Order requiring Petitioner to deposit Rs.600 crores as a condition for de-sealing of premises is preposterous & an abuse of power: High Court
FOR your kind information this is not a Central Excise/Customs/Service Tax case but a Delhi VAT case.
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On 15.03.2013 (Friday) the Value Added Tax Officer (VATO) arrived at the premises of the petitioner at about 5.30 p.m. and demanded important documents. The representative of the petitioner stated that he would provide those documents but that would require some time as information had to be culled, collated and reconciled. Moreover, the office of the petitioner had shifted from Okhla Industrial Estate to Nehru Place and the bulk of documents were lying in boxes.
The VATO was not willing to buy this plea and consequently passed a sealing order dated 16.03.2013 at 01.35 am in respect of three premises.
In response to the application made by the petitioner for de-sealing the premises, by an order dated 18.03.2013, the VATO permitted de-sealing but as a precondition to de-sealing under Section 60(4) of the DVAT Act, 2004, required the petitioner to deposit a sum of Rs.600 crores.
Aggrieved, the petitioner approached the Delhi High Court and in its order dated 19.03.2013 while prima facie agreeing that that the demand for Rs.600 crores was 'preposterous and cannot be sustained in law' and that "the security that is required for de-sealing in terms of Section 60(4) has, prima facie, no reference to the expected tax demand" ordered that the premises be de-sealed immediately and asked the petitioner to deposit a sum of Rs.5 crores.
The petition was heard recently and the High Court picked holes in the action taken by VATO by observing -
+ Sealing the three premises of the Petitioner was only on account of the failure to produce the records as demanded by the notice dated 15th March 2013 issued u/s 59 of the DVAT Act. This certainly was not in accordance with the requirements of Section 60 of the DVAT Act.
+ The deployment order was not in respect of the two addresses and yet those were sealed. How this was possible without a fresh deployment order being issued is unexplained.
+ The order (of sealing) has been passed not by the Commissioner but by the VATO. There is nothing to indicate that the VATO was authorised to do so by an order issued in Form DVAT 50 as on 15th March 2013.
+ The de-sealing order simply totals up the turnover figures for 2011-12 and 2012-13, deducts 25% therefrom in terms of Rule 3 (2) of the DVAT Rules 2005 and arrives at a figure of Rs. 124.11 crores towards tax and approximately Rs. 31.02 crores as penalty. It then adverts to the assessment order for 2008-09 (under challenge) and in terms of the rectified assessment and penalty orders, the demand created worked out to Rs. 614.60 crores.
+ Then it seeks to create a demand "on the basis of same proportions" for 2009-10 to 2012-13 and arrives at a figure of approximately Rs. 2190.44 crores! It is on this basis that the VATO has ordered that as a condition for de-sealing the Petitioners three premises, it should deposit Rs. 600 crores. This figure is, therefore, based entirely on guesswork and 'projections' without any adjudication.
Terming the de-sealing order as 'preposterous' and an abuse of the power under Section 60 (4) of the DVAT Act, the same was held to be unsustainable in law and the sum of Rs.5 crores deposited by petitioner was directed to be released forthwith.
Interestingly, the case file was reported as missing by the department "despite best efforts to trace the same" and, therefore, the High Court directed the Commissioner to file a FIR and simultaneously order vigilance enquiry against those found responsible for the serious lapse.
The Commissioner was also directed to file affidavit in compliance and a further hearing was fixed to decide the costs that should be awarded to the Petitioner, Larsen & Toubro Ltd..
See 2016-TIOL-222-HC-DEL-VAT.