High Court sets aside tax order due to procedural errors, directs re-determination within 75 days

The High Court held that the impugned order determining tax liability and imposing a penalty under the TNVAT Act 2006 was unsustainable due to procedural irregularities and lack of proper notice service. The Court set aside the order, remitting the case for re-determination of taxable returns within 75 days. The respondent was directed to provide detailed information and allow the petitioner to respond. Emphasizing the right to be heard, the Court allowed the Writ Petition, closing the connected Miscellaneous Petitions without costs.

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Issues involved: Determination of tax liability, imposition of penalty u/s 27(3)(C) of TNVAT Act 2006, violation of principles of natural justice.

Tax Liability Determination:
The respondent determined a tax due of Rs. 71,26,907.00 from the petitioner for the assessment year 2015-2016 under the TNVAT Act 2006. The petitioner, engaged in the sale of batteries, disputed the claim, stating that goods were not imported for trading purposes but were manufactured and sold within Tamil Nadu. The respondent issued show cause notices and passed the impugned order without sufficient basis or consideration of the petitioner's responses.

Imposition of Penalty u/s 27(3)(C) of TNVAT Act 2006:
In addition to the tax liability, a penalty of Rs. 1,06,90,360.00 was imposed on the petitioner for willful non-disclosure of turnover and non-payment of tax, attracting a penalty of 150% on the tax due. The petitioner argued that the order lacked justification and violated principles of natural justice as they were not given a proper opportunity to present their case.

Violation of Principles of Natural Justice:
The petitioner contended that the impugned order was passed without considering their replies and without affording them a fair hearing. The respondent failed to provide necessary details and confirm the demand without proper substantiation, leading to a violation of principles of natural justice.

Judgment:
The High Court found that the impugned order was not sustainable due to procedural irregularities and lack of proper service of notices. The order was set aside, and the case was remitted back to the respondent for re-determination of the taxable returns within 75 days. The respondent was directed to provide detailed information on the alleged imports and CAG Defect Memo, allowing the petitioner to respond. The Court emphasized the importance of expeditious resolution and the right to be heard before passing any new order. As a result, the Writ Petition was allowed, and the connected Miscellaneous Petitions were closed without costs.

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