2019 (8) TMI 121 - HC - VAT and Sales Tax

Court Invalidates Assessment Orders under TNVAT Act, Stresses Procedural Fairness and Rule of Law

The court set aside the revised Assessment Orders under the Tamil Nadu Value Added Tax Act, 2006, for the years 2011-12, 2012-13, and 2015-16 due to ... Validity of assessment order - imposition of penalty u/s 27(4) - reversal of ITC - TNVAT Act - Section 27 of TNVAT Act - principles of natural justice - HELD THAT:- This Court also notices entire sub-section (4) of Section 27 of TNVAT Act i.e., this provision together with the proviso whicih was inserted in the statute book on and with effect from 29.01.2016, but it is also noticed that the proviso makes it statutorily imperative to give reasonable opportunity of showing cause being given before imposition of penalty was there even prior to 29.01.2016 - In the instant case, though a provisional notice was issued, there is nothing to show that the writ petitioner dealer was given a reasonable opportunity of showing cause against imposition of penalty under Section 27(4). This Court is of the considered view that in the instant case it will be appropriate to direct the respondent to give an opportunity of personal hearing to the writ petitioner - Petition disposed off. Issues:Challenging assessment orders under Tamil Nadu Value Added Tax Act, 2006; Levying of 100% penalty under Section 27(4) of TNVAT Act without providing an opportunity for showing cause.Analysis:Challenging Assessment Orders:The judgment pertains to three writ petitions arising under the Tamil Nadu Value Added Tax Act, 2006. The petitions challenge revised Assessment Orders for the years 2011-12, 2012-13, and 2015-16. The Enforcement Wing officials conducted an audit at the petitioner's business premises, identifying discrepancies related to the reversal of Input Tax Credit on ineligible commodities. Subsequently, revisional notices were issued, and revised Assessment Orders were passed without giving the petitioner an opportunity for a personal hearing. The court acknowledged the common facts across the petitions and emphasized the need for a detailed factual matrix to appreciate the issues.Levy of 100% Penalty without Opportunity:A crucial contention raised in the petitions was the imposition of a 100% penalty under Section 27(4) of the TNVAT Act without providing the petitioner with an opportunity to show cause against the penalty. The court highlighted the statutory requirement, both pre and post an amendment in 2016, for granting a reasonable opportunity for showing cause before levying such penalties. It was observed that despite a provisional notice being issued, the petitioner was not afforded a proper opportunity to present their case against the penalty.Court's Decision and Directions:In light of the circumstances and the absence of a fair opportunity for the petitioner to contest the penalties, the court set aside the impugned Assessment Orders solely on the ground of non-compliance with the proviso to Section 27(4) of the TNVAT Act. The court directed the respondent to provide the petitioner with a personal hearing to address the objections raised. The judgment outlined specific steps to be followed, including the filing of further objections, consideration of objections by the respondent, and the issuance of revised Assessment Orders within a specified timeframe. The court emphasized the importance of adherence to procedural fairness and the rule of law in tax assessments.Conclusion:The judgment underscores the significance of procedural fairness in tax assessments under the TNVAT Act and the necessity of providing a reasonable opportunity for affected parties to present their case before the imposition of penalties. By setting aside the Assessment Orders and mandating a personal hearing for the petitioner, the court ensures that due process is followed in resolving the tax disputes. The detailed directions issued by the court aim to facilitate a thorough reconsideration of the assessments while upholding the principles of natural justice.