2019 (7) TMI 474 - HC - VAT and Sales Tax

Court sets aside order under Kerala VAT Act for 2012-13 due to procedural fairness violation

M/s KOOL HOME BUILDERS Versus STATE OF KERALA, THIRUVANANTHAPURAM AND ASSISTANT COMMISSIONER (WORKS CONTRACT), OFFICE OF THE DEPUTY COMMISSIONER, STATE GOODS AND SERVICE TAX DEPARTMENT, ERNAKULAM

M/s KOOL HOME BUILDERS Versus STATE OF KERALA, THIRUVANANTHAPURAM AND ASSISTANT COMMISSIONER (WORKS CONTRACT), OFFICE OF THE DEPUTY COMMISSIONER, STATE ... Issues:Challenge to notice and order under Kerala Value Added Tax Act, 2003 for assessment year 2012-13; Alleged violation of Articles 14, 19(1)(g), 265 and 300A of Constitution of India; Principles of natural justice in Ext.P7 order challenged.Analysis:The petitioner challenged Ext.P2 notice and Ext.P7 order under the Kerala Value Added Tax Act, 2003, for the assessment year 2012-13, citing violations of constitutional articles and principles of natural justice. The petitioner received Ext.P2 notice on 21.11.2018, alleging suppression of inter-State purchases. The petitioner denied the allegations in Ext.P3 reply and requested details to reconcile any discrepancies. The second respondent provided the details in Ext.P4, to which the petitioner responded with Ext.P5, asserting no liability based on Form 20H submissions. However, Ext.P7 issued on 15.01.2019 determined a tax liability of Rs. 66,19,866, prompting the writ petition.The petitioner contended Ext.P7 as illegal, violating natural justice and being an arbitrary exercise of power under Section 25 of the Act. The petitioner argued that Ext.P7 was finalized without a hearing, affecting their rights and imposing an illegal tax liability. The Government Pleader argued against the writ petition's maintainability, stating that natural justice principles were upheld, and any challenge to Form 20H submissions should be through appeal, not judicial review. The main issue was whether Ext.P7 was illegal and breached natural justice.Section 25 of the Act empowers the second respondent to reassess the alleged escaped turnover, reopening self-assessment for the subject year. The petitioner requested a hearing in both Ext.P3 and Ext.P5 to reconcile disputed details, but the respondents claimed Ext.P2 and Ext.P4 provided sufficient opportunity. However, the Court found that denying a hearing after Ext.P5 and making adverse findings without a hearing in Ext.P7 violated natural justice principles. Ext.P7 was set aside, and the matter was remitted to the second respondent for proper consideration and disposal in compliance with the law.In conclusion, the Court found Ext.P7 to be vitiated by the lack of a proper hearing and remitted the case for reevaluation. The petitioner was granted an opportunity for a hearing, emphasizing the importance of procedural fairness in assessments under the Act.