2018 (8) TMI 1324 - HC - VAT and Sales Tax

Principles of Natural Justice - Validity of assessment order - CST Act - it was alleged that interstate sales camouflaged as High Sea sales - Held that - To establish the same, the respondent should have sufficient material to confront the petitioner so as to deny the benefit of exemption. If that material was available with the respondent, it should be made known to the dealer so that the dealer would be in a position to to effectively defend. If the respondent has recorded any statement from third parties, then those statements should be provided to the petitioner and on verification, it was found that the transactions were not genuine High Sea Sale transactions. It is clear that the impugned assessment order has been passed in total violation of the Principles of Natural Justice. The matter is remanded to the respondent for fresh decision - appeal allowed by way of remand.

Summary

Issues:
Assessment order under Central Sales Tax Act, 1956 challenged for Assessment Year 2000-01 based on genuineness of High Sea Sales transactions.

Analysis:
The petitioner, a Government of India Company dealing in Gold, Silver bullion, Iron, and Steel, challenged an assessment order passed by the respondent under the Central Sales Tax Act, 1956 for the Assessment Year 2000-01. Initially, the petitioner's claim for exemption was accepted in an order dated 17.04.2002 after reviewing Invoices, High Sea Sales Agreement, Bill of Lading, and Bill of Entry. However, after four years, the respondent issued a notice questioning transactions with two dealers and sought clarification regarding High Sea sales turnover. The petitioner responded to the notices, emphasizing the genuineness of the transactions and compliance with Section 5(2) of the Act. Despite providing detailed explanations, the respondent doubted the transactions' genuineness and confirmed the assessment order without a personal hearing, leading to the petitioner challenging the order on grounds of violating Principles of Natural Justice.

In the counter affidavit, the respondent reiterated the assessment order, alleging that the transactions were not genuine High Sea Sales but interstate sales disguised as such. The Court highlighted that for denying exemption benefits, the respondent should have sufficient material to confront the petitioner and disclose any statements obtained from third parties. The lack of transparency in the verification process and failure to provide essential materials to the petitioner indicated a violation of Principles of Natural Justice. Consequently, the Court allowed the writ petition, set aside the impugned order, and remanded the matter to the respondent for a fresh decision. The respondent was directed to fully disclose all collected materials, allowing the petitioner to respond comprehensively and granting a personal hearing to the authorized representative, ensuring adherence to natural justice principles.