2024 (7) TMI 813 - HC - VAT and Sales Tax

Classification of goods - Rejection of petition - writ petitions by relegating the appellant to avail the statutory remedy by way of appeal before the Appellate Assistant Commissioner under Section 51 of the Tamil Nadu Value Added Tax Act, 2006 - challenge to assessment order - violation of principles of natural justice. Whether the Autoclaved Aerated Concrete block known as (AAC Blocks) would fall under Entry 22 of part B of First Schedule to the TNVAT Act as claimed by the appellant or under Entry 15 of Part C of the First Schedule of the TNVAT as proposed by the revenue? - HELD THAT - There is merit in the submission of the appellant that the impugned order suffers from violation of principles of natural justice inasmuch as the impugned order has been passed confirming the levy under residuary entry viz., Entry 69 of Part C of the First Schedule to the TNVAT Act, an entry different from that which was proposed in the notice dated 17.04.2023 - the assessment orders insofar as they classify the AAC Blocks sold by the appellant under the residuary entry viz, Entry 69 of Part C of First Schedule to the TNVAT Act marks a departure from the Show cause notice. Notice is not an empty formality but a mandatory requirement intended to put the assessee on notice of the reason on the basis of which the revenue intends to assess. It is trite law that a notice must contain the reasons to which the noticee is required to respond - it is essential to disclose the reasons to enable the noticee to give a reply/ response, for it is rudimentary that the noticee should be made aware of all that which influence the decision maker and which he has to meet. If the reasons which are set out in the notice to which the noticee is required to respond and the reasons contained in the order are different, the issuance of the notice would fail to serve its purpose and would be reduced to an empty formality. That means, it would neither qualify as a notice nor serve the object of issuance of notice. Thus, an order made in departure of the show cause notice without putting the assessee on notice cannot be sustained as the same is in violation of principles of natural justice and thus cannot be sustained - the impugned orders of assessment suffer from the above vice and thus cannot be sustained - appeal disposed off.

Issues Involved:
1. Rejection of writ petitions by relegating the appellant to avail the statutory remedy.
2. Classification of "Autoclaved Aerated Concrete Block" (AAC Block) under TNVAT Act.
3. Violation of principles of natural justice in the assessment orders.

Issue-wise Detailed Analysis:

1. Rejection of Writ Petitions by Relegating the Appellant to Avail the Statutory Remedy:
The appellant challenged the order of the learned Judge which rejected the writ petitions by directing the appellant to avail the statutory remedy of appeal before the Appellate Assistant Commissioner under Section 51 of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act). This is the third round of litigation regarding the classification of AAC Blocks. Initially, the Advance Ruling Authority (ARA) decision dated 02.09.2015 was set aside due to the lack of a personal hearing, and the matter was remitted to the ARA. Subsequently, the ARA passed a fresh order on 26.04.2019, which was again challenged by the appellant. The learned Judge, on 09.09.2022, concluded that the applications and the impugned order of ARA would not survive due to the repeal of the TNVAT Act. The assessing officer then issued fresh notices and completed the assessment on 01.06.2023. The appellant's writ petitions challenging these assessment orders were rejected on the grounds of the existence of an alternate remedy, leading to the present appeals.

2. Classification of "Autoclaved Aerated Concrete Block" (AAC Block) under TNVAT Act:
The primary issue in the assessment was whether AAC Blocks fall under Entry 22 of Part B of the First Schedule to the TNVAT Act, as claimed by the appellant, or under Entry 15 of Part C, as proposed by the revenue. The appellant contended that AAC Blocks should be classified under Entry 22 of Part B, which includes various types of bricks and blocks. However, the impugned assessment orders classified AAC Blocks under Entry 69 of Part I, which is a residuary entry for "ANY OTHER GOOD, NOT SPECIFIED IN ANY OF THE SCHEDULE," levying a tax rate of 14.5%. This classification marked a departure from the show cause notice, which proposed to classify the AAC Blocks under Entry 15 of Part C.

3. Violation of Principles of Natural Justice in the Assessment Orders:
The appellant argued that the impugned assessment orders violated the principles of natural justice by classifying AAC Blocks under a different entry (Entry 69 of Part I) than what was proposed in the show cause notice (Entry 15 of Part C). The court found merit in this submission, emphasizing that notice is a mandatory requirement intended to inform the assessee of the reasons for the proposed assessment. The departure from the show cause notice without notifying the appellant was deemed a violation of natural justice. The court cited several judgments to support the principle that an order made in departure from the show cause notice without proper notice to the assessee cannot be sustained.

Conclusion:
The court concluded that the impugned assessment orders suffered from a violation of the principles of natural justice and could not be sustained. While the existence of an alternative remedy is a factor in exercising judicial review under Article 226 of the Constitution, it is not an absolute bar, especially in cases of natural justice violations. The court directed the appellant to treat the assessment orders as show cause notices and submit objections within two weeks. The adjudicating authority was instructed to pass orders within eight weeks after receiving the objections. The writ appeals were disposed of with these directions, and the connected miscellaneous petitions were closed.

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