Voltas Limited Through Its Principal Officer Mr Debjit Mukherjee vs. The State Of Jharkhand Through Its Secretary Cum Commissioner Of Commercial Taxes

Held

The Court held that the penalty imposed under Section 37(6) of the JVAT Act was unsustainable as no show-cause notice was issued to the petitioner prior to its imposition, violating the principles of natural justice. Regarding the disallowance of ITC, the Court noted that the petitioner is not a manufacturer, and therefore, Section 18(8)(ix) of the JVAT Act cannot be applied to allow only proportionate ITC. The Court observed that the reassessment order, appellate order, and revision order did not explicitly apply Section 18(9) of the JVAT Act. It was only the Tribunal that applied Section 18(9) in its judgment. The Court found that the Tribunal had not factually ascertained whether the goods locally purchased by the petitioner were the same goods that were stock transferred outside the State, which is a prerequisite for applying Section 18(9). Therefore, the matter was remitted back to the Tribunal to ascertain these facts and pass a fresh order. The Court quashed the Tribunal's order dated December 17, 2018.

Facts

The petitioner, Voltas Limited, challenged a reassessment order dated August 28, 2015, passed by the Deputy Commissioner of Commercial Taxes, Jamshedpur, for the financial year 2010-11. This order disallowed Input Tax Credit (ITC) of Rs. 5,60,024/- and imposed a penalty of Rs. 11,20,048/- under Section 37(6) of the Jharkhand Value Added Tax Act, 2005 (JVAT Act), without a prior show-cause notice for the penalty. The petitioner's appeal to the Joint Commissioner of Commercial Taxes (Appeals) was dismissed on September 10, 2016, confirming the reassessment order. Subsequently, a revision application before the Commercial Taxes Tribunal, Ranchi, was also dismissed on December 17, 2018. The petitioner argued that the reassessment was based on an erroneous audit objection presuming it was a manufacturer, when it is a wholesaler and retailer.

Key Issues

1. Whether the reassessment order disallowing Input Tax Credit (ITC) of Rs. 5,60,024/- for the financial year 2010-11, by presuming the petitioner to be a manufacturer and applying Section 18(8)(ix) of the JVAT Act, is sustainable in law? 2. Whether the penalty of Rs. 11,20,048/- imposed under Section 37(6) of the JVAT Act is valid without a prior show-cause notice? Petitioner's Arguments: The petitioner contended that the audit objection, which formed the basis for reassessment, erroneously presumed it was a manufacturer, leading to the disallowance of proportionate ITC. It argued that as a wholesaler and retailer, Section 18(8)(ix) was not applicable. Furthermore, the petitioner asserted that the penalty was imposed without affording an opportunity of hearing or issuing a show-cause notice, violating principles of natural justice. Revenue's Arguments: The State argued that even if the petitioner was a reseller or engaged in trading, its case would be governed by Sections 18(4)(2) and 18(8)(ix) of the JVAT Act, disallowing ITC for goods transferred out of the state. The State also contended that the penalty was rightly imposed as the reassessment was made under Section 40(1) of the JVAT Act.