2016 (7) TMI 545 - HC - VAT and Sales Tax

Demand of VAT @14.5% on commission receipt treating the same as sale proceeds - receipt of commission against the indenting agency business is shown under the head other income reported in Form WW for 2013-14 - TNVAT - Held that - the right to reason is an indispensable part of a sound judicial system; reasons at least sufficient to indicate application of mind to the matter before the Court, Tribunal or Authority and that the affected party has to know why the decision has gone against him. The reasons are not forthcoming as to why the case of the petitioner, as projected by them in the representations, is not found acceptable. Furthermore, an opportunity of personal hearing was not afforded to the petitioner, more so, when the petitioner would state that they are only indenting agents representing national and foreign companies. Hence, on this technical ground alone, the impugned order calls for interference. - Matter remanded back.

Summary

Issues:
Assessment order under Tamil Nadu Value Added Tax Act, 2006 for financial year 2013-14; Discrepancy in reporting other income by the petitioner; Failure to provide reasons for rejecting petitioner's submissions; Denial of opportunity for personal hearing to the petitioner.

Analysis:
The judgment pertains to a writ petition involving a registered dealer in glassware and glass decoration items under the Tamil Nadu Value Added Tax Act, 2006 for the financial year 2013-14. The petitioner received a notice from the respondent regarding the reporting of other income for a specific amount, which was deemed taxable at 14.5%. The petitioner responded by explaining their primary role as an indenting agency representing national and foreign companies, receiving commission for services rendered, and paying service tax accordingly. They clarified that the commission receipts reported as other income were subject to TDS under the Income Tax Act and service tax was duly remitted to the authorities.

The judgment emphasizes the necessity of providing reasons for decisions, citing the Hon'ble Supreme Court's stance on the right to reason as fundamental in a judicial system. It notes that the respondent's order lacked justification for disregarding the petitioner's submissions and for not granting a personal hearing, especially considering the petitioner's role as indenting agents representing various companies. The absence of reasons and denial of a personal hearing were deemed sufficient grounds to interfere with the impugned order.

Consequently, the writ petition was allowed, the impugned order was set aside, and the matter was remitted back to the respondent for fresh consideration. The respondent was directed to provide the petitioner with an opportunity for a personal hearing or representation, evaluate all submitted documents, including proof of service tax payment, and issue a reasoned order in line with the law promptly. The judgment concluded by closing the matter without imposing any costs on either party.