2019 (3) TMI 1215 - HC - VAT and Sales Tax

Principles of natural justice - petitioner submitted that the petitioner has not been afforded adequate opportunity by the second respondent before passing of the impugned assessment order - reversal of input tax credit - Held that - This Court has perused and examined the impugned assessment order. Admittedly, the petitioner has sent a detailed reply, dated 08.05.2015, wherein, he has referred to the objections, which were raised by the learned Counsel for the petitioner during his arguments and relied upon various decisions of this Court and also internal circulars of the Department in support of his case. But, under the impugned assessment order, this Court finds that all the objections raised by the petitioner were not considered by the second respondent. It is the case of the petitioner that he has shown gross profit while filing his monthly returns before the second respondent - But without application of mind, the second respondent has come to a wrong conclusion that the goods sold by the petitioner at a lesser price than the purchase price and the petitioner has shown losses in the monthly return submitted by him. This Court is also unable to find out from the assessment order as to why the second respondent has come to that conclusion, despite the fact that the petitioner is a profit making concern and has also disclosed gross profit, as seen from the reply, dated 08.05.2015, sent to the second respondent. This Court is of the considered view that the second respondent has violated the principles of natural justice by not affording personal hearing to the petitioner and also for not having considered the vital objections raised by the petitioner in his reply, dated 08.05.2015, objectively under the impugned assessment order - Petition allowed by way of remand.

Summary

Issues involved:
Challenging an assessment order under the Tamil Nadu Value Added Tax Act, 2006 for the assessment year 2013-14 based on alleged suppression of sales, reversal of input tax credit, and imposition of tax and penalty. Violation of principles of natural justice by not affording a personal hearing to the petitioner and not considering objections raised in the reply.

Analysis:

1. Allegations of Suppression of Sales:
The petitioner, a registered dealer under the Tamil Nadu Value Added Tax Act, challenged the assessment order alleging suppression of sales by the second respondent. The petitioner contended that the basis for issuing the pre-revision notice was flawed as it did not consider the actual profit made on sales. The petitioner argued that the second respondent's approach in proposing to reject accounts and returns based on alleged gross loss was incorrect, as evidenced by the detailed trading method presented by the petitioner.

2. Reversal of Input Tax Credit:
The petitioner raised objections regarding the reversal of input tax credit by the second respondent, emphasizing the need for a fair calculation method that considers discounts received from the seller. The petitioner highlighted discrepancies in the assessment, pointing out that the second respondent failed to deduct discounts received, leading to an erroneous determination of gross profit/loss.

3. Violation of Principles of Natural Justice:
The petitioner contended that the second respondent violated the principles of natural justice by not affording a personal hearing before passing the assessment order. Citing relevant legal provisions and court decisions, the petitioner argued that the right to a personal hearing is fundamental, irrespective of whether specifically requested by the petitioner.

4. Legal Provisions and Appellate Remedies:
The legal arguments presented by both parties revolved around key provisions of the Tamil Nadu Value Added Tax Act, 2006, such as Section 19(20) concerning input tax credit reversal and Section 24 related to assessment of sales at low prices. The petitioner's counsel highlighted the statutory provisions to support the contention that the petitioner had not violated tax regulations.

5. Court's Decision:
Upon examining the impugned assessment order and considering the arguments presented, the Court found that the second respondent failed to address crucial objections raised by the petitioner in the reply. The Court concluded that the second respondent's actions lacked proper consideration of the petitioner's submissions and violated principles of natural justice. Consequently, the Court quashed the assessment order and directed the second respondent to provide the petitioner with a fair opportunity to present objections and a right to a personal hearing within a specified timeframe.

In conclusion, the judgment focused on upholding procedural fairness and ensuring that the petitioner's rights were respected during the assessment process, emphasizing the importance of affording a personal hearing and objectively considering objections raised by the concerned party.