Summons Can Be Issued to Dealers Post Deemed Assessment: Madras High Court Clarifies Scope Under TNVAT Act

Court dismisses writ petitions challenging the validity of summons issued for document production under Section 81 of the TNVAT Act, 2006. The Madras High Court has upheld the authority of the State Tax Officer to issue summons for document production under Section 81 of the Tamil Nadu Value Added Tax (TNVAT) Act, 2006. In a significant judgment delivered on April 30, 2024, Justice C. Saravanan clarified that the power to summon documents is not limited to third parties and can be exercised against dealers, even post the deemed completion of assessment under Section 22(2) of the TNVAT Act, 2006.

The case involved two writ petitions filed by M/s. V.R. Muthu & Bros. and M/s. V.V.V. and Sons Edible Oils Limited, challenging the summons issued by the State Tax Officer, Virudhunagar, under Form PP. The petitioners argued that such summons under Rule 16(1) of the TNVAT Rules, 2007, should apply only to third parties and not to assessees who have filed regular returns. They contended that their assessments for the year 2015-16 were deemed complete on October 31, 2016, under Section 22(2) of the TNVAT Act, 2006.

Justice Saravanan emphasized the broad scope of Section 81 of the TNVAT Act, 2006, which allows the assessing authority to summon any person, including dealers, for document production. "The power under Section 81 of the TNVAT Act, 2006 is wide and is not eclipsed by the power vested under Section 22(3) of the TNVAT Act, 2006," the judgment noted.

The court observed that Section 22(3) of the TNVAT Act mandates that up to 20% of assessments be selected for detailed scrutiny by the Commissioner using a stratified random sampling method. These cases, which include the petitioners, require further scrutiny regardless of deemed assessment status.

The judgment extensively analyzed the provisions of the TNVAT Act and Rules. Justice Saravanan stated, "Merely because the assessment is deemed to have been completed under Section 22 of TNVAT Act, 2006, ipso facto will not mean that an Assessing Officer cannot call for information from a dealer whose name features in the list under Section 22(3) of the Act."

"The power to issue summon to a witness and production of documents is very wide and would include a dealer. Under Section 81 of the Act, an Assessing Authority...shall, for the purposes of the Act, have all the powers conferred on a Court by the Code of Civil Procedure, 1908," remarked Justice Saravanan​​.

The dismissal of the writ petitions reinforces the authority of the tax department to ensure compliance and accuracy in tax filings through the issuance of summons for document production. This judgment clarifies the extensive powers vested in tax authorities under the TNVAT Act, 2006, and underscores the importance of thorough scrutiny in tax assessments. The decision is expected to have significant implications for the procedural conduct of tax assessments and the scope of powers exercised by tax authorities in Tamil Nadu.

Date of Decision: April 30, 2024