2018 (12) TMI 355 - HC - VAT and Sales Tax

Denial of input tax credit - Principles of natural justice - validity of assessment order - case of petitioner is that during the assessment proceedings, the assessing authority had not either provided the details of such dealer, nor called upon the petitioner to clarify the position in this regard - Held that - The impugned order suffers from gross violation of principles of natural justice. The departmental authority cannot unilaterally come to the conclusion that the petitioner s sales or purchases were not genuine and therefore, tax credit in relation to such transactions was liable to be disallowed - Any such finding must be preceded by an opportunity of hearing to the petitioner. Impugned order st aside - proceedings are placed back before the adjudicating authority for passing a fresh order in accordance with law - petition allowed by way of remand.

Summary

Issues:
1. Challenge to an order passed by the Dy. Commissioner of Sales Tax assessing tax liability under the MVAT Act, 2002, along with interest and penalty liabilities.
2. Allegation of the order being cryptic and violating principles of natural justice by disallowing tax credit without providing details or opportunity to clarify.
3. Opposing the petition on the grounds that the order is appellable.
4. Interference due to gross violation of principles of natural justice in the impugned order, specifically regarding disallowance of tax credit without sharing relevant information with the petitioner.

Detailed Analysis:
1. The petitioner challenged an order assessing tax liability under the MVAT Act, 2002, along with interest and penalty liabilities. The Dy. Commissioner of Sales Tax determined the gross turnover of sales and purchases, disallowed set-off, imposed tax, interest, and penalty. The petitioner contended that the order was cryptic and violated natural justice by disallowing tax credit without providing details or an opportunity to clarify. The statutory appeal was available against the impugned order.

2. The petitioner argued that the assessing authority disallowed tax credit on the basis of the selling dealer's involvement in a trade circular transaction without providing details or seeking clarification during the assessment proceedings. In contrast, the Department's counsel opposed the petition, emphasizing the appealability of the order. The High Court found a gross violation of natural justice in the impugned order due to the lack of sharing crucial information with the petitioner before making the final decision.

3. The High Court decided to interfere due to the substantial breach of natural justice in the impugned order. It noted that the assessing authority cannot unilaterally disallow tax credit without providing an opportunity for the petitioner to be heard. The Court set aside the order and directed the proceedings to be returned to the adjudicating authority for a fresh decision in compliance with the law. The petitioner was instructed to cooperate with the new assessment process. The judgment was made without expressing an opinion on the availability of credits, keeping all contentions open for both parties.