2015 (9) TMI 471 - HC - VAT and Sales Tax

Court overturns Commercial Tax Officer's order, emphasizing natural justice, due process in tax assessments

The Court set aside the order passed by the Commercial Tax Officer for violating principles of natural justice. The petitioner's challenge was successful, ... Fixation of higher rate of tax – Increase in turnover – Violation of Natural Justice – Notice was issued upon petitioner fixing rate of tax liability payable at 12.5% or more as per TNVAT act as turnover of petitioner exceeded ₹ 50 lakhs – In appeal against said order before respondent to drop proceedings as petitioner has not crossed limit of ₹ 50 lakhs, was filed – However respondent, without considering documents sent by petitioner, passed erroneous order – Held that:- After receipt of notice petitioner had sent all documents clearly mentioning therein that invoice was cancelled with return of cheque issued by customer and thereupon it was also further made clear that petitioner has also filed revised return – But nowhere these documents were considered – Respondent was duty bound to consider all documents, atleast documents called for from their side – That shows there was absence of application of judicious mind –Therefore, respondent miserably failed to consider entire case, direction issued to respondent to re-consider entire issue in accordance with law – Impugned order set aside – Decided in favour of Petitioner. Issues:Challenge to order passed by Commercial Tax Officer without affording opportunity of personal hearing to the petitioner.Analysis:The petitioner, a registered dealer of timbers and plywoods, challenged an order passed by the Commercial Tax Officer for violating principles of natural justice. The petitioner opted to pay 0.5% tax on monthly returns under the TN VAT Act, with an annual turnover below Rs. 50 lakhs. The dispute arose when a customer cancelled a purchase order, leading the petitioner to revise their monthly turnover in subsequent returns. Despite providing necessary documents and explanations, the Assessment Circle issued notices claiming the petitioner had crossed the Rs. 50 lakhs threshold. The petitioner responded with objections and clarifications, but the Assessment Circle continued to demand higher taxes without considering the petitioner's submissions.Analysis:The files were later transferred to the Sholinganallur Assessment Circle, where the respondent issued another notice requesting specific documents. The petitioner complied by submitting all required documents, emphasizing the cancellation of the purchase order and the revised turnover figures. However, the respondent failed to consider these documents, indicating a lack of application of judicious mind. The petitioner argued that the impugned order did not reflect a fair consideration of their case, leading to a request for setting aside the order and a re-consideration of the issue with a personal hearing.Analysis:The Court found in favor of the petitioner, setting aside the impugned order and directing the Commercial Tax Officer to re-examine the issue, considering all documents provided by the petitioner and granting a personal hearing. The judgment emphasized the importance of applying a judicious mind in such matters and ensuring due process in tax assessments.