Mismatch-based input tax credit reversal requires meaningful notice, disclosure of relied-on material, and a personal hearing.

Mismatch-based reversal of input tax credit under the TNVAT regime requires a meaningful opportunity to respond before assessment. Pre-assessment notices that lack particulars and do not follow the prescribed mismatch procedure are procedurally defective, especially where the dealer is denied access to the material relied on by the assessing authority. A requested personal hearing must also be considered and granted in such proceedings so the dealer can explain objections and produce supporting material. Failure to do so breaches natural justice and renders the assessment unsustainable; the impugned notices and assessment orders were set aside and the matter remanded for fresh consideration with hearing and disclosure of material.

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Issues: (i) Whether the pre-assessment notices and assessment orders based on mismatch between the dealer's returns and the other-end dealers' Annexure II particulars were sustainable. (ii) Whether failure to grant a requested personal hearing vitiated the assessment orders.

Issue (i): Whether the pre-assessment notices and assessment orders based on mismatch between the dealer's returns and the other-end dealers' Annexure II particulars were sustainable.

Analysis: The notices were found to be bereft of particulars and the procedure followed did not conform to the course earlier directed for mismatch cases under the TNVAT regime. The dealer was not given an effective opportunity to meet the proposed reversal of input tax credit on the basis of the material relied on by the Assessing Officer. The assessment process was therefore held to be procedurally flawed.

Conclusion: The pre-assessment notices and consequential assessment orders were not sustainable.

Issue (ii): Whether failure to grant a requested personal hearing vitiated the assessment orders.

Analysis: A specific request for personal hearing had been made, but it was ignored. A request for hearing, when made in assessment proceedings of this nature, had to be considered and afforded so that the dealer could effectively explain the objection and produce material. The omission amounted to violation of natural justice.

Conclusion: The assessment orders were vitiated for denial of personal hearing and breach of natural justice.

Final Conclusion: The impugned assessment orders and demand notices were set aside and the matters were remanded for fresh consideration after granting opportunity of hearing and access to the relevant material.

Ratio Decidendi: Where mismatch-based reversal of input tax credit is proposed, the dealer must be given a meaningful opportunity, including access to the relied-on material and any requested personal hearing, before a reasoned assessment is completed.

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