Bombay High Court Quashes Show Cause Notice Issued Without Mentioning Documents Required To Be Furnished By Assessee

The Bombay High Court has quashed the show cause notice, which was in a printed format with only the period, date, and time filled up and did not give details of the information or documents required to be furnished.

The bench of Justice K. R. Shriram and Justice Jitendra Jain has observed that before passing best judgment assessment, Section 23(2) provides that if the registered dealer fails to comply with the terms of any notice issued under the sub-section, the Commissioner shall assess to the best of his judgement the amount of tax due from the assessee. In the show cause notice, no details of documents required to be produced have been given. The pre-conditions required to pass the best judgment assessment are not satisfied.

The petitioner/assessee is in the business of exploration of petroleum resources in 'Panna and Mukta' and 'Mid and South Tapti' fields off the coast of Mumbai. The area where Petitioner operates is situated at a distance ranging from 60 to 120 nautical miles from the territorial baselines of India. Based on the exploration in the contract areas, the petitioner sells petroleum, crude, and natural gas to the nominated agencies of the Government of India. It is the petitioner's case that title in respect of crude and natural gas is transferred in favor of the government nominee at the delivery point in the contract areas of the oil fields. It will not fall within the jurisdiction of the respondent, i.e., the Deputy Commissioner of State Tax exercising the jurisdiction under the Maharashtra Value Added Tax Act, 2002.

A show cause without any details was issued calling upon the petitioner to attend the office of the respondent. The show cause notice, as anybody could see, is in a printed format without any details.

The petitioner, though severely handicapped because the show cause notice did not contain any details, by its letter filed the annual financial statements for FY 2019-20, the auditor's report for FY 2019-20, a copy of the filed VAT and CST returns for FY 2019-20, and acknowledged the audit report in Form 704.

The petitioner was issued a letter once again calling upon the petitioner to submit assessment compliance within 7 days. The department proceeded to pass the order under Section 23 of the MVAT Act. The department has passed the order without dealing with any points and simply on the best judgment basis under Section 23(2) of the MVAT Act.

Under Section 23(2) of the MVAT Act, where the return in respect of any period is filed by a registered dealer by the prescribed date. The petitioner has filed by the prescribed date, and if the commissioner considers it necessary or expedient to ensure that return is correct and complete and he thinks it necessary to require the presence of the dealer or the production of further documents, he shall serve on such dealer a notice requiring him, on a date and at a place specified therein, either to attend and produce or cause to be produced all documents on which such dealer relies in support of his return, or to produce such documents or evidence as specified in the notice.

The court found the letter to be as bald and vague as the show cause notice. In the letter, there is not even a reference to the documents that the petitioner had, along with its letter dated January 6, 2024, submitted.

The court stated that the commissioner should first form an opinion that it is necessary or expedient to ensure that the return is correct and complete, and after he forms such an opinion, he is required to produce any documents, and then he shall give notice describing the documents that are required to be produced.

The court held that before passing best judgment assessment, Section 23(2) provides that if the registered dealer fails to comply with the terms of any notice issued under the sub-section, the Commissioner shall assess to the best of his judgement the amount of tax due from the assessee. The order only refers to the letter in which the letter and the show cause notice; no details of documents required to be produced have been given. Therefore, the pre-conditions required to pass the best judgment assessment are not satisfied.

The court quashed the order and the demand notice.

Counsel For Petitioner: Rohan P. Shah

Counsel For Respondent: S. D. Vyas

Case Title: B. G. Exploration and Production Versus The State of Maharashtra

Case No.: Writ Petition No.6547 Of 2024

Click Here To Read The Order