Impugned notices and the consequential orders of audit are barred by limitation and thus without jurisdiction and are therefore not liable to be interfered with by this Court under Article 226 of the Constitution of India. Question of relegating the petitioners to the appellate remedy does not arise. A division bench comprising of Justice Ujjal Bhuyan and Justice Milind Jadhav while adjudicating the matter in M/s Yogi Petroleum v. Commissioner of VAT [WRIT PETITION (STAMP) NO.93644 OF 2020]; dealt with the issue of permissibility of re-assessment of audits.
Petitioner is carrying on the business of retail petrol pump dealership. Deputy Commissioner (VAT), Dadra and Nagar Haveli, Silvassa, issued notice for audit of business affairs to the petitioner. By the said notice, it was stated that the Deputy Commissioner was satisfied that an audit of petitioner’s business affairs as a dealer was required to be undertaken. Petitioner was, therefore, directed to attend office of Value Added Tax (VAT) Department to produce / cause to be produced the books of accounts and all evidence on which petitioner would rely in support of the returns filed by the petitioner, including tax invoices. Petitioner submitted the required documents. However, by the said audit reports Deputy Commissioner came to the conclusion that information received from various refineries indicated differences with the returns furnished by the retailers for which the VAT Department had decided to conduct audit in respect of all petroleum dealers. Deputy Commissioner recorded that there was violation of sub-section (9) of section 86 and, therefore, the dealer is liable to pay tax and interest, besides payment of penalty. Aggrieved by this, the petitioner filed a writ petition on the ground that such audit report / order is basically re-assessment but the time limit for assessment and re-assessment is four years as per section 34 of the VAT Regulations. Admittedly, the impugned notice as well as the impugned audit reports (orders) are beyond the limitation period of four years and, therefore, are without jurisdiction.
The Court upon considering the aforesaid facts sounded the judgment that “having regard to the meaning of the word ‘audit’ as is ordinarily understood since it is not a defined expression under the VAT Regulations and having regard to the scheme of section 58, it is quite evident that when a notice is issued to a person informing him that an audit of the affairs of his business shall be conducted, the same certainly has a legal significance. Such a notice of audit may lead to assessment if not done and if assessment had been done then either to confirm the assessment or to make re-assessment if the result of the audit shows that despite the assessment already made there is tax deficiency and more tax is required to be paid. If that is the position then for making of assessment or re-assessment, we will have to fall back upon sections 31 and 32 for which limitation of four years is prescribed in section 34. Therefore, section 58 of the VAT Regulations cannot be construed or interpreted in isolation or as a standalone provision. Having regard to the consequences following invocation of section 58, it has to be read with sections 31 and 32 of the VAT Regulations and consequently section 34.”