Natural justice in VAT reassessment: ex parte order set aside where no effective hearing was given before adverse assessment.

An ex parte re-assessment under Section 39(1) of the Karnataka Value Added Tax Act cannot be sustained where the assessee was not given a meaningful opportunity to file objections and produce documents before the assessment was finalised. Where time was sought soon after service of notice, fairness and natural justice required a hearing before any adverse assessment was made. The ex parte re-assessment order, rectification order and consequential demand notice were set aside, and the matter was remitted to the Assessing Authority for fresh consideration after granting an opportunity of hearing.

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Issues: Whether the ex parte re-assessment order, rectification order and consequential demand notice could be sustained when the assessee had not been afforded an opportunity of hearing before completion of the assessment under Section 39(1) of the Karnataka Value Added Tax Act, 2003.

Analysis: The re-assessment proceedings were initiated for the relevant tax period after inspection by the Enforcement Wing and notice under Section 39(1) was issued. The assessment was completed ex parte without granting the assessee time to file objections and produce documents, even though time had been sought shortly after service of notice. In such a situation, the requirements of fair procedure and natural justice required that the assessee be heard before an adverse assessment was made.

Conclusion: The ex parte re-assessment order, rectification order and demand notice were set aside and the matter was remitted to the Assessing Authority for fresh consideration after granting the assessee an opportunity of hearing.

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