M/S.V.R.Muthu And Bros vs. The Sales Tax Officer - I

Held

The Court acknowledged that while the respondent's stand that the Writ Court should be reluctant to interfere at the show cause notice stage had merit, there was considerable deficiency in the pre-revision notices. The Court noted that the absence of relevant particulars in the notices made it difficult for the assessee to respond appropriately. Therefore, the Court declined to interfere with the impugned notices but directed the respondent to issue a supplemental notice. This supplemental notice was to enclose the relevant particulars, enabling the petitioner to offer their explanation in time. The respondent was instructed to consider the petitioner's objections in light of the circular dated 04.11.2013 and relevant legal provisions. If the respondent remained unsatisfied, a personal hearing was to be granted before passing orders in accordance with law. The Court did not expressly leave any issue undecided.

Facts

The petitioner, M/s.V.R.Muthu & Bros, filed four writ petitions challenging pre-revision notices issued by the Sales Tax Officer-I, Virudhunagar. These notices pertained to the tax periods 2011-12 to 2014-15. The respondent's case was that an inspection by Enforcement Wing Officials revealed the petitioner was selling goods at a price lower than their purchase price due to quantity discounts, leading to a proposal to reverse 15% of the input tax credit (ITC). The impugned notices were issued based on this proposal. The petitioner contended that the notices lacked necessary particulars and were not in line with a circular issued by the Commissioner of Commercial Taxes.

Key Issues

1. Whether the pre-revision notices issued by the respondent are in consonance with the circular dated 04.11.2013 issued by the Commissioner of Commercial Taxes, particularly concerning the reversal of input tax credit when sale price is less than purchase price? (Question of law). Petitioner's arguments: The pre-revision notices are not in consonance with the circular dated 04.11.2013. This circular, considered in W.A.Nos.1038 to 1040 of 2015, outlines a three-step process for reversing ITC: identification of cases with huge accumulated ITC due to lower sale price than purchase price, verification of purchase and sale price per unit, and reversal of ITC exceeding output tax if both conditions are met. The petitioner argued that the notices lacked the necessary particulars to enable them to respond appropriately. Revenue's arguments: The respondent contended that the pre-revision notices were issued based on the statement given by the petitioner before the enforcement wing officials during inspection. While such a statement may not be binding, it could furnish cause of action for initiating proceedings under Section 27 of the Tamil Nadu Value Added Tax Act. The respondent also argued that the Writ Court should be reluctant to interfere at the stage of a show cause notice.