2020 (7) TMI 673 - HC - VAT and Sales Tax

Validity of Section 4(8) of the Telangana VAT Act, 2005 read with Section 2(28) Explanation (iv) - Section 65(105)(O) of the Finance Act, 1994, vires to Entry 54 of List II of the VII Schedule to Article 14 and Articles 19(1)(g) and 245 of the Constitution of India - validity of Audit Assessment Proceedings - time limitation. HELD THAT - The impugned assessment proceedings dt.13.03.2020 for the tax period 2013-14 to 2016-17 passed by the 1st respondent is set aside - the matter is remitted back to the 1st respondent for fresh consideration; the 1st respondent shall permit the petitioner to file additional objections to the notice dt.23.01.2020 issued by the 1st respondent, if the petitioner so desires; afford a personal hearing to the petitioner; and then the 1st respondent shall pass a reasoned order in accordance with law and communicate it to the petitioner.

Summary

Issues:
Assaulting the constitutionality of tax laws under Telangana VAT Act and Finance Act, challenging audit assessment proceedings for double taxation and limitation, violation of natural justice in passing assessment order clandestinely.

Constitutionality of Tax Laws:
The petitioner challenged Section 4(8) of Telangana VAT Act, 2005 and Section 65(105)(O) of the Finance Act, 1994, alleging violations of Articles 14, 19(1)(g), and 245 of the Constitution of India, and ultra-vires to Entry 54 of List II of the VII Schedule. The petitioner sought a declaration of ultra-vires for both sections. The High Court acknowledged the contentions and set aside the assessment proceedings, remitting the matter back for fresh consideration.

Audit Assessment Proceedings:
The petitioner argued that the assessment for the tax period March 2013 to January 2014 was time-barred and challenged the double taxation imposed without considering specific contentions and service tax payments made. The petitioner highlighted the issuance of notices, discussions, and the lack of response from the respondent, alleging violation of principles of natural justice. The High Court found merit in this argument, setting aside the impugned assessment proceedings and directing a fresh consideration by the respondent.

Violation of Natural Justice:
The petitioner contended that additional objections were not considered before passing the assessment order, alleging a violation of natural justice. The petitioner's representative was asked to file objections on a later date, while the assessment order was passed clandestinely in the meantime. The Court agreed with this argument, emphasizing the importance of adhering to principles of natural justice. The Court allowed the writ petition, directing the respondent to permit the filing of additional objections, afford a personal hearing, and pass a reasoned order in accordance with the law.

Conclusion:
The High Court allowed the writ petition, setting aside the assessment proceedings and remitting the matter back for fresh consideration. The Court emphasized the importance of natural justice and directed the respondent to follow due process in reconsidering the matter. Other issues raised by the petitioner were left open for consideration in separate proceedings if filed later, with no order as to costs.