M/S. Sri Sai Ganga Educational Academy vs. Assistant Commissioner (St)

Held

The Court held that the impugned assessment order was indeed passed on grounds not mentioned in the show cause notice, rendering it liable to be set aside. The reasoning was based on the petitioner's specific contention, supported by the judgment in Sumo Foods Private Limited, Hyderabad, which emphasizes the necessity for assessment orders to be based on the grounds articulated in the show cause notice. The Court found merit in the respondents' submission to treat the assessment order as a show cause notice and to allow the petitioner an opportunity to file detailed objections. Consequently, the Court directed the first respondent to return the seized books and records to the petitioner within two weeks. The petitioner was then directed to file detailed objections within three weeks of receiving the records. The first respondent was further directed to pass fresh orders after affording a personal hearing, strictly in accordance with the procedure established by law, within two months of the expiry of the stipulated timeframes for objections.

Facts

The petitioner, an educational society providing coaching for TET and DSC exams, filed a writ petition challenging an assessment order dated May 20, 2019, passed by the first respondent for the tax period July 2017 to June 2018. The first respondent had conducted an inspection on June 28, 2018, seized records, and issued a show cause notice on August 1, 2018, proposing tax based on application forms from prospective students. The petitioner filed objections on February 4, 19, and 22, 2019, disputing the turnover calculation. The impugned assessment order confirmed the turnover proposed in the show cause notice. The petitioner argued that the assessment order was based on grounds not mentioned in the show cause notice.

Key Issues

1. Whether the impugned assessment order, dated May 20, 2019, passed by the first respondent for the tax period July 2017 to June 2018, is arbitrary, capricious, erroneous, violative of the principles of natural justice, contrary to law, and illegal, specifically concerning the grounds relied upon for the assessment. This issue turns on the principles of natural justice and the requirements of a valid show cause notice and assessment order under the CGST Act, 2017 and SGST Act, 2017. Petitioner's contentions: The petitioner argued that the impugned assessment order was passed on grounds not mentioned in the show cause notice, making it unsustainable. Reliance was placed on the decision in Sumo Foods Private Limited, Hyderabad v. Commercial Tax Officer, Rajendra Nagar Circle, Hyderabad. Respondents' contentions: The learned standing counsel for Commercial Taxes submitted that the impugned assessment order could be treated as a show cause notice, and the first respondent could be directed to pass orders afresh after affording the petitioner an opportunity to submit detailed objections upon the return of seized books and records.