Dept. To Follow Procedure Set Out In Circular On The Issues Of Mismatch: Madras High Court Quashes VAT Assessment

The petitioner has challenged the assessment order passed under the provisions of the Tamil Nadu Value Added Tax Act, 2006 for the period 2013–14. The substantial addition to turnover was on the ground of a mismatch of particulars between the details contained in the returns filed by the petitioner as compared with the annexures filed by the selling and purchasing dealers.

The Special Commissioner/Commissioner of Commercial Taxes Department has issued Circular No.5 dated 24.02.2021 addressing the issue of mismatch. A procedure has been put in place to deal with the issue of mismatch. The procedure involved a detailed examination and reconciliation of particulars using the offices of the Assessing Officer of the concerned dealers as well as the selling and purchasing dealers.

As per the circular, the assessing authority who has raised the dispute of mismatch shall list out all pending mismatch cases in respect of the assessment circle. The case to be reported to the DC/JC as well as in the next statistics to be furnished after the circular comes into effect, for which a suitable table is being prescribed, and thereafter to report the progress every month.

Further, as per the circular, the original assessing authority shall undertake verification of mismatched transaction reports on the department internet website (tnvat.gov.in) with reference to the data available at both the ends, i.e., buyer and seller. On verification of the data, if the authority can reconcile the mismatch and finds that the mismatch is due to a clerical error, the Assessing Authority shall pass orders dropping further action.

If the original assessing authority is unable to resolve either the whole or part of the mismatch, then a notice shall be issued to the dealer concerned indicating the discrepancy with an opportunity to show cause to reconcile it. After the receipt of the reply and after due enquiry, the Original Assessing Authority finds that the sign has affected the transaction, shall make a request to the other end Assessing Authority through email (zimbra mail) marking copy to the concerned DC and JC and seek the requisite details of verification. If on enquiry, the original assessor is of the view that the buyer has made a bogus claim by being involved in bill trading by producing a bogus invoice, etc., the buyer shall be assessed for tax or reversal of ITC, as the case may be. Then the Original Assessing Authority shall pass appropriate orders in accordance with the provisions of the TNVAT Act, 2006.

The details must be verified by the other end assessing authority using the manually filed original or revised returns or by issuing a show cause notice and requesting the details from the deale. After the receipt of the reply and after due enquiry, the other end assessing authority finds that the seller has reported the transaction and paid the tax due, shall report it to the original assessing authority and both of them shall drop further proceedings. On the other hand, if the whole or part of the transactions are not reported by the seller, then the seller shall initiate assessment proceedings against the seller and shall pass appropriate orders in accordance with the provisions of the TNVAT Act, 2006. The result of action shall be reported to the original assessing authority.

The Assessing Authority should issue a show cause notice along with all the relevant documents to the assessment seeking objections. On receipt of objections, the Assessing Authority shall fix a date and time for a personal hearing (either a physical or virtual hearing). The assessing officer shall grant adequate opportunity to the dealer to put forth their objections by duly following the principles of natural justice. During the course of enquiry, either on a request made by the assessee or suo motu, the Assessing Authority can summon the other end dealer, and on request, a cross examination may be provided to the assessee if such a dealer is available. However, if the dealer is non-existent, the Assessing Officer may proceed to make an assessment on the basis of material on record in accordance with the law. The entire process involving the issue of show cause notice till the final order may be completed within a period of 180 days. The Territorial Deputy Commissioners shall oversee the work and ensure that the verification reports are promptly sent and the cases are finalised without any undue delay.

The court ordered that the procedure set out in the circular be applied to the present case as well. The orders of assessment are set aside to enable both parties, i.e., the assessee as well as the department, to engage in the finalisation of the issue in line with the circular.

"Let the petitioner be heard, the procedure as set out in the circular be followed scrupulously and orders of assessment be passed within a period of eight weeks from the date of receipt of a copy of this order," the court said.

Case Title: M/s.Gharpure Engg. & Construction (Pvt) Ltd. Versus Assistant Commissioner (ST)

Case No: W.P. Nos.28370 & 28372 of 2019 and W.M.P. Nos.28059 & 28060 of 2019

Citation: 2022 LiveLaw (Mad) 324

Dated: 19.07.2022

Counsel For Petitioner: Advocate K.M.C. Arun Mohan

Counsel For Respondent: Advocate K.Vasanthamala

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