2021 (4) TMI 136 - HC - VAT / Sales Tax

Violation of principles of natural justice - specific personal hearing notice to the assessee not issued by assessing authority - reversal of Input Tax Credit (ITC) on furnace oil and LSHS oil - HELD THAT - The impugned order will have to be set aside for the simple reason that the assessing authority did not give specific personal hearing notice to the assessee. Of course, in the impugned order, it has been mentioned that the authorised signatories were allowed to discuss the issue many times and no additional details were adduced. Of course, there was informal interaction between the assessee on the one hand and the authority on the other. When Section 27 of the TNVAT Act, 2006 contemplates grant of personal hearing to the assessee, it will have to be fulfilled only by issuing personal hearing notice. In the case on hand, no personal hearing notice was issued - non-issuance of independent personal hearing notice had indeed vitiated the impugned proceedings. Input Tax Credit (ITC) - HELD THAT - The Hon'ble Division Bench of the Orissa High Court in the case of Reliance Industries Ltd. vs Asst. Commissioner Of Sales Tax 2008 (5) TMI 620 - ORISSA HIGH COURT held that the furnace oil was used in the process of manufacturing of the final product and it has to be treated only as an input tax credit and that therefore, the input tax paid on the purchase of furnace oil can be claimed as input tax credit - assessee has been contending right from the inception that the furnace oil is being utilised only for maintaining the heat for the purpose of smelting copper and that it was not used for production of electricity. This issue could have been resolved only by holding proper study and conducting spot inspection and verifying the manufacturing process of the assessee. This exercise was not undertaken. It is for this reason, the learned counsel for the petitioner submitted that the matter will have to be revisited by the authority - the matter is remitted to the file of the assessing authority to pass orders afresh in accordance with law - Petition allowed by way of remand.

Summary

Issues:
Challenging orders passed by appellate and original assessing authorities regarding deemed assessment basis, reversal of ITC claimed on purchase of furnace oil and LSHS oil, lack of specific personal hearing notice to assessee, utilization of furnace oil for smelting copper, failure to consider merits of the case by assessing authority.

Analysis:
The petitioner, Sterlite Industries (India) Limited, filed three writ petitions challenging orders passed by the appellate authority and original assessing authority for the assessment years 2006-07, 2007-08, and 2008-09. The assessments were concluded on a deemed assessment basis under Section 22(2) of the Act. The impugned orders sought to reverse the Input Tax Credit (ITC) claimed on the purchase of furnace oil and LSHS oil used in the captive power plant for electricity production, alleging no ITC available for power production. The petitioner argued that furnace oil was used solely as a fuel for smelting copper, not for electricity generation, and requested a spot study, which was denied by the assessing authority, leading to the impugned orders.

Counter affidavits were filed, and the Special Government Pleader contended that the petitioner was seeking a double benefit, as a refund was already applied for and being processed. It was argued that the furnace oil was used for electricity production, an exempted commodity, justifying the reversal of ITC claimed by the petitioner. The court noted the lack of specific personal hearing notice to the assessee, emphasizing the necessity of issuing such notice as per Section 27 of the TNVAT Act, citing a judgment highlighting the importance of providing an opportunity for personal hearing before revising an assessment.

The court acknowledged the petitioner's argument that furnace oil was used only for smelting copper, citing a relevant judgment from the Orissa High Court supporting the treatment of furnace oil as an input tax credit for manufacturing processes. The assessing authority failed to consider this crucial aspect, leading to the quashing of the impugned orders. The court directed the matter to be remitted to the assessing authority for fresh consideration, emphasizing the need for a proper study, spot inspection, and personal hearing to address the petitioner's contentions adequately.

In conclusion, the writ petitions were allowed, with no costs imposed, and connected miscellaneous petitions were closed. The court emphasized the importance of providing a fair opportunity for personal hearing, considering the merits of the case, and conducting a thorough examination of the manufacturing processes involved in utilizing furnace oil for smelting copper.