2022 (8) TMI 308 - HC - VAT and Sales Tax

Violation of principles of Natural Justice - Opportunity of hearing not provided - Validity of assessment orders - Hank Yarn - exempted commodity falling under serial no.44 part B of the IV Schedule of the TNVAT Act, 2006 or not - rejection of claim of the appellant on the sales of hank yarn in respect of interstate sales, stock transfer and outside the State sales and passed the assessment orders, on the ground that the appellant did not file their objections to the notices issued by the respondent - HELD THAT - The order of the learned Judge in setting aside the assessment orders passed by the respondent, is agreed upon, on the ground of violation of the principles of natural justice, as it is an admitted fact that the appellant / assessee did not file their objections to the notices issued by the respondent and they were not provided any opportunity of personal hearing. The order of the learned Judge dated 02.12.2021 passed in the writ petitions, is modified to that extent. The appellant shall file their reply/objections to the notices dated 22.06.2018 within a period of two weeks from the date of receipt of a copy of this judgment - Appeal disposed off.

Issues:
Challenge to assessment orders regarding exemption claim for hank yarn sales under TNVAT Act and CST Act, imposition of pre-condition to deposit 25% of demand, violation of principles of natural justice, setting aside assessment orders, appeal against order imposing pre-condition, consideration of objections and personal hearing.

Analysis:

1. Challenge to Assessment Orders:
The appellant challenged assessment orders dated 31.12.2018 regarding the exemption claim for hank yarn sales under the TNVAT Act and CST Act for the assessment years 2011-12 to 2016-17. The respondent rejected the claim based on Enforcement Wing Officials' inspection, stating that the appellant did not file objections to the notices issued. The learned Judge set aside the assessment orders due to violation of natural justice principles.

2. Imposition of Pre-Condition to Deposit 25% of Demand:
The learned Judge, while quashing the assessment orders, imposed a pre-condition on the appellant to deposit 25% of the demand within three months for the case to be heard. The appellant contended that this condition was unwarranted as the entire assessment proceedings were quashed. The court found this pre-condition unnecessary and referred to a previous judgment setting aside a similar condition.

3. Violation of Principles of Natural Justice:
The appellant argued that the assessment orders were passed without providing a reasonable opportunity to be heard, making them arbitrary and illegal. The respondent claimed that show cause notices were issued, granting time for filing objections, which the appellant did not utilize. The court agreed with the appellant that there was a violation of natural justice as no personal hearing was provided.

4. Setting Aside Assessment Orders:
After hearing both sides and reviewing the documents, the court concurred with the learned Judge's decision to set aside the assessment orders due to the violation of natural justice principles. The appellant did not file objections to the notices issued by the respondent, and no personal hearing was provided, leading to the orders being quashed.

5. Appeal Against Order Imposing Pre-Condition:
The appellant appealed against the order imposing a pre-condition to deposit 25% of the demand. The court found this condition unwarranted in the circumstances of the case and referred to a previous judgment where a similar condition was set aside as unsustainable. The court modified the order, directing the appellant to file objections within two weeks, and the respondent to pass fresh orders within eight weeks after affording a personal hearing.

In conclusion, the High Court of Madras upheld the decision to set aside the assessment orders due to the violation of natural justice principles. The pre-condition to deposit 25% of the demand was deemed unwarranted and modified by the court. The appellant was directed to file objections promptly, and the respondent was instructed to pass fresh orders after providing a personal hearing within a specified timeframe.

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