2019 (8) TMI 596 - HC - VAT and Sales Tax

Validity of assessment order - principles of natural justice - Section 25(1) of Kerala Value Added Tax Act, 2003 - mis-classification of taxable item - petitioner failed to produce the documents, accounts etc. - HELD THAT - The petitioner has been making efforts to get full information and simultaneously from the correspondence made with respondent shows that was requesting for grant of reasonable time. Order in Ext.P5 substantially rests on hearing dated 26.11.2018. There could not have been hearing on 26.11.2018 on a request alone was made for time. Ext.P5 does not satisfy the requirement of principles of natural justice and also not in accordance with the prescription of Section 25 of the Act. The dates chronologically adverted to in the judgment demonstrate that Ext.P5 order is made without giving sufficient opportunity or following procedural fairness while determining the further tax liability on the petitioner. The petitioner has been repeatedly stating that the information has to be gathered from more than one source to answer the allegation against the petitioner and has requested for two more months from 24.12.2018. The respondent is of the view that further time of two months, if is intended to delay the assessment proceedings, ought to have passed a conditional order and granted reasonable time from 24.12.2018. Ext.P5 order is set aside as violative of principles of natural justice and Section 25 of the Act - Petition disposed off.

Summary

Issues:
Challenge to assessment order under Kerala Value Added Tax Act, 2003 for misclassification of taxable items and evasion of tax, violation of principles of natural justice under Section 25(1) of the Act.

Analysis:

The petitioner, a registered dealer under the Kerala Value Added Tax Act, 2003, contested the legality of the assessment order dated 31.12.2018, alleging it to be in violation of principles of natural justice. The respondent accused the petitioner of misclassifying taxable items to evade tax, providing details of the misclassification. The petitioner requested time to gather relevant information through various correspondences (Exts. P2, P3, and P4) due to the substantial data involved, including a request for a two-month extension to present necessary documentary evidence. However, the respondent passed the assessment order (Ext.P5) citing the petitioner's failure to produce documents despite granting sufficient time, leading to the challenge on grounds of procedural fairness and violation of natural justice.

The petitioner argued that a practical and effective hearing should precede any decision based on the show-cause notice, highlighting the absence of a hearing on 26.11.2018 as indicated in Ext.P3 notice. The petitioner's requests for adjournment and additional time were acknowledged but not acted upon, depriving them of a fair opportunity to address the serious allegations and implications on tax liability. The Government Pleader emphasized the seriousness of the charges against the petitioner, acknowledging their efforts to obtain necessary information and the repeated requests for reasonable time, underscoring the failure to adhere to procedural fairness and principles of natural justice as required by Section 25 of the Act.

Consequently, the Court set aside the Ext.P5 order, deeming it violative of natural justice and the Act's provisions. The Court directed the petitioner to appear before the respondent on 20.08.2019, accompanied by a copy of the judgment and relevant documents, for further assessment proceedings. The respondent was instructed to consider and finalize the pending assessment either on the specified date or a subsequent one, ensuring compliance with procedural fairness and the principles of natural justice. The writ petition was disposed of accordingly, without imposing any costs.