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2016 (1) TMI 1116 - MADRAS HIGH COURT

2016 (1) TMI 1116 - MADRAS HIGH COURT - tmi - Recovery of dues - power of enforcement wing officials to collect cheques - The Commissioner has also issued circulars following the directions of this Court. It appears that the orders as well as administrative instructions have only fallen on deaf ears and as a result, many writ petitions are being filed on similar grounds. - Non-submission or delayed submission of 'C-Forms' - Reversal of input tax credit - Held that:- The power to levy and de .....

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claim of the assesse before passing orders. - This Court has time and again held that the enforcement wing officials have no authority to collect cheques. Their duty under Section 65 of the TNVAT Act is limited to inspection and drawing of a report. As per Section 65 (3), the enforcement wing officials, even when they discover that there is an attempt to evade tax, they can only seize the records for the purpose of enquiry. However, the demand can be made only after assessment and that has t .....

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edly in numerous cases has set aside the orders of the assessing authority with directions to consider all the materials, to give proper reasons for not accepting the objections, to give proper opportunity including personal hearing, to apply their mind independently and not to follow the report of the enforcement wing officials and that the enforcement wing officials have no power to collect cheques. The Commissioner has also issued circulars following the directions of this Court. It appears t .....

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been granted by the respondent and the contentions have not been considered by the respondent. The further grievance of the petitioner is that though the C Forms and other documents have been submitted, the respondent has not considered the same and has passed the impugned proceedings. 3. Whereas the petitioner filed W.P.No.3089 of 2016 alleging that the impugned order dated 14.05.2015 has been passed without affording any opportunity and thereafter, the petitioner submitted all the statutory fo .....

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he CST Act. Further, ₹ 2,46,141/- (Rupees Two Lakhs Forty Six Thousand One Hundred and Forty One only) was collected and once the order is reversed under the CST Act, the impugned order under the TNVAT could not survive and the amount collected has to be refunded. 5. By consent, the main writ petitions themselves are taken up for final hearing. 6. The learned Counsel for the petitioner painstakingly contended that the order passed by the respondent is a non-speaking order as various conten .....

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s mind to the explanations and afford a personal hearing was sought for, the respondent has not granted the same. The learned Counsel also contended that being a quasi-judicial officer, the respondent must apply his mind independently to the objections and cannot rely upon the statement made to the officer or the report of the officer. 7. Moreover, the learned Counsel for the petitioner submitted that a cheque for a sum of ₹ 11,98,512/- (Rupees Eleven Lakhs Ninety Eight Thousand Five Hundr .....

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earned Counsel for the petitioner also contended that it isonly mandatory under the CST Act to deal with the items mentioned in the Registration Certificate and it is not mandatory under the TNVAT Act. The only mandate is to mention the purchase and sales turnover in the returns, which the petitioner has made and therefore, when all the documents are available, the respondent cannot reverse the ITC claiming that transactions with registered dealers who have deviated from their routine are bogus. .....

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t. Subsequently, the form was submitted along with the objections dated 21.09.2015 and a request was sought to revise the assessment. However, the same was turned down by the respondent refusing to exercise the power vested in him without considering the provisions. He further submitted that C forms can be submitted at any time even after the assessment orders are passed and once they are filed, the same have to be considered and the orders revising the assessment have to be passed. 10. Insofar .....

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ned Counsel for the petitioner urged this Court to set aside the impugned proceedings and sought refund of the amounts collected. 12. Per contra, Mr.Kanmani Annamalai, the learned Additional Government Pleader (Taxes) appearing for the respondent contended that the purchase bills have not been produced as contended by the learned Counsel for the petitioner and they have failed to avail the opportunity provided by the authority through the notice dated 01.10.2015 to submit the documents and hence .....

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ing officials and paid money, cannot now raise any objections during the assessment proceedings and therefore, no refund can be made and sought the dismissal of the writ petitions. 14. I have considered the rival submissions and scrutinised the materials on record. W.P.Nos.3084 to 3087 and 3090 to 3092 of 2016: 15. A mere perusal of the impugned proceedings would revealthat the order has been passed mechanically and in violations of principles of natural justice. Though the respondent has extrac .....

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ps. It can also be seen that the personal hearing though specifically sought, was also not given. 16. The Honourable Apex Court in the Judgment Reported in AIR 2003 SC 1984 has laid down the necessity for a detailed order in following terms: 34. The decisions of this Court referred to above indicate that with regard to the requirement to record reasons the approach of this Court is more in line with that of the American Courts. An important consideration which has weighed with the Court for hold .....

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is not the sole consideration. The other considerations which have also weighed with the Court in taking this view are that the requirement of recording reasons would (i) guarantee consideration by the authority; (ii) introduce clarity in the decisions; and (iii) minimize chances of arbitrariness in decision making. In this regard a distinction has been drawn between ordinary Courts of law and tribunals and authorities exercising judicial functions on the ground that a judge is trained to look .....

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holding that an administrative authority must record reasons for its decision, are of no less significance. These considerations show that the recorded of reasons by an administrative authority services a salutary purpose, namely, it excludes chances of arbitrariness and ensures a degree of fairness in the process of decision-making. The said purpose would apply equally to all decisions and its application cannot be confined to decisions which are subject to appeal, revision or judicial review. .....

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What is necessary is that the reasons are clear and explicit so as to indicate that the authority has given due consideration to the points in controversy. The need for recording of reasons is greater in a case where the order is passed at the original stage. 17. In the Judgment reported in AIR 2003 SC 4664, the Honourable Apex Court has observed as follows; Reason is the heartbeat of every conclusion. Without the same, it becomes lifeless. 18. Further, the Honourable Apex Court in the Judgment .....

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ecording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations. f. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies. g. Reaso .....

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e common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants' faith in the justice delivery system. j. Insistence on reason is a requirement for both judicial accountability and transparency. k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to .....

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cial Candor (1987) 100 Harward Law Review 731-737). n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553, at 562 para 29 and Anya vs. University of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of Human Rights which requires, "adequate and intelligent re .....

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4 and the relevant passage is extracted below: a. Passing of Orders: Fifteen days time limit shall be given as reasonable opportunity to dealers before passing any order and it shall be reckoned from the date or service of the notice. No order shall be passed without being satisfied of the reasonable opportunity and adopting the following process. After issue of notice calling for the objections, if any further time is requested by the dealer within a period of fifteen days, it shall be examined .....

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in the notice and it shall invariably be afforded to the dealer irrespective of whether the dealer has opted for personal hearing or not. b. Revision of Assessment Under the TNVAT Act 2006, the assessing officers usually issue orders to reverse the ITC on obvious reasons. During the current financial year, the assessing officer may issue notice to reverse the ITC tor each month separately under Section 25 of the TNVAT Act 2006. After closure of the financial year, the assessment should be compl .....

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own that being a quasi-judicial authority, the respondent must pass a reasoned order considering and discussing all the materials placed before him. Only, then when his order can be subjected to judicial scrutiny on merits. As rightly contended by the learned Counsel for the petitioner, when the petitioner has raised objections on each point, the respondent must give specific findings on each point. In the absence of the same, orders can only be termed as non-speaking. The Circular is an outcome .....

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s held as follows: 22. This 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 exposito. 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. 27. We also hold, in the facts and circumstances of this case, the impugned order by way of revision of assessment should not hav .....

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ng. The conduct of the respondent is highly inappropriate and the order is therefore clearly in violation of the principles of natural justice. 23. In respect of denial of liability regarding payments made to the enforcement wing officials, this court is not in consonance with the contentions of the learned Counsel for the respondent and the reason given in the impugned proceedings that it is only by way of afterthought , the objections have been raised. It is settled law that the assessing offi .....

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ed that the assessing officer is a quasi-judicial authority and in exercising his quasijudicial function of completing the assessment, he is not bound by the instructions or directions of the higher authorities. We find that in both the matters the assessing officer has acted on the basis of the directions of his higher authority in completing the assessments. We hold that the assessments are not sustainable in law. Accordingly, the orders of assessment in both the matters are liable to be quash .....

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nd that the cheque was collected by force. Therefore, the assessing officer is duty bound to look into the books of accounts, documents and verify the claim of the assesse before passing orders. 25. This Court has time and again held that the enforcement wing officials have no authority to collect cheques. Their duty under Section 65 of the TNVAT Act is limited to inspection and drawing of a report. As per Section 65 (3), the enforcement wing officials, even when they discover that there is an a .....

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rom the dealers during inspection. Many writ Petitions are being filed challenging the collection of cheques during inspections, in the above cases, the High Court of Madras has also issued directions to the Enforcement authorities to return the cheques along with interest stating that there is no express provision in the TNVAT Act 2006. The law officer of High Court has expressed their opinion to handle this issue carefully and not to collect cheques under duress. In such cases, Assessing offic .....

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er (CT), The Commercial Tax Officer Enforcement and The Branch Manager, Canara Bank ((2014) 67 VST 321 (Mad.) and prays for allowing the writ petition. 5.This Court time and again held that there is no power vested with the enforcement wing authorities to compel the petitioners to handover the cheques and despite the same, they are collecting cheques. As rightly submitted by the learned Counsel for the petitioners, the issue raised in the writ petitions is squarely covered by the above decision .....

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ntly, connected miscellaneous petitions are closed. 28. Therefore, It is very clear that the enforcement wing officials cannot usurp the powers of the assessing officers and collect cheques. Therefore, the petitioner is entitled to refund of the cheque amount. 29. Relating to the reversal of ITC regarding dealers who have claimed to have done transactions deviating from the usual line, this Court is in consonance with the submissions of the learned Counsel for the petitioner to a limited extent .....

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tioner has submitted a common reply for all the assessment years. In the said reply, the petitioner claims to have submitted C Forms, Purchase Bills and books of accounts. In reply the respondent has claimed that purchase bills have not been submitted. The learned Counsel for the petitioner has submitted that the purchase bills and the particulars of the vehicles have been submitted. The above submission is vehemently objected by the learned Counsel for the respondent. It is pertinent to mention .....

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s inclined to grant one more opportunity to the petitioner to submit the documents by setting aside the impugned proceedings. 31. Insofar as W.P No 3087/2016 is concerned, the impugned order dated 14.05.2015 has been passed without issuing any notice. As per Section 8(4) of the CST Act, the dealer is liable to produce the c Form from the purchaser within the prescribed time or within such further time as that authority may, for sufficient cause, permit. Therefore, there is no time limit prescrib .....

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ssed. On the contrary, when the petitioner submitted the Forms and requested the respondent to revise the assessment, the same was turned down by order dated 01.10.2015 stating that Section 84 cannot be invoked as per Section 9 (2) of the CST Act. Section 9(2) of the CST Act reads as under: "Section 9 (2): Subject to the other provisions of this Act and the rules made there under, the authorities for the time being empowered to assess, re-assess, collect and enforce payment of any tax under .....

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te and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family recovery of tax from third parties, appeals, reviews, revisions, ref .....

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ive and clearly specifies that the authorities under the state law can exercise all or any of the functions under state for assessment, review, revision, recovery measures, etc for the purpose of assessment and recovery of any tax due under the Central Act. Therefore, the respondent has powers to invoke Section 84 of the TNVAT Act and revise an assessment under the CST Act. 34. The Honourable Apex Court in the judgment reported in 146 STC 1 has held as under: 40. It was urged on behalf of the ap .....

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It is to be noted that under Rule 12(7) of the Central Sales Tax (Registration and Turnover) Rules, 1957 (in short the Registration Rules') the declaration form can be filed at a subsequent point of time and not necessarily along with returns. On an application being made before the Assessing Officer the exemption can be granted. The object of the Rule is to ensure that the assessee is not denied a benefit which is available to it under law on a technical plea. The Assessing Officer is empow .....

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d. It can also be accepted as additional evidence in support of the claim for deduction. In the instant case, respondent No.1-company made a specific request before the revisional authority which was turned down. Therefore, the question of any noncompliance with the relevant statutes does not arise. It was noted by this Court in Sahney Steel and Press Works Ltd. and Anr. v. Commercial Tax Officer and Ors., [1985] 4 SCC 173 that even in a given case, an assessee can be given an opportunity to col .....

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ll grant opportunity to the respondent No.1-company to cure the defects, if any in the Declaration Forms. 35. The Honourable Full Bench of this Court in the judgment reported in 51 STC 381 has held as under: 16. We would proceed now to advert to the different ways in which the discretion to allow further time for filing C forms is conferred by the proviso to Section 8(4) of the Act, on the one hand, and the proviso to rule 12(7) of the Central Sales Tax (Registration and Turnover) Rules, on the .....

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cient cause from filing the C forms in time. The "sufficient cause" spoken of by Parliament in Section 8(4) is sufficient cause which appeals to the mind of the authority concerned, and which enables it to allow further time without bothering about any onus on the assessee. The proviso to rule 12(7), however, is a study in contrast. The power to allow further time under this rule is severely circumscribed by the language of its proviso. This proviso is more or less fashioned after Sect .....

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not merely one of language or of emphasis. The difference lies in the basic approach to the substance of the power to allow further time. Under the statutory provision, the prescribed authority can allow further time for sufficient cause, without bothering to see whether anything or any occurrence prevented the assessee from filing the C forms within time, and whether the assessee could have filed the C forms within time even in the position is which he actually found himself. The rule, however, .....

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peculiar preferences had worked in this regard. While Parliament was content to leave to the rule-making authority, namely, the Central Government, the task of prescribing a rule laying down the time-limit for furnishing C forms, the power to allow further time, however, was not relegated to the Rules, but deliberately enacted into the very text of the provisos to Section 8(4). In this statutory format, with Parliament clearly expressing its mind on the subject, the Central Government must be he .....

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rent drafting is all the more regrettable when the remember the legislative history which brought into the statute book the proviso to Section 8(4) as a necessary part of the taxing enactment. Avowedly, the proviso was introduced by Parliament in Section 8(4) to fill in the lacuna disclosed by the previous litigations in the country, culminating in the decision of the Supreme Court in Abraham's case . It is a matter for comment that Parliament's effort at clarity should have been neutral .....

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undoubted power to allow further time for C forms to be filed on sufficient cause, the rest of it is mere procedure or follow up action. Where the assessing authority is satisfied, in a given case, about the existence of sufficient cause, it must necessarily be followed up by appropriate action, such as reopening the assessment already completed. Perhaps the requisite corrective action can be taken by invoking the assessing authority's statutory power of rectification of mistakes. Even othe .....

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ssary to pursue the line of discussion further, because the particular problem we are concerned with in the two cases before us is quite different. What we are asked to consider, and what we have been engaged in discussing so far, is whether an appellate authority has the same power as the assessing authority to allow further time for accepting C forms, and not how and by what process the assessing authority itself could exercise the power after the completion of the assessment. 36. From the abo .....

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nd the amounts collected thereafter. 37. Insofar as W.P.No.3088 of 2016 is concerned, the Input Tax Credit, has been reversed as the statutory forms has not been submitted. The petitioner has not submitted any objections to the proposal. Obviously, he did not have any reply or the C Forms at that point of time. However, inview of the fact that this Court has already set aside the impugned proceedings dated 14.05.2015 and directed the respondent to consider the C Forms and pass revised orders. On .....

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ition when there is an alternative remedy and it is only a self-imposed restriction. 39. In this regard, it is useful to recall the law laid down by the Honourable Apex Court in the Judgment reported in 146 STC 1, wherein it is held as follows: "23. ...That being the position, we do not consider the High Court's judgment to be vulnerable on the ground that alternative remedy was not availed. There are two well recognized exceptions to the doctrine of exhaustion of statutory remedies. Fi .....

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n abuse of process of law the High Court in an appropriate case can entertain a writ petition. 24.Where under a statute there is an allegation of infringement of fundamental rights or when on the undisputed facts the taxing authorities are shown to have assumed jurisdiction which they do not possess can be the grounds on which the writ petitions can be entertained. But normally, the High Court should not entertain writ petitions unless it is shown that there is something more in a case, somethin .....

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