2019 (2) TMI 1477 - HC - VAT and Sales Tax

Compounding rate of tax - section 8A of KVAT Act - principles of natural justice - Held that - The record submitted, the first Intelligence Officer might not have acted immediately. That inaction, I am afraid, cannot be regarded as his getting satisfied with the petitioner s explanation. That satisfaction, if any, must translate into some concrete measure an order by the Intelligence Officer, say, resulting in the closure of the proceedings. That has not happened. On the contrary, the successor Intelligence Officer simply proceeded with the matter from where it had been left. She, in fact, issued notice and proceeded further. So the replacement of one officer with another does not lead to any disruption in adjudication. The proceedings are deemed to have been continued - Then the petitioner s counsel has also, on merits, insisted that the second respondent has not considered the petitioner s books of accounts and other materials the petitioner produced. If that were so, it would not amount to the second respondent s violating the principles of natural justice. It is then, at best, a shortcoming on merits. The petitioner has an efficacious alternative remedy, and must approach the appellate authority - petition dismissed.

Summary

Issues:
1. Petitioner's challenge to penalty order on grounds of merit and violation of natural justice.

Analysis:
The petitioner, a private limited company registered under the KVAT Act, initially opted for compounding under Section 8A of the Act. Subsequently, after undertaking two construction projects in 2014-15 and paying tax at the compounded rate, the petitioner faced scrutiny when the successor Intelligence Officer issued a penalty notice (Ext.P3) after a gap of two years. The petitioner challenged this penalty order (Ext.P8) on the grounds of merit and violation of natural justice.

The petitioner contended that the initial Intelligence Officer was convinced by the explanation provided, and the successor officer did not request further records, indicating that the record had been submitted previously. However, the court noted that the inaction of the first officer did not imply satisfaction with the explanation, as no concrete measure had been taken to close the proceedings. The successor officer's actions were deemed a continuation of the adjudication process, as evidenced by the issuance of a notice and further proceedings.

Regarding the violation of natural justice, the petitioner argued that the second respondent did not adequately consider the petitioner's books of accounts and other materials. The court clarified that a failure to consider these materials would not necessarily constitute a violation of natural justice but rather a merit-based shortcoming. The court concluded that the petitioner had an alternative remedy available through the appellate authority and, therefore, dismissed the writ petition. However, recognizing the petitioner's genuine pursuit of legal recourse, the court directed that time spent before the High Court would be excluded if the petitioner pursued the appellate remedy.

In summary, the court upheld the penalty order, emphasizing the importance of pursuing available appellate remedies and acknowledging the petitioner's bona fide intentions in seeking legal redress.