2021 (1) TMI 964 - HC - VAT / Sales Tax

Principles of Natural Justice - Validity of assessment order - petitioner contends that the Assessment Orders were passed for the said periods on different dates, but none of those orders were served on the petitioner - HELD THAT - It is not in dispute that notices as well as orders passed are required to be served on the assessee in accordance with Rule 64(1)(b) of the TVAT Rules, which does not contemplate service of either notices or orders through the mode of e-mail. In Soa Software Engineering India Private Limited Vs. Commercial Tax Officer 2013 (3) TMI 850 - ANDHRA PRADESH HIGH COURT , a Division Bench of this Court held that as per Rule 64(1)(b) of the Telangana State Value Added Tax Rules, 2005 read with Section 9(2) of the Central Sales Tax Act, 1956, show-cause notice should be served on the nominated person or left at the registered office of the person or sent by registered post to any office or place of business of that person, and it cannot be sent by e-mail - This legal position is not disputed by the learned Special Counsel. It has to be held that there was neither service of a show-cause notice on the petitioner nor service of the Assessment Order on the petitioner for the period 2010-11 and therefore, there was a violation of principles of natural justice which caused prejudice to the petitioner. Period 2011-12 - HELD THAT - This order mentions that a show-cause notice was sent through e- mail and was also served through registered post - But there is no material produced by the learned Special Counsel to show service of the show-cause notice on the petitioner through registered post - We have already noticed that service of show-cause notice through e-mail is not a valid service as per Rule 64(1)(b) of the TVAT Rules. Period 2012-13 - HELD THAT - But there is no evidence of service of the same on the petitioner. The said Assessment Order was dispatched to the petitioner on 26.05.2016 but is also returned with endorsement addressee left . Therefore, even for 2012-13 period there is no evidence of service of pre-assessment show-cause notice or even the Assessment Order and it has to be held that there was a violation of principles of natural justice which caused prejudice to the petitioner - Assessment order cannot be sustained. 2013-14 period - HELD THAT - It is already pointed out that service of such show-cause notice through e-mail is not a valid service and admittedly the notice sent through registered post was not served on the petitioner - The postal cover enclosing copy of the Assessment Order was also returned with endorsement addressee left . So the said Assessment Order was also not served on the petitioner. So it has to be held that there was a violation of principles of natural justice which caused prejudice to the petitioner - assessment order also not sustainable. Assessment year 2014-15 - HELD THAT - A reading of the said Assessment Order indicates that a show- cause notice dt.04.10.2017 was issued to the petitioner, which was served by dispatch and that the petitioner filed a letter dt.23.10.2017 and declared certain turnovers. No proof of service of the pre-assessment show cause notice is filed by the 1st respondent and even the alleged letter dt.23.10.2017 has not been produced - No evidence produced by respondents 1 to 3 of proof of service of the said Assessment Order also on the petitioner - Without service of show cause notice and Assessment Order on the petitioner, the respondents cannot seek to enforce any demand raised thereunder as there has been a violation of principles of natural justice which has caused prejudice to the petitioner. The demand of tax raised in the impugned notice dt.17.02.2020 under Section 29 of the Telangana State VAT Act, 2005 served on the petitioner's banker, the 4th respondent, for the periods 2010-11 to 2014-15 cannot be sustained. The assessments for the said periods 2010-11 to 2014-15 are all remitted to the 1st respondent for fresh consideration - the 1st respondent is directed to serve pre-assessment show-cause notice for each of the aforesaid periods on the petitioner strictly in accordance with Rule 64(1)(b) of the TVAT Rules, 2005 to the address mentioned in this writ petition affidavit - Petition allowed by way of remand.

Summary

Issues:
Violation of principles of natural justice in the assessment orders for the periods 2010-11 to 2014-15 under the CST Act, 1956.

Analysis:
1. The petitioner, a company engaged in the business of engineering, iron, and steel components, challenged the notice from the 1st respondent to attach funds in its bank account towards dues under the CST Act for the tax periods 2010-11 to 2014-15.

2. The petitioner claimed that despite requests, it was not provided with copies of the Assessment Orders for those periods and was denied a personal hearing, alleging a lack of opportunity to present material showing its tax liability.

3. The Court directed the Special Counsel to produce proof of service of pre-assessment show-cause notices and Assessment Orders. The Assessment Orders for the periods 2010-11 to 2014-15 were examined.

4. For the period 2010-11, the Assessment Order was found to have been sent via e-mail, which did not comply with Rule 64(1)(b) of the TVAT Rules, leading to a violation of natural justice principles and causing prejudice to the petitioner.

5. Similarly, Assessment Orders for the periods 2011-12, 2012-13, 2013-14, and 2014-15 were also deemed invalid due to lack of proper service of show-cause notices and Assessment Orders, violating principles of natural justice.

6. The Court held that without proper service of notices and orders, the demands raised for the periods 2010-11 to 2014-15 could not be enforced, setting aside the notice under Section 29 of the Telangana State VAT Act, 2005, and the Assessment Orders for those years.

7. The Court remitted the assessments for the said periods back to the 1st respondent for fresh consideration, directing strict compliance with Rule 64(1)(b) of the TVAT Rules for serving show-cause notices, granting the petitioner time to file objections and supporting material, and mandating a personal hearing before passing reasoned orders.

8. The judgment allowed the writ petition, setting aside the impugned notice and Assessment Orders, and instructed the 1st respondent to follow due process in reassessing the tax liabilities for the periods in question, ensuring the petitioner's rights to natural justice.

9. The Court concluded by closing pending miscellaneous petitions related to the writ petition.