Order Date – 20 April 2023

Parties: M/S Naarjuna Agro Chemicals Pvt.Ltd. Vs State of U.P. and Another

Facts – 

• The Petitioner, M/S Naarjuna Agro Chemicals Pvt.Ltd., has submitted returns for the assessment year 2017-18.
• The proceedings under Section 74 have been initiated by the department against the petitioner on certain grounds with regard to classification and consequential tax payable of certain goods and it was alleged that the tax previously paid was found short and a demand has been raised for deposit of appropriate short fall in the deposit of tax as also interest and penalty.

Issue – 

• Whether the issue of notice once returns have been submitted by the assessee before initiating action under Section 74 of the Act are in order?

Order – 

• The divisional bench of Hon’ble High Court observed that it does not appear that any discrepancy was noticed by the department in the returns of the petitioner, nor any such deficiency was pointed out to the assessee for it to be rectified by it. The returns, therefore, remain intact.
• The scrutiny proceedings of return as well as proceeding under Section 74 are two separate and distinct exigencies and issuance of notice under Section 61(3), therefore, cannot be construed as a condition precedent for initiation of action under Section 74 of the Act.
• It was held that merely because no notices were issued under Section 61 of the Act would mean that issues of classification or short payment of tax cannot be dealt with under Section 74 as exercise of such power is not dependent upon issuance of notice under Section 61. The argument is misconceived is thus, repelled.
• The petitioner has a remedy of preferring appeal which has not been availed. Therefore, the Court permits the petitioner to prefer such appeal within two weeks from today and in the event such an appeal is filed, the same shall be entertained without raising any objection with regard to limitation.
• The writ petition is dismissed.