2020 (8) TMI 691 - HC - VAT and Sales Tax

Validity of assessment order - Levy of VAT - input tax credit - It was mentioned in the show cause notice that the petitioner did not file information such as books of accounts and tax invoices relating to input tax credit claimed by it and the input tax credit was proposed to be disallowed - assessment had to be completed under Section 29(3) of the Act within 4 years from the last date of filing the return for a particular month - HELD THAT - Naturally during the period between the date of issuance of show cause notice dt.09-04-2020 and June, 2020 and 30-06-2020, it would have been difficult for the petitioner to obtain the services of Sales Tax Consultant, have access to material documents such as invoices etc., to properly defend itself against the proposal made by 1st respondent in the show cause notice dt.09-04-2020. There has been a violation of principles of natural justice because petitioner could not file objections to the show cause notice on account of non-availability of its Sales Tax Consultant, and even a personal hearing was not provided to the petitioner though such personal hearing was sought by the petitioner. The matter is remitted back to the 1st respondent for fresh consideration - Petition allowed by way of remand.

Summary

Issues:
Assessment order challenge under Telangana VAT Act, 2005 for the period 2014-15 during the Covid-19 lockdown.

Analysis:
The petitioner, a firm engaged in rice milling and trading, challenged the assessment order passed by the 1st respondent under the Telangana VAT Act for the period 2014-15. The petitioner contended that it had filed its tax returns and disclosed sales turnovers for the said period. However, during the Covid-19 lockdown, a show cause notice was issued proposing a VAT levy of ?59,58,480. The petitioner submitted invoices, balance sheets, and other relevant documents to support its claim of input tax credit. Despite requesting an adjournment due to the unavailability of its Sales Tax Consultant, the assessment order was passed, determining an under-declared tax of ?90,50,725, exceeding the proposed amount in the notice.

The petitioner argued that the 1st respondent violated principles of natural justice by denying a personal hearing and proceeding with the assessment during the lockdown when crucial information could not be furnished due to consultant unavailability. The petitioner also contended that the respondent failed to consider the VAT payments made and exceeded the proposed tax amount without justification. Additionally, the assessment was finalized after the limitation period, and the petitioner disputed the applicability of an amendment extending the assessment time to 6 years.

In response, the Special Counsel for Commercial Taxes acknowledged the lockdown's impact on petitioner's ability to defend against the notice. The court found a violation of natural justice as the petitioner couldn't file objections or have a personal hearing due to consultant unavailability. Consequently, the court allowed the writ petition, setting aside the assessment order and remitting the matter back to the 1st respondent for fresh consideration. The petitioner was granted four weeks to file objections and supporting material, with the respondent instructed to provide a personal hearing. The petitioner could raise all contentions, including the limitation plea, and the 1st respondent was directed to pass a reasoned order in accordance with the law.

In conclusion, the court's decision focused on upholding principles of natural justice and ensuring a fair assessment process, considering the challenges faced by the petitioner during the Covid-19 lockdown.