2017 (3) TMI 696 - HC - VAT and Sales Tax

Validity of assessment order - inter-state sales - C-Forms - Held that - It is true that the notice sent to the petitioner on 09.08.2016 has not referred to the proposal on exemption claimed u/s 8 (2-A) of the CST Act. Further, the assessment order proceeded to impose tax on the said head also. Therefore, it is evident that the tax imposed on such head is without affording an opportunity of hearing to the petitioner. Thus, it is in violation of the principles of natural justice. On that ground alone, the said imposition of tax under the impugned assessment order dated 31.12.2016 is liable to be set aside for the purpose of remitting the matter to the Assessing Authority to issue a fresh proposal and thereafter pass an assessment order, after hearing the petitioner - appeal allowed by way of remand.

Summary

Issues:
Challenging assessment orders dated 31.12.2016 and 07.02.2017 regarding imposition of tax on exemption claimed under Section 8 (2-A) of the CST Act without proper notice and violation of principles of natural justice.

Analysis:
The petitioner, an assessee under the TNVAT Act and a dealer in Kumkum, challenged the assessment orders dated 31.12.2016 and 07.02.2017. The initial order imposed tax on the petitioner without proper notice regarding the exemption claimed under Section 8 (2-A) of the CST Act. The petitioner requested time to submit C-declaration forms for inter-state sales, but the request was rejected, leading to the assessment order. Subsequently, the petitioner submitted C-declaration forms covering a portion of inter-state sales, resulting in a revised assessment order dated 07.02.2017. The petitioner contended that the initial assessment order imposed tax on exemption without proper notice, violating principles of natural justice.

The respondent argued that the assessment order considered the exemption claimed under Section 8 (2-A) of the CST Act along with the proposed taxable turnover. However, the respondent admitted that the proposal notice did not specifically address the exemption claimed. The assessment order included tax on the exemption without providing an opportunity for the petitioner to be heard, indicating a violation of natural justice principles.

The Court noted that the assessment order contained two heads of tax imposition: taxable turnover and exemption claimed under Section 8 (2-A) of the CST Act. The proposal notice did not mention the exemption claimed, and the subsequent imposition of tax on this basis without a hearing violated principles of natural justice. Consequently, the tax imposed on the exemption claimed under the CST Act was set aside, and the matter was remitted back to the respondent for issuing a fresh proposal and passing a new assessment order after hearing the petitioner.

As a result, the assessment order dated 31.12.2016 imposing tax on the exemption claimed under Section 8 (2-A) of the CST Act was set aside, and the matter was remitted back to the respondent for a fresh assessment after providing an opportunity for the petitioner to be heard. The petitioner withdrew the second writ petition, reserving the right to appeal before the Appellate Authority regarding the non-submission of C-declaration forms. The second writ petition was dismissed as withdrawn, and no costs were awarded.