Madhucon Projects LTD. vs. Commercial Tax Officer

Held

The Court held that the notice dated 11.02.2019, issued by the Respondent, is not a proper show cause notice as contemplated under the proviso to Section 27(1) and (2) of the Tamil Nadu Value Added Tax Act, 2006. The Court found that this notice was merely a summon for personal hearing and did not specify the alleged escaped turnover, the proposed tax rate, or the basis for the re-assessment. This contravened the specific directions given in the earlier writ petition, which mandated the issuance of a proper show cause notice detailing the proposals. The Court reasoned that a show cause notice must clearly spell out the reasons for reopening under Section 27, including the alleged escaped turnover, the percentage of tax, and any proposed penalties. Without such a notice, the subsequent assessment order dated 09.09.2020 is vitiated. The ratio decidendi is that a re-assessment order under Section 27 of the TNVAT Act, 2006, must be preceded by a valid show cause notice that clearly outlines the revenue's proposals, and a mere summon for personal hearing is insufficient. The impugned order was quashed, and the matter was remitted back to the Respondent for reconsideration, with a direction to issue a proper show cause notice and follow the prescribed procedure.

Facts

Madhucon Projects Limited (Petitioner) is an EPC contractor engaged in infrastructure projects. For the tax period 2011-2012, the Petitioner filed a self-return under Section 22 of the Tamil Nadu Value Added Tax Act, 2006, which was deemed accepted. The Commercial Tax Officer (Respondent) later initiated proceedings under Section 27 of the Act to reopen the assessment due to alleged escaped turnover. After several pre-assessment notices and replies, the Respondent passed a re-assessment order on 27.02.2018, demanding Rs. 3,64,92,113/-. This order was challenged in a previous writ petition (W.P.(MD).No.9119 of 2018), where the High Court set aside the order and remitted the matter for issuing a proper show cause notice and affording a personal hearing. Subsequently, the Respondent issued an order of assessment on 09.09.2020, which is now challenged in the present writ petition.

Key Issues

1. Whether the notice dated 11.02.2019, issued by the Respondent, constitutes a proper show cause notice as contemplated under the proviso to Section 27(1) and (2) of the Tamil Nadu Value Added Tax Act, 2006, and in compliance with the previous order of this Court? Petitioner's arguments: The Petitioner contended that the notice dated 11.02.2019 is merely a summon for personal hearing and not a proper show cause notice. It failed to specify the alleged escaped turnover, the proposed tax rate, or any other details required for a show cause notice. Therefore, the subsequent assessment order dated 09.09.2020, passed in violation of the Act and the Court's previous directions, is illegal and arbitrary. The Petitioner argued that the Respondent did not comply with the mandatory requirement of issuing a proper show cause notice before passing the assessment order. Respondent's arguments: The Respondent argued that the notice dated 11.02.2019 was issued in pursuance of the earlier Court direction and was intended to be a show cause notice, leading to a personal hearing. The judgment does not explicitly record further arguments from the Respondent regarding the validity of the notice.