2017 (5) TMI 997 - HC - VAT and Sales Tax

Validity of assessment order - denial of opportunity of being heard - principles of natural justice - Held that - Giving an opportunity of hearing is not merely a ceremony to be performed, but an opportunity of hearing has to be given to the petitioner in order to ensure that the petitioner is satisfied that justice has been done to it - the contention raised by the learned counsel for the respondents that since no new facts were submitted, and since the respondent had relied upon its original position, there was no need to give right of rebuttal to the petitioner, the said contention is unacceptable - The learned Commissioner is directed to hear both the parties simultaneously, and to give ample opportunity to the petitioner to meet out the case of the department - appeal allowed by way of remand.

Summary

Issues:
Challenge to legality of order by Joint Commissioner of Commercial Taxes (Appeals), violation of principles of natural justice in hearing process, dismissal of appeal by Commissioner of Commercial Tax (Appeals).

Analysis:
The petitioner, a software service business, challenged the legality of an order passed by the Joint Commissioner of Commercial Taxes (Appeals) dismissing the appeal filed by the petitioner. The dispute arose when the respondent alleged that the petitioner failed to declare a transaction related to software services in the VAT-100 filing system. The respondent also noted a discrepancy in the petitioner's income declaration to the Income Tax department and the corresponding sales turnover in the VAT-100 filing. Consequently, a reassessment was conducted, resulting in a revised turnover and imposition of penalties and interest under the Karnataka Value Added Tax Act, 2003.

The petitioner contended that the principles of natural justice were violated during the hearing process as the petitioner and their counsel were not present when the respondents presented their arguments to the Commissioner. The petitioner argued that the right to rebut the contentions raised by the respondents was essential for a fair hearing. The learned counsel for the petitioner emphasized that the impugned order should be set aside due to the violation of natural justice principles.

On the other hand, the learned counsel for the Revenue argued that no new facts were presented during the hearing, and the department merely reiterated its position. The Revenue's counsel maintained that the principles of natural justice were not breached as the petitioner was given an opportunity to be heard, even if the right to rebut was not explicitly granted. The Revenue supported the impugned order based on these arguments.

The High Court, in its judgment, emphasized that the Commissioner is bound by the principles of natural justice, including the right to hear both sides and the right to rebut contentions raised by the opposing party. The Court highlighted that the mere opportunity to be heard is insufficient; the right to rebut is integral to ensuring justice. Therefore, the Court allowed the petition, setting aside the order of the Commissioner and directing a simultaneous hearing for both parties, with ample opportunity for the petitioner to present their case. The Court instructed the Commissioner to complete this process within a month and directed the parties to appear before the Commissioner on a specified date. Additionally, the Court prohibited coercive actions against the petitioner until the appeal was finally decided by the Commissioner.