IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. CWP No. 15752 of 2009 Date of Decision: October 15, 2009 M/s R.S. Export …Petitioner Versus State of Punjab and another …Respondents CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE JASWANT SINGH Present: Mr. Avneesh Jhingan, Advocate, for the petitioner. Mr. T.S. Salana, DAG, Punjab, for the respondents. 1. To be referred to the Reporters or not? 2. Whether the judgment should be reported in the Digest? M.M. KUMAR, J. This petition filed under Article 226 of the Constitution challenges notice dated 23.9.2009 (P-5) issued in Form VAT 58 under Rule 51-A of the Punjab Value Added Tax Rules, 2005 (for brevity, ‘the Rules’), locking the Tax Identification Number (TIN) of the petitioner on the ground that it has knowingly furnished incomplete or incorrect information in the return furnished for the period 2005-06 onwards. The petitioner was also directed to appear before the Designated Officer, Amritsar-I on 29.9.2009 to produce evidence, record or documents. Brief facts of the case are that the petitioner is a partnership firm carrying on the business of Rice Sheller at Amritsar. It has been registered under CWP No. 15752 of 2009 the Punjab General Sales Tax Act, 1948, Central Sales Tax Act, 1956 as well as Punjab Value Added Tax Act, 2005. On 31.1.1994, the petitioner firm started its original unit of Rice Sheller at Amritsar, which was expanded in the year 2000 and commercial production was started on 14.1.2000. On the basis of Eligibility Certificate issued by the Industries Department, the petitioner firm was issued Entitlement Certificate, dated 27.5.2005, by the Assistant Excise and Taxation Commissioner, Amritsar-I (P-1). The tax exemption was granted for the period from 14.1.2000 to 13.1.2010 for maximum of Rs. 1,71,00,000/-. It has been asserted that the petitioner firm is filing returns and depositing the due tax in accordance with the returns and the assessment upto the assessment year 2004-05 has been completed. The Excise and Taxation Officer-cum-Designated Officer, Amritsar- I issued a notice to the petitioner firm regarding cancellation of exemption/entitlement certificate under Rule 8 of the Punjab Exemption and Deferment Rules, 1991. It was pointed out that the petitioner firm has not made any export outside India for the year 2006-07 onwards whereas it was required to export at least 25% of its product in market outside India with minimum value addition of 33% and as such it was liable for cancellation of exemption/entitlement certificate as well as recovery of the amount of exemption already availed. The petitioner firm was afforded an opportunity of hearing (P- 2). The petitioner firm filed reply stating that it was required to export 25% for five years from the date of commercial production and, in fact, it has exported 100% during that period. The jurisdiction of the officer for canceling the tax benefit was also questioned (P-3 Colly). Being not satisfied with the return filed by the petitioner firm in respect of assessment year 2005-06, on 14.9.2009 the Designated Officer-respondent No. 2 issued a notice of assessment under Section 2 CWP No. 15752 of 2009 92(3) of the Punjab Value Added Tax Act, 2005 read with Section 9(2) of the Central Sales Tax Act, 1956 (P-4). It has been claimed that on 25.9.2009 the petitioner along with his counsel appeared before the Designated Officer and apprised him that the petitioner firm has already filed its returns along with all the required declaration forms, audit reports etc. However, the Designated Officer-respondent No. 2 insisted for deposit of some tax. The petitioner also apprised that its unit is an exempt unit and assessment may be finalized accordingly and if some demand is created in the assessment order it would pursue its remedies. The matter was adjourned to 5.10.2009. Thereafter the matter was adjourned to 7.10.2009, and 9.10.2009. On 9.10.2009 there was a holiday in Amritsar and no further date has been informed. On 23.9.2009, impugned notice in Form VAT 58 (P-5) was issued to the petitioner firm. The TIN number of the petitioner was also locked. On 29.9.2009 and 6.10.2009 replies were filed by the petitioner firm (P-6 Colly). However, TIN number was not opened despite requests made. With this grievance the petitioner firm has approached this Court by filing the instant petition. We have heard learned counsel for the parties and perused the paper book with their able assistance. In pursuance of Rule 51-A of the Rules, TIN number of the petitioner firm has been locked. Notice issued under Form VAT- 58 has alleged that the petitioner firm has furnished incomplete or incorrect information concerning the return furnished for the assessment years 2005-2006 onwards. Rule 51-A of the Rules requires that immediately after locking the TIN number, notice is required to be issued and on furnishing of the evidence of the payment of tax, interest and penalty or furnishing of overdue return or return or annual statement, the TIN number has to be re-opened immediately. 3 CWP No. 15752 of 2009 Shri Harmit Singh, ETO, Amritsar-I is present in the Court and has placed before us an order showing that the petitioner was granted exemption certificate w.e.f. 14.1.2000 to 13.1.2010, with maximum benefit of Rs. 1,71,00,000/- under the Punjab Deferment and Exemption Rules, 1991, being an export oriented unit. The petitioner firm is alleged to have violated the provisions of Rule 2.22 by not exporting goods outside India w.e.f. 1.4.2006 to 31.3.2009 and it has not been functioning as manufacturing unit of rice shelling as mentioned in the eligibility certificate. The order further states that the unit is procuring paddy milled on job work basis from another unit, namely, M/s R.S. Rice Mills, Tarn Taran Road, Amritsar. Therefore, recommendations have been made for cancellation of Exemption/Entitlement Certificate to the General Manager, Department of Industrial Centre, Amritsar and to lock the ICC transactions of the petitioner firm. The assessment proceedings are to be completed in due course. We have heard learned counsel for the parties at a considerable length and are of the view that this petition deserves to be accepted. The power to lock the TIN has been conferred vide amendment dated 12.9.2008 (P-7). It was in pursuance of the aforesaid amendment that Rule 51-A was added and the same reads as under:- “51-A. Locking of Tax Identification Number (TIN).- If any person, who, is registered under section 21 of the Punjab Value Added Tax Act, 2005, fails to pay any tax, penalty or interest payable under the Act or fails to furnish a return or returns or annual statement by the prescribed date or has filed incomplete or incorrect return or has conducted huge transactions as per Information Collection Centre data available in the computer system but has not 4 CWP No. 15752 of 2009 filed corresponding returns or no business at the declared place is being conducted or has failed to comply with the requirements of any notice issued by a designated officer, the Commissioner or the designated officer may lock his Tax Identification Number, without prejudice to other actions which may be taken against him under the Act or the Rules: Provided that a notice in Form VAT-58 shall be issued immediately after locking of the Tax Identification Number by the designated officer to the person, informing him about the action taken, alongwith the reasons thereof. The locked Tax Identification Number shall be reopened immediately after the compliance by the concerned person by furnishing evidence of the payment of the tax, interest and penalty or furnishing of overdue return or returns or annual statement, as the case may be. In all cases where the Tax Identification Number is locked or reopened the designated officer shall display the fact in the office notice board and also inform the Commissioner within twenty four hours. Explanation.- “Locking of Tax Identification Number (TIN)” means temporary stoppage of inter-state movement of goods of the concerned person for the purpose of verification or further legal action.” A perusal of the aforesaid rule shows that powers can be invoked under Rule 51-A of the Rules against a person who fails to pay tax, penalty or interest payable under the Punjab Value Added Tax Act, 2005 or fails to furnish a return or annual statement by the prescribed date. A notice in that regard is 5 CWP No. 15752 of 2009 required to be issued in Form VAT-58 immediately after the locking of the TIN. In the show cause notice dated 23.9.2009 (P-5) the ground for locking the TIN is that the dealer had furnished incomplete or incorrect information in the return furnished for the period 2005-06 onwards. It is conceded during the course of arguments by the learned State counsel, as instructed by the Excise and Taxation Officer, that the petitioner’s unit was granted exemption certificate from 14.1.2001 to 13.1.2010 with a maximum limit of Rs. 1,71,00,000/- under the Punjab Deferment and Exemption Rules, 1991 (for brevity, ‘the 1991 Rules’). The allegation is that the dealer has violated the provisions of those rules. It is, thus, clear that none of the grounds conferring power under Rule 51-A of the Rules are available nor it could be shown at the time of hearing that the dealer had failed to pay any tax, penalty or interest payable under the Punjab Value Added Tax Act, 2005 or has failed to furnish a return or annual statement by the prescribed date or has filed incomplete or incorrect return etc. Therefore, the continuation of locking TIN is absolutely unwarranted and the grounds given in the show cause notice does not exist on record. Therefore, we are of the view that the continuation of locking of TIN is not germane to the grounds available under Rule 51-A of the Rules and, therefore, the action of the respondents cannot be sustained. For the reasons stated above, this petition succeeds. The respondents are directed to open the TIN of the petitioner immediately. However, this order cannot be taken to mean that the respondent department is debarred from proceed ingagainst the petitioner under the relevant provisions of law for violating the 1991 Rules or any other lapse. (M.M. KUMAR) JUDGE 6 CWP No. 15752 of 2009 (JASWANT SINGH) October 15, 2009 JUDGE manoj/Pkapoor 7