2020 (8) TMI 220 - HC - VAT and Sales Tax

Classification of goods - inter-State sales on rexin cloth, Tarpauline cloth and PVC cloth - whether classified under Section 8(2) of the Central Sales Tax Act read with Entry-86 in the IV Schedule of the Telangana VAT, 2005 or classified as cotton connected fabrics/ man-made fabrics covered by G.O.Ms.No.2328? HELD THAT - A reading of the impugned revisional order passed by the 3rd respondent indicates that there is no reference in the said order to the request made by the petitioner on 29.03.2020 through e-mail for grant of time to attend the personal hearing for the year 2012-13. Admittedly, at that point of time, there was a lockdown declared by the Central Government and the State Government which was in force and naturally the petitioner would be disabled from attending the personal hearing before the 3rd respondent. The 3rd respondent, therefore, ought to have adjourned the matter - But, apparently, since the limitation was going to expire for making Revision by 30.03.2020, the impugned Assessment Order was passed by the 3rd respondent. The respondent are unable to explain why the impugned revisional order passed by the 3rd respondent contains no reasons and he frankly admitted that in view of the limitation getting expired for Revision by 30.03.2020, the 3rd respondent passed the revisional order without affording a personal hearing to the petitioner though the petitioner requested for the same on 29.03.2020 through email. The impugned revisional order passed by the 3rd respondent as well as the consequential order passed by the 5th respondent are both set aside - the matter is remanded to the 3rd respondent to pass a fresh revisional order - petition allowed by way of remand.

Issues involved:
1. Revision of assessment order under the Central Sales Tax Act, 1956.
2. Interpretation of classification of goods for tax purposes under the Telangana VAT Act, 2005.
3. Validity of show-cause notices issued by the 3rd respondent.
4. Consideration of Advance Ruling Authority's decision in assessment proceedings.
5. Impact of COVID-19 lockdown on administrative proceedings.
6. Compliance with principles of natural justice in passing revisional orders.

Detailed Analysis:
1. The petitioner challenged the Revision Order in CCT.RAF.No.LIII(2), 320/2019 dated 30.03.2020 passed by the 3rd respondent, contesting the assessment under the Central Sales Tax Act, 1956. The petitioner, a registered dealer, engaged in the manufacture and sale of various products, disputed the levy of tax on inter-State sales of certain goods, claiming classification as "cotton connected fabrics/ man-made fabrics" under a specific Government Order. The 2nd respondent initially allowed exemption based on this contention, which was later revised by the 3rd respondent, citing specific tax rates under the Telangana VAT Act, 2005.

2. The issue of classification of goods for tax purposes arose concerning the interpretation of Entry-86 in the IV Schedule of the Telangana VAT Act, 2005. The petitioner argued for exemption based on a historical Government Order, while the authorities relied on specific tax rates mentioned in the legislation. The 3rd respondent proposed revisions based on the specific classification of goods and previous rulings, leading to a dispute over the correct tax treatment of the goods in question.

3. The validity of show-cause notices issued by the 3rd respondent was questioned by the petitioner, highlighting procedural irregularities in the objection filing process and personal hearing related to assessment orders for different years. The petitioner claimed communication gaps and procedural lapses in responding to the notices, emphasizing the need for fair administrative practices in tax assessment proceedings.

4. The consideration of the Advance Ruling Authority's decision in the assessment process was a key aspect of the dispute. The petitioner contested the binding nature of the ruling, citing an ongoing appeal challenging its validity. The petitioner argued that until the appeal was resolved, the ruling should not be enforced, invoking legal precedents to support this argument and seeking a fair review of the ruling's applicability.

5. The impact of the COVID-19 lockdown on administrative proceedings was raised by the petitioner, highlighting the challenges faced in responding to official communications and attending hearings during the pandemic-induced restrictions. The petitioner requested a postponement of proceedings due to the lockdown, emphasizing the need for flexibility and consideration of extraordinary circumstances affecting normal business operations.

6. Compliance with principles of natural justice in passing revisional orders was a significant concern addressed in the judgment. The lack of reasons in the revisional order, failure to consider petitioner's submissions, and procedural shortcomings in granting a personal hearing were noted. The court emphasized the importance of providing a fair opportunity for the petitioner to present objections, receive a personal hearing, and have relevant legal arguments considered before passing any revisional orders.

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