Reasonable opportunity under KVAT Act is essential before best judgment assessment and penalty can stand, the court noted.

Assessment and penalty under the KVAT Act cannot be sustained if the dealer is denied a meaningful opportunity to substantiate a defence of fraudulent consignments or misuse of TIN. Although the burden under Section 9 remains on the dealer to prove non-liability to tax, Section 25 requires a reasonable opportunity before best judgment assessment. Where the plea of misuse was raised and supporting material could have been produced, the orders were held unsustainable for want of effective hearing, and the matter was remitted for fresh consideration after affording such opportunity.

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Issues: Whether the assessment and penalty orders under the KVAT Act could be sustained when the assessee was not given a full and proper opportunity to substantiate the plea that the consignments shown in his name were fraudulent and were not intended for delivery to him.

Analysis: Section 25 of the KVAT Act authorises assessment of escaped turnover and requires a reasonable opportunity of being heard before best judgment assessment is made. Although the burden of proving that a transaction is not liable to tax lies on the dealer under Section 9 of the KVAT Act, that burden does not dispense with the requirement of a meaningful opportunity to produce material in support of the defence. The assessment years involved were 2011-12 to 2013-14, and the plea of misuse of the petitioner's TIN had been raised before the authorities. On the facts, the Court found that the petitioner should have been allowed to place supporting material to show that the consignments were not intended for him or did not reach him.

Conclusion: The assessment and penalty orders were unsustainable for want of reasonable opportunity, and the matter was sent back for fresh consideration after affording the petitioner an effective opportunity to produce his materials.

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