2020 (6) TMI 389 - HC - VAT and Sales Tax

Maintainability of petition - existence of alternative remedy - Levy of CST on entire turnover - taxable, export as well as exempted sales - petitioner contends that the 1st respondent adopted the gross turnover as ₹ 9475,63,11,243/- and proposed to levy tax at 14.5% on the entire turnover without considering the exemptions claimed towards direct exports, branch transfer and CST collections under the CST Act - Personal hearing not attended - HELD THAT - The petitioner s Representative could not be blamed for not attending the personal hearing given by the 1st respondent due to such lockdown, more particularly when the online response also could not be submitted due to technical glitches on the portal of the 1st respondent - However, since the time fixed for making the assessment was to expire on 31.03.2020, without providing a personal hearing as sought by the petitioner on the phone on 31.03.2020, the impugned order was passed. It appears that on account of lack of time in view of the impending lapsing of limitation for making the assessment, not only was the petitioner denied proper opportunity to personally represent its case before the 1st respondent but also errors might have crept into the order of the 1st respondent passed on 31.03.2020 - a proper opportunity was denied to the petitioner to represent its case and there has been violation of principles of natural justice inasmuch as personal hearings were fixed on 16.03.2020 for the first time during lockdown period disabling the petitioner and causing serious prejudice to the petitioner. The existence of alternative remedy of appeal available to the petitioner to challenge the impugned order of Assessment dt.31.03.2020 cannot be a bar for the petitioner to avail the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India - the matter is remitted back to the 1st respondent to consider the matter afresh after giving personal hearing to the petitioner and to decide within a period of two (2) months from the date of receipt of a copy of this order - Petition allowed by way of remand.

Summary

Issues:
Assessment Order challenge under CST Act for the year 2015-16, Denial of proper opportunity for personal hearing, Violation of principles of natural justice, Existence of alternative remedy of appeal.

Assessment Order Challenge under CST Act for the year 2015-16:
The petitioner, a Company engaged in Software sale and IT services, challenged the Assessment Order dated 31.03.2020 by the 1st respondent. The petitioner contended that the respondent adopted a gross turnover of ?9475,63,11,243/- and proposed to levy tax at 14.5% without considering exemptions claimed for direct exports, branch transfers, and CST collections. The petitioner reported inter-State sales of software at ?39,47,93,331/- taxed at 5%, but the respondent assessed it at 14.5%, creating an artificial liability. The petitioner also highlighted errors in turnover reporting, like unreported branch transfers and alleged absence of documentary evidence for non-sales. The petitioner filed rectification requests not acted upon by the respondent.

Denial of Proper Opportunity for Personal Hearing:
The petitioner's counsel argued that the Assessment Order was passed on the last day of the limitation period, denying adequate time for submissions. Despite lockdown due to COVID-19, the petitioner faced technical glitches preventing online responses and requested postponement of personal hearing. The Court noted that the impugned order was passed without providing a personal hearing during the lockdown, causing serious prejudice and violating principles of natural justice. Lack of time due to impending limitation expiration likely led to errors in the assessment order.

Violation of Principles of Natural Justice:
The Court held that the petitioner was denied a proper opportunity to represent its case, and principles of natural justice were violated. The first personal hearing was fixed during the lockdown, making it impossible for the petitioner to attend or submit online responses. This denial of opportunity and errors in the order necessitated setting aside the Assessment Order and remitting the matter for fresh consideration after a proper personal hearing.

Existence of Alternative Remedy of Appeal:
Although an alternative remedy of appeal under the CGST Act was available to the petitioner, the Court allowed the Writ Petition under Article 226 of the Constitution of India. The Court emphasized that the availability of an appeal remedy should not bar the petitioner from seeking relief through extraordinary jurisdiction. The impugned Assessment Order was set aside, and the matter was remitted back to the respondent for reevaluation after granting a personal hearing within two months.