2025 (6) TMI 4 - HC - VAT / Sales Tax

Tax Assessment Invalidated as Authority Fails to Provide Reasoned Order, Violates Natural Justice Principles Under Section 254

M/s Lifestyle International Private Limited Versus State of U.P. and another

HC quashed tax assessment orders due to procedural impropriety. The Assessing Authority mechanically reiterated previous orders without addressing ... Challenge to impugned assessment orders passed by respondent no.2 under Section 28(2)(ii) read with Section 32 of the Uttar Pradesh Value Added Tax Act, 2008 - proper application of mind or not - violation of principles of natural justice - HELD THAT:- The facts are glaring, wherein the two orders passed by the Assessing Authority are compared, one which was passed on 23.03.2021, which was set aside in appeal on 31.01.2023, and the order impugned dated 26.03.2025. The order dated 26.03.2025 is verbatim the copy of the order dated 23.03.2021. The Assessing Authority has not even cared to indicate the fact about passing of the previous order, the appellate order and that he was passing the order on remand and, surprisingly has incorporated even the mistakes, which were there in the earlier order and have been rectified, in the orders impugned. The manner of dealing with the matter on remand by the Assessing Authority is ex facie contrary to the requirements on remand and are essentially in dereliction of his duty to act in a manner which may reflect his application of mind to the issue before him. The manner in which the Assessing Authority has dealt with the matter, clearly reflects non application of mind and a totally mechanical exercise has been undertaken in passing the orders impugned. The assessment orders dated 26.03.2025 passed by the Assessing Authority cannot be sustained - Petition allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court were:Whether the assessment orders dated 26.03.2025 passed under Section 28(2)(ii) read with Section 32 of the Uttar Pradesh Value Added Tax Act, 2008, comply with the directions issued by the appellate authority on remand.Whether the Assessing Authority acted in accordance with the principles of natural justice and applied its mind while passing the orders on remand.Whether the impugned orders can be sustained in law despite the alleged mechanical reiteration of earlier orders and failure to consider documents produced by the petitioner.Whether the petitioner's grievance regarding the non-consideration of documents and repetition of earlier mistakes in the impugned orders warrants quashing of the assessment orders.Whether the conduct of the Assessing Authority in passing the impugned orders calls for any administrative or disciplinary action.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Compliance with directions issued on remandRelevant legal framework and precedents: Under the Uttar Pradesh Value Added Tax Act, 2008, when an appellate authority remands a matter to the Assessing Authority, the latter is required to pass fresh orders in accordance with the directions given, considering all relevant documents and evidence. The principles of administrative law and natural justice require that the authority apply its mind and not merely reiterate earlier findings mechanically.Court's interpretation and reasoning: The Court compared the impugned order dated 26.03.2025 with the earlier order dated 23.03.2021, which had been set aside on appeal. It was found that the impugned order was a verbatim copy of the earlier order, including the mistakes that had been rectified by the appellate authority. The Assessing Authority failed to acknowledge the appellate order or the fact that it was passing an order on remand.Key evidence and findings: The identical language and content of the two orders, the absence of any reference to the remand directions, and the failure to consider documents produced by the petitioner were critical findings.Application of law to facts: The Court held that the Assessing Authority's failure to comply with the remand directions and to consider relevant documents amounted to non-application of mind and a mechanical exercise, which is impermissible under the law.Treatment of competing arguments: Although the respondents contended that the orders were appealable and thus could be challenged, they conceded that the Assessing Authority had simply copy-pasted the earlier order without due consideration.Conclusion: The impugned orders were held to be ex facie illegal and contrary to the remand directions, warranting quashing.Issue 2: Application of mind and adherence to principles of natural justiceRelevant legal framework and precedents: Administrative authorities are bound to act fairly, consider all relevant material, and apply their mind to the issues before them. A mechanical or perfunctory exercise violates these principles and renders the order liable to be set aside.Court's interpretation and reasoning: The Court observed that the Assessing Authority's conduct reflected a dereliction of duty and non-application of mind. The mere reiteration of earlier orders without addressing the appellate directions or the petitioner's submissions was a clear breach of procedural fairness.Key evidence and findings: The identical repetition of earlier mistakes and failure to provide any reasoned consideration of documents produced by the petitioner were pivotal.Application of law to facts: The Court applied the principle that an order passed without application of mind is liable to be quashed and set aside.Treatment of competing arguments: The respondents' argument that the orders were appealable was rejected as a mere formality given the Assessing Authority's conduct.Conclusion: The impugned orders failed to meet the standards of reasoned decision-making and natural justice.Issue 3: Remedy and administrative consequencesRelevant legal framework and precedents: Courts have the power to quash orders that are illegal or passed without jurisdiction or application of mind. Further, where there is evident misconduct or dereliction of duty by a public authority, the Court may direct administrative authorities to take appropriate action.Court's interpretation and reasoning: The Court quashed the impugned orders and remanded the matter back to the Assessing Authority with directions to pass fresh orders in accordance with the appellate directions and after providing an opportunity of hearing to the petitioner.Key evidence and findings: The mechanical reiteration of earlier orders and failure to consider evidence justified the remedy of quashing and remand.Application of law to facts: The Court emphasized the necessity of a fresh, reasoned order reflecting application of mind and compliance with procedural fairness.Treatment of competing arguments: The Court rejected the suggestion that the petitioner should merely file appeals against the impugned orders, recognizing that such appeals would be an 'empty formality' given the Assessing Authority's conduct.Conclusion: The matter was remanded with clear directions, and a copy of the judgment was directed to be sent to the Principal Secretary, State Tax, for appropriate administrative action.3. SIGNIFICANT HOLDINGS'The order dated 26.03.2025 is verbatim the copy of the order dated 23.03.2021... The Assessing Authority has not even cared to indicate the fact about passing of the previous order, the appellate order and that he was passing the order on remand and, surprisingly has incorporated even the mistakes, which were there in the earlier order and have been rectified, in the orders impugned.''The manner in which the Assessing Authority has dealt with the matter, clearly reflects non application of mind and a totally mechanical exercise has been undertaken in passing the orders impugned.''Looking to the conduct of the Assessing Authority in passing the orders requiring the petitioner to file appeals, would be an empty formality.''The assessment orders dated 26.03.2025 passed by the Assessing Authority cannot be sustained.''The matter is remanded back to the Assessing Authority to pass appropriate orders after taking into consideration the directions given in the orders of remand and after providing opportunity of hearing to the petitioner.''A copy of this order be communicated to the Principal Secretary, State Tax, Government of Uttar Pradesh, who would look into the conduct of the Assessing Authority and take appropriate measures in accordance with law.'Core principles established include the requirement that on remand, the Assessing Authority must pass fresh orders reflecting application of mind and compliance with appellate directions, failure of which renders the order illegal and liable to be quashed. Mechanical reiteration of earlier orders without consideration of documents and directions violates principles of natural justice and administrative law. Further, the Court underscored the need for administrative accountability for dereliction of duty by public authorities.