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Gujarat High Court · body

2019 DIGILAW 1109 (GUJ)

Sunflowers Developers v. State Of Gujarat

2019-12-04

HARSHA DEVANI, SANGEETA K.VISHEN

body2019
JUDGMENT : HARSHA DEVANI, J. 1. Rule. Mr. Trupesh Kathiriya, learned Assistant Government Pleader waives service of notice of rule on behalf of the respondents in both the petitions. Having regard to the controversy involved in the present case which lies in a very narrow compass as well as the urgency of the matter, the petitions were taken up for final hearing today. 2. Since the subject matter of both these petitions is identical and the facts are also more or less similar and the parties are also common, both these petitions were taken up for hearing together and they are decided by this common judgment. For the sake of convenience reference is made to the facts as appearing in Special Civil Application No.19147 of 2019. 3. The petitioner No.1, a partnership firm, started business of development, construction and sale of flats in the year 2014-15. It is the case of the petitioners that they bona fide believed that they were selling immovable property and therefore, neither obtained registration under the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as the “GVAT Act”) nor paid any tax thereunder. 4. On 12.4.2017, there was a search at the scheme, that is, M/s. Garden City by the authorities of the Commercial Tax Department. On getting the news of the search proceedings at M/s. Garden City, the petitioners obtained legal advice and were told that the petitioners being contractors were required to take registration and pay tax under the GVAT Act insofar as units agreed to be sold prior to the completion of construction. The petitioners, thereafter, immediately applied for and obtained voluntary registration certificate under the GVAT Act on 20.4.2017 wherein, it was clearly mentioned that there turnover had exceeded the threshold limit in the year 2014. Pursuant to the application, the petitioners were granted registration certificate on 19.5.2017 with effect from the date of application. 5. Thereafter, a notice dated 29.5.2017 in Form 401 came to be issued to the petitioners, wherein it was mentioned that they were unregistered dealers. In the said notice, it was clearly mentioned that the same was pursuant to search proceedings in the case of M/s. Garden City. 5. Thereafter, a notice dated 29.5.2017 in Form 401 came to be issued to the petitioners, wherein it was mentioned that they were unregistered dealers. In the said notice, it was clearly mentioned that the same was pursuant to search proceedings in the case of M/s. Garden City. By a letter dated 20.6.2017, the petitioners informed the authorities that they had already obtained registration certificate under the GVAT Act and hence, assessment under the GVAT Act for the registered as well as unregistered period would be undertaken by the jurisdictional officer at Ghatak-85. The petitioners also expressed willingness to pay the tax liability as assessed by the jurisdictional officer. Requests were made to drop the proceedings pursuant to the notice in form-401 dated 29.5.2017. However, by a communication dated 22.6.2017, the second respondent informed the petitioners that assessment for the unregistered period was required to be undertaken by him. The petitioners, thereafter, immediately addressed a letter dated 7.7.2017 that as per the circular issued by the Commissioner, their jurisdiction vested with Ghatak-85. It was further stated that the petitioners had not received any intimation for transfer of proceedings from the Commissioner and that in view of such facts the assessment proceedings be kept in abeyance. 6. Thereafter, there was no action at the end of the second respondent for almost two years. Since the petitioners wanted to pay the applicable taxes and put an end to the matter, they addressed letters to the jurisdictional officer as well as the superior authorities requesting for generation of task for assessment of the petitioners for the unregistered period. It was stated by the petitioners that they voluntarily wanted to pay tax and therefore, were making such request. 7. By a notice dated 30.8.2019 issued by the second respondent, the petitioners were called upon to remain present for assessment on 16.9.2019 for assessment of the unregistered period. In the meanwhile, the Government of Gujarat passed resolution dated 11.9.2019 announcing an amnesty scheme. The benefit of such scheme was available to cases pending at all stages, that is, cases pending assessment as well as cases pending in appeal. In cases pending assessment, the applicants were required to declare self-assessed liability and also give an undertaking to pay any further liability under the GVAT Act. The last date for making an application under the amnesty scheme was 15.11.2019. 8. In cases pending assessment, the applicants were required to declare self-assessed liability and also give an undertaking to pay any further liability under the GVAT Act. The last date for making an application under the amnesty scheme was 15.11.2019. 8. On 16.9.2019, that is, the date fixed for hearing by the second respondent, the petitioners informed the second respondent that they were desirous of availing benefit of amnesty scheme and that they were awaiting availability of the requisite forms for making such application and requested him to keep the assessment proceeding in abeyance. The petitioners simultaneously wrote letters to the superior authority requesting that the assessment proceedings may be kept in abeyance since they were desirous of taking benefit of the amnesty scheme. However, the second respondent rejected the request of the petitioners and proceeded to pass an assessment order dated 27.9.2019 under section 34(8) of the GVAT Act. In the impugned order, the second respondent has observed that the case of the petitioners is an enforcement case and that the petitioners are not entitled to the benefit of the amnesty scheme. It is the case of the petitioners that a very high pitched assessment has been made on the basis of search proceedings in the case of M/s. Garden City by making ad hoc enhancement of 100% and by imposing tax even on sales of fully constructed units. Being aggrieved, the petitioners have filed the present petition. 9. On 23.10.2019, this court had passed an order in the following terms:- “1. Mr. Uchit Sheth, learned advocate for the petitioner invited the attention of the court inter alia to the communication dated 16.09.2019 of the petitioner in response to the notice issued by the second respondent on 30.08.2019 whereby, the petitioner has asked the second respondent to keep the proceedings in abeyance as the petitioner wants to avail the benefit of the Amnesty Scheme declared by the State Government vide Government Resolution dated 11.09.2019. It was pointed out that despite the aforesaid request having been made, the second respondent has proceeded to pass the impugned order of assessment wherein, he has recorded that the petitioner is not entitled to the benefit of the Amnesty Scheme. It was pointed out that despite the aforesaid request having been made, the second respondent has proceeded to pass the impugned order of assessment wherein, he has recorded that the petitioner is not entitled to the benefit of the Amnesty Scheme. It was submitted that under the Amnesty Scheme, an application can be made from 15.09.2019 to 15.11.2019 and that the petitioner has not as yet made the application and therefore, there was no question for the second respondent to go into the question as to whether the petitioner was entitled to the benefit of such a scheme. It was submitted that in any case, when the petitioner had requested the respondent that the petitioner wants to avail the benefit of the Amnesty Scheme, the second respondent was not justified in passing the assessment order. 2. Having regard to the submissions advanced by the learned advocate for the petitioner, issue Notice, returnable on 11th November 2019. By way of ad-interim relief, the operation of the impugned order dated 27.09.2019 passed by the second respondent (Annexure 'A' to the petition) is hereby stayed. 3. In the meanwhile, it would be open for the petitioner to file an application under the Amnesty Scheme dated 11.09.2019 subject to the final outcome of this petition. 4. Direct service is permitted.” 10. The learned advocate for the petitioners has stated that pursuant to the said order, the petitioners have filed an application under the amnesty scheme. 11. Vehemently assailing the impugned orders, Mr. Uchit Sheth, learned advocate for the petitioners, submitted that when the State Government had come up with an amnesty scheme, and the petitioners had requested the second respondent to keep the assessment proceedings in abeyance, the second respondent was not justified in proceeding to make a high pitched best judgment assessment, thereby affecting the right of the petitioners under the amnesty scheme. It was submitted that pending assessment, the petitioners were required to file application under the amnesty scheme on the basis of self assessment and the respondent authority would thereafter, determine the amount of tax payable by the petitioners; whereas, in view of the high pitched assessment made by the respondent, now that there is an assessment order against the petitioners, if they want to avail the benefit of the amnesty scheme they would have to admit the huge liability under the assessment order. Therefore, the respondent by making the impugned order has more or less deprived the petitioners of the right to get the benefit under the amnesty scheme. 11.1 It was further submitted that the petitioners have always co-operated with the authority and that even after the notice was issued for fixing the hearing on 16.9.2019, the petitioners had responded but had requested that the matter be kept in abeyance as the petitioners wanted to get the benefit of the amnesty scheme. It was submitted that right from the inception the petitioners had shown readiness and willingness to discharge their tax liability and having regard to the object and purpose of the amnesty scheme, when the petitioners had made an application for keeping the assessment proceedings in abeyance, the second respondent was not justified in proceeding further and making an ex-parte high pitched best judgment assessment which is in breach of the principles of natural justice. 11.2 Next, it was submitted that upon the petitioners being registered under the GVAT Act, their jurisdiction was vested with Ghatak-85 and the second respondent had no jurisdiction to issue the notice in Form-401 and to make an assessment order. The attention of the court was invited to the provisions of section 17 of the GVAT Act, which provides for power to transfer proceedings and lays down that the Commissioner may, after due notice to the concerned parties and by an order in writing, transfer any proceedings or class of proceedings under any provision of the GVAT Act from himself to any other officer and he may likewise transfer any such proceedings from such officer to another or to himself. It was submitted that in the facts of the present case, it is an admitted position that the proceedings were not transferred to the second respondent and hence, the assessment order is without jurisdiction as the second respondent was not the appropriate authority to make assessment in the case of the petitioners. 11.3 Referring to the impugned order, it was pointed out that the Assessing Officer has observed that the petitioners are not entitled to get the benefit under the amnesty scheme as their case is an enforcement case. It was submitted that in this case, the search was conducted at the premises of M/s. Garden City and not in the case of the petitioner and therefore, this was not an enforcement case. It was submitted that in this case, the search was conducted at the premises of M/s. Garden City and not in the case of the petitioner and therefore, this was not an enforcement case. To bolster such submission, the learned advocate invited the attention of the court to the reply dated 1.11.2019 received by the petitioners in response to the application filed by them under the Right to Information Act, 2005 wherein, it has been stated that no search warrant has been issued in the name of the firm - M/s. Sunflower Developers. Furthermore, the attention of the court was invited to the provisions of the Tax Amnesty Scheme, 2019 issued by the State Government vide Government Resolution dated 11.09.2019 and more particularly to paragraph 5 (2) thereof, which is a specific provision for entertaining applications under the amnesty scheme in case of enforcement cases. It was submitted that apart from the fact that the petitioners case is not an enforcement case, assuming for the sake of argument that it is an enforcement case, even then the benefit of amnesty scheme is available and hence, the second respondent was not justified in holding that the petitioners are not entitled to the benefit of the scheme. 11.4 It was further submitted that while making the impugned assessment order, it was not permissible for the Assessing Officer to adjudicate on the question as to whether or not the petitioners were entitled to the benefit under the amnesty scheme. It was accordingly urged that the impugned order being without jurisdiction and having been passed in breach of principles of natural justice and with a view to overreach the process of law and to deprive the petitioners of the benefit of the amnesty scheme, deserves to be quashed and set aside and the reliefs prayed in the petitions deserve to be granted. 12. On the other hand, Mr. Trupesh Kathiriya, learned Assistant Government Pleader, submitted that in this case the petitioners have accepted the liability to pay tax for the period during which the first petitioner was unregistered. Reliance was placed upon the averments made in the affidavit-in-reply filed on behalf of the second respondent wherein it had been stated that despite several intimations having being issued to the petitioners for providing the books of accounts, the petitioners did not provide the same and did not appear before the authority. Reliance was placed upon the averments made in the affidavit-in-reply filed on behalf of the second respondent wherein it had been stated that despite several intimations having being issued to the petitioners for providing the books of accounts, the petitioners did not provide the same and did not appear before the authority. It was further submitted that while it is true that on 16.9.2019 the petitioners had made an application before the respondent authority and requested it not to pass the assessment order as the petitioners wanted to apply under the amnesty scheme, the making of the assessment order does not prejudice the case of the petitioners and that even after the passing of the assessment order, the petitioners still have an option to make an application to the common portal which would be considered by the authorities and the petitioners would be entitled to avail the benefit of the amnesty scheme. 12.1 It was further submitted that if the assessment order is set aside and in case for any reason the petitioners are held to be not entitled to the benefit of the scheme, the respondent authorities would be left with no other option on the basis of which further proceedings could be taken. It was further submitted that against the impugned assessment order, the petitioners have an alternative statutory remedy available under the provisions of the GVAT Act and hence, this court may not entertain this petition under article 226 of the Constitution of India. It was urged that the impugned order cannot be said to be without jurisdiction as the respondent authority has the power to pass an order after granting opportunity of hearing under section 34(8) of the GVAT Act, which has been done in the present case. It was accordingly urged that the court may not entertain the petition and that the petitioners be relegated to avail the alternative statutory remedy available under the GVAT or to avail of the benefit of the amnesty scheme as they may deem fit. 13. This court has considered the submissions advanced by the learned advocates for the respective parties. The facts are not in dispute. A search was carried out at the premises of M/s. Garden City pursuant to which, the petitioner No.1 got itself registered under the provisions of the GVAT Act and voluntarily offered to pay the tax liability. 13. This court has considered the submissions advanced by the learned advocates for the respective parties. The facts are not in dispute. A search was carried out at the premises of M/s. Garden City pursuant to which, the petitioner No.1 got itself registered under the provisions of the GVAT Act and voluntarily offered to pay the tax liability. A notice dated 29.5.2017 came to be issued in form-401 under rule 48 of the Gujarat Value Added Tax Rules, 2006. Since the said notice had been issued by the Commercial Tax Officer, Range-21, Junagadh, who, according to the petitioners, did not have the jurisdiction to assess the petitioners; the petitioners submitted a reply dated 20.6.2017 challenging the jurisdiction of the said officer to assess the petitioners. Thereafter, another notice dated 22.6.2017 came to be issued by the second respondent in response to which the petitioners, by a communication dated 7.7.2017, once again raised the question of jurisdiction. Thereafter, there was no response from the respondent. By a communication dated 15.7.2019 the petitioners informed the jurisdictional officer viz. the Commercial Tax Officer, Ghatak-85, Junagadh that they voluntarily want to pay the tax and requested him to generate URD assessment task. Thereafter, there was no response from the respondent. By a communication dated 15.7.2019 the petitioners informed the jurisdictional officer viz. the Commercial Tax Officer, Ghatak-85, Junagadh that they voluntarily want to pay the tax and requested him to generate URD assessment task. Thereafter, the second respondent issued a notice dated 30.8.2019 to the petitioners stating that the petitioners were issued the notice in form 401 at reference item No.2 (dated 29.5.2017) and were called upon to remain present on 20.6.2017, but the petitioners by a communication reference item No.3 (dated 20.6.2017) had informed that they had obtained TIN No.24120400436 which was effective from 20.4.2017 and that the non-registered assessment for the period 7.3.2014 to 19.4.2017 was required to be made by the State Tax Officer - 2 Ghatak – 2 Junagadh; however; as the non-registered assessment was in the Login of that office and as the inquiry was made by that office and the seized documents were in their possession, by the letter reference item No.4 (dated 18.11.2017), they were called upon to remain present with all the accounts on 18.11.2017 without fail, but they had not produced any accounting documents and had not given any kind of reply; moreover by reference item No.5 a notice in Form-302 dated 17.11.2018 had been issued informing the petitioners to remain present on 6.2.2018 at 11:00 hours, but they had not remained present and hence, now without expecting any further reminders they should remain present on 16.9.2019 without fail else an ex parte decision would be taken and assessment would be completed. It is the case of the petitioners that they have not received the two assessment notices dated 18.11.2017 or 17.11.2018. 14. Since the amnesty scheme declared on 11.9.2019, also covers the GVAT Act, the petitioners were desirous of availing the benefit of the scheme. Accordingly, on 16.9.2019, the petitioners requested the second respondent to keep the assessment proceedings in abeyance as they wanted to avail the benefit of the scheme. The second respondent, however, ignored the request of the petitioners and proceeded further, to not only make a best judgment assessment, but also determine the eligibility of the petitioners to make an application under the amnesty scheme. 15. In this backdrop, it may be germane to refer to the object behind the above referred amnesty scheme. The second respondent, however, ignored the request of the petitioners and proceeded further, to not only make a best judgment assessment, but also determine the eligibility of the petitioners to make an application under the amnesty scheme. 15. In this backdrop, it may be germane to refer to the object behind the above referred amnesty scheme. The preamble of the Amnesty Scheme provides that the Goods and Services Act has been brought into force in the State with effect from 1.7.2017. Prior to the coming into force of this enactment, there were approximately more than 20,000 cases pending at different levels under the Sales Tax Act, Value Added Tax Act, Central Sales Tax Act, Motor Spirit Taxation Act, Entry Tax Act and Sugar Cane Purchase Tax Act. As a result considerable recoveries of the amounts involved in such cases were outstanding. Various business associations in the State had made representations for expeditious and effective disposal of such old cases. By this scheme the Government will get the amounts of old pending recoveries, the business segment will get a huge relief and the administrative cost of the Government will be reduced. Considering this submission a proposal had been made for introducing the Amnesty Scheme. Under this scheme, the outstanding recoveries under the above enactments are to be covered. 16. Thus, the object of the amnesty scheme is to bring about expeditious and effective resolution of old disputes and recoveries of old outstanding dues of the Government and reduction of administrative costs. Since such scheme is applicable to all pending cases, the officers acting under the relevant statutes are expected to respect the object of the scheme and to ensure that the assessees get the benefit under the scheme. Therefore, when a bona fide request is made by an assessee to adjourn the hearing of a case with a view to enable him to avail the benefit of the scheme, the concerned officer is duty bound to respect such request. Therefore, when a bona fide request is made by an assessee to adjourn the hearing of a case with a view to enable him to avail the benefit of the scheme, the concerned officer is duty bound to respect such request. Therefore, when in the present case, where the matter had not been taken up for hearing for a considerable period of time, when the petitioners requested the second respondent to keep the assessment proceedings in abeyance as they wanted to avail the benefit of the amnesty scheme, the respondent ought to have respected such request and afforded the petitioners sufficient time to avail the benefit of the amnesty scheme, however, on the contrary, the second respondent, in undue haste, has proceeded to pass an exparte high pitched best judgment assessment order under section 34(8) of the GVAT Act. 17. Moreover, as pointed out by the learned advocate for the petitioners, the jurisdiction of the petitioners was with the Commissioner, Ghatak-85 and the second respondent did not have the jurisdiction to make assessment in the case of the petitioners. Despite the specific objections having been raised by the petitioners regarding lack of jurisdiction on the part of the second respondent, the second respondent has not dealt with the same and has proceeded to pass the impugned assessment order. Section 17 of the GVAT Act provides for power to transfer proceedings and lays down that the Commissioner may, after due notice to the concerned parties and by an order in writing, transfer any proceedings or class of proceedings under any provision of that Act from himself to any other officer and he may likewise transfer any such proceedings from such officer to another or to himself. In the facts of the present case, on a perusal of the reply received by the petitioners in response to their application under the Right to Information Act, it is evident that the jurisdiction of the petitioners was not transferred to the second respondent. Consequently, the second respondent did not have any jurisdiction to make assessment in the case of the petitioners, which renders the impugned assessment orders null and void as they have been passed by an authority which lacked the jurisdiction to make such orders. 18. Consequently, the second respondent did not have any jurisdiction to make assessment in the case of the petitioners, which renders the impugned assessment orders null and void as they have been passed by an authority which lacked the jurisdiction to make such orders. 18. Significantly, not only has second respondent not considered the petitioners’ request to keep the proceedings in abeyance and passed the impugned assessment orders, he has gone a step further and also decided on the eligibility of the petitioners’ to make an application under the amnesty scheme. In the impugned assessment order, the second respondent has observed that the petitioners’ cases are enforcement cases and the petitioners are not entitled to avail the benefit under the amnesty scheme. In this regard a perusal of the paragraph 5(2) of the Amnesty Scheme reveals that the scheme clearly provides for making applications thereunder even in cases where there have been enforcement proceedings. Moreover, the petitioners have asserted that in their case there was no search, which fact is clearly supported by the reply received by them in response to their applications under the Right to Information Act, wherein it has been stated that no search warrant has been issued to Sunflower Developers - the first petitioner in both the petitions. Under the circumstances, prima facie it appears that the case of the petitioners is not a search case. In any event, even otherwise, while making a best judgment assessment under the GVAT Act, it was not permissible for the second respondent to comment on the eligibility or otherwise of the petitioners under the amnesty scheme. 19. As discussed hereinabove, apart from the fact that the second respondent lacked the jurisdiction to make the assessment orders, even otherwise, the second respondent ought to have respected the request of the petitioners to keep the proceedings in abeyance so as to enable the petitioners to avail of the benefit under the amnesty scheme. While it is true that even after the passing of the assessment orders, the petitioners would be entitled to avail of the amnesty scheme, the consequence of the passing of the impugned assessment orders would be that the petitioners would be required to accept the amount assessed under the impugned assessment orders and pay tax accordingly under the amnesty scheme. While it is true that even after the passing of the assessment orders, the petitioners would be entitled to avail of the amnesty scheme, the consequence of the passing of the impugned assessment orders would be that the petitioners would be required to accept the amount assessed under the impugned assessment orders and pay tax accordingly under the amnesty scheme. Thus, the second respondent, by not keeping the proceedings in abeyance, has tried to frustrate the petitioners’ chances of obtaining the benefit of the amnesty scheme and by making a high pitched best judgment assessment, has attempted to ensure that even if the petitioners decide to avail the benefit of the Amnesty Scheme, they are required to pay a huge amount of tax. This conduct of the second respondent cannot be countenanced. 20. For the foregoing reasons, the petitions succeed and are accordingly allowed. The impugned assessment orders dated 27.9.2019 issued by the second respondent (Annexure-A to the petitions) are hereby quashed and set aside. Rule is made absolute accordingly in each of the petitions, with no order as to costs. 21. It is further directed that the respondent authorities shall process the applications made by the petitioners under the amnesty scheme in accordance with law. 22. To protect the interests of the revenue, it is further clarified that in the event, the petitioners, for any reason do not avail of or are held to be not entitled to the benefit of the amnesty scheme, it would be permissible for the respondents to initiate assessment proceedings for the period in question.