2013 (4) TMI 429 - HC - VAT and Sales Tax

Liability to register as a dealer under the provisions of the Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act 1981 - department caused an inspection and based on that notice was issued demanding tax on the rent collected and also on the food and beverage supplied under the provisions of TNVAT Act, 2006 & levy of penalty under Section 16 of the Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act 1981 - Held that - The petitioner is held to be liable for tax as well as penalty under the provisions of the Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act, 1981 Section 6(5) of it provides for opportunity of being heard which have to be strictly complied with by giving an opportunity of personal hearing. In all the cases, the petitioners have made a specific request for furnishing documents and for cross examination so as to comply with the principles of natural justice, therefore, the requirement of hearing becomes necessary as a specific request was made for cross examination. In such view of the matter it is incumbent on the respondent department to have granted opportunity of personal hearing before deciding the issue on merits. Since in this case the order adverse to the petitioner has been passed demanding tax and penalty without giving them an opportunity of hearing as contemplated under Section 6(5) of the Act, the impugned proceedings require to be interfered with - the impugned proceedings in all the writ petitions are set aside and the matters are remitted back to the authorities for passing fresh orders after giving personal hearing to the respective petitioners. Insofar as cross examination is concerned it is left to the discretion of the officer to either accept the said plea or decline it by giving sufficient reasons for the same.

Summary

Issues:
1. Compliance with Section 6(5) of the Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act, 1981 regarding personal hearing before determining tax liability and penalty.

Detailed Analysis:

The petitioner, engaged in the business of renting service apartments, challenged an assessment order demanding tax and penalty under the Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act, 1981. The petitioner argued that they were not given an opportunity of personal hearing as required under Section 6(5) of the Act. The petitioner requested cross-examination of Enforcement Wing Officers to defend against the tax liability. The court noted that the provision of personal hearing is crucial when penal consequences are involved, and the petitioner's request for cross-examination indicated the necessity of a hearing to comply with principles of natural justice.

The respondent contended that since objections were filed, there was no need for a personal hearing, citing a decision from the Andhra Pradesh High Court. However, the court held that in cases where tax liability and penalty are imposed, the provisions of Section 6(5) mandating a personal hearing must be strictly adhered to. The court distinguished the Andhra Pradesh case, emphasizing that the present situation required a hearing due to the penal consequences faced by the petitioner.

Given the specific request for documents and cross-examination made by the petitioners, the court found it necessary for the respondent department to grant a personal hearing before determining tax liability and penalty. The court set aside the impugned proceedings and remitted the matters back to the authorities for fresh orders after providing personal hearings to the petitioners. The court left the decision on cross-examination to the discretion of the officer, emphasizing the importance of considering such requests on their merits.

In conclusion, the court held that the impugned proceedings lacked compliance with the mandatory provision of personal hearing under Section 6(5) of the Act. The court ordered a fresh determination of tax liability and penalty after affording the petitioners a proper opportunity for a personal hearing. The court did not issue specific directions regarding cross-examination, leaving it to the discretion of the authority to decide based on the merits of the request.