Input Tax Credit denial requires meaningful hearing and proper verification before adverse assessment and penalty can stand.

Input Tax Credit cannot be denied mechanically where the assessee was not given a meaningful personal hearing and the supporting invoices, dealer particulars, books of account and other records were not properly verified. The assessment process under the Tamil Nadu VAT regime must follow fair procedure, with notice, dialogue and examination of the original materials before adverse action is taken. On this reasoning, the denial of ITC and the consequential penalty were set aside and the matter was remitted for fresh assessment after affording an effective opportunity.

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Issues: Whether the denial of Input Tax Credit and levy of penalty could be sustained when the petitioner was not afforded personal hearing and the assessment was completed without proper verification of the supporting records.

Analysis: The assessment was made on a summary basis after rejecting the objections of the petitioner, even though the petitioner had sought a personal hearing and had produced bill details in support of the claim. The materials indicated that the invoices and dealer particulars required verification, and the assessment ought to have been completed after calling for the original records, books of account and other relevant details. The governing provisions under the Tamil Nadu Value Added Tax regime, together with the requirement of fair procedure, required the assessing authority to examine the claim on proper verification rather than deny it mechanically. The assessment process had to be conducted with dialogue and discussion, and the petitioner could not be treated as an adversary without affording an effective opportunity.

Conclusion: The denial of Input Tax Credit and the consequential penalty could not be sustained on the manner in which the assessment was completed, and the matter had to be reconsidered after giving the petitioner notice and personal hearing.

Final Conclusion: The writ petition succeeded, the assessment order was set aside, and the matter was sent back for fresh assessment in accordance with law after affording a proper opportunity to the petitioner.

Ratio Decidendi: An assessment affecting Input Tax Credit cannot be sustained when it is completed without affording a meaningful opportunity of hearing and without proper verification of the supporting records; such an order is liable to be quashed and remitted for fresh consideration.

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