BSCPL Infrastructure Limited vs Commercial Tax Officer and Others

Akil Kureshi, J.—Leave to amend. Heard the learned counsel for the parties for final disposal of the petition.

The petitioner has challenged the notice dated March 8, 2013 as at annexure B to the petition under which the respondents asked the petitioner why permission for composition of tax should not be cancelled. The petitioner has also challenged the subsequent order dated March 12, 2013 by which, acting on the said notice dated March 8, 2013, the order of cancellation was passed. The petitioner has further challenged the orders at annexure E collectively under which the petitioner''s bank accounts came to be attached by the respondents.

Brief facts are as follows:--

The petitioner is a company registered under the Companies Act, 1956. It is engaged in the business of executing infrastructure related projects, principally of construction of roads. The petitioner is presently in the process of executing one such contract by the National Highway Authority for four laning of Godhra to MP border section of NH 59 from KM 129.300 to KM 219.900. Such contract is valued at approximately Rs. 600 crores.

The petitioner had applied to the authorities under the Gujarat Value Added Tax Act, 2003 ("the VAT Act", for short) for composition of tax which permission u/s 14A of the VAT Act was granted under an order dated March 27, 2011. The petitioner utilizes various raw materials, such as, cement, steel, sand, grit, etc., in execution of the said works contract. The petitioner has leased out certain mines from where it procures blacktsrap and the same is converted into grit. The grit is then used in construction of roads and in particular in the execution of the contract in question.

Between March 6, 2013 and March 8, 2013, the respondents conducted an inquiry at the petitioner''s business premises. The respondents hold a belief that use of the grit by the petitioner from its own mines is not duty-paid and therefore, the petitioner has breached the conditions of permission for composition of tax. On such basis, the impugned notice dated March 8, 2013 came to be issued calling upon the petitioner to show cause why such permission should not be cancelled. The petitioner was granted time up to 12th March to remain present with original records failing which ex parte decision would be taken. Along with such notice itself the respondents supplied tentative calculation of the tax liability of the petitioner in case the permission for composition of tax was cancelled. Such liability along with interest would come to Rs. 11.83 crores (rounded off) by way of duty and Rs. 2.37 crores (rounded off) by way of interest.

On March 12, 2013, the petitioner applied to respondent No. 1 and prayed for time. It was pointed out that the time allowed was only for four days. The notice was received on March 9, 2013 in the afternoon and 10th March was a holiday being Mahashivaratri and also happened to be a Sunday. Books of accounts of the company were lying in Hyderabad. They, therefore, prayed for two weeks extension. In addition to such request for adjournment, the petitioner also raised certain legal contentions why permission for composition of tax should not be cancelled.

Ignoring such request for extension of time and the legal contentions of the petitioner, respondent No. 1 passed a brief order dated March 12, 2013 and cancelled the permission from the inception. Simultaneously, respondent No. 2 passed several orders all dated March 12, 2013 and attached various bank accounts of the petitioner for the possible tax liability of Rs. 11.83 crores (rounded off) with interest and penalty. Such attachment orders are produced at annexure E collectively to the petition.

Having heard the learned counsel for the parties, we are of the opinion that respondent No. 1 showed undue hurry in passing the final order of cancellation of permission for composition of tax. On March 8, 2013, show cause notice was issued which was served on the petitioner on March 9, 2013. 10th March happened to be Sunday. The petitioner, therefore, had only one clear day for responding to the notice and producing the material called for. There was no earthly reason why the said respondent could not have waited for a reasonable period to permit the petitioner to put the full facts on record. The question, whether in the background of the facts noted above, the petitioner can be stated to have breached the conditions of permission for such composition of tax is an important question. It required full examination and proper consideration. Such an important question which would result into a possible tax demand of more than Rs. 11 crores from the assessee cannot be considered in such a hasty manner. Under any circumstances, respondent No. 1 breached the principle of natural justice. Mere issuance of show cause notice is not sufficient for complying with the basic requirement of hearing. A reasonable opportunity to put forth its defence was part of the petitioner''s right. No reason whatsoever has been brought to our notice why the entire exercise was required to be completed in four days.

Under the circumstances, the impugned order dated March 12, 2013 cancelling the permission for composition of tax is set aside. Since the orders of bank attachment were based on this order itself, the same, as a consequential step, are also quashed.

We are conscious that under the VAT Act, the competent authority has wide powers for passing appropriate order for safeguarding the interest of the Revenue pending the assessment proceedings. In the present case, the sole reason for attachment of bank accounts was the order of cancellation of permission for composition of tax and the possible duty demand pursuant to such cancellation. When the base order itself is set aside, we have no hesitation in setting aside the consequential orders of attachment. Nothing has been pointed out to us to believe that the petitioner would not discharge its duty liability so fastened. As noted, the petitioner is in the process of executing road construction work valued approximately at Rs. 600 crores. In absence of any such facts permitting the respondent to attach the bank accounts even before taking a final decision on the cancellation of permission for composition of tax, at this stage, at least does not arise.

In the result the petition is disposed of with following further directions:-- (i) The petitioner would have time up to April 15, 2013 to file further reply and necessary details pursuant to notice dated March 8, 2013 (which we have not interfered with though prayed for by the petitioner).

(ii) Respondent No. 1 shall thereafter take final decision in connection with the said notice after granting personal hearing to the petitioner''s representative.

(iii) The question of any attachment in terms of section 45 of the VAT Act is left to be judged by the competent authority in future at any stage if such situation arises satisfying the requirement of the said section.

The petition is disposed of accordingly.