2012 (11) TMI 1053 - HC - VAT and Sales Tax

Non speaking order - service of penalty notice on the friend of the appellant - Held that - It is not disputed that the notice bears the signatures of the friend of the appellant. This certainly does not fall within the array of the persons specified under rule 79(1)(a) of the Rules. Further the report of the process server dated November 7, 2010, about seven months after the alleged service of notice, on which reliance had been placed by the appellate authorities also could not have formed the basis for rejecting the plea of the appellant. The notice had, thus, not been validly served upon the appellant. Thus the order dated April 20, 2010 passed by the Assessing Authority imposing penalty under section 38 of the Act was without affording any opportunity of hearing to the appellant.

Summary

Issues:
1. Validity of the order of the Tribunal
2. Validity of service of notice on an unknown person
3. Legal evidence of service of notice
4. Consequence of service of penalty notice during assessment proceedings

Issue 1: Validity of the order of the Tribunal
The appellant challenged the order of the Tribunal under section 36 of the Haryana Value Added Tax Act, 2003, claiming that the order was a non-speaking order. The appellant raised substantial questions of law regarding the validity of the order, including issues related to service of notice and the imposition of penalty. The appellant contended that the order was passed ex parte without proper notice and opportunity of hearing.

Issue 2: Validity of service of notice on an unknown person
The appellant argued that the notice for penalty proceedings was not validly served as it was not received by any designated person as required by rule 79 of the Haryana Value Added Tax Rules, 2003. The appellant claimed that the report of the process server, dated seven months after the penalty order, did not constitute valid service of notice. The appellant emphasized that the order imposing penalty was in violation of the principles of natural justice.

Issue 3: Legal evidence of service of notice
The State contended that the notice had been validly served as it was delivered to the agent of the appellant, who signed on behalf of the appellant. The State relied on specific rules of the Code of Civil Procedure to support the argument that service on the agent was sufficient. However, the court found that the service on the friend of the appellant did not fulfill the requirements under the relevant rules, leading to a conclusion that the notice was not validly served.

Issue 4: Consequence of service of penalty notice during assessment proceedings
The court examined the implications of serving a penalty notice separately from the assessment order. It was observed that the penalty notice was served during the assessment proceedings without including the penalty in the assessment order. The court held that the penalty order, passed without affording the appellant an opportunity of hearing, was invalid. The court directed the Assessing Authority to pass a fresh order under section 38 of the Act after providing the appellant with a proper opportunity of hearing.

In conclusion, the court found that the order imposing penalty was not valid due to improper service of notice and lack of opportunity for the appellant to be heard. The court directed the Assessing Authority to conduct fresh proceedings in accordance with the law, emphasizing the importance of adhering to principles of natural justice in tax matters.