2018 (6) TMI 1404 - HC - VAT and Sales Tax

Principles of Natural Justice - cancellation of registration of premises - KVAT Act, 2003 - main grievance of the petitioner in the present writ petition is that the impugned order was passed by the respondent without giving notice and opportunity of hearing to the petitioner and hence the same is violative of principles of natural justice - Held that - The notice was not at all served to the petitioner as contemplated under the provisions of Section 39(1) of the KVAT Act and no opportunity was given to the petitioner either to produce books of accounts or for the hearing. The impugned order clearly depicts that the proposition notice was returned un-served by the postal authorities with remarks that No such firm in this address . If it is so, the authorities ought to have proceeded to apply the provisions of Rule 176 of the Karnataka Value Added Tax Rules, 2005 to serve the petitioner and the same has not been done. Though in the impugned order both office and residential addresses are given, the material does not depict that petitioner has been served either in the residential address or in office address and on that ground itself, the impugned order has to be quashed. Petition allowed.

Summary

Issues:
Challenge to re-assessment order and demand notice under KVAT Act for assessment period 2011-12 due to lack of notice and opportunity of hearing to the petitioner.

Analysis:
The petitioner, a registered dealer under the KVAT Act, closed business and requested registration cancellation. Alleging lack of notice and hearing, the petitioner challenged the re-assessment order and demand notice. The petitioner contended that the order violated principles of natural justice.

The petitioner's counsel argued that the re-assessment order lacked notice as required by Section 39(1) of the KVAT Act, denying the opportunity to present accounts. Seeking to quash the order on this basis, the counsel emphasized the mandatory nature of the notice provision.

In response, the Additional Government Advocate justified the order, citing the petitioner's deregistration in 2016 and incorrect address submission. The advocate argued that due to these factors, the authorities proceeded with the order issuance, urging the dismissal of the writ petition.

Upon hearing both parties, it was revealed that the Commissioner of Commercial Taxes issued an audit assignment note in 2014, which was not served to the petitioner as mandated by Section 39(1) of the KVAT Act. The impugned order was returned unserved, indicating a failure to follow Rule 176 of the KVAT Rules for proper service. The order did not demonstrate that the petitioner was given a chance to present records, leading to the conclusion that the order lacked proper service.

Consequently, the court allowed the writ petition, quashing the re-assessment order and demand notice. The matter was remanded to the respondent for reconsideration with a directive to provide the petitioner with a fair hearing and issue orders in compliance with the law. The petitioner was instructed to appear before the authorities without further notice to produce necessary documents for the re-evaluation process.