2023 (12) TMI 298 - HC - VAT and Sales Tax

Violation of principles of natural justice - impugned order Annexure P/4 rejecting the application for rectification was passed without affording opportunity of being heard to petitioner - HELD THAT - From bare perusal of Section 54 of the MP VAT Act, it is obvious that Commissioner is vested with the power to rectify clerical/ arithmetical mistakes or error arising from any omission in an order passed earlier. The said power is circumscribed by an exception in subsection (1)(ii) of Section 54, that if rectification leads to enhancing the tax or reducing the amount of refund then a prior opportunity of being heard shall be afforded to the Revenue by issuing notice - However, the provision is silent as regards affording of any opportunity to the assessee who preferred the application for rectification. Since the Revenue has not denied that petitioner-assessee was not afforded prior opportunity of being heard before passing the impugned order dated 27.03.2017 (Annexure P/4) and dated 17.04.2017 (Annexure P/6), this Court deems it appropriate to interfere in the impugned order for having been passed without affording reasonable opportunity of being heard to petitioner-assessee - Petition allowed.

Summary

Issues involved: Challenge to rejection of application for rectification under Section 54 of the M.P. Value Added Tax Act (M.P. VAT Act) for financial year 2014-15.

The petitioner challenged the orders dated 27.03.2017 and 17.04.2017 rejecting the rectification application under Section 54 of the M.P. VAT Act. The main contention raised was that the rejection was done without affording the petitioner an opportunity to be heard, citing a previous decision of the Coordinate Bench of the Court in a similar matter.

Upon examining Section 54 of the M.P. VAT Act, it was noted that the Commissioner has the power to rectify mistakes in orders, subject to certain conditions. Notably, if rectification leads to an increase in tax or a reduction in refund, the Commissioner must provide a prior opportunity of being heard to the dealer. However, the provision does not explicitly mention affording such an opportunity to the assessee who filed the rectification application.

The Coordinate Bench of the Court had previously decided in a similar case that principles of natural justice should be read into the statute, obliging the competent authority to provide a prior opportunity of being heard to the assessee before deciding on the rectification application. This interpretation was based on a Full Bench decision of the Delhi High Court regarding a similar provision in the Income Tax Act. The Court held that the intention of the legislature in providing for rectification applications implies a right for the dealer to explain any mistakes or justifications for correction, necessitating a hearing before rejecting the application.

The Court reiterated that the decision in the previous case remains valid and has not been overturned. Consequently, as the Revenue did not dispute that the petitioner was not given a chance to be heard before the impugned orders were passed, the Court intervened to set aside the orders and directed the Revenue to provide the petitioner an opportunity to be heard before deciding on the rectification application.