Pre-penalty hearing requirement under VAT law led to setting aside revised assessment orders imposing penalty.

Revised assessment orders imposing penalty under Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006 were interfered with because the proviso required a reasonable opportunity to show cause before penalty could be levied. Although a provisional notice had been issued after audit objections, the record did not show that the assessee was given a proper opportunity before the 100% penalty was imposed. The defect affected the legality of the penalty component, so the orders were set aside and the matter was remanded for reconsideration after personal hearing and an opportunity to file objections.

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Issues: Whether the revised assessment orders levying penalty under Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006 were liable to be set aside for want of a reasonable opportunity of showing cause against the proposed penalty.

Analysis: The writ petitioner was assessed under the Tamil Nadu Value Added Tax Act, 2006 and the impugned revised assessment orders were passed after audit objections. The orders imposed 100% penalty under Section 27(4). The proviso to that provision required a reasonable opportunity of showing cause before penalty could be imposed. On the facts, though a provisional notice had been issued, the record did not show that the dealer had been given such opportunity before the penalty was imposed. In these circumstances, the defect went to the legality of the penalty component and justified interference, without going into the merits of the assessment.

Conclusion: The impugned revised assessment orders were set aside for non-compliance with the proviso to Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006, and the matter was directed to be reconsidered after affording the assessee a personal hearing and opportunity to file objections.

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