2022 (8) TMI 925 - HC - VAT and Sales Tax

Validity of assessment order - principal ground of challenge is that the orders have been passed without following principles of natural justice - Opportunity of personal hearing not provided - Section 9(2) of Central Sales Tax Act, 1956 for the period 2014-2015 - HELD THAT - Despite request made by petitioner, reports/documents relied upon have not been provided and before passing the order on the rectification application, no personal hearing has been granted though the law mandates personal hearing to be given. This shows a complete failure to the observance of rule of law on the part of respondent no.3. A huge demand has been raised by respondents against petitioner without following the rule of law. Imposition of cost upon the authority by enhancing the cost equivalent to the tax and penalty levied - HELD THAT - Though it is not intended to impose such high cost, since the attitude of respondent no.3 smacks of deliberate failure to the observance of rule of law, the said officer should be saddled with costs to be paid by him personally - The Allahabad High Court in the judgment pronounced in the matter of SR COLD STORAGE VERSUS UNION OF INDIA AND 3 OTHERS 2022 (8) TMI 806 - ALLAHABAD HIGH COURT , has lamented about the abysmal state of affairs reflecting the absence of any effective system of accountability of the erring officers, the harassment of the assessees and breach of principles of natural justice by the Officers. Petition disposed off.

Issues Involved:
1. Assessment order under Section 9(2) of Central Sales Tax Act, 1956.
2. Rejection of rectification application under Section 24 of the Maharashtra Value Added Tax Act, 2002.
3. Violation of principles of natural justice.
4. Non-provision of investigation report and other relied-upon documents.
5. Personal hearing not granted before rejecting rectification application.
6. Costs imposed on the officer for failure to observe the rule of law.

Issue-wise Detailed Analysis:

1. Assessment Order under Section 9(2) of Central Sales Tax Act, 1956:
The petitioner challenged the assessment order dated 30th March 2019, which added 10% additional income to the total sales turnover and disallowed tax-free and OMS sales due to lack of supporting documents. The petitioner contended that the assessment was made without following the principles of natural justice. The court noted that the assessment order relied on an investigation report and statements from Railway Authorities, which were not provided to the petitioner despite requests.

2. Rejection of Rectification Application under Section 24 of the Maharashtra Value Added Tax Act, 2002:
The petitioner filed a rectification application on 26th June 2019, arguing that the cancellation of registration of two entities should not affect the validity of C forms issued before cancellation. The application was rejected on 26th August 2019 without addressing the petitioner's reliance on a Delhi High Court judgment and without providing the investigation report. The court found that the rectification application was rejected without a reasonable opportunity of being heard, as mandated by Section 24(1) of the Maharashtra Value Added Tax Act, 2002.

3. Violation of Principles of Natural Justice:
The court observed that the assessment and rectification orders were passed without following the principles of natural justice. The petitioner was not provided with the investigation report and other documents relied upon by the respondents, and no personal hearing was granted before rejecting the rectification application. The court emphasized that such procedural lapses amount to a failure in observing the rule of law.

4. Non-provision of Investigation Report and Other Relied-upon Documents:
The petitioner requested copies of the investigation report and details from Railway Authorities, which were crucial for their defense. The respondents failed to provide these documents, leading to the impugned assessment order. The court highlighted that the reasons for not providing the documents were not explained in the assessment order, making the conclusions cryptic and unsupported.

5. Personal Hearing Not Granted Before Rejecting Rectification Application:
The court noted that the rejection of the rectification application was done without granting a personal hearing to the petitioner, which is a violation of the statutory requirement under Section 24(1) of the Maharashtra Value Added Tax Act, 2002. The court stressed that a reasonable opportunity of being heard is essential for a fair decision-making process.

6. Costs Imposed on the Officer for Failure to Observe the Rule of Law:
The court imposed a cost of Rs. 25,000 on the officer, Mr. Balasaheb B. Satpute, to be paid personally to the PM Cares Fund. The court cited the Supreme Court and Allahabad High Court judgments, emphasizing the need for accountability and adherence to the principles of natural justice by public authorities. The court also directed that a copy of the order be forwarded to the Commissioner of Sales Tax and the Central Board of Indirect Taxes and Customs for further action.

Conclusion:
The court set aside the impugned orders dated 30th March 2019 and 26th August 2019 and remanded the matter for denovo consideration to a different officer. The court directed that all documents relied upon be provided to the petitioner, a personal hearing be granted, and a reasoned order be passed dealing with every submission made by the petitioner. The court clarified that it made no observations on the merits of the matter and emphasized the importance of following the rule of law and principles of natural justice in administrative proceedings.

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