2017 (6) TMI 961 - HC - VAT and Sales Tax

Natural justice - validity of assessment order - Non-deduction of TDS - the contention of the petitioner that an assessment being one made under Section 5 of the TNVAT Act, r/w Rules 8(5)(d) Rules made thereunder, they are liable to pay 70% of the tax, at the rate of 5% leaving remaining 30% towards the labour charges - natural justice - Held that - If an opportunity of personal hearing was given to the petitioner, though they would have been in a position to satisfy the Assessing Officer as to how they are justified in making such contention. In this case, the Assessing Officer has not given such opportunity. Therefore, considering all these aspects and considering the very fact that the imposition of penalty was passed in violation of principles of natural justice, the Assessing Officer has to re-do the assessment in respect of all the three assessment years, after giving an opportunity of personal hearing to the petitioner - appeal allowed by way of remand.

Summary

Issues involved:
Assessment orders for years 2013-2014, 2014-2015, and 2015-2016; imposition of penalty without proper notice; non-deduction of TDS under TNVAT Act; lack of opportunity for personal hearing.

Analysis:

The petitioner challenged assessment orders for the years 2013-2014, 2014-2015, and 2015-2016, arguing that tax liability should be based on 70% of the sale value with 30% allocated to labor charges under Section 5 r/w Rule 8(5)(d) of the TNVAT Act. The petitioner contended that penalties were imposed without proper notice or opportunity for a personal hearing. The court noted that penalties imposed without notice violated principles of natural justice, especially when no personal hearing was granted before finalizing the assessment order.

Regarding the non-deduction of TDS under the TNVAT Act, the petitioner claimed they were liable to pay 70% of the tax at a 5% rate, leaving 30% for labor charges. The petitioner expressed willingness to pay 70% of the tax but asserted that the Assessing Officer did not consider this argument. The court emphasized the importance of a personal hearing to allow the petitioner to present their case properly. The Assessing Officer was directed to re-do the assessment for all three years after granting the petitioner a personal hearing and considering their objections.

In the case of the assessment year 2015-2016, the notice of proposal indicated a penalty of 150% without specifying the relevant provisions. The court agreed with the petitioner's contention that clarity was lacking in the penalty imposition. The Assessing Officer was instructed to conduct a fresh assessment, ensuring a personal hearing for the petitioner within four weeks from the date of the court order. The petitioner was also given the opportunity to raise additional objections during the personal hearing. The court set aside the impugned assessment orders and remitted the matter back to the Assessing Officer for re-assessment.

Overall, the court ruled in favor of the petitioner, highlighting the importance of adhering to principles of natural justice, providing opportunities for personal hearings, and considering objections raised by the parties during assessments under the TNVAT Act.