2022 (9) TMI 532 - HC - VAT and Sales Tax

Violation of the principles of natural justice - exparte reassessment order - illegal availment of Input Tax Credit - Section 29(7) of the U.P. Value Added Tax Act 2008 - HELD THAT - A perusal of the reassessment order dated 30.03.2022 itself indicates that the respondent No.2 had proceeded to pass the reassessment order after getting sanction on 08.03.2022 from the respondent No.3, in a hurry that the case would become time barred after 31.03.2022. The reason for denial of time of 7 days sought by the petitioner vide adjournment application dated 25.03.2022 is recorded in the order impugned itself wherein it is stated that in case any adjournment was granted to the petitioner, the proceedings would become time barred and hence there was no option but to pass an exparte order - It is evident from the record that the respondent No.2 had concluded the entire matter within the month of March 2022 without granting adequate time to the petitioner to submit its reply to the reassessment notice dated 10.03.2022. Even otherwise, the order which has been passed exparte does not disclose the reason for the rejection of the objections of the petitioner that it is entitled to claim ITC for the work done by Azko Nobel as a job worker falling within the definition of manufacturer under Section 2(u) of the VAT Act. The reassessment order is simply a reiteration of the statement made in the notice dated 02.03.2022 seeking explanation of the petitioner and the sanction order dated 08.03.2022. It is evident from the record that the petitioner has given a categorical reply to the notice dated 02.03.2022 wherein various objections have been raised with regard to the claim of ITC made by the petitioner and the jurisdiction of the department to initiate reassessment proceedings. None of the objections have been considered by the respondent No.2 in the order impugned. Without entering into the merits of the claim, noticing that adequate opportunity of hearing has not been provided to the petitioner and the exparte order dated 30.03.2022 does not reflect the mind of the adjudicating authority, the reassessment order dated 30.03.2022 is being set aside being violative of the principle of natural justice, being a non-speaking order having been passed without considering the objections taken by the petitioner in its reply dated 08.03.2022 before the respondent No.2 - matter is relegated to the respondent No.2 namely Joint Commissioner, Corporate, Commercial Tax Department, Kanpur Zone 2, Kanpur from the stage of the reassessment notice dated 10.03.2022 to give opportunity to the petitioner to submit a reply. Petition allowed by way of remand.

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Legitimacy of reassessment proceedings.
3. Adequacy of reasoning in the exparte reassessment order.

Issue-wise Detailed Analysis:

1. Violation of Principles of Natural Justice:
The petitioner argued that the exparte reassessment order dated 30.03.2022 was passed without adequate opportunity to present their case, thus violating the principles of natural justice. The court noted that the reassessment notice dated 10.03.2022 was issued in haste to conclude proceedings before the financial year ended on 31.03.2022. The petitioner sought a 7-day adjournment on 25.03.2022, which was denied by the respondent No.2, citing the impending limitation period. The court found that the reassessment order did not consider the petitioner's detailed reply dated 08.03.2022, making the opportunity of hearing an "empty formality." The court concluded that the reassessment order was passed with a predetermined mind and lacked adequate reasoning, thus violating the principles of natural justice.

2. Legitimacy of Reassessment Proceedings:
The reassessment was initiated based on an SIB investigation report dated 17.06.2015, which was never served upon the petitioner. The petitioner argued that the reassessment proceedings were initiated solely to avoid the limitation period and were based on a change of opinion rather than new material evidence. The court observed that the reassessment notice and subsequent proceedings were conducted in a hurried manner, without granting the petitioner sufficient time to respond. The court found that the reassessment proceedings lacked proper consideration of the petitioner's objections and were initiated with a premeditated intent to fasten liability on the petitioner.

3. Adequacy of Reasoning in the Exparte Reassessment Order:
The court scrutinized the exparte reassessment order dated 30.03.2022 and found it devoid of reasoning. The order merely reiterated the statements made in the notice dated 02.03.2022 and the sanction order dated 08.03.2022, without addressing the petitioner's objections on merits. The court noted that the reassessment order did not provide any deliberation on the petitioner's entitlement to claim Input Tax Credit (ITC) for the work done by Azko Nobel as a job worker. The court concluded that the reassessment order was a non-speaking order and did not reflect the mind of the adjudicating authority.

Conclusion:
The court set aside the exparte reassessment order dated 30.03.2022, finding it violative of the principles of natural justice and lacking adequate reasoning. The matter was remanded to the respondent No.2 for reconsideration from the stage of the reassessment notice dated 10.03.2022. The petitioner was directed to submit a reply by 26.09.2022, and the respondent No.2 was instructed to provide a personal hearing and pass a reasoned and speaking order within two weeks. The court clarified that the reassessment proceedings would not be barred by limitation due to this order and directed the respondent No.2 to consider the objections independently.