2015 (4) TMI 169 - HC - VAT and Sales Tax

Seizure of the goods - Imposition of penalty - goods were not accompanied by a Form No.402 - Opportunity of hearing not granted - Violation of principle of natural justice - Held that - It is apparent that the goods of the petitioner have been detained along with the truck by the fifth respondent. Thereafter, the fifth respondent, by the impugned order, has assessed the tax payable on the goods in question at ₹ 1,65,240/- and has imposed penalty at 150% of the said amount being ₹ 2,47,860/-. In this regard, a perusal of the provisions of sub-section (5) of section 68 of the VAT Act reveals that the officer-in-charge of the check-post or barrier may, after giving the owner, driver or person-in-charge of goods, a reasonable opportunity of being heard and after holding such further inquiry, as he deems fit, impose on him penalty, in addition to tax payable under the Act, not exceeding one and one-half times of the tax for possession of goods so seized. Reverting to the facts of the present case, it is not in dispute that the value of the goods in question is ₹ 3,60,000/- . If the goods are sought to be sent outside the State of Gujarat, the tax payable would be at 2%, which would come to ₹ 7,200/-. However, even if the goods are meant for sale within the State of Gujarat, the highest amount of tax that could be leviable would be at the rate of 15%, which would come to ₹ 54,000/-. From the facts which have come on record, it is apparent that the petitioner has not been afforded an opportunity of hearing by the respondents. Clause (a) of subsection (5) of section 68 of the VAT Act clearly contemplates affording reasonable opportunity of being heard to the owner, driver or person-in-charge of the goods. Under the circumstances, the impugned order clearly suffers from the vice of being in breach of the principles of natural justice and as such, cannot be sustained on this ground alone. - Decided in favour of assessee.

Summary

Issues:
Challenge to order under VAT Act for seizure of goods, assessment of tax, and imposition of penalty without proper opportunity of hearing.

Analysis:
1. The petitioner challenged an order under the VAT Act directing seizure of goods, assessing tax at Rs. 1,65,240, imposing a penalty at 150% thereof, and requiring a total payment of Rs. 4,13,100, along with Rs. 12,880 towards input tax. The petitioner contended that the order was passed without affording a reasonable opportunity of hearing as required under sub-section (5) of section 68 of the VAT Act.

2. The petitioner, engaged in trading ceramic goods, dispatched goods to Chennai with a Manual Form No.402 due to a non-functional online system. The truck carrying the goods was detained for not having Form No.402. Despite the petitioner's efforts to comply and willingness to pay legitimate tax, the respondents levied excessive tax and penalty. The petitioner approached the court seeking release of the goods and truck.

3. The court noted that the tax assessed by the respondents was significantly higher than the actual tax liability. The maximum tax payable for goods valued at Rs. 3,60,000 would be Rs. 54,000. The penalty imposed at 150% of the tax amount was deemed exorbitant and not in line with the provisions of the VAT Act.

4. It was observed that the petitioner was not given a reasonable opportunity of being heard as required by the VAT Act. The impugned order lacked compliance with the principles of natural justice, rendering it unsustainable on this ground alone. The court emphasized the importance of providing a fair hearing before imposing penalties.

5. The court further highlighted that the petitioner was not a defaulter in regular assessments, indicating no reasonable grounds for the respondents to doubt the petitioner's tax payment capability. Considering the overall facts, the court allowed the petition, setting aside the impugned order and directing the release of the truck and goods upon depositing a reasonable amount of Rs. 54,000.

6. In conclusion, the court quashed the impugned order, directing the release of the truck and goods upon payment of the appropriate tax amount. The respondents were instructed to provide a fair opportunity for hearing before any fresh order under section 68 of the VAT Act. The court made the rule absolute with no order as to costs.