Ananthashayana Food Tech Pvt. Ltd. vs Deputy Commissioner of Commercial Taxes

H.G. Ramesh, J.—Petitioner has sought for quashing the order passed by the Appellate Authority bearing VAT AP. Nos. 2508 to 2532/10-11, dated 16.1.2004 vide Annexure-D for the period, February 2008, March 2008, April 2008 to March 2009 and April 2009 to June 2009 and to issue directions to the Appellate Authority to pass fresh orders after affording reasonable opportunity to the petitioner and to accept the ''C'' and ''F'' declaration forms filed by the petitioner in respect of CST assessment for the above said period and for such other order.

Petitioner is a private limited company registered under the Companies Act and engaged in the manufacture and sale of biscuits and registered as a dealer under the provisions of the Karnataka Value Added Tax Act and also under the provisions of the CST Act. According to the petitioner, it is regularly submitting its return of turnover in VAT-100 along with tax payable thereon with the VSO-171. The 1st respondent -Deputy Commissioner had visited the business premises of the petitioner on 8.6.2009 for the purpose of inspection and seized certain of the documents. The respondent-authority has processed the seized documents and proceedings were drawn stating that petitioner has made attempts to evade tax due to the government by not raising tax invoices for sale transactions and not accounting the same in the books of accounts and rejected the books of accounts maintained by the petitioner as not true and correct and caused notice proposing to conclude reassessment on the alleged inspection proceedings for which, petitioner filed reply stating that on account of labour unrest, the services of some of the employees who were part of the administration as well as production activity have been terminated during the year 2009 due to their clandestine and fraudulent activities and those terminated employees accompanied by team of officers have entered the business premises claiming that they are the witness to the seizure proceedings and with vengeance, created unwanted trouble to the normal production and business activities and have fabricated certain records and the same was brought to the notice of the inspecting authority, who promised to consider those aspects. When the petitioner had sought for summoning of the witnesses for cross-examination, same was not considered by the assessing authority, thereby petitioner was deprived the right of cross-examining all the witnesses who are part of the proceedings drawn against the petitioner. Petitioner also submitted several replies and the same has not been accepted. The assessing authority concluded the assessment as proposed in the pre-assessment notice and passed the reassessment order for the period February 2008 and March 2008 and assessment order for the period April 2008 to March 2009 under the KVAT Act and also passed assessment order under the provisions of the CST Act for the period August 2008 to March 2009 levying tax as interstate sales transactions without considering the fact that the petitioner has effected consignment transfer of biscuits to outside the state and claimed exemption under Section 6A of the CST Act and the respondent authority without affording reasonable opportunity to produce statutory declaration Forms C & F, passed the assessment order. Aggrieved by the same, petitioner filed appeals before the Joint Commissioner of Commercial Taxes (Appeals). The Appellate Authority has also rejected the appeals without affording reasonable opportunity to cross-examine the witnesses. Hence, the petitioner is before this Court.

Heard the learned counsel representing the parties.

According to the Addl. Government Advocate, as against the order of Appellate Authority an appeal is provided and hence, writ petition is not maintainable. He also submitted that the authorities have rightly acted upon and rejected the claim of the petitioner.

The learned counsel for the petitioner has relied upon the judgment of the Apex Court in the case of State of Kerala v. K.R. Shaduli Yusuff (1977 STC Vol.39 Page 478) and contended that an opportunity to prove the correctness or completeness of the return would, therefore, necessarily carry with it the right to examine witnesses and that would include equally the right to cross-examine witnesses examined by the Sales Tax Officer. In that context, the Apex Court held that when assessee could prove the correctness and completeness of his return only by showing that the entries in the books of account and other wholesale dealers were false, bogus or manipulated and that the return submitted by the assessee should not be disbelieved on the basis of such entries and this obviously, the assessee could not do, unless he was given an opportunity of cross-examining the witnesses and other persons with reference to their account. It further held that cross-examination of witnesses is one of the most efficacious method of establishing the truth and exposing falsehood. The act of the officer making the witnesses not available for cross-examination by the assessee would constitute infraction of the right conferred on the assessee.

So far as production of declaration Forms C & F are concerned, in the decision reported in A.S. Nasiruddin Vs. Commissioner of Commercial Taxes in Karnataka, Bangalore, , the Apex Court held that so far as submission of these declaration forms are concerned in case of inter-state sales, such declarations filed for the first time before the Tribunal can be entertained by the Tribunal if sufficient cause is shown for not producing before the assessing authority and the matter shall be remanded for reconsideration.

In the case on hand, inspection was made and certain irregularities with respect to non-mentioning of sale transactions in the books of accounts were noticed. However, the defense of the petitioner is that there was restlessness in the company and as such, action was taken against some of the employees for dereliction of duty and such terminated employees with vengeance, created unwanted trouble to the normal production and business activities and have fabricated certain records. Further it is the grievance of the petitioner that the assessing authority while holding an enquiry based on the inspection report should have given due opportunity to the petitioner. Further more, the act of the assessing authority shall be independent consideration of the material produced and not on the basis of inspection report for the purpose of ordering reassessment. But at the time of reassessment, necessarily to understand the flaw in the assessment order, due opportunity ought to have been given as a matter of right to the petitioner for compliance of principles of natural justice. In the present case, after reply is furnished by the petitioner from time to time, neither the same has been considered nor petitioner is heard in the matter. In the circumstances, as rightly pointed out by the petitioner, he had not been given opportunity to cross-examine the witnesses to prove the case as is explained by the petitioner. Might be, there is prima facie case for the petitioner for non-mentioning of certain sale transactions in the books of accounts due to total unrest in the company which was beyond the control of the petitioner. Further this could be a matter of concern which the assessing authority has not considered. When the matter is taken up before the Appellate Authority, the Appellate Authority could have given due opportunity to the petitioner to have a say in the matter, much less, the Appellate Authority would have entertained the declaration forms produced in Form-C & F to stand by the contention of the petitioner as the same is also permissible even at the appellate stage. This is a matter of re-appreciation and petitioner could have explained the delay in non-furnishing of forms and other reasons. In the circumstances, though there is an appellate forum entertaining the grievance of the petitioner, but the fact remains that in case of non-compliance of principles of natural justice viz., an opportunity of hearing to be given, then necessarily this Court could exercise the power to do away the illegality crept in due to non-compliance of principles of natural justice.

In that view of the matter, the impugned order vide Annexure-D is quashed and the matter is remanded to the Appellate Authority. The Appellate Authority is directed to reopen the issue concerning the case of the petitioner and allow him to cross-examine the witnesses and if reasonably found, the declaration Form-C & F produced by the petitioner before the Appellate Authority or before the reassessing authority shall be considered. The petitioner is directed to appear before the Appellate Authority on 5th of January 2015.

Writ petitions are disposed of accordingly.