BEFORE XXXXXXXXXXX, NEW DELHI

Name of Firm : M/s. XXXXXXXXXXXXXXXXXx

Address : XXXXXXXXXXXXXXXXXX

TIN NO. : XXXXXXXXXXXXX

Assessment Year : First Quarter 2013-14 (Local & CST)

Second Quarter 2013-14 (Local & CST)

Disputed amount : Period Local/CST Penalty

First Qrt. 2013-14 Local XXXXXX
First Qrt. 2013-14 CST XXXXXX
Second Qrt. 2013-14 Local XXXXXX
Second Qrt. 2013-14 CST XXXXXX

Objector is a registered dealer of ward -78 New Delhi holding TIN No. XXXX and is
engaged in the business of trading of ready- made garments taxable @ 5%. .
Objector was assessed by the way of penalty u/s 9(2) of CST Act read with Section
86(9) of Delhi value Added Tax Act 2004 vide order Reference No. XXXXXXX dated
02.09.2014 whereby a penalty of Rs. XXXXX/- was imposed

Being aggrieved of the order, objector has filed the present objection on
18.06.2017 vide online Reference No. XXXXX in Form DVAT-38 and hard copy of
the same was submitted in your office on XXXXX. Order imposing the penalty is
assailed on the ground that order passed is bad in law and without appreciating
the facts and law on the subject, without application of mind and is non-speaking
without affording an opportunity of being heard and without following legal
mandatory procedure and in violation of natural justice.

That the objector filed DVAT return for the II quarter ending 30.09.2013 on
______ in Form DVAT-16 vide online receipt No. declaring NIL GTO and also there
was no element of tax involved . Return filed was late but the same was nor
without reasonable cause. The business carried on is by a lady who was
undergoing some family problem and dispute and as such she was solely
dependent of her accountant for making the necessary statutory compliance, but
due to the problem in the family she could not check the compliances or work of
the accountant which resulted I this lapse or failure in filing the return in time

Immediately on realizing the error she took necessary action and filed the return
although no tax was involved and filed the return sue-moto and complied
accordingly, before it could be detected or action could be taken by the
department.

However, on legal issue it is submitted that Assessing Authority has failed to

appreciate the law on the subject and failed to pass speaking order without
following the legal mandatory provision and procedure. Assessing Authority prior
to passing an order imposing the penalty has failed to record his satisfaction and
also failed to issue prior notice affording an opportunity of being heard, thus
violated the principle of natural justice. Filing of returns is governed by chapter –V
of the DVAT Act 2004. Section 26 of the DVAT Act 2004 prescribes periodical
payment of tax and furnishing of returns and sub clause (1) which read as under
Every registered dealer who is liable to pay tax under this Act shall
furnish to the Commissioner such returns for each tax period and by
such dates as may be prescribed and in the prescribed form.

Under the tax law proceedings are quasi-judicial proceedings and before inflicting
injury in the shape of penalty, an opportunity of being heard must be given to the
objector and only after considering the reply, then the order should be passed on
merits. Order passed also suffers from legal infirmity as it does not bear the
signature of the Assessing Authority.

From the reading of the provision it that emerges that every registered dealer is
liable to furnish the return only when there is a liability to pay tax and not
otherwise .

That during the period under consideration there was no tax liability and as there
was no purchase and sale, as such not liable to file return as per Section 26 (1).
In support of the submission I would like draw your kind attention to the case
decided by Honorable Tribunal Delhi in a case M/S Garg Electronics Vs
Commissioner Of Trade & Taxes.[2013] 51DSTC 518 (DELHI TRIB.)

11. We have heard Ld. Counsel for the respective parties and
have gone through the records of the case file including the
impugned orders and the grounds of appeal as well as
relevant provisions of the DVAT Act, 2004 as quoted above r/w
Rules framed thereunder. We are of the considered view that
appellant was not under legal obligation to file the returns for
the A.Y 2007-08 to 2010-11 as he was having no sales during
the years. In fact, it is so clear also from ‘NIL’ returns filed by
the appellant after the assessment of penalty orders passed
against him by the AVATO for the year 2007-08 to 2010-11
and till date no default assessment has been carried out nor
the notice of the assessment has been issued as contemplated
under section 32 of DVAT Act, 2004.

12. After going through the provisions and Rules referred to

above and addressed before us by respective Ld. Counsel for
the parties, we are of the considered view that the
submissions made by the Ld. Counsel for the Revenue hold no
water on the face of the provisions and Rules quoted above.
We are not convinced at all that there exists any provision in
the DVAT Act, 2004, which obliged a dealer to file so called
’NIL’ return when the dealer is not liable to pay tax. In fact,
there are provisions which deals with such like appellant
dealer registered under the Act who fails to file the returns
while having or having no liability to pay tax under the DVAT
Act, 2004, however, certainly, non-filing of returns by a
registered dealer having no liability to pay tax does not
prescribed jurisdiction to the Assessing Authority, AVATO in
the present case, to assess penalty under u/s 33 r/w Section
86(9) of the DVAT Act, 2004. Under section 33 of the DVAT Act
2004, liability to pay penalty under the Act shall arise only
when the dealer furnish returns u/s 33 of the DVAT Act as
required u/s 26 0r 27 of the Act itself. Again, reference has to
be made to Section 26 as Section 27 has to be read in addition
to the return specified in Section 26 of the Act and deals with
the powers of Commissioner to require to furnish other
returns. So far as , submissions that registered dealer is
required to file self-assessment return u/s 31 of the DVAT Act,
we are of the view that such submissions are devoid of any
merit or substance having no support of the provisions of the
DVAT Act as a registered dealer who fail to file return, is
governed for consequential action under chapter-IV of the
DVAT Act, 2004 itself of which relevant provision has been
referred to above for ready reference.

13. In view of the foregoing discussions, we are of the view

that non-filing of returns in the given facts and circumstances
where the appellant is not liable to pay tax under the DVAT
Act. 2004 and without recourse taken by the Assessing
Authority of issue of Notice in Form DVAT-24 to be served on
the dealer in the manner prescribed in Rule 62 of the DVAT
Rules 2005, in respect of the default assessment of tax and
interest or re-assessment of tax to the best of the judgment of
the amount of net tax due for such tax period u/s 32 of the
DVAT Act, 2004 r/w Rule 86 DVAT Rules 2005, the Assessing
Authority i.e AVATO, Ward-80 in the present case a case , has
no jurisdiction to assess the penalty u/s 33 of the DVAT Act
2004 r/w Section 86(9)of the DVAT Act and hence, we hold the
assessment of the penalty under the DVAT Act and the CST Act
for year 2007-08. 2008-09. 2009-10 & 2010-11 by the
Assessing Authority, in the present case AVATO, is without
jurisdiction.
Assessing authority failed to appreciate the law and erred in imposing penalty
without issue of legal mandatory notice to the objector, thus depriving the
objector of an opportunity of being heard and in violation of natural justice. This

issue came up and settled at rest by the Hon’ble High Court of Delhi in the case of
M/S Bansal Dye Chem Pvt ltd vide order dated 24.9.2015 reported at ST
Appl. 29/2015, wherein it was held as under :-

“4. Admittedly, prior to levying penalty under Section 86(1)

no separate notice was issued to the assessee. The Asessee
paid the tax, interest and penalty. While the assessee did
not challenge the levy of tax and interest, he questioned the
penalty order, inter alia, on the ground that no opportunity
of hearing was afforded on the question of penalty before the
order was passed.

6. The fact remains that no notice was issued to the

assessee by the VATO on the aspect of penalty. The mere
fact that the Assessee had paid the penalty under protest
would not preclude it from questioning the levy of penalty on
the ground that the basic procedural requirement was not
fulfilled by the VATO.

9. The very nature of the proceedings under Section 33

of the DVAT Act read with Rule 36(2) of the DVAT Rules
underscore the need for the VATO to observe the principles
of natural justice while making the penalty order. This
entails serving on the assessee a separate notice to show
cause why penalty should not be imposed and affording the
 assessee an opportunity of being heard prior to passing the
penalty order. The imposition of penalty is not a
mechanical or automatic exercise but requires
application of mind by the assessing authority to the
facts and circumstances of the case. The fact that an
assessee is found liable to pay enhanced taxes and
interest does not ipso facto determine whether the
assessee is also liable to pay a penalty.

In Indian Tourism Development Corporation V. Sales Tax Officer (decision

dated 24th September 2010 in W.P. (C) Nos. 17431 of 2006), this Court inter
alia dealt with an identical issue;

Likewise in Indian Railway Catering and Tourism Corporation Ltd V. Govt. of

NCT of Delhi 48 DSTC J-316 (decision dated 19th July 2010 in WP (C) Nos.
10527/2009) this court ordered : “We feel that the petitioner ought to
have been given an opportunity, of hearing before the penalty orders
could have been passed.”

Honorable High Court Delhi has taken a serious view of the facts in the case
Progressive Alloys (India) Pvt Ltd Vs. Commissioner of Trade &
Taxes W.P. (C) 7434/2015 & C.M. No. 13724/2015 and has held

“11. A perusal of the order dated 9th March 2015 of the

DVAT Act reveals that it is another machine generated
order. The said order fails to note what transpired at the
hearing before the VATO. The preamble of the said order
which reads as under :-

“Whereas I am satisfied that the dealer has not furnished

returns/furnished incomplete returns/or incorrect
returns/furnished a return that does not comply with the
requirements of Delhi Valued Added Tax Act, 2004/any
other reason.”

The above order in Form DVAT-24 is in a pre-printed

format and is unsigned. Therefore, it is not possible to
make out which of the above alternatives provided in
the captioned preamble paragraph applies to the
case on hand. It fails to spell out the reasons for the
VATO concluding that the purchases in question were
made from suspicious/bogus dealers. In effect, it is a
non-speaking order and it is impossible to discern
what reasons weighed with the VATO while issuing
such an order.”