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Issues: Whether the classification dispute could be finally decided in penalty proceedings under Section 67(1) of the KVAT Act, and whether the impugned penalty orders required interference.
Analysis: The notices were issued proposing penalty, but the authority proceeded to decide the classification dispute while finalising the penalty orders. The Court found merit in the contention that such an approach was not proper and that the matter had to be examined in the light of the earlier ruling relied on by the petitioner. As the impugned orders were passed without the required reconsideration of the issue and the petitioner was entitled to be heard afresh, the orders could not be sustained in their present form.
Conclusion: The penalty orders were set aside and the matter was remanded to the third respondent for fresh consideration after affording the petitioner an opportunity of hearing.
Final Conclusion: The petitioner obtained relief against the penalty orders, and the dispute was sent back for reconsideration in accordance with law and the prior ruling referred to by the Court.
Ratio Decidendi: A classification dispute should not be conclusively determined in penalty proceedings without fresh consideration and an opportunity of hearing to the affected party.
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