2018 (9) TMI 550 - HC - VAT and Sales Tax

Principles of Natural Justice - Stay on condition of pre-deposit - case of appellant is that the order passed by the respondent without giving the appellant an opportunity of personal hearing - Held that - As there is violation of principles of natural justice and the only request of the learned counsel for the appellant is to remit the matter back to the respondent for re-consideration after affording him a personal hearing the impugned order passed by the respondent dated 04.07.2013 may be set aside and the matter may be remitted back to the respondent for re-consideration - petition allowed by way of remand.

Summary

Issues Involved:
1. Revision of assessment under TNVAT Act and CST Act.
2. Allegations of sales suppression and denial of Input Tax Credit.
3. Denial of personal hearing and violation of principles of natural justice.

Issue 1: Revision of assessment under TNVAT Act and CST Act
The appellant, a manufacturer of batteries, challenged the order passed by the respondent regarding the demand of tax and interest. The Enforcement Wing Officers pointed out defects during inspection, leading to allegations of sales suppression and denial of Input Tax Credit (ITC) on inter-state sales to the Ministry of Defence. The respondent issued revision notices proposing to revise the ITC availed by the appellant based on these allegations. The appellant raised objections in writing, contending that the objections and audited financial statements were not properly understood by the respondent. The main grievance was the lack of a personal hearing to clarify entries before passing the impugned order.

Issue 2: Allegations of sales suppression and denial of Input Tax Credit
The appellant, being a registered dealer under the TNVAT Act and CST Act, faced allegations of sales suppression and ineligibility to avail ITC on capital goods. The Enforcement Wing Officers' allegations were reiterated by the respondent through revision notices, accusing the appellant of sales suppression. The appellant contended that the objections raised and financial statements submitted were not adequately considered by the respondent. The appellant argued that a personal hearing should have been granted to explain the entries, as per the proviso to Section 27(2) of the TNVAT Act, emphasizing the need for a reasonable opportunity to show-cause against the order.

Issue 3: Denial of personal hearing and violation of principles of natural justice
The appellant's main contention revolved around the denial of a personal hearing by the respondent before passing the impugned order. Citing the proviso to Section 27(2) of the TNVAT Act, the appellant argued that principles of natural justice were violated as no opportunity for a personal hearing was provided. The appellant referred to a Division Bench decision emphasizing the importance of personal hearing in cases involving complex factual disputes. Consequently, the appellant sought to set aside the order and remit the matter back to the respondent for re-consideration after affording a personal hearing.

In conclusion, the High Court allowed the Writ Petitions, setting aside the impugned order and remitting the matter back to the respondent for fresh consideration. The court directed the respondent to provide the appellant with an opportunity for a personal hearing to explain the entries in the annual report with the assistance of the Auditor. The respondent was instructed to complete the re-consideration process and pass appropriate orders within six weeks from the date of receipt of the judgment. The court emphasized the importance of adhering to principles of natural justice and providing a fair opportunity for the appellant to present their case.