V.J.Dharmarajan vs. Assistant Commissioner (Works Contract)

Facts

The petitioner, an Electrical Contractor registered under the Kerala Value Added Tax (KVAT) Act, opted to pay tax under Section 8 of the KVAT Act for the years 2010-2011 to 2013-2014. He filed quarterly e-returns, and tax was deducted at source by various Government Departments based on Liability Certificates issued by Respondent No. 1. The petitioner claims he did not need to upload purchase details as no input tax credit was applicable. However, some Government Departments allegedly deducted tax at source but did not pay it to the Government in time or issue Form No. 20F, leading to short reporting of contract receipts. Respondent No. 1 issued pre-assessment notices (Ext. P3 series) alleging non-filing of annual returns, audited financial statements, and defective quarterly returns, and subsequently passed best judgment assessment orders (Exts. P5, P5(a), P5(b), P5(c)) demanding balance tax and interest.

Held

The Court held that while the respondents raised the issue of maintainability due to statutory remedies, the writ petition was entertained given its pendency for nearly 8 years and the interim order staying further proceedings. The Court noted that the proceedings were initiated due to non-production of regular books of accounts and non-payment of TDS amounts collected by government departments. The Court found that the petitioner could not be blamed for the default of Respondent No. 3 (Kothamangalam Municipality) in remitting the TDS collected. Consequently, the assessment orders (Exts. P5, P5(a), P5(b) & P5(c)) were set aside. The Court directed Respondent No. 1 to provide the petitioner a reasonable opportunity to answer the pre-assessment notices and produce records, and to complete the assessment within four months. Additionally, Respondent No. 1 was directed to take appropriate steps against Respondent No. 3 to demand proof of TDS payment or its remittance, and to initiate proceedings against Respondent No. 3 if it failed to comply. The issue of whether the petitioner could file revised quarterly e-returns was not explicitly decided but impliedly allowed by setting aside the assessment orders to enable further proceedings.

Key Issues

1. Whether the writ petition is maintainable despite the availability of statutory remedies under the KVAT Act, considering the prolonged pendency and interim orders? 2. Whether the assessment orders passed under Section 25(1) of the KVAT Act are liable to be set aside due to the alleged non-compliance with the opportunity of being heard as provided under Section 22 of the KVAT Act and the non-availability of Form 20F certificates from awarders? 3. Whether the petitioner can be blamed for the defects in filing returns and the mismatch in accounts due to the alleged default of Government Departments in remitting Tax Deducted at Source (TDS)? Petitioner's arguments: The petitioner argued that he was not given an adequate opportunity as per Section 22 of the KVAT Act. He contended that the inability to file annual returns was due to the non-receipt of Form 20F certificates from government authorities. He also stated that the mismatch in accounts occurred because he could not file revised quarterly e-returns and that proper verification of his books would have led to the dropping of proceedings. Revenue's arguments: The respondents argued that the writ petition was not maintainable due to statutory remedies. They contended that pre-assessment notices were issued because verification of KVATIS data revealed huge purchases declared in returns, suggesting suppression of sales turnover and escapement of turnover from self-assessment. They also pointed out the petitioner's failure to provide proper explanations for non-filing of annual returns, profit and loss accounts, non-declaration of purchases, and non-filing of closing stock inventory, and that the petitioner did not produce books of accounts even during personal hearings.