2020 (6) TMI 590 - HC - VAT and Sales Tax

Violation of Principles of Natural Justice - petitioner was denied a fair opportunity of being heard even on merits - baseless presumption that petitioner had effected sale of its assets to MHPL at Book Value and that there is no sale as a going concern - HELD THAT - It is not in dispute that the 1st respondent issued show-cause notice dt.12.02.2020 proposing to levy additional VAT of ₹ 82,04,233/- for the periods 2014-15 to 2017-18 (up to June, 2017) and gave a mere seven (07) days time to the petitioner to file a reply - In such a short time, it is not possible for the petitioner to file all the documentary evidence and also file a detailed reply covering a period of more than five (05) years. It is not in dispute that petitioner filed a letter dt.20.02.2020 seeking additional time of two (02) months to file objections to gather the various tax invoices from 2014-15 and also to seek legal advice in the matter. There is no material filed by the respondents to show that the endorsement allegedly made on 28.02.2020 by him (which is referred to in the impugned order) was, in fact, served on the petitioner at all - the time granted to the petitioner was too short and there has been a clear violation of principles of natural justice and denial of fair opportunity to the petitioner of being heard. The matter is remitted to the 1st respondent to pass a fresh order in accordance with law within three (03) months - Petition allowed by way of remand.

Summary

Issues:
Challenging Assessment Order under Telangana Value Added Tax Act, 2005 for the periods 2014-15 to 2017-18; Denial of fair opportunity of being heard; Violation of principles of natural justice.

Analysis:
The petitioner challenged the Assessment Order passed by the 1st respondent under the Telangana Value Added Tax Act, 2005 for the periods 2014-15 to 2017-18. The petitioner, a registered dealer providing medical services in Gastroenterology and operating a Pharmacy, contended that its establishment was taken over as a 'going concern' by another company through a slump sale, which should not be subjected to VAT. The petitioner received notices for audit purposes and a show-cause notice proposing additional VAT. Despite seeking more time to gather evidence and legal advice, the Assessment Order was passed confirming a substantial VAT amount.

The petitioner argued that the Assessment Order violated principles of natural justice as it was passed without a fair opportunity to present objections. The petitioner disputed the VAT levy, claiming it was based on a flawed presumption of asset sale to the acquiring company. The petitioner's counsel highlighted the onerous appeal process, requiring a deposit of disputed tax without a waiver provision, as a reason for approaching the Court directly.

The Government Pleader for Commercial Taxes acknowledged errors in overlooking the petitioner's request for additional time to respond to the show-cause notice. Both sides' submissions were considered by the Court, which found the short response time inadequate for the petitioner to prepare a comprehensive reply covering a five-year period. The Court concluded that the petitioner's request for an extended timeline was reasonable, and the Assessment Order lacked proper consideration of this aspect, leading to a violation of natural justice.

Consequently, the Court allowed the Writ Petition, setting aside the Assessment Order and remitting the matter back to the 1st respondent for a fresh order within three months. The petitioner was granted six weeks to submit a reply and supporting material, with a requirement for a personal hearing before the fresh assessment order. The Court emphasized the importance of adhering to principles of natural justice and providing a fair opportunity for parties to be heard in tax assessment matters.