Effective hearing requirement under tax clarification procedure led to setting aside of the impugned order and remand

Under section 94 of the Kerala Value Added Tax Act, a clarification order must be made after prescribed procedure and an effective opportunity of hearing to the affected dealers. The Court found the hearing granted was not legally proper, and because the matter had earlier been remitted for de novo consideration, the clarification could not stand. The Court did not decide the classification merits and left them to the competent authority for fresh determination after due hearing. The impugned clarification order and consequential penalty orders were set aside and the matter was remitted.

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Issues: Whether the clarification order under section 94 of the Kerala Value Added Tax Act, 2003 was liable to be set aside for want of effective hearing and whether the matter required fresh consideration by the competent authority.

Analysis: The statutory framework under section 94 required the competent authority to decide the request for clarification after following the prescribed procedure and giving the affected dealers a proper opportunity of hearing. On the materials in the departmental file and the sequence of notices and hearings, the Court found that the hearing said to have been granted was not an effective or proper hearing in the legal sense. Since the matter had earlier been remitted for de novo consideration, and because the hearing requirement under the amended statutory scheme was not satisfied, the impugned clarification could not stand. The Court declined to enter into the merits of the classification dispute and left those questions to the competent authority for a fresh decision after due hearing.

Conclusion: The impugned clarification order and consequential penalty orders were set aside, and the matter was remitted to the competent authority for fresh decision after affording due opportunity of hearing.

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