2016 (6) TMI 1110 - HC - VAT and Sales Tax

Validity of recovery proceedings - Benefit of scheme granting reliefs to the sick industries from payment of amount of interest and penalty interest and penalty etc. - GVAT - petitioner has paid the entire amount as per the scheme - later the BIFR has dismissed the proceedings - Consequently recovery notices were issues by the respective authorities on the premises that the benefit of scheme was availed wrongly - petitioners mainly contended that action on the part of the respondent authorities is not only unjust and arbitrary but reflects clear non-application of mind. Held that - only because of the fact that BIFR has terminated the proceedings straightway without examining any aspect, the authorities have issued notice and it appears that the impugned action is in clear breach of principles of natural justice. The fact of payment by the petitioner under the scheme which also acknowledged by the authority as reflected from various communications ought to have been considered before issuing impugned notice. The authorities directed to re-consider the case of the petitioner after granting a reasonable opportunity to the petitioner. It is expected that the respondent authorities before initiating any action in this regard, must grant reasonable opportunity to the petitioner and after hearing pass an appropriate order considering all material which may be produced before it. - decided partly in favor of petitioner.

Summary

Issues:
Challenge to legality and validity of demand notices under Gujarat Valued Added Tax Act, 2003.

Analysis:
The petitioners challenged the demand notices issued by respondent authorities under the Gujarat Valued Added Tax Act, 2003. The petitioners, a registered company, faced financial difficulties and approached the Board of Industrial Finance and Restructuring (BIFR) for relief. The State of Gujarat introduced a scheme for relief to sick industrial units, under which the petitioners applied for benefits. After approval, the petitioners made the required payment, which was acknowledged by authorities. However, despite this, the authorities issued multiple demand notices totaling a significant amount, threatening punitive action and asset attachment. The petitioners contended that the actions were unjust and arbitrary, given full compliance with the scheme and termination of BIFR proceedings. The respondent argued that the petitioners breached conditions of approval and lost their industrial character, justifying the demand notices. The Court observed that the authorities failed to consider the payment made and issued notices without proper application of mind. It deemed the notices a breach of natural justice and directed authorities to re-consider the case after granting a reasonable opportunity to the petitioners.

The Court found that the authorities should have initiated any action after due compliance with natural justice and providing a reasonable opportunity to the petitioners. It noted that the impugned notices were issued without proper consideration of the payment made under the scheme and without granting a fair opportunity to the petitioners. Consequently, the Court quashed the impugned communication dated 2-4.9.2015 and directed authorities to re-examine the case after affording a reasonable opportunity to the petitioners. The Court emphasized that authorities must consider all relevant material before taking any action and provide a proper opportunity for the petitioners to be heard. If any breaches were found, they should issue a proper notice and allow for a hearing. As a result, the impugned communications were set aside, and the petition was allowed to that extent. The Court also ordered the release of bank accounts previously attached due to the notices being quashed.