Mandatory penalty notice in prescribed form is required before levy; absence of Form 309 vitiates the penalty order.

Penalty under section 34(7) of the Gujarat Value Added Tax Act could not be sustained because the prescribed notice in Form 309 under rule 46 was not issued before the penalty order. Section 34(7) requires an opportunity of being heard, and rule 46(1) mandates notice specifying the default and the provision under which penalty is proposed. As no Form 309 notice was served, the statutory hearing requirement was breached and the penalty procedure was held mandatory. The Gujarat HC upheld deletion of the penalty in favour of the assessee.

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Issues: Whether penalty under section 34(7) of the Gujarat Value Added Tax Act could be sustained when no notice in Form 309 was issued under rule 46 of the Gujarat Value Added Tax Rules, 2006.

Analysis: Section 34(7) authorises penalty only after the dealer is given an opportunity of being heard. Rule 46(1) prescribes the manner of issuing notice for penalty in Form 309, requiring the authority to specify the default and the provision under which penalty is proposed. The record showed that no notice in Form 309 had been issued before the penalty order. In the absence of the prescribed notice, the dealer was not afforded the statutory opportunity of hearing contemplated by the Act and Rules, and the levy of penalty was contrary to the mandatory procedure.

Conclusion: The penalty under section 34(7) was unsustainable for want of the prescribed notice, and the deletion of penalty by the Tribunal was upheld in favour of the assessee.

Ratio Decidendi: When the statute requires prior notice in the prescribed form before imposition of penalty, failure to issue such notice vitiates the penalty order for breach of the mandatory hearing requirement.

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