Court sets aside assessment orders under TNVAT Act, allows Writ Petitions for fresh consideration

The court allowed the Writ Petitions, setting aside the assessment orders under the TNVAT Act for multiple years due to the denial of a personal hearing and ad hoc assessment of 'Invisible Loss'. The matters were remanded to the respondent for fresh consideration, directing an inspection of the petitioner's factory to ascertain the manufacturing process and issue necessary show cause notices regarding the manufacturing loss. The Assessing Officer was instructed to redo the assessment in compliance with the law. The Writ Petitions were allowed with no costs, and connected Miscellaneous Petitions were closed.

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Issues involved:
Challenging assessment orders under TNVAT Act for multiple years, denial of personal hearing, ad hoc assessment of 'Invisible Loss'.

Analysis:

Challenging assessment orders under TNVAT Act:
The petitioner, a registered dealer under TNVAT Act, challenged assessment orders for six consecutive years. The primary grounds of challenge included the denial of a personal hearing and the ad hoc assessment of 'Invisible Loss'. The petitioner contended that despite specific requests for a personal hearing, the respondent finalized the assessments without granting this opportunity. Additionally, the assessment related to 'Invisible Loss' was done in an ad hoc manner, contrary to previous court decisions.

Denial of personal hearing:
The court noted that the petitioner had consistently requested a personal hearing in their objections to the assessment notices. It was emphasized that when factual issues are involved, providing a personal hearing is crucial for the Assessing Officer to make a well-informed decision based on the documents presented by the dealer. Failure to grant a personal hearing, especially when requested by the petitioner, was deemed a violation of principles of natural justice.

Ad hoc assessment of 'Invisible Loss':
The issue of determining 'Invisible Loss' was addressed in a previous case, where the court criticized the uniform percentage estimation of losses and the reversal of input tax credit without proper justification. The court highlighted the necessity for the Assessing Officer to conduct a fact-finding exercise to ascertain the actual loss incurred and to follow the provisions of the TNVAT Act. In the present case, the Assessing Officer had applied a uniform 3% manufacturing loss without examining the petitioner's manufacturing process, leading to a flawed assessment.

Judgment:
Consequently, the court allowed the Writ Petitions, set aside the impugned orders, and remanded the matters to the respondent for fresh consideration. The respondent was directed to inspect the petitioner's factory, ascertain the manufacturing process, and issue necessary show cause notices regarding the manufacturing loss. The petitioner was instructed to provide details during the inspection, and the respondent was tasked with redoing the assessment in compliance with the law. The Writ Petitions were allowed with no costs, and connected Miscellaneous Petitions were closed.

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