2023 (2) TMI 323 - HC - GST

Tax Assessment Order Nullified for Procedural Lapses: Authority Directed to Ensure Fair Hearing and Proper Document Review

HC quashed tax assessment order due to violation of natural justice principles. The court found procedural irregularities in the tax authority's order, ... Principles of natural justice - personal hearing - non-speaking order - input tax credit reconciliation - verification under Section 16 of TNGST Act, 2017 - adherence to departmental circular - remand for fresh considerationPrinciples of natural justice - personal hearing - non-speaking order - Whether the impugned Assessment Order is vitiated by breach of the principles of natural justice and is a non speaking order requiring interference. - HELD THAT: - The Court found that the petitioner, due to medical ailments supported by medical certificates, did not respond to the show cause notice and that no personal hearing was afforded or recorded in the impugned Assessment Order. The Assessment Order did not address the petitioner's Annual Return for 2018 19 where the petitioner himself had reversed input tax credit, and the order fails to demonstrate application of mind to those records. For these reasons the Court concluded that the principles of natural justice were not complied with and the order is non speaking in relation to the Annual Return. [Paras 11]Impugned Assessment Order quashed insofar as it is vitiated by breach of principles of natural justice and is non speaking.Input tax credit reconciliation - verification under Section 16 of TNGST Act, 2017 - adherence to departmental circular - remand for fresh consideration - personal hearing - Whether the matter must be remanded to the assessing authority for fresh consideration including verification of ITC claims in accordance with Section 16 and the instructions in Circular No.1/2023 TNGST, dated 04.01.2023, and after affording a personal hearing. - HELD THAT: - The Court observed that the Assessment Order does not make it clear whether the Assessing Officer carried out the enquiries set out in Clause 4 of the departmental Circular-namely, verification of possession of tax invoices or other documents, receipt of goods or services, payment to the supplier, reversal under sections 17/18, and availing within the time prescribed under Section 16(4). Although the Circular post dates some proceedings, the Court held that the procedures and safeguards reflected therein ought to have been followed and noted that the Annual Return indicated voluntary reversal of ITC by the petitioner. In view of the lack of specific, reasoned findings and absence of personal hearing, the proper course is to remit the matter for fresh consideration on merits with directions to the respondent to adhere to Section 16 requirements, the departmental Circular, and to afford a personal hearing before passing final orders. [Paras 10, 11]Matter remanded to the respondent for fresh consideration on merits in accordance with law, with directions to afford personal hearing and to follow the verification procedures indicated in Circular No.1/2023 TNGST, dated 04.01.2023.Final Conclusion: The impugned Assessment Order dated 16.06.2022 is quashed and the matter is remitted to the respondent for fresh consideration on merits; the respondent shall afford a personal hearing and comply with the verification requirements under Section 16 and the instructions in Circular No.1/2023 TNGST, dated 04.01.2023, and pass final orders within twelve weeks from receipt of this order. Issues:Challenge to Assessment Order under Tamil Nadu Goods and Services Tax Act, 2017 on grounds of violation of principles of natural justice.Analysis:The petitioner challenged the Assessment Order, contending that due to medical ailments, he couldn't respond to the show cause notice issued by the respondent. Medical certificates supported his claim of suffering from diabetes, Coronary Artery disease, and acute chest pain. The petitioner argued that the respondent erroneously concluded an input tax mismatch and excess input tax claim without verifying documents as per Section 16 of the TNGST Act, 2017. The petitioner also highlighted that the Annual Return for the year 2018-19 showed reversed input tax credit, indicating a lack of scrutiny by the respondent.The petitioner emphasized the absence of a personal hearing before the Assessment Order was passed, alleging a violation of natural justice. Referring to a Circular by the Commercial Taxes Department, the petitioner argued that specific documents should have been scrutinized before the Assessment Order. The Court noted discrepancies in the Assessment Order, indicating a failure to adhere to the Circular's instructions, leading to a lack of compliance with natural justice principles.The Court concluded that the Assessment Order lacked clarity on adherence to the Circular's requirements, highlighting a non-speaking order concerning the petitioner's Annual Return. Consequently, the Court quashed the Assessment Order and remanded the matter to the respondent for fresh consideration within twelve weeks. The respondent was directed to provide a personal hearing to the petitioner, adhere to natural justice principles, and strictly follow the Circular's instructions for a fair and lawful reconsideration of the case.In summary, the Court found the respondent's Assessment Order to be deficient in procedural fairness and legal compliance, necessitating a fresh review with proper adherence to principles of natural justice and regulatory guidelines.