2015 (3) TMI 479 - HC - VAT and Sales Tax

Constitutional validity of Section 29(7) of the Punjab Value Added Tax Act, 2005 - power to amend amend assessment - no opportunity of hearing is provided to the assessee before grant of approval by the Commissioner - Violation of Article 19(1)(g) of the Constitution of India - Violation of principle of natural justice - Held that - A plain reading of Section 29 (7) of the PVAT Act shows that the designated officer within a period of three years from the date of assessment is authorised to amend assessment order made under Sub section 2 or 3 of Section 29 of the PVAT Act if he discovers that there has been under-assessment of tax payable by a person as a result of fraud or willful neglect or misrepresentation of facts on the part of such person or part of the turnover has escaped assessment. However, the amendment of an assessment order is subject to seeking prior permission from the Commissioner and after affording an opportunity of hearing to the affected person by the designated officer. Section 29(7) of the PVAT Act nowhere envisages personal hearing to be provided to the dealer before granting of prior permission by the Commissioner. The grant of permission is an administrative function and cannot be termed to be quasi judicial in nature. The prior permission of the Commissioner has been incorporated to safeguard the interest of the dealer so that the designated officer, where he is of the opinion that action is required to be taken, seeks approval of the higher officer of the rank of Excise and Taxation Commissioner. The dealer is provided with an opportunity of hearing at the time when the designated officer after getting approval from the Commissioner proceeds to amend the assessment order. Under the circumstances, the provision in question cannot be termed to be unreasonable, unconstitutional and ultravires. - approval given by the Commissioner and the notices issued by the concerned authority for amending the assessment order cannot be faulted. - Decided against assessee.

Summary

Issues Involved:
1. Constitutionality of Section 29(7) of the Punjab Value Added Tax Act, 2005 (PVAT Act).
2. Violation of principles of natural justice.
3. Legality of the order dated 29.1.2014 and consequential notices dated 5.2.2014 and 17.6.2014.

Issue-wise Detailed Analysis:

1. Constitutionality of Section 29(7) of the PVAT Act:
The petitioner challenged Section 29(7) of the PVAT Act as unconstitutional, arguing it violates Article 19(1)(g) of the Constitution of India and principles of natural justice. The court noted that Section 29(7) empowers the designated officer to amend an assessment order within three years if under-assessment of tax is discovered due to fraud, wilful neglect, misrepresentation of facts, or escaped turnover, but requires prior permission from the Commissioner and an opportunity of hearing to the affected person. The court found this provision reasonable and not unconstitutional, as it includes safeguards like prior permission from a higher authority and a subsequent hearing.

2. Violation of Principles of Natural Justice:
The petitioner contended that no opportunity of hearing is provided before the Commissioner grants permission to amend the assessment order, which is arbitrary and unreasonable. The court referred to various Supreme Court judgments, including *Assistant Commissioner, Assessment II, Bangalore vs. Velliappa Textiles Limited* and *Subramanian Swamy vs. Manmohan Singh*, which held that granting of sanction is an administrative act and does not require a hearing at that stage. The court concluded that the prior permission by the Commissioner is an administrative function aimed at safeguarding the dealer's interests and does not necessitate a hearing. The opportunity for hearing is provided when the designated officer proceeds to amend the assessment order after obtaining the Commissioner's approval.

3. Legality of the Order Dated 29.1.2014 and Consequential Notices:
The petitioner sought to quash the order dated 29.1.2014 by the Excise and Taxation Commissioner and the consequential notices dated 5.2.2014 and 17.6.2014 issued by the Assistant Excise and Taxation Commissioner. The court examined Rule 49 of the Punjab VAT Rules, which mandates issuing a notice specifying grounds for the proposed amendment and providing a reasonable opportunity of being heard before enhancing the tax liability. The court found that these procedural safeguards were in place, ensuring compliance with principles of natural justice at the appropriate stage. Consequently, the court held that the order and notices were legally valid and could not be faulted.

Conclusion:
The court dismissed the petitions, upholding the constitutionality of Section 29(7) of the PVAT Act and affirming that the procedural safeguards provided under the Act and Rules adequately protect the principles of natural justice. The court found no merit in the petitioner's arguments and validated the actions taken by the tax authorities.