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2016 (6) TMI 220 - DELHI HIGH COURT

2016 (6) TMI 220 - DELHI HIGH COURT - [2016] 92 VST 401 (Del) - Validity of notices issued during the pendency of this petition - Section 59(2) of the Delhi Value Added Tax Act, 2004 - Call for production of records, books of accounts, registers and other documents etc. - No rule had been framed under Section 102(2)(z) of the DVAT Act in regard to the exercise of the power under Section 59(2) thereof - whether in the absence of such a rule, the exercise of the powers under Section 59(2) of the D .....

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of production of records. The Commissioner has to exercise the power for 'the proper administration' of the DVAT Act, he has to make assure that what is being asked to be produced, in the form of books of accounts and other documents, are "related to the activities" of either the person to whom such notice is issued or any other person as the Commissioner may deem necessary. The Commissioner has to decide what document should be asked to be produced. It is another matter that there have been in .....

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of the above instances, the language of the provision was such that the exercise of the power was dependent on the framing of the Rules. However, Section 59 (2) of the DVAT Act is so worded that it can be given effect to even in the absence of the rules. Therefore, in the absence of any rules being framed under Section 102(2)(z) read with Section 59(2) of the DVAT Act, the power of the Commissioner under Section 59(2) of the DVAT Act to call upon a person to produce the books of accounts and oth .....

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, that does not preclude the Petitioner, along with other dealers, to make a representation to the Government of NCT of Delhi and in particular to the DT&T that Rules in terms of Section 102(2)(z) read with Section 59(2) of the DVAT Act should be framed. They can draw the attention of the GNCTD to the provisions in the ten other states which have VAT statutes. If such representation is made, the Court has no doubt that it will receive adequate and serious consideration in the hands of GNCTD and .....

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har, J. 1. The challenge in this petition is to system generated notices dated 19th June 2015, 17th July 2015, 17th August 2015, 19th August 2015 and 7th October 2015 issued to the Petitioner by Value Added Tax Officers (VATOs) of the Department of Trade & Taxes ('DT&T') of different Wards under Section 59 (2) of the Delhi Value Added Tax Act, 2004 (DVAT Act), uploaded on the DT&T's website. 2. During the pendency of this petition, 13 further system generated notices, eac .....

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r, Ward-206 who would exercise jurisdiction as far as the Petitioner is concerned and that this had to be read with the order dated 12th November 2013 issued by the Commissioner (VAT) inter alia delegating the powers of assessment and re-assessment under Section 32 of the DVAT Act to all officers not below the rank of the Assistant VATO. The Court recorded in para 6 of its order dated 4th March 2016 as under: "6. Mr Narayan, ASC on instruction of Mr M. K. Aggarwal, Assistant Commissioner, s .....

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sel appearing for the Petitioner, drew the attention of the Court to one of the grounds urged in petition on which he desired the Court to give a ruling. The said ground reads as under: "A. Because the impugned notices u/s 59(2) are required to be struck down for being issued in the absence of rules being framed under the provisions of Section 102(2) (z) of the Act. Section 102(2)(z) empowers the Government to make rules laying down the conditions subject to which the Commissioner may requi .....

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anner in which the vehicles would be impounded. Reliance is also placed upon the judgment of the Hon'ble Bombay High Court in the case of Garware Shipping Corporation Ltd. & P.R. Sawant Vs. J.H. Joglekar, Addl, Collector of Customs reported as 1984 (15) ELT 375. There also, confiscation of the ship carrying smuggled goods was set aside when no rules were framed by the Government for precaution required to be taken U/S 115(2) of the Customs Act, 1962 (Annexure P10). The word 'prescrib .....

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er' registered under the DVAT Act cannot be called upon by the Commissioner or other officer mentioned in Section 59 (2) of the DVAT Act, to produce records, books of accounts etc. 6. At that stage, Mr. Narayan referred to the decision of this Court in The Commissioner, VAT v. A.K. Woollen Industries (order dated 19th February 2015 in Sales Tax Appeal No. 65 of 2014) and submitted that absence of such a rule will not preclude the exercise of the powers under Section 59 (2) of the DVAT Act. T .....

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records subject to such conditions "as may be prescribed". In these 10 States, Rules have been framed in terms of the said provision. A tabulation of such State Acts and the corresponding Rules in the said States are set out as under: S.No. State VAT Act Section VAT Rules Rule 1. Assam VAT Act 2003 74 (1) Assam VAT Rules 2005 40 2. Bihar VAT Act 2005 56 (1) Bihar VAT Rules 2005 35 3. Gujarat VAT Act 2003 67 (1) Gujarat VAT Rules 2006 48 (notice in form 401) 4. J&K VAT Act 2005 66 ( .....

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s may be prescribed does not follow the words conferring the power to call for records. The following tabular column gives the names of the 12 statutes and the corresponding provision: S.No. State Act Section 1. Uttarakhand VAT Act, 2005 42 (1) 2. UP VAT Act, 2008 45 (1) 3. Tamil Nadu VAT Act, 2006 65 (1) 4. Sikkim VAT Act, 2005 62 5. Puducherry VAT Act, 2007 55 (1) 6. Nagaland VAT Act, 2005 64 (1) (b) 7. Meghalaya VAT Act, 2003 84 (5) 8. Madhya Pradesh VAT Act, 2002 63 (1) 9. Kerala VAT Act, 20 .....

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ions 59 (2) of the DVAT Act that no rules have been framed despite Section 102 (2) (z) of the DVAT Act providing for it. Relying on the decision of the Supreme Court in Dr. Subramanian Swamy v. State of Tamil Nadu (2014) 5 SCC 75, Mr. Jain submitted that in the absence of any rules being framed thereunder, the power under Section 59 (2) of the DVAT Act cannot be exercised. He further relied on the decisions in Goa Central Cooperative Consumers v. Bhagwant Narayan Tendulkar (1998) 4 SCC 527 and T .....

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sessment of tax, interest and penalty, ignoring that Section 59 falls under Chapter X, whereas Section 32 and 33 for making assessments fall under Chapter VI of the Act; (c) to illegally deny/block the refund; (d) to block the downloading of forms under the Central Act; when no such provision exists under Rule 5 (4) of the Central Sales Tax (Delhi) Rules, 2005; (e) to seek explanation/reason for shortfall in the deposit of tax as compared to the earlier years; (f) to reopen the concluded assessm .....

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e also referred to the requirement of a separate notice under Rule 75 (1) of the Gujarat VAT Rules 2006 for production of accounts etc. He also referred to Form VAT 401 issued under Rule 75 (1) of the Odisha VAT Rules 2005 and Form 603 under Rule 70 of the Maharashtra VAT Rules 2005. 12. Countering the above submissions Mr. Narayan referred to the decision in Orissa State (Prevention & Control of Pollution) Board v. Orient Paper Mills (2003) 10 SCC 421. According to him, the failure to frame .....

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dhir Chandra Nawn v. Wealth Tax Officer, Calcutta 1968 (69) ITR 897 (SC) and Mahim Patram Pvt. Ltd. v. Union of India 2007 (6) VST 248. 13. The above submissions have been considered. Section 59 of the DVAT Act reads as under: 59. Inspection of records (1) All records, books of accounts, registers and other documents, maintained by dealer, transporter or operator of a warehouse shall, at all reasonable times, be open inspection by the Commissioner. (2) The Commissioner may, for the proper admini .....

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cords, books of account, registers and other documents; (ii) answer such questions; and (iii) prepare and furnish such additional information; relating to his activities or to the activities of any other person as the Commissioner may deem necessary. (3) The Commissioner may require a person referred to in sub-section (2) above, to (a) prepare and provide any documents; and (b) verify the answer to any question; in the manner specified by him. (4) The Commissioner may retain, remove, take copies .....

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(ii) subject to such conditions "as may be prescribed. The expression 'as may be prescribed' has to be interpreted as requiring Rules to be framed in the matter of inspection of production of records. In Dr. Subramanian Swamy v. State of Tamil Nadu (supra) the Supreme Court was interpreting Section 45 of the Tamil Nadu Hindu Religious and Charitable Endowments Act, 1959 ('TNHRCE Act') which envisages the appointment of an Executive Officer ('EO') by the Commissioner .....

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he legislature uses the term "prescribed", it only refers to a power that has simultaneously been provided for or is deemed to have been provided and not otherwise. Similarly, Section 2(n) of the Consumer Protection Act, 1986 defines "prescribed" as "prescribed by rules made by the State Government or as the case may be, by the Central Government under the Act". 61. Section 45 of the 1959 Act provides for appointment of an Executive Officer, subject to such conditio .....

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Ltd. v. LIC AIR 1963 SC 1083, Maharashtra SRTC v. Babu Goverdhan Regular Motor Service (1969) 2 SCC 746 and BSNL v. BPL Mobile Cellular Ltd (2008) 13 SCC 597). 15.1 In Goa Central Cooperative Consumers v. Bhagwant Narayan Tendulkar (supra), the Supreme Court interpreted Section 45 of the Maharashtra Cooperative Societies Act, 1960 which provided that: 45. Restrictions on other transactions with non-members - Save as is provided in this Act, the transaction of a society with persons other than me .....

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using Society Limited (supra) where the Karnataka High Court was interpreting Section 38 of the Bangalore Development Authority Act, 1976 which stated that subject to such restrictions, conditions and limitations as may be prescribed, the Authority shall have power to lease, sell or otherwise transfer any movable or immovable property which belongs to it, and to appropriate or apply any land vested in or acquired by it for the formation of open spaces or for building purposes or in any other man .....

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of the provisions considered in the above decisions, and Section 59 (2) of the DVAT Act. It is not as if there are no guidelines in Section 59 (2) of the DVAT Act to indicate under what circumstances the Commissioner may require production of books of accounts, records etc. Apart from the fact that the Commissioner has to exercise the power for 'the proper administration' of the DVAT Act, he has to make assure that what is being asked to be produced, in the form of books of accounts and .....

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he power under Section 59 (2) is incapable of being exercised. It is in this context that the language used in Section 45 of TNHRCE Act or Section 45 of the Maharashtra Cooperative Societies Act, 1960 or Section 38 of the Bangalore Development Authority Act, 1976 became relevant. In each of the above instances, the language of the provision was such that the exercise of the power was dependent on the framing of the Rules. However, Section 59 (2) of the DVAT Act is so worded that it can be given .....

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nder: 19. Power to declare air pollution control areas - (1) The State Government may, after consultation with the State Board, by notification in the Official Gazette, declare (in such manner as may be prescribed), any area or areas within the State as air pollution control area or areas for the purposes of this Act. 19.2 The Supreme Court first dealt with the expression 'such manner as may be prescribed and distinguished the said expression from the expressions 'in the manner prescribe .....

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dity about it and it may have the meaning of a situation of being in existence during a particular time or contingent, and so on and so forth. This is to say, something to happen in a manner, if such a manner is in being or exists, if it does not, it may not happen in that manner. Therefore, the reading of the provision under consideration makes it clear that manner of declaration is to be followed as may be prescribed i.e., if any prescribed. 13. Thus, in case manner is not prescribed under the .....

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e, however, the rules have been framed prescribing the manner, undoubtedly, the declaration must be in accordance with such rules. 19.3 The Supreme Court reiterated in para 15 that the power which vests in an authority would not cease to exist simply for the reason that the rules have not been framed or the manner of exercise of the power has not been prescribed. So far as Section 54 of the Act is concerned, it only enumerates the subjects on which the State Government is entitled to frame rules .....

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he statute expressly provides for the same. In other words framing of the rules is not condition precedent to the exercise of the power expressly and unconditionally conferred by the statute. The expression 'subject to the rules' only means, in accordance with the rules, if any. If rules are framed, the powers so conferred on authority could be exercised in accordance with these rules. But if no rules are framed there is no valid and the authority is not precluded from exercising the pow .....

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