2019 (3) TMI 406 - HC - VAT and Sales Tax

Principles of natural justice - closure of business - case of petitioner is that the demand was without any basis, returns were not filed with the second respondent, since the petitioner s business was closed down within two months from the date of commencement of business, and the also no notice was received by the petitioner before passing the order - Held that - This Court is of the considered view that the respondents have violated the principles of natural justice by not affording sufficient opportunity including the right of personal hearing to the petitioner before passing the impugned demand - the matter is remanded back to the second respondent for fresh consideration and the second respondent after affording sufficient opportunity to the petitioner including the right of personal hearing, pass fresh orders on merits - petition allowed by way of remand.

Summary

Issues:
Challenge to order and notice dated 13.05.2015 and 09.06.2015 - Violation of principles of natural justice - Right of personal hearing - Compliance with circular dated 03.02.2014 - Assessment under TNVAT Act 2006 - Quashing of impugned demand.

Analysis:
The petitioner initiated a writ petition challenging the order and notice issued by the second respondent related to a demand for a substantial amount of value-added tax and penalty. The petitioner contended that the demand was baseless as the business was closed shortly after commencement due to heavy losses. It was argued that no notice was received before the demand was issued, and no personal hearing was granted to raise objections. The petitioner relied on a circular mandating personal hearing and referred to a previous Division Bench judgment emphasizing the mandatory nature of personal hearing in such cases.

The petitioner's counsel highlighted the necessity of personal hearing as per the circular issued by the Principal Secretary/Commissioner of Commercial Taxes, Chepauk, Chennai-5. Referring to a Division Bench judgment, it was stressed that personal hearing is a fundamental right and failure to adhere to this requirement could lead to the quashing of assessment orders and demand notices. Consequently, the petitioner sought the quashing of the impugned demand based on the lack of personal hearing.

In response, the Additional Government Pleader argued that the Assessing Officer had issued a pre-assessment notice to the petitioner, which was allegedly ignored by the petitioner. The respondent contended that sufficient opportunity was provided before passing the impugned order. Additionally, it was stated that the petitioner later submitted a return admitting the purchases mentioned in the demand, implying that the petitioner had been given due opportunity.

The Court noted that as per the circular and the Division Bench judgment, personal hearing is a crucial aspect of natural justice that must be afforded to the concerned party. Despite the respondent's claim of issuing a notice to the petitioner, the Court found discrepancies in the process, especially regarding the lack of personal hearing and reliance on information solely from the respondent's website without verification from the petitioner or other sources. Consequently, the Court concluded that the principles of natural justice were violated by not granting sufficient opportunity, including the right of personal hearing.

In the final judgment, the Court quashed the impugned orders and notice, remanding the matter back to the second respondent for fresh consideration. The second respondent was directed to provide the petitioner with adequate opportunity, including personal hearing, and to pass fresh orders within a specified timeframe in accordance with the law. No costs were imposed, and the connected miscellaneous petition was closed, thereby resolving the issues raised in the writ petition.