2020 (7) TMI 675 - HC - VAT and Sales Tax

Principles of natural justice - service of notice - Concessional rate of tax - inter-state sales - entire turnover covered by C-Forms - rate of tax applicable under Section 8(1) of the CST Act - HELD THAT - There has been a grave violation of principles of natural justice in as much as the personal hearing notice dt.30.03.2020 was served at 7.15 p.m. through e-mail and the impugned assessment order was passed on the very next day i.e 31.3.2020 when there was a lockdown prevalent on account of COVID-19 pandemic situation and the petitioner was disabled from availing the personal hearing offered by the 1st respondent. The matter is remitted back to the 1st respondent for fresh consideration - Petition allowed by way of remand.

Summary

Issues:
1. Assessment order under CST Act, 1956 challenged by petitioner.
2. Discrepancy in tax levy due to common maintenance of accounts for CST Act and Telangana VAT Act.
3. Non-consideration of C-Declaration Forms submitted by petitioner.
4. Allegations of improper notice issuance and assessment during COVID-19 lockdown.
5. Violation of principles of natural justice due to lack of opportunity for personal hearing.

Analysis:
1. The petitioner challenged an assessment order under the CST Act, 1956 for the year 2015-16 issued by the 1st respondent, alleging discrepancies in tax levy. The petitioner argued that the entire turnover was covered by C-Forms, warranting a lower tax rate of 2% under Section 8(1) of the CST Act, contrary to the proposed 14.5% levy.

2. The petitioner highlighted that the 2nd respondent had previously completed a final assessment under the Telangana VAT Act, 2005, confirming inter-state sales at a specific amount. However, the 1st respondent proposed a higher tax rate without justification. The petitioner contended that the common maintenance of accounts for both Acts led to the erroneous tax assessment.

3. Despite submitting C-Declaration Forms for the entire taxable turnover, the petitioner claimed that the forms were not considered by the 1st respondent. This non-consideration further contributed to the dispute regarding the appropriate tax rate applicable to the petitioner's turnover.

4. The petitioner raised concerns about procedural irregularities during the COVID-19 lockdown, including the untimely issuance of notices and the subsequent assessment order. The petitioner argued that the lack of opportunity for a personal hearing due to the lockdown constituted a violation of natural justice principles.

5. The Court acknowledged the grave violation of natural justice principles due to the improper notice service and assessment order issuance during the lockdown. Consequently, the Court allowed the Writ Petition, setting aside the impugned assessment order and remitting the matter back to the 1st respondent for fresh consideration. The petitioner was granted the opportunity to file fresh objections, and the 1st respondent was directed to provide a personal hearing before passing a reasoned order.