2020 (2) TMI 745 - HC - VAT and Sales Tax

Service of SCN - Reversal of input tax credit - case of petitioners is that when said notice was issued, the petitioner had already closed down on its business and therefore the said notice remained unserved on the petitioner - TNVAT Act - Principles of Natural Justice - HELD THAT - Since, the impugned order has been passed without hearing the petitioner there is a manifest violation of principles of natural justice - the impugned order deserves to be quashed on this ground alone. The case is remitted back to the respondent to pass a speaking order in accordance with law - Petition allowed by way of remand.

Summary

Issues:
Challenge to impugned order dated 28.03.2014 under Tamil Nadu VAT Act, 2006 regarding input tax credit availed by the petitioner. Allegations of notice not served due to business closure. Changes in the constitution of the petitioner's firm in 2009. Petitioner's firm dissolved in 2014. Legal arguments based on previous court decisions regarding input tax credit availed by the petitioner. Government Advocate's defense of the impugned notice and credit availed without tax payment by selling dealer. Violation of principles of natural justice in passing the impugned order without hearing the petitioner.

Detailed Analysis:
The petitioner challenged the impugned order dated 28.03.2014 passed by the respondent, claiming regular tax payments under the Tamil Nadu VAT Act, 2006 and input tax credit for the assessment year 2009-2010. A notice issued on 21.06.2013 to reverse input tax credit remained unserved due to the petitioner's business closure. Changes in the firm's constitution in 2009 were highlighted, with subsequent dissolution in 2014. The petitioner argued that the impugned order should be set aside due to the firm's defunct status.

The petitioner's counsel relied on a previous court decision to support their case, emphasizing that input tax credit was rightfully claimed as per the TNVAT Act provisions. The court's ruling in a similar case established that the petitioner had paid taxes to the selling dealer, justifying the input tax credit claim. The court further clarified that the responsibility for tax collection from the selling dealer should not fall on the purchasing dealer, as long as proper documentation of tax payment exists.

In contrast, the Government Advocate defended the impugned notice, alleging that the petitioner availed credit without the selling dealer paying taxes. However, the court found a violation of natural justice principles in passing the impugned order without hearing the petitioner. Consequently, the court quashed the order dated 28.03.2014 and remitted the case back to the respondent for a lawful decision, allowing the petitioner to respond to the notice within 30 days.

The court directed that the petitioner be heard before the new order is passed, ensuring service of notice at the petitioner's provided address. The writ petition was allowed with no costs, and connected miscellaneous petitions were closed, concluding the judgment.