Natural justice in assessment requires a real hearing and reasoned order; non-speaking VAT assessments were set aside.

Assessment orders under the Kerala Value Added Tax Act were held unsustainable where the assessee was denied a real and effective opportunity of hearing and the authority passed a non-speaking order without independent application of mind. The court emphasised that Rule 38 of the Kerala Value Added Tax Rules requires a reasonable opportunity before best judgment assessment, and that a fair hearing must be meaningful rather than ritualistic. As the assessee could not effectively contest the proceedings and the orders failed to deal with the material issues, the assessments were vitiated for breach of natural justice and fresh adjudication was directed.

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Issues: Whether the assessment orders under the Kerala Value Added Tax Act, 2003 were liable to be set aside for breach of natural justice, including denial of a meaningful opportunity of hearing and absence of reasons.

Analysis: The assessment orders were passed after concluding that the dealer had not effectively participated, but the surrounding circumstances showed a serious inability to contest the proceedings because the managing director was in custody abroad, the other director was unable to travel, and the books and records were not readily accessible. Rule 38 of the Kerala Value Added Tax Rules, 2005 contemplates a reasonable opportunity before best judgment assessment. A fair hearing must be real and effective, not merely ritualistic. The orders also failed to deal with the material issues independently and were found to be non-speaking, reflecting lack of application of mind. In these circumstances, the twin requirements of notice and reasoned decision were not satisfied.

Conclusion: The assessment orders were vitiated by violation of natural justice and were liable to be set aside, with fresh adjudication directed after giving the assessee an effective opportunity to contest.

Ratio Decidendi: An assessment order is unsustainable where the assessee is denied a real and effective opportunity of hearing and the authority passes a non-speaking order without independent application of mind.

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