2012 (9) TMI 908 - HC - VAT and Sales Tax

Court Quashes Order, Directs Reconsideration

The court allowed the petition, quashed the withdrawal order and the appeal rejection letter, and directed the petitioner to deposit a sum as costs. The ... Right to hearing - natural justice - quashing of administrative order for lack of opportunity of hearing - withdrawal of eligibility certificate under rule 28A(8)(a) for stoppage of manufacturing activity - remand for fresh considerationRight to hearing - natural justice - quashing of administrative order for lack of opportunity of hearing - Validity of the order dated April 13, 2006 withdrawing the eligibility certificate where service of notice was returned and no hearing was afforded to the petitioner-company - HELD THAT: - The court found that the registered A.D. notice sent to the factory address was returned as the firm was closed and no notice was sent to the petitioner's registered office in New Delhi. The order of withdrawal was therefore passed without affording the petitioner-company a proper opportunity to be heard. Since serious civil consequences flowed from the impugned order and the matter was decided on the basis of the respondents' record without hearing the petitioner on merits, the principles of natural justice required that the order could not stand and must be set aside.Order dated April 13, 2006 withdrawing the eligibility certificate quashed.Remand for fresh consideration - withdrawal of eligibility certificate under rule 28A(8)(a) for stoppage of manufacturing activity - Validity of the higher level screening committee's communication dated May 3, 2012 (decision recorded February 22, 2012) dismissing the petitioner's appeal without affording effective opportunity of hearing and refusing adjournment - HELD THAT: - The appeal was taken up after a long interval and notice was again sent to the counsel's Rohtak address rather than the petitioner's registered office. On the date fixed the counsel did not appear and the petitioner's manager appeared and sought time, which the committee refused and dismissed the appeal. Given the absence of meaningful opportunity to the petitioner and that the matter was not decided on merits, the communication rejecting the appeal cannot be allowed to stand. The court accordingly set aside the impugned communication and directed that the matter be heard afresh by the appropriate committee in accordance with law.Communication dated May 3, 2012 (decision of February 22, 2012) quashed and the matter remitted for fresh decision after affording opportunity of hearing.Final Conclusion: Both the order withdrawing the eligibility certificate and the subsequent communication rejecting the appeal were set aside for failure to afford a proper hearing; the petitioner ordered to deposit costs and the matter remitted to the screening committee for fresh disposal in accordance with law after giving the petitioner an opportunity to be heard. Issues:Challenge to withdrawal of sales tax exemption under rule 28A of the Haryana General Sales Tax Rules, 1975 based on cessation of manufacturing activity for more than six months; Allegation of lack of proper opportunity for hearing before withdrawal of exemption; Failure to send notices to the registered office of the petitioner; Dismissal of appeal without proper opportunity to present case; Delay in hearing the appeal; Allegation of evading hearing by the petitioner; Justification of withdrawal by the State based on non-appearance of petitioner at hearings.Analysis:The petitioner, a private limited company engaged in manufacturing aluminum sections, sought sales tax exemption under rule 28A of the Haryana General Sales Tax Rules, 1975, for the period May 12, 1998, to May 11, 2007. The exemption was granted, but later sought to be withdrawn due to cessation of manufacturing activity for more than six months. The petitioner alleged lack of proper opportunity for a hearing before the withdrawal. Notices were not sent to the registered office of the petitioner, leading to a perceived lack of communication. The appeal process was marred by delays, with the appeal being heard after a significant period, and the petitioner's counsel failing to appear at the scheduled hearing, resulting in dismissal of the appeal.The State justified the withdrawal based on the petitioner's non-appearance at hearings and attempts to delay proceedings. The court noted that the petitioner's case was not properly heard before the withdrawal decision was made, emphasizing the importance of affording a fair opportunity to present arguments. The court found that the petitioner was entitled to a proper hearing before any adverse orders were passed. Consequently, the court allowed the petition, quashed the withdrawal order and the appeal rejection letter, and directed the petitioner to deposit a sum as costs. The petitioner was instructed to appear before the Lower Level Screening Committee for a fresh decision, ensuring a fair opportunity for a hearing in accordance with the law.