M/S Dhanpati Packaging vs. Commissioner Trade & Taxes & Ors.

Held

The Court held that the impugned order dated December 15, 2017, could not be sustained in law and was set aside. The primary reasoning was twofold. Firstly, the AVATO's decision to reject 'C' forms based on their subsequent cancellation by the Haryana authority, after the initial assessment and verification by the AVATO, was deemed unreasonable. The Court found it unreasonable to subject the Petitioner to a greater liability for no fault of its own, especially when the 'C' forms were validly issued and verified initially. Secondly, the Court found that the AVATO had unlawfully exercised powers under Section 74B(5) of the DVAT Act to review the earlier assessment order dated July 5, 2017, suo motu without issuing a show cause notice to the Petitioner. This exercise was declared unlawful by the Court in M/s S.L. Enterprises v. Commissioner of Value Added Tax. The Court directed that the refund due to the Petitioner, along with interest, be credited to its account within four weeks. The writ petition was allowed.

Facts

The Petitioner, M/s Dhanpati Packaging, a registered dealer under the DVAT Act and CST Act, challenged an order dated December 15, 2017, by the Assistant Value Added Tax Officer (AVATO) raising a demand of Rs. 1,23,13,745/- for tax and interest for the first, second, third, and fourth quarters of 2016. Previously, an assessment order dated July 5, 2017, by the AVATO had determined a nil tax demand after verifying 'C' forms on the TINXYs site, noting no 'C' forms were missing. The Petitioner had filed for a refund. Subsequently, the AVATO, after verifying 'C' forms with the Haryana Authority, found that the issuing firm in Haryana was a tax defaulter and its 'C' forms were cancelled. The AVATO then reviewed the earlier assessment order suo motu under Section 74B(5) of the DVAT Act, rejecting the sales at concessional rates and creating the demand.

Key Issues

1. Whether the AVATO could review the assessment order dated July 5, 2017, under Section 74B(5) of the Delhi Value Added Tax Act, 2004 (DVAT Act) based on the subsequent cancellation of 'C' forms by the issuing authority in Haryana, without issuing a show cause notice to the Petitioner? Petitioner's Arguments: - The Petitioner argued that the AVATO's review of the assessment order was unlawful, particularly as it was done suo motu without a show cause notice. They relied on the High Court's judgment in M/s S.L. Enterprises v. Commissioner of Value Added Tax. - They contended that the cancellation of 'C' forms by the Haryana authority, after the initial assessment and verification, should not invalidate the earlier assessment order, especially when the Petitioner was not at fault. Respondents' Arguments: - No counter affidavit was filed by the Respondent. The judgment notes that the AVATO reviewed the assessment order under Section 74B(5) of the DVAT Act.