Valid show cause notice and hearing are mandatory before a penalty order can be finalised under VAT law.

A penalty order under the Kerala Value Added Tax Act could not be sustained where it was not preceded by a valid show cause notice covering the same turnover and proposed penalty. The court found that the notice and the penalty order referred to different turnovers and different penalty proposals, so the mandatory requirements of prior notice and hearing were not satisfied. The impugned order was therefore directed to be treated as a notice, with the assessee given an opportunity to object before a fresh order is passed after hearing.

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Issues: Whether the penalty order was passed without a valid show cause notice and opportunity of hearing under Section 67 of the Kerala Value Added Tax Act, 2003.

Analysis: The notice and the penalty order referred to different turnovers and different proposed penalties, showing that the penalty order was not preceded by the show cause notice said to support it. On that basis, the Court accepted that the impugned penalty order had been issued without the required prior notice. The proper course was to treat the impugned order as a notice, permit objection, and thereafter pass a fresh order after affording hearing.

Conclusion: The issue was answered in favour of the petitioner; the penalty order could not stand as an order passed after due notice and was directed to be treated as a notice for further proceedings.

Final Conclusion: The matter was sent back for fresh adjudication after objection and hearing, so the impugned action was not finally sustained on merits.

Ratio Decidendi: A penalty order cannot be sustained where it is not preceded by a valid show cause notice covering the same proposal, and compliance with the requirements of notice and hearing is mandatory before final adverse action is taken.

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