2020 (12) TMI 752 - HC - VAT and Sales Tax

Violation of principles of natural justice - Petitioner contends that it had suffered serious prejudice on account of such violation of principles of natural justice and so the impugned assessment order by the 1st respondent and the consequential garnishee order issued by the 1st respondent to the 2nd respondent require to be set aside - HELD THAT - It is obvious that there has been a violation of principles of natural justice and the petitioner had suffered grave prejudice on account of non-service of the pre-assessment show-cause notice on it by 1st respondent. The matter is remitted back to 1st respondent for fresh consideration - the 1st respondent shall serve a show-cause notice on the petitioner in accordance with rule 64 of the Telangana VAT Rules indicating the proposed tax and the turnover on which it is sought to be imposed - Petition allowed by way of remand.

Summary

Issues:
Challenge to Assessment Order under Central Sales Tax Act, 1956 for the period April 2015 to March 2016; Non-service of show-cause notice leading to Garnishee notice; Violation of principles of natural justice; Prejudice suffered by the petitioner.

Analysis:

1. Challenge to Assessment Order: The petitioner challenged Assessment Order No.35396 dated 26.03.2020 passed by the 1st respondent under the Central Sales Tax Act, 1956 for the period April 2015 to March 2016. The petitioner contended that despite the order stating a show-cause notice was issued and a response filed by the petitioner, no such notice was served, and the petitioner did not have the opportunity for a personal hearing.

2. Non-Service of Show-Cause Notice: The petitioner, through its banker, received a Garnishee notice from the 1st respondent for arrears of tax, indicating a lack of prior communication or notice. The petitioner discovered the Assessment Order on the Commercial Taxes Department website without being informed officially, raising concerns about procedural fairness and due process.

3. Violation of Principles of Natural Justice: The court acknowledged the serious prejudice suffered by the petitioner due to the non-service of the pre-assessment show-cause notice and the absence of a personal hearing. The learned Special Counsel for Commercial Taxes did not dispute the lack of notice and hearing, emphasizing the violation of principles of natural justice.

4. Judgment and Remedial Measures: The court allowed the Writ Petition, setting aside the impugned Assessment Order and the consequential garnishee order. The matter was remitted back to the 1st respondent for fresh consideration. The 1st respondent was directed to serve a show-cause notice in compliance with the Telangana VAT Rules, granting the petitioner six weeks to file objections with supporting material. A personal hearing was mandated, followed by a reasoned order to be communicated to the petitioner.

5. Conclusion: The Writ Petition was allowed with no order as to costs, and any related pending miscellaneous petitions were to be closed. The judgment emphasized the importance of adherence to principles of natural justice and procedural fairness in tax assessments, ensuring that parties are given adequate opportunities to present their case and respond to allegations.