2022 (3) TMI 268 - HC - VAT and Sales Tax

Validity of assessment order - Petitioner claims to have been deprived of sufficient opportunity to contest the case - violation of principles of natural justice - HELD THAT - The impugned orders Ext.P5, Ext.P6 and Ext.P7 are in fact, issued in violation of the principles of natural justice. The principle of natural justice has twin ingredients; firstly the person who is likely to be adversely affected by the action of the authorities should be given notice to show cause thereof and be granted an opportunity of hearing and secondly, the orders so passed by the authorities should give reasons for arriving at any conclusion showing a proper application of mind. Violation of either of them could in the given facts and circumstances of the case vitiate the order itself. On an analysis of the facts of the instant case, this Court notices the availability of the above-mentioned twin ingredients. The orders of assessment apart from failing to give a reasonable opportunity of hearing had failed to consider any of the issues that arose and are seen to be non-speaking orders, issued without due application of mind - the opportunity for contesting a case must be a real opportunity and not an unreal one. The real opportunity arises when the petitioner is accorded a sufficient chance to place all the materials before the assessing officer. The opportunity contemplated must be real and not ritualistic, effective and not illusory. In the instant case, it is found that such an opportunity was not available to the petitioner for reasons beyond the control of the petitioner. Even the request for three months time to produce the documents, requested as per Ext.P8, is seen refused, on the ground that already two months time had been granted. Application of mind to the request was glaringly absent. This Court notices that the orders of assessment are not speaking orders, since the specific issues arising in the case were not considered by a proper application of mind. Non-application of mind as mentioned earlier is also a case of violation of principles of natural justice. This Court had, in a case where the assessing officer merely adopted the conclusions in the order of penalty, without applying his mind independently - In the instant case, there is no application of mind at all. The assessing officer had merely proceeded on the basis of non-reply by the assessee, without independently applying his mind to the case. The petitioner is directed to appear before the first respondent on 15.12.2021 and file necessary objections if any, on the same day, without fail - petition allowed.

Summary

Issues:
Challenge to assessment orders under Section 25(1) of the Kerala Value Added Tax Act, 2003 for the assessment years 2014-15 and 2015-16, and the order issued under Section 25A of the Act for the year 2014-15.

Analysis:
The petitioner, a private limited company, challenged assessment orders citing deprivation of sufficient opportunity to contest the case due to extraordinary circumstances. The Managing Director's imprisonment in the UAE and subsequent inability to move out of the country, along with the closure of business activities in Kerala, were highlighted. The petitioner's contention was that they were disadvantaged, leading to non-response to notices and closure of business places, resulting in the Bank taking possession of assets.

The High Court observed that the impugned orders were issued in violation of the principles of natural justice, emphasizing the importance of notice, hearing, and reasoning in administrative actions. The Court found the orders to be non-speaking and lacking a proper application of mind, thus vitiating the orders. The petitioner's plea of being deprived of a reasonable opportunity to contest the case was deemed credible, given the circumstances.

The Court stressed the need for a real opportunity for contesting a case, highlighting that the opportunity must be effective, not illusory. In this case, the petitioner's request for time to produce documents was denied without proper consideration, showcasing the absence of a real opportunity. The disability suffered by the petitioner's Directors during the relevant period was seen as impairing their right to a fair hearing.

Emphasizing the flexibility of natural justice principles, the Court held that compliance must vary based on the circumstances of each case to ensure fairness. The Court found that the orders of assessment lacked a proper application of mind, as the issues were not considered, leading to non-speaking orders. Consequently, the Court set aside the impugned orders and directed the petitioner to appear for necessary objections, ensuring a fair opportunity for a hearing within a specified timeframe.