2019 (8) TMI 633 - HC - VAT and Sales Tax

Validity of assessment order - Section 25(1) of Kerala Value Added Tax Act, 2003 - main allegation against the petitioner in the notice dated 12.02.2019 is that the petitioner transported goods without proper and/or genuine documents - petitioner requested for calling for the books of accounts and invoices from the list of dealers and suppliers to verify whether goods had been transported except in the manner known to law - HELD THAT - The second respondent without a request from the petitioner ought to have given opportunity of hearing before passing Ext.P3. The petitioner, to prove the bona fides in the movement of goods undertaken by the petitioner, volunteered through an application filed on 22.03.2019 to summon books of accounts and invoices from the dealers and suppliers of the petitioner. The illegality committed in this behalf is that no order on the request of the petitioner is made and then the very valuable opportunity is denied to prove the case of the petitioner. Further the second respondent assumes ipse dixit, what he sates in the show cause notice dated 12.02.2019. This Court is of the view that the second respondent, while exercising his power under Section 25 and concluding the reassessment resulting in fixation of tax liability, is expected to act fairly, reasonably and in accordance with the requirement of the Act. The fairness of procedure is not an abstract application by Courts to interfere with orders passed by the statutory authorities by merely stating that principles of natural justice are denied or deviated, but is tested subtly on case to case basis by taking note of undisputed facts. Matter remitted to the second respondent - petitioner is directed to appear before the second respondent on 07.08.2019 with all documents on which the petitioner intends to support its case.

Summary

Issues: Challenge to assessment order under Kerala Value Added Tax Act, 2003 as illegal, arbitrary, and beyond jurisdiction due to lack of opportunity for hearing and failure to consider evidence.

Analysis:

1. Assessment Order Challenge: The petitioner, a registered dealer under the Kerala Value Added Tax Act, challenged the assessment order dated 29.04.2019 as illegal and beyond jurisdiction. The main allegation was the transportation of goods without proper documentation, contrary to the Act. The petitioner denied these allegations and requested to summon books of accounts and invoices from dealers and suppliers to prove compliance with the law. However, the second respondent did not consider this request and proceeded to determine a tax liability of ?43,63,416, leading to the writ petition.

2. Violation of Natural Justice: The petitioner contended that the assessment order was vitiated as the second respondent did not provide an opportunity for a hearing before passing the order. Despite the petitioner's efforts to demonstrate compliance by requesting to summon relevant documents, this request was ignored. The Court emphasized that fairness and adherence to the Act's requirements are essential in such assessments. The failure to consider the petitioner's request and provide an opportunity for a hearing rendered the assessment unsustainable and violative of principles of natural justice.

3. Judicial Review and Remedy: Upon judicial review, the Court found that the second respondent's actions lacked fairness and failed to meet the standards of natural justice. Consequently, the Court set aside the assessment order (Ext.P3) and remitted the matter back to the second respondent. The petitioner was directed to appear before the second respondent with all supporting documents on 07.08.2019. Additionally, the Court instructed the second respondent to consider and dispose of the petitioner's request (Ext.P2) in accordance with the law promptly.

In conclusion, the High Court of Kerala, in a judgment delivered by Mr. S. V. Bhatti, J., highlighted the importance of providing a fair opportunity for a hearing and considering relevant evidence in assessment proceedings under the Kerala Value Added Tax Act, 2003. The Court's decision to set aside the assessment order and remit the matter for proper consideration underscores the significance of procedural fairness and adherence to statutory requirements in such cases.