Natural justice bars reversal of input tax credit without hearing; the matter was quashed and remitted for fresh adjudication.

An order reversing input tax credit cannot be sustained when passed without notice or an opportunity of hearing, as this violates natural justice. The Madras HC noted that the dispute on availability of input tax credit under the Tamil Nadu Value Added Tax Act, 2006 was already covered by earlier decisions and required fresh consideration by the authority. The impugned order was therefore quashed and the matter remitted for a speaking order after giving the petitioner an opportunity to reply and be heard.

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Issues: Whether the impugned order reversing input tax credit was liable to be quashed for breach of natural justice and whether the matter required remand for fresh consideration.

Analysis: The petitioner's challenge was found to be supported by the record as the impugned order had been passed without affording a hearing. The decision also noted that the controversy on the availability of input tax credit was covered by earlier decisions dealing with the Tamil Nadu Value Added Tax Act, 2006 and the related rules, and therefore the matter called for fresh consideration by the authority after hearing the petitioner. In these circumstances, non-service of the notice and absence of hearing amounted to a violation of natural justice.

Conclusion: The impugned order was quashed and the matter was remitted to the respondent to pass a speaking order after giving the petitioner an opportunity to reply and be heard.

Ratio Decidendi: An order affecting tax liability cannot be sustained when passed without affording the affected party a hearing, and such an order is liable to be set aside and remitted for fresh adjudication.

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