Fair hearing in tax assessment requires consideration of objections before reversing input tax credit and penalty

Assessment orders demanding reversal of input tax credit and penalty were set aside because they were passed without affording a personal hearing and without properly considering the assessee's objections or calling for the books of account. The court treated this as a procedural defect contrary to fair hearing requirements, particularly where the treatment of excess input tax credit under the Tamil Nadu VAT framework and the transition to GST required proper examination. The matter was remitted for fresh assessment after hearing the assessee and considering the materials in accordance with law.

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Issues: Whether the assessment orders demanding reversal of input tax credit and penalty were vitiated for want of personal hearing and proper consideration of the assessee's objections, and whether the matter required remand for fresh assessment.

Analysis: The writ petitions arose from demands raised on the basis of alleged incorrect and double claim of input tax credit. The assessee had filed a detailed reply, but no personal hearing was granted and the books of accounts were not called for before passing the assessment orders. Section 19(18) of the Tamil Nadu Value Added Tax Act, 2006 contemplates adjustment of excess input tax credit and carry forward or refund, and the transition to the Goods and Services Tax regime from 01.07.2017 meant that the manner of dealing with the credit required proper consideration. In these circumstances, the assessment process was found to be procedurally erroneous and contrary to fair hearing requirements.

Conclusion: The impugned assessment orders were set aside and the matter was remitted to the respondent for fresh consideration after granting personal hearing and considering the objections and materials in accordance with law.

Final Conclusion: The dispute was reopened for a lawful reassessment, with the assessee given an opportunity to be heard before any fresh determination is made.

Ratio Decidendi: An assessment order affecting tax credit cannot be sustained where it is passed without affording a personal hearing and without properly considering the assessee's reply, especially when the statute requires lawful adjustment or refund of excess input tax credit.

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