2021 (5) TMI 328 - HC - VAT and Sales Tax

Violation of principles of Natural Justice - opportunity of hearing not granted - works contract - HELD THAT - In the present case there has been no personal hearing afforded to the petitioner which is violation of principles of natural justice and also the statutory mandate under Section 27 of the Act to afford an effective hearing prior to finalisation of assessment. The petitioner has sought some time to respond. Thereafter notice dated 25.02.2021 was issued to which a written reply was filed enclosing documentary evidence. It was incumbent upon the Assessing Authority to hear the petitioner thereafter which has not been done - Since no personal hearing has admittedly been afforded the impugned order is set aside. The petitioner will appear before the Assessing Authority on Thursday the 6th of May 2021 at 10.30 a.m. along with all/any materials in support of its contention without expecting any further notice in this regard. Appeal allowed by way of remand.

Summary

Issues:
Challenge to assessment order under Tamil Nadu Value Added Tax Act, 2006 for the period 2016-17 - Determination of works contract - Violation of principles of natural justice and statutory mandate under Section 27 of the Act - Lack of personal hearing - Setting aside of the impugned order - Directions for a de novo assessment.

Analysis:
The petitioner challenged an assessment order dated 15.03.2021 under the Tamil Nadu Value Added Tax Act, 2006, for the period 2016-17. The Assessing Authority considered the entire contract value declared in the balance sheet for the relevant year as taxable under the assumption that the transaction was a works contract, applying a 30%:70% formula. The petitioner contended that the contract did not fall under the works contract category, thus challenging the application of the formula in this case.

The Court acknowledged that determining whether a transaction constitutes a works contract or a regular contract typically involves a factual examination. However, it noted a violation of principles of natural justice and statutory mandate under Section 27 of the Act due to the lack of a personal hearing afforded to the petitioner before finalizing the assessment. The Court emphasized the importance of an effective opportunity for a hearing, criticizing the vague and open-ended nature of the notice provided by the Assessing Authority, which did not specify a fixed date and time for the hearing.

Since the petitioner had only requested time to collect necessary records in response to a notice dated 27.05.2019, and had subsequently submitted a written reply with documentary evidence to a notice dated 25.02.2021, the Court found it necessary for the Assessing Authority to conduct a proper hearing before finalizing the assessment. As no personal hearing had been granted to the petitioner, the Court set aside the impugned order and directed the petitioner to appear before the Assessing Authority on a specified date with all supporting materials. The Court mandated that a new assessment be conducted within four weeks from the first hearing, either via video conference or in person, as mutually convenient.

In conclusion, the Writ Petition was disposed of with the above directions, without imposing any costs. The connected Miscellaneous Petition was closed, ensuring that the petitioner would have the opportunity for a fair and comprehensive hearing in the assessment process.