2019 (7) TMI 474 - HC - VAT and Sales Tax

Principles of natural justice - Ext.P7 order dated 15.01.2019 - whether violative of Articles 14, 19(1)(g), 265 and 300A of Constitution of India or not? - HELD THAT - Section 25 of the Act confers power on the second respondent to assess or reassess the alleged escaped turnover. In other words the second respondent is reopening the self-assessment already accepted for the subject year. The assessment is reopened by referring to two circumstances already referred to above. The petitioner through both the replies i.e. Exts.P3 and P5 requested for opportunity of hearing before a decision is taken. The case of respondents is that Ext.P7 is not vitiated by the breach of principle of natural justice, for opportunity was afforded through Ext.P2, reply is received through Ext.P3 and thereafter order in Ext.P7 was made. In the considered view of this Court the said contention loses sight of an important circumstance to appreciate the effectiveness of procedural fairness afforded by the second respondent to the petitioner. The petitioner in Ext.P3 as well as in Ext.P5 has been demanding opportunity of hearing firstly to reconcile the disputed details or explain the reasons basing on which the second respondent is entertaining on the subcontract execution and Form 20H. Ext.P7 alone warrants interference and accordingly set aside. Matter remitted to second respondent for consideration and disposal in accordance with law - petition allowed by way of remand.

Summary

Issues:
Challenge to notice and order under Kerala Value Added Tax Act, 2003 for assessment year 2012-13; Alleged violation of Articles 14, 19(1)(g), 265 and 300A of Constitution of India; Principles of natural justice in Ext.P7 order challenged.

Analysis:
The petitioner challenged Ext.P2 notice and Ext.P7 order under the Kerala Value Added Tax Act, 2003, for the assessment year 2012-13, citing violations of constitutional articles and principles of natural justice. The petitioner received Ext.P2 notice on 21.11.2018, alleging suppression of inter-State purchases. The petitioner denied the allegations in Ext.P3 reply and requested details to reconcile any discrepancies. The second respondent provided the details in Ext.P4, to which the petitioner responded with Ext.P5, asserting no liability based on Form 20H submissions. However, Ext.P7 issued on 15.01.2019 determined a tax liability of ?66,19,866, prompting the writ petition.

The petitioner contended Ext.P7 as illegal, violating natural justice and being an arbitrary exercise of power under Section 25 of the Act. The petitioner argued that Ext.P7 was finalized without a hearing, affecting their rights and imposing an illegal tax liability. The Government Pleader argued against the writ petition's maintainability, stating that natural justice principles were upheld, and any challenge to Form 20H submissions should be through appeal, not judicial review. The main issue was whether Ext.P7 was illegal and breached natural justice.

Section 25 of the Act empowers the second respondent to reassess the alleged escaped turnover, reopening self-assessment for the subject year. The petitioner requested a hearing in both Ext.P3 and Ext.P5 to reconcile disputed details, but the respondents claimed Ext.P2 and Ext.P4 provided sufficient opportunity. However, the Court found that denying a hearing after Ext.P5 and making adverse findings without a hearing in Ext.P7 violated natural justice principles. Ext.P7 was set aside, and the matter was remitted to the second respondent for proper consideration and disposal in compliance with the law.

In conclusion, the Court found Ext.P7 to be vitiated by the lack of a proper hearing and remitted the case for reevaluation. The petitioner was granted an opportunity for a hearing, emphasizing the importance of procedural fairness in assessments under the Act.