2013 (3) TMI 583 - HC - VAT and Sales Tax

Composition of tax denied - Held that - Respondent No. 1 showed undue hurry in passing the final order of cancellation of permission for composition of tax. On March 8, 2013, showcause notice was issued which was served on the petitioner on March 9, 2013. 10th March happened to be Sunday. The petitioner, therefore, had only one clear day for responding to the notice and producing the material called for. There was no earthly reason why the said respondent could not have waited for a reasonable period to permit the petitioner to put the full facts on record. respondent No. 1 breached the principle of natural justice. Mere issuance of show cause notice is not sufficient for complying with the basic requirement of hearing. A reasonable opportunity to put forth its defence was part of the petitioner s right. No reason whatsoever has been brought to our notice why the entire exercise was required to be completed in four days. Appeal allowed. Case remanded.

Summary

Issues Involved:
Challenge to notice for cancellation of tax composition permission, challenge to subsequent cancellation order, challenge to bank account attachment orders.

Analysis:
The petitioner, a company engaged in infrastructure projects, challenged a notice dated March 8, 2013, questioning the permission for tax composition. The respondents believed the petitioner breached conditions by using grit from its mines without duty payment. The petitioner was given limited time to respond, and subsequently, the permission was canceled on March 12, 2013, along with bank account attachments. The High Court found the respondent hurried in canceling the permission without proper examination, breaching natural justice principles. The cancellation order and bank attachments were set aside due to lack of a fair opportunity for defense.

The High Court acknowledged the authority's power to safeguard revenue interests but emphasized the need for a proper assessment process. The bank attachments were solely based on the canceled permission, which was deemed unjustified after its reversal. The petitioner, engaged in a significant construction project, was granted time to provide further details, and the respondent was directed to make a final decision after a personal hearing. The possibility of future attachments was left to the competent authority to decide if necessary under the VAT Act.

In conclusion, the High Court set aside the cancellation of tax composition permission and the consequential bank account attachments, emphasizing the importance of fair procedures and adequate time for defense. The case highlighted the necessity for thorough examination before drastic actions impacting substantial tax liabilities. The judgment aimed to uphold principles of natural justice and ensure a balanced approach in tax assessment matters.