Futura Ceramics Pvt. Limited and Another vs State of Gujarat and Others

Akil Kureshi, J.—Rule. The learned Additional Government Pleader Ms. Maithli Mehta waives rule for the respondents. We have heard learned advocates at considerable length. We may record facts in brief:

The petitioner is a dealer registered under the Gujarat Value Added Tax Act 2003 ("the VAT Act", for short). The petitioner is exigible to tax on the basis of its turnover under the VAT Act. For the financial year 2006-07, the petitioner had filed its return with the authorities under the VAT Act. Such return was processed by the authorities and order thereon was passed on June 2, 2009 by the Assistant Commissioner of Commercial Tax.

A notice came to be issued on March 9, 2012 by the said authority indicating that for the period from April 1, 2006 to March 31, 2007, he has reason to believe that taxable turnover of the petitioner-assessee has escaped assessment. The petitioner was required to attend the office on March 26, 2012. Along with such notice, accompanied communication dated March 12, 2012 conveyed to the petitioner as to why the assessment previously made was sought to be re-opened. In such reasons, it was stated that on the business premises of the petitioner, Excise Department carried out raid on January 17, 2008. Pursuant to such raid, show-cause notice was issued by the said Department indicating that for the financial year 2006-07, the petitioner had suppressed sales to the tune of Rs. 5,24,00,000 (rounded off) and thereby evaded excise duty to the extent of Rs. 73.55 lakhs (rounded off). The assessing officer, therefore, was of the opinion that the petitioner had not reflected in its books a total sales of Rs. 5.97 crores (rounded off). It was, therefore, decided to reopen the assessment.

The petitioner appeared before the State authorities and filed a written reply. The assessing officer however by his impugned order dated March 31, 2012 framed fresh assessment and concluded that the assessee had not reflected sales to the tune of Rs. 5.97 crores (rounded off) for the said financial year 2006-07.

We may notice that independent of the said order, the assessing officer had also passed yet another order dated March 31, 2012 for the financial year 2007-08, which also, the petitioner has challenged in this petition. However, such order for the financial year 2007-08 was passed not under reassessment proceedings but by way of the original assessment.

We are not inclined to entertain a single petition challenging two separate orders passed in entirely different backgrounds. We have at the choice of the learned counsel for the petitioner, confined this petition to the order dated March 31, 2012 pertaining to the financial year 2006-07. We leave it open to the petitioner to seek remedy in accordance with law with respect to the order passed by the assessing officer for the financial year 2007-08.

The petitioner has challenged the impugned order passed in reassessment proceedings on the ground that only on the basis of show-cause notice issued by the Excise Department, additions are made. Counsel submitted that this would be wholly impermissible. On the other hand, Department has contended that the order is appealable and this court therefore, should not interfered at this stage in the present case.

We may reproduce entire order of reassessment which is rather brief and reads as under:

The regular assessment u/s 34 of the Gujarat Value Added Tax Act of the trader is completed on June 2, 2009. At place of business of trader is of trader inspection of place was held on January 17, 2008 by Directorate General of Central Excise Department, Ahmedabad. Regarding this inspection show-cause notice was given vide No. F. No. DGCEI/AZU/12(4) 131/2008-09 dated October 19, 2010. Show-cause notice in inquiry and statement obtained in context of inquiry and on perusing evidences, in assessment year 2006-07 you have shown Rs. 5,97,82,816 sell less in turnover of total taxable sell. In this regard on March 12, 2010 show-cause notice was given to you.

Regarding above show-cause notice your written submission dated March 23, 2012 considered. In your case at the time of assessment in taxable turnover of sale turnover stated in above show cause is not included. Therefore, from here by taking decision of reassessment u/s 35 of the Gujarat Value Added Tax Act order is passed. Order of assessment and notice of demand to be served to trader.

From the above, it can be seen that the assessment which was previously concluded was reopened on the premise that during the excise raid, it was revealed that the petitioner had clandestinely removed goods without payment of excise duty. The Sales Tax Department, therefore, formed a belief that the value of goods plus excise duty evaded should form part of the turnover of the assessee for the purpose of tax under the Value Added Tax Act.

It may be that the raid carried out by the Excise Department and the material collected during such proceedings culminating into issuance of a show-cause notice for recovery of unpaid excise duty and penalty in a given case sufficient to re-open previously closed assessment. In this case, however, we are not called upon to judge this issue and would therefore not give any definite opinion. The question, however, is whether on a mere show cause issued by the Excise Department, the Sales Tax Department can make additions for the purpose of collecting tax under the Gujarat Value Added Tax Act without any further inquiry. If the Assistant Commissioner of Commercial Tax has utilized the material collected by the Excise Department; including the statements of the petitioner and other relevant witnesses and had come to an independent opinion that there was in fact evasion of excise duty by clandestine removal of goods, he would have been justified in making additions for the purpose of VAT Act. In the present case, however, no such exercise was undertaken. All that the assessing officer did was to rely on the show-cause notice issued by the Excise Department. Nowhere did he conclude that there was a case of clandestine removal of goods without payment of tax under the VAT Act. Merely because the Excise Department issued a show-cause notice, that cannot be a ground to presume and conclude that there was evasion of excise duty implying thereby that there was also evasion of tax under the VAT Act. It is not even the case of the Department that such show-cause notice proceedings has culminated into any final order against the petitioner. We wonder what would happen to the order of reassessment, if ultimately the Excise Department were to drop the proceedings without levying any duty or penalty from the petitioner.

All in all, the Assistant Commissioner has acted in a mechanical manner and passed final order of assessment merely on the premise that the Excise Department has issued a show-cause notice alleging clandestine removal of the goods. Such order, therefore, cannot be sustained and is accordingly quashed. When the order is ex facie illegal and wholly untenable in law, mere availability of alternative remedy would not preclude us from interfering at this stage in a writ petition. Petition is disposed of accordingly. Rule is made absolute with no order as to costs.