2016 (4) TMI 361 - HC - VAT and Sales Tax

Claim of benefit - Whole-sale dealer in cements, hence, various types of incentives/discount are offered by the Companies - Appellant contended that when the Companies similarly placed have been granted benefits of exemption from the tax on discounts, the appellant alone cannot be singled out without any basis and not even affording an opportunity of personal hearing - Held that - It is not in dispute that personal hearing was not given to the appellant. Principles of natural justice require that the appellant should have been offered personal hearing. Therefore, the order of the respondent is hereby set aside. The matter is remitted back to the respondent. The respondent shall offer personal hearing to the appellant. While the personal hearing is offered, it is open to the appellant to produce the order copy passed in respect of M/s. Sree Laxmi Traders, and to claim the benefit. It is for the respondent to consider on the applicability of the order passed in respect of M/s. Sree Laxmi Traders. - Appeal disposed of

Summary

Issues:
1. Taxability of discounts offered by Cement Companies under TNVAT Act.
2. Application of Section 19(20) of the TNVAT Act.
3. Validity of the order subjecting discounts to tax.
4. Right to personal hearing and principles of natural justice.

Analysis:
1. The appellant, a wholesale dealer in cements, challenged the taxability of discounts offered by Cement Companies. The respondent issued a notice proposing to tax the discounts, relying on Section 19(20) of the TNVAT Act. The order subjecting discounts to tax was challenged through a Rectification Petition and subsequently a Writ Petition, which was dismissed with a direction to file a Statutory Appeal.

2. The appellant contended that similar cases where the tax on discounts was challenged had been allowed by the Court, directing the respondent to consider relevant circulars and past assessment orders. The Court noted that a sister company of the appellants had benefited from such considerations in previous assessment years.

3. The constitutional validity of Section 19(20) of the TNVAT Act had been upheld previously. The Assessing Officer found that discounts, regardless of nomenclature, fell under this provision and were liable to tax. The appellant argued against being singled out for taxation without basis, especially when other companies had been exempted without a personal hearing.

4. The Court found that the appellant was not granted a personal hearing, contravening principles of natural justice. The order subjecting discounts to tax was set aside, and the matter was remitted back to the respondent for a fresh consideration. The respondent was directed to offer a personal hearing to the appellant, who could present relevant documents for consideration, including past orders benefiting other dealers.

5. The Writ Appeal was allowed, with no costs imposed. The Court emphasized the importance of affording the appellant a fair opportunity to present their case and directed the respondent to reevaluate the taxability of discounts in light of the principles discussed in the judgment.