A division bench of the Delhi High Court imposed a penalty of Rs. 75000 as a cost on the Delhi VAT officers on the ground of misconduct while exercising the powers of inspection and seizure under section 59 and 60 of the Delhi Value Added Tax (DVAT) Act.
While slamming the conduct of the officials, the bench comprising Justices Sanjiv Khanna and Prathiba M Singh warned that the department should take care of not repeating such lapses in future.
The petitioners, Teleworld Mobiles Pvt. Ltd approached the Court claiming that they were subjected to an illegal search by the respondents, VAT officials, under sections 59 and 60 of the Delhi Value Added Tax Act.
They contended that the search was unauthorized since the officials did not carry and show Form DVAT-50 in spite of repeated requests. They urged that the operations under Section 60 and Rule 65(1) were undertaken by the non-jurisdictional Assistant Value Added Tax Officer. Further, non-jurisdictional officers below the rank of Assistant Commissioner were also part of the team, which had carried on the search operations.
Analyzing the relevant provisions of the Act and connected Rules, the bench admitted that there are ambiguity and difficulty in Rule 65 of the Act but the same has to be interpreted in a pragmatic and in a practical manner.
As per the provisions, Commissioner can delegate his power for grant of authority to exercise power, the delegate will issue the authority letter in Form DVAT-50. Under Sub – Rule 2, the grant of authority will be to a specific person and limited to a period not exceeding three years and would expire earlier on retiring, resignation or transfer. Authority in terms of time can, however, be extended.
Further, as per Sub-Rule 3, the person, who is authorized to undertake search and survey shall carry with him authorization Form DVAT-50 while exercising any of the power contained under Chapter X and shall produce such authorization in Form DVAT -50 at the request of the owner/occupier.
The bench noted that Form DVAT – 50 is not required to be filled by the Commissioner when he delegates his power to issue the authorization to Special Commissioner. The Form has to be filled up when power is conferred and authorization is given to a particular officer by name for carrying out audit /enforcement function under Chapter X.
However, the bench ruled that the department should ensure that when Form DVAT50 is shown to the dealer at the time of the search or survey/investigation, signatures of the party ought to have been obtained to avoid controversy.
Pointing out the lapses made by the Officials while exercising their powers for inspection and seizure during the search, the bench imposed the penalty in the form of costs on the respondents since they have acted contrary to the provisions of the Act and the Rules.
“If the contention and the pleas of the petitioner are rejected, they can be burdened with tax, interest, and penalty. However, there is no provision in the Act under which the authorities can be burdened with any penalty or costs for the wrongs committed by them in violation of the provisions of the Act. In these circumstances, having held that the respondents have acted contrary to the provisions of the Act and the Rules, we are of the opinion that they must be burdened with the penalty in form of costs. This is necessary and required to ensure that such lapses do not happen in future and are not repeated. Such conduct and misconduct cannot be condoned and overlooked.”
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