2016 (1) TMI 280 - HC - VAT and Sales Tax

Input Tax Credit - levy of penalty - TNVAT - gross violation of principles of natural justice without conducting - The petitioner herein filed a petition under Section 84 of the TNVAT Act to the respondent on 5.11.2015 stating that the revised order has been passed by mistake of law and mistake of fact of incorrect adoption of amount of ITC reversed and hence, it is liable to be rectified under Section 84 of the Act and requested the respondent to issue a revised order. - Held that - After elaborate arguments, learned counsel for the petitioner submitted that it would be suffice if the petitioner is given an opportunity for production of all the documents for the purpose of quantifying the actual taxes to be paid, it would meet the ends of justice.

Issues:
1. Reversal of Input Tax Credit on exempted bakery products.
2. Correctness of the order passed by the respondent.
3. Violation of principles of natural justice in passing the impugned order.
4. Rejection of petition under Section 84 of TNVAT Act.
5. Opportunity for production of documents by the petitioner.
6. Setting aside of the impugned order and directions for further proceedings.

Analysis:
1. The petitioner, a bakery company, engaged in the manufacture and trade of bakery products, filed monthly returns under TNVAT Act, 2006. The respondent issued notices proposing to reverse Input Tax Credit (ITC) on exempted bakery products, leading to a dispute over the amount to be reversed and penalty levied. The petitioner objected to the computation of ITC reversal, leading to the filing of a petition under Section 84 of TNVAT Act.

2. The petitioner contended that the impugned order contained errors apparent on the face of the record and was passed without conducting a proper enquiry as required by law. The petitioner argued that the order was in violation of principles of natural justice, specifically Section 27(2) of the Tamilnadu Value Added Tax Act, 2006.

3. The High Court, after hearing submissions from both parties, found merit in the petitioner's argument regarding errors in the order and the lack of a proper enquiry. The Court held that the impugned order was liable to be set aside due to the absence of an enquiry under Section 27 of the TNVAT Act for imposing penalties. The Court directed the petitioner to submit all relevant documents within two weeks for reconsideration by the respondent.

4. The Court emphasized the importance of affording due opportunity to the petitioner for quantifying the actual taxes to be paid. It noted that the rejection of the petitioner's petition under Section 84 of the TNVAT Act without an opportunity was unjust. The Court set aside the impugned order and instructed the respondent to review the documents submitted by the petitioner and pass appropriate orders within six weeks.

5. The Court's decision aimed to ensure a fair process, allowing the petitioner the chance to present necessary documents for a correct assessment of taxes. The Court highlighted the need for adherence to legal procedures and principles of natural justice in tax matters. The judgment concluded by disposing of the writ petition in favor of the petitioner and providing clear directions for further proceedings.

Conclusion:
The High Court's judgment in the case addressed the issues of ITC reversal, correctness of the order, violation of natural justice, rejection of the petition, and the need for document production. The Court set aside the impugned order, directing the petitioner to submit documents for reconsideration by the respondent. The judgment underscored the importance of following legal procedures and principles of natural justice in tax assessments, ensuring a fair and transparent process for all parties involved.

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