD Court No. - 35 Case :- WRIT TAX No. - 1350 of 2018 Petitioner :- M/S Nawla Ispat Pvt. Ltd. Respondent :- Additional Commissioner Grade-I And 2 Others Counsel for Petitioner :- Suyash Agarwal,Ankur Agarwal,Sri Rakesh Ranjan Agrawal Counsel for Respondent :- C.S.C. Hon'ble Bharati Sapru,J.
Hon'ble Piyush Agrawal,J.
(Delivered by Hon'ble Piyush Agrawal, J.) The present writ petition has been filed challenging the reassessment proceedings initiated against the petitioner for Assessment Years 2011-12 & 2012-13 under the U.P. Value Added Tax Act, 2008 (hereinafter referred to as, 'the VAT Act') as well as the impugned order passed by the Additional Commissioner, Grade - I, Commercial Tax, Meerut Zone, Meerut dated 01.08.2018 and consequential reassessment notices dated 16.08.2018 issued by the Joint Commissioner, Corporate Cell, Commercial Tax, Meerut under section 28(2) read with section 29(7) of the VAT Act.
The facts of the case, in brief, are that the petitioner is a Company incorporated under the Indian Companies Act, 1956. It is duly registered under U.P. VAT Act as well as the Central Sales Tax Act and carrying on the business of manufacturing and sale of ingots made of iron steel and runner riser falling under Chapter - 72 of the 1st Schedule to the Central Excise Tariff Act, 1985 and section 14 of the Central Sales Tax Act.
The original assessment orders for the Assessment Years 2011-12 and 2012-13 were passed on 31.07.2014 and 16.09.2015 respectively after due verification of books of account maintained by the petitioner and the input tax credits, as claimed, were allowed.
On perusal of the assessment orders, it reveals that the Assessing Authority has applied its mind to the disclosed purchase and sales figures against tax invoice and input tax credits, claimed on the raw materials purchased in the years in dispute and the same were allowed after due verification of documents and material on records.
On 04.07.2013, the business premises and residence of Directors of M/s Trikoot Iron & Steel Casting Limited, Industrial Estate, Meerut Road, Muzaffarnagar (hereinafter referred to as, 'M/s TISCL') was surveyed by the Director General of Central Excise Investigation, New Delhi (hereinafter referred to as, 'the DGCEI'). In the said survey, it was alleged that certain documents, hard-disk, pen-drive, etc. were recovered and seized by the said authority.
On 11.07.2013, the business premises of the petitioner was also searched by the DGCEI (in pursuance of search of M/s TISCL) and seized certain documents and panchnama was also drawn. The statement of Sunil Jain, the Director of the petitioner - Company, was recorded on 22.10.2013 at the Office of DGCEI, New Delhi.
Thereafter, a notice dated 10.02.2015 was issued by the Additional Director General (Adjudication), DGCEI, New Delhi against the petitioner. In reply to the said notice, the petitioner submitted a detailed objection/reply on 10.02.2016 before the Additional Director General (Adjudication), DGCEI, New Delhi.
Thereafter, the reassessment proceedings have been initiated against the petitioner and a notice dated 05.04.2018 was issued by the respondent no. 1 proposing to reopen the completed assessment for the Assessment Years 2011-12 & 2012-13 on the basis of an information received from the Deputy Commissioner (SIB), Commercial Tax, Muzaffarnagar, inter alia, stating that the survey was conducted on 11.07.2013 at the business premises of the petitioner and on 04.07.2013, at the business premises of M/s TISCL, in which certain discriminatory materials were found.
The petitioner filed a detailed reply of the said notices on 25.05.2018. In the reply, it was specifically stated that in pursuance of the search/survey, a notice was issued on 10.02.2015 and the same was replied to in detail, but no action, whatsoever, has been taken against the petitioner till date by the excise authorities, i.e., the DGCEI, New Delhi and therefore, no proceeding for reassessment should be initiated against the petitioner on the basis of search of Excise Authorities.
The respondent no. 1, by the impugned order dated 01.08.2018, rejected the reply/objection of the petitioner and granted approval/sanction to the respondent no. 2 to reopen the assessment under section 29(7) of the VAT Act for both the Assessment Years, i.e., 2011-12 & 2012-13. After getting sanction/approval from the respondent no. 1, on 16.08.2018, the respondent no. 2 issued notices to the petitioner from framing the reassessment for the disputed years.
We have heard Shri Rakesh Ranjan Agrawal, learned Senior Counsel, assisted by Shri Suyash Agarwal, learned counsel for the petitioner and Shri C.B. Tripathi, learned counsel appearing on behalf of the respondent nos. 1, 2 & 3.
It has been argued on behalf of the petitioner that initiation of the reassessment proceedings is bad as the same is being initiated merely on change of opinion and re-examination of the same material which was available before and which had been examined by the Assessing Authority while framing the original assessment order and that, such course is not permissible under the law.
It has further been argued that under the garb of reassessment proceedings, the authorities cannot be permitted to make a fishing or roving inquiry. The reassessment proceedings have only been initiated on the basis of survey conducted by the excise authorities, i.e., DGCEI, New Delhi, at the business premises of M/s TISCL on 04.07.2013 and thereafter, at the business premises of the petitioner on 11.07.2013. Detailed reply of the notices had been submitted by the petitioner and no further action was taken against the petitioner. Neither any tax or duty or penalty has been imposed, nor has been served with any order and therefore, the initiation of the proceedings, only on the basis of the said proceedings, is not permissible under the law.
Learned counsel appearing on behalf of the State has submitted that the reassessment proceedings have been initiated against the petitioner in accordance with law and there is no substance in the submissions made on behalf of the petitioner and hence, the writ petition is liable to be dismissed. Moreover, he has emphasized that during the course of search/survey by the DGCEI, New Delhi, certain materials have been surfaced, which show that the goods have been sold clandestinely, i.e., without payment of due taxes.
We have perused the records of the case.
Admittedly, the reassessment proceedings have been initiated only on the basis of the information received from the Deputy Commissioner (SIB), Commercial Tax, Muzaffarnagar pertaining to the search/survey dated 04.07.2013 at M/s TISCL and search/survey dated 11.07.2013 carried out at the business premises of the petitioner by the DGCEI, New Delhi. On the basis of the said search, notices were issued by the excise authorities and the replies have been submitted by the petitioner. Thereafter, no proceeding, whatsoever, has been undertaken by the excise authorities, nor has levied any duty, tax or imposed penalty upon the petitioner. The said fact has been mentioned by the petitioner in paragraph no. 13 of the writ petition, which has neither been denied by the State in the counter affidavit dated 07.10.2018, nor in the supplementary counter affidavit dated 31.01.2019. The basis of reassessment proceedings initiated by the respondents - authorities is only the survey/search conducted by the DGCEI, New Delhi and no further action or order has been passed or brought on record by the respondents.
The jurisdiction to initiate reassessment proceedings arises only after the Assessing Authority records his reason to believe that any turnover has escaped assessment. Thus, not only is the belief of escapement essential, but, more importantly, it is necessary for the Assessing Authority to record his reason(s) as to existence of the belief of such escapement. In the present case, the respondents, while making proposal for reassessment, record their reason to the effect that survey has been conducted by the Central Excise authorities at the business premises of M/s TISCL, in which certain incriminating materials were found, which represent clandestine removal of goods and non-payment of due taxes and therefore, verification is required for the said figures and reassessment proceedings may be permitted.
The respondent granted sanction to reopen the completed assessment only for the purposes of verification. Where there is no fresh material available with the Assessing Authority, reassessment proceedings are not permissible under the law or under section 29 of the VAT Act, which is nothing but making a fishing or roving inquiry of the matter.
This Court in M/s Kejriwal & Sons Vs. State of U.P. & 2 Others (2017 UPTC, 1141), in paragraph no. 54, has made following observation:-
"We have examined the issue in detail and found that the submission of the learned counsel for the department, appears to be attractive, however, in the present set of facts, particularly when admittedly the transaction has properly been examined and verified and where there is no fresh material available with the assessing authority, re-assessment proceedings are nothing but are roving and fishing inquiry of the matter, which is not permissible under the law nor it is permissible under Section 29 of the VAT Act."
This Court in paragraph nos. 36 & 37 of M/s. Bharat Heavy Electricals Limited Vs. State of U.P. & 2 Others (2017 NTN (63) 37) has observed as under:
"36. Thus we do not find there exist any reason less so cogent or germane to the belief of escapement, if any. In fact there neither exists a belief with the petitioner's assessing authority as to escapement of turnover nor there exist any reason to justify a belief of escapement. The initiation of reassessment proceedings against the petitioner is based on presumptions devoid of factual basis or reasonable ground germane to the formation of belief regarding escaped turnover.
37. To allow the respondents to reassess the petitioner in the present facts would allow the State to make an inquiry into the facts on which its authorities have not entertained a reason to believe inasmuch as the sanction order and the proposal containing the belief do not even remotely suggest that the Assessing Authority has any material or information that the petitioner had not shown separately the value of labour and services and amount of profit accrued on such labour and services."
In the present case, the reassessment proceedings have only been initiated on the basis of the survey/search conducted by the Central Excise authorities, i.e., DGCEI, New Delhi, and this fact is admitted between the parties that no further action has been taken by the said authorities, nor any tax, duty or penalty has been imposed upon the petitioner. Therefore, the present proceedings of reassessment are absolutely bad in law and are not permissible under the law. Hence, the same are liable to be set aside.
The impugned order dated 01.08.2018 passed by the Additional Commissioner, Grade - I, Commercial Tax, Meerut Zone, Meerut and consequential reassessment notices dated 16.08.2018 issued by the Joint Commissioner, Corporate Cell, Commercial Tax, Meerut for the Assessment Years 2011-12 & 2012-13 under the U.P. VAT Act are hereby quashed.
The writ petition succeeds and is allowed.
Order Date :-01.03.2019 Amit Mishra