2022 (2) TMI 196 - HC - VAT and Sales Tax

Principles of natural justice - opportunity not provided to the petitioner to file its objections and contest both proceedings - evasion of tax - time limitation - it is the specific contention of the respondents that the respondents are entitled to the period of eight years prescribed under Section 42 of KVAT Act since the petitioner fraudulently evading payment of tax during the assessment year 2013-14 - HELD THAT - It is relevant to state that the period of eight years would be available to the respondents only pursuant to passing a separate and independent order under Section 79 and it was only after passing an order under Section 79(1) that the respondent would be entitled to invoke Section 39(1) and not before that; in other words in order to claim eight years under Section 40, respondents were not entitled to pass a composite order by invoking both Sections 39 and 79, but had to necessarily pass an independent order under Section 79 after providing an opportunity to the petitioner and thereafter pass another order under Section 39 also after giving an opportunity to the petitioner. In view of the failure on the part of the respondents to follow the prescribed procedure and since no reasonable or sufficient opportunity was provided in favour of the petitioner before passing the impugned orders, thereby violating principles of natural justice, without expressing any opinion on the merits/demerits of the rival contentions and in order to give one more opportunity to the petitioner to file his objections to the notices dated 05.04.2021 and contest the proceedings, it is deemed just and appropriate to set aside the impugned orders and remit the matter back to the respondents for re-consideration afresh - petition allowed by way of remand.

Summary

Issues:
Challenge to the validity of proposition notices and orders under Sections 39 and 79 of the KVAT Act, 2003 based on limitation period and lack of opportunity for objections.

Analysis:
1. The petitioner sought relief by challenging multiple notices and orders under Sections 39 and 79 of the KVAT Act, 2003, issued by the Assistant Commissioner of Commercial Taxes. The petitioner contended that the reassessment proceedings initiated on 05.04.2021, beyond the limitation period, were unjust as they should have been concluded by 30.03.2019 under Section 40(1) of the KVAT Act. The petitioner argued that the impugned orders were passed without providing an opportunity to file objections, rendering them invalid and beyond jurisdiction.

2. The learned counsel for the petitioner emphasized that the simultaneous issuance of notices under Section 39(9) and Section 79 of the KVAT Act on 05.04.2021, followed by orders on the same day, violated the petitioner's right to contest the proceedings. The petitioner's counsel also argued that the invocation of Section 79 of the KVAT Act, extending the reassessment period to eight years, was improper without granting a fair opportunity to respond. The petitioner contended that the impugned orders lacked legal authority and jurisdiction.

3. In response, the learned AGA defended the validity of the notices and orders, citing the provision under Section 40(2) of the KVAT Act, allowing for an eight-year reassessment period. The AGA argued that the impugned actions were lawful and justified, urging the court not to interfere with the proceedings. Additionally, the AGA refuted the petitioner's jurisdictional objections, claiming them to be without merit.

4. The Court acknowledged the contentions raised by both parties but noted the crucial issue of the limitation period for reassessment under the KVAT Act. While the respondents claimed an extended period of eight years based on fraudulent tax evasion by the petitioner, the Court highlighted the procedural flaw in issuing a composite notice under both Section 39(1) and Section 79 without separate orders. The Court emphasized that for invoking the extended reassessment period, a distinct order under Section 79 should precede any action under Section 39.

5. Considering the failure to adhere to procedural requirements and provide a fair opportunity for objections, the Court concluded that the impugned orders were invalid due to the violation of natural justice principles. Consequently, the Court allowed the petition, quashed all impugned notices and orders, and remitted the matter back to the respondents for reconsideration within a specified timeframe. The Court directed the petitioner to file objections, and the respondents were instructed to conduct the proceedings afresh, ensuring compliance with the law and principles of natural justice.

6. Ultimately, the Court granted the petitioner another opportunity to contest the reassessment proceedings, highlighting the importance of procedural fairness and adherence to legal requirements. The Court refrained from expressing any opinion on the merits of the case, leaving all substantive contentions between the parties open for further consideration.