Lack Of Delegation Vitiates Assessments: Delhi High Court Quashes VAT Orders Passed By Audit Officer For Acting Without Jurisdiction
Isabella Mariam
The High Court of Delhi Division Bench of Justice Prathiba M. Singh and Justice Shail Jain held that a series of VAT assessments issued by the VAT Audit Officer were without authority and therefore liable to be quashed. The Bench found that the officer lacked the requisite delegation to conduct assessments and noted that the statutory mode of conferring such powers—through Form DVAT-50, which enables the Commissioner to authorize officials for audit, investigation, and enforcement under the DVAT framework—had not been invoked in favour of VATO (Audit) before 15 October 2014. The matters concerned demands raised following audit proceedings and denial of input tax credit. Determining that the assessments were issued without jurisdiction, the Court set them aside and disposed of the appeals.
The appeals arose from default assessment orders issued to multiple registered dealers for various tax periods under the Delhi Value Added Tax Act, 2004. These orders were passed by the Value Added Tax Officer (Audit) determining tax, interest, and, in some cases, penalty, while also disallowing input tax credit. Following issuance of these assessments, the dealers filed objections before the Objection Hearing Authority, which upheld the demands raised by the assessing authorities. The dealers then approached the Appellate Tribunal, which affirmed the orders and dismissed their appeals.
The matters subsequently came before the High Court after the Supreme Court remitted them for reconsideration of specific legal issues. The Court identified questions relating to whether VATO (Audit), VATO (Enforcement), or VATO (Special Cell) could exercise assessment powers; whether absence of authorization under Form DVAT-50 affected the validity of actions taken; and whether input tax credit could be denied by relying on statutory provisions that came into force after the relevant periods.
During submissions, the appellants asserted that the assessments were issued by officers who were not the jurisdictional authorities and lacked delegation under Chapter X of the Act. They also relied on earlier judicial decisions and internal departmental circulars to emphasize that Form DVAT-50 had not been issued during the years when the assessments were made. The respondents argued that objections to jurisdiction had not been raised at earlier stages and that any procedural irregularity would be protected under statutory saving clauses.
The Court recorded that the “assessment orders were issued by VATO (Audit)” and that the jurisdictional VATO in each case was undisputed. It observed that the VATO (Audit) “was not the jurisdictional VATO” in any of the matters. The Court examined the earlier decision in Capri Bathaid Pvt. Ltd., noting that the Coordinate Bench had “analysed the scheme of the DVAT Act i.e. Section 60, 66 and 68 and Rule 65 of the DVAT Rules” and concluded that officers exercising powers under Chapter X must possess authorisation in Form DVAT-50. The Court quoted the finding that “the authority shall be issued by the person empowered by the CVAT… and expire on the retirement, resignation or transfer of the person”.
The Bench also noted the position recorded in Capri Bathaid that “every officer… shall carry the authorisation in Form DVAT-50 with him when purporting to exercise any of the powers conferred under Chapter X” and must produce it upon request.
The High Court further referred to the observation that delegation orders require officers to act “within their respective jurisdiction”, and that overlapping or cross-exercise of jurisdiction would cause “undue harassment of the dealer and administrative chaos”.
The Court then recorded the findings from Larsen & Toubro Ltd., particularly the Commissioner’s affidavit stating that “the authority to exercise powers under chapter X… in the prescribed form i.e. Form DVAT-50 was not issued… and was issued subsequently vide order dated 15.10.2014.”
It also noted from Capri Bathaid that “no officer below the rank of AVATO has been authorized to exercise any other function under the DVAT Act” and that in absence of jurisdictional delineation “it is the jurisdictional VATO, and not the AVATO Enf-I, who will continue to exercise the power of assessment vis-à-vis the Assessee.”
The Court recorded that the earlier 2017 judgment in the same matter did not consider Capri Bathaid because “the decision… was, unfortunately, not brought to the notice of the Court”. The Court further noted that the circular dated 11 April 2016 issued by the department itself acknowledged that audit officers must forward their reports to the jurisdictional ward officer for assessment.
Relying on the earlier judgments accepted by the department, including ITD-ITD CEM JV and JMD Digital Art Xchange Pvt. Ltd., the Court stated that those cases had already quashed assessments where VATO (Audit) acted without jurisdiction and without authorisation.
Following this reasoning, the Court recorded its conclusion that “when the VAT (Audit) officer, not being the jurisdictional officer concerned and also not having the necessary delegation to carry out assessments, the assessments orders… would not be valid.” It further observed that “Form DVAT-50 was not issued prior to 15th October, 2014 and therefore, the audit itself… would also be without jurisdiction.”
The Court directed that “the assessment orders in this batch of appeals deserve to be quashed. Ordered accordingly. The other questions of law i.e. Question (A) and (D) need not be gone into, as the assessments themselves are being quashed. The present appeals stand disposed of in said terms. Pending applications, if any, are also disposed of.”
Advocates Representing the Parties
For the Petitioners/Appellants: Mr. Varun Nischal, Mr. Arif Ahmed Khan, Ms. Saira Tagre, Mr. Afroz Ahmed Ahmad Khan, Ms. Shaziya Fahim, Mr. Jitendra Kumar; Mr. A.K. Babbar, Mr. B.K. Tripathi; Mr. Ruchir Bhatia, Mr. Abhishek Anand; Mr. Virag Tiwari, Mr. Ramashish, Mr. Himank Ahuja
For the Respondents: Mr. K. Gopalakrishnan
Case Title: H.G. International & Connected Appeals v. Commissioner of Trade and Taxes, Delhi
Neutral Citation: 2025: DHC:10063-DB
Case Number: ST.APPL. 63/2014 & connected matters
Bench: Justice Prathiba M. Singh, Justice Shail Jain
