2015 (10) TMI 2515 - HC - VAT and Sales Tax

Demand of VAT on exempted turnover - suppression of turnover - principle of natural justice - chillies and chilly powder fall under Entry 18 of the Part-B of IV Schedule to the TNVAT Act and sale of the same by any dealer is exempted from tax by Section 15 of the TNVAT Act, whose turn over in respect of those items does not exceed Rupees three hundred crores in a year. The petitioner total turn over of chillies and chilly powder for the assessment year 2014-2015 is below the limit of Rupees three hundred crores and hence, the petitioner claimed exemption on their local sales turn over of ₹ 10,22,09/,426/- in the regular monthly returns filed under the TNVAT Act. - the respondent stated that the petitioner have reported a total turn over (CST VAT) of ₹ 353,63,85,695 for the year 2014-2015 and requested the petitioner firm to pay tax of 5% for exempted sale under commodity code-2052. Held that - as per Section 22(4) of the Act, before passing the impugned order, personal hearing is must to put forth the contentions of the petitioner firm. In the case on hand, it is seen that no such personal hearing was given to the petitioner to substantiate the claim of the petitioner. Accordingly, the order impugned in this Writ Petition stands set aside and the respondent is directed to provide a personal hearing to the petitioner within a period of four weeks from the date of receipt of a copy of this order. After doing so, the respondent is directed to pass appropriate orders on merits and in accordance with law within a period of four weeks from the date of personal hearing.

Summary

Issues: Violation of principles of natural justice

Detailed Analysis:
The petitioner, a manufacturer/dealer in condiments, masala powder, and chilli powder, filed a Writ Petition seeking to quash an order by the respondent under the Tamil Nadu Value Added Tax Act, 2006. The petitioner contended that they had properly reported their turnovers under both the TNVAT Act and the CST Act separately, as required by the rules, and had claimed exemption on their sales turnover of chillies and chilly powder under the TNVAT Act. However, the respondent issued a notice demanding tax payment for exempted sales, without providing a personal hearing to the petitioner, which the petitioner argued was a violation of principles of natural justice.

The petitioner's main contention was that the impugned order was passed without affording them a personal hearing, as mandated by Section 22(4) of the Act. The petitioner argued that the lack of personal hearing amounted to a total violation of principles of natural justice, rendering the impugned order invalid. The respondent, through the Additional Govt. Pleader, opposed this contention, claiming that the order was reasoned and did not require setting aside.

However, the Court, after considering the arguments, held that personal hearing was a mandatory requirement under Section 22(4) of the Act before passing such orders. Since the petitioner was not provided with a personal hearing to substantiate their claim, the Court set aside the impugned order and directed the respondent to provide a personal hearing to the petitioner within four weeks. The respondent was further instructed to pass appropriate orders based on merits and in accordance with the law within four weeks from the date of the personal hearing.

In conclusion, the Writ Petition was disposed of with the direction for a personal hearing to be provided, and no costs were awarded. The connected miscellaneous petition was also closed as a result of the judgment.