2014 (6) TMI 558 - HC - VAT and Sales Tax

Violation of principle of natural justice - Whether the first respondent has passed the order under Section 22 (2) or 27 (2) of TNVAT Act and whether the requirement to afford an opportunity of personal hearing is different from issuing a show cause notice as contemplated under Section 27 (2) of the said Act - Held that - As per Section 88 (3) (i) of the TNVAT Act which deals with repeal and saving it was provided that the amendment or repeal shall not affect the previous operation of the said Act or 1970 Act as the case may be or any right privilege obligation or liability already acquired accrued or incurred thereunder and subject thereto anything done or any action taken including any appointment made any notification notice or order issued any rule or regulation framed or forms prescribed and any certificate licence or permit granted in exercise of any power conferred by or under the said Act or 1970 Act as the case may be shall be valid and always as deemed to have been valid during the period the said Act or 1970 Act as the case may be was in force notwithstanding the repeal of the said Act or 1970 Act as the case may be. Therefore even the Circular issued by the Commissioner will be applicable in this case. Thus Section 16 (1) is in para materia of Section 27 of TNVAT Act. Even if the argument advanced on behalf of the respondents is accepted that personal hearing need not be given when such an opportunity of hearing is specifically sought it has to be extended to the petiitoner. The quasi judicial powers conferred on the assessing officer has to be exercised in a judicious fair and objective manner without arbitrariness and subject to the rules of natural justice including grant of personal hearing and recording of reasons for conclusions ultimately arrived at before rejection of an application for exemption or waiver or stay and the non-adherence to the aforesaid principle will offend Article 14 of the Constitution of India and also renders the very remedy available to the assessee a nugatory. Whether it is application of Section 22 (2) or 27 (1) of the Act the petitioner ought to have granted an opportunity of personal hearing when he has specifically sought for the same. Inasmuch as such principle was not adhered to in this case the impugned orders in WP Nos. 9077 to 9079 of 2014 cannot be sustained. It is also to be mentioned that according to the petitioner they are in possession of voluminious documents running to 16, 09, 190 pages of photostat copies and therefore they have produced some sample documents. At least at that stage the assessing officer ought to have afforded an opportunity of hearing to the petitioner for perusal of such volumnious documents. The non-consideration of the same vitiates the impugned orders. Even though the impugned orders are quashed this Court taking into consideration the demand notices issued by the first respondent are still valid the effect of quashing the assessment orders will not totally take away the right of the first respondent to proceed further in the matter. Further taking note of the fact that the transaction reported by the petitioner is huge pertaining to foreign sale which according to the petitioner is totally exempted the question of deposit of any amount will not arise. At the same time in the impugned orders of assessment it has been clearly stated that certain documents have been produced in form C and F in which there are lot of differences - If an appeal is filed against the impugned order it will be a different aspect to be considered. Now by virtue of this order the first respondent is directed to re-consdier the entire matter afresh. At the same time the revenue also has to be safeguarded to some extent. In that view of the matter out of the demand of Rs. 2, 400/- crores made by the revenue in the impugned orders of assessment the petitioner is directed to deposit 10% of the tax amount thereof as a pre-condition for reviving the orders of assessment. This amount shall be depsoited by the petitioner within a period of eight weeks - decided partly in favour of assessee.

Summary

Issues Involved:
1. Validity of the assessment orders dated 28.02.2014 for the assessment years 2009-2010, 2010-2011, and 2011-2012.
2. Requirement of personal hearing before passing assessment orders.
3. Compliance with principles of natural justice.
4. Production and scrutiny of voluminous documents.
5. Applicability of deemed assessment under Section 22(2) of the TNVAT Act.
6. Conditions for pre-deposit for filing appeals.

Detailed Analysis:

1. Validity of the Assessment Orders:
The petitioner challenged the assessment orders dated 28.02.2014 for the years 2009-2010, 2010-2011, and 2011-2012, arguing that the orders were passed without considering the voluminous documents provided and without affording a personal hearing. The court noted that the assessing officer did not review the documents submitted by the petitioner and passed the orders without a personal hearing, which violated the principles of natural justice.

2. Requirement of Personal Hearing:
The petitioner argued that personal hearing is mandatory under Section 22(4) and Section 27(1) of the TNVAT Act. The court agreed, citing the Division Bench decision in Tvl.SRC Projects Private Limited vs. Commissioner of Commercial Taxes and other precedents, which emphasized the necessity of personal hearings in assessment proceedings, especially when requested by the petitioner.

3. Compliance with Principles of Natural Justice:
The court found that the assessing officer's failure to provide a personal hearing and to consider the voluminous documents submitted by the petitioner violated the principles of natural justice. The court emphasized that the opportunity to be heard is fundamental, particularly when the petitioner has explicitly requested it.

4. Production and Scrutiny of Voluminous Documents:
The petitioner submitted that the documents related to export sales were voluminous, running into several pages, and only sample documents were provided initially. The court noted that the assessing officer should have either called for the complete set of documents or set criteria for their scrutiny. The failure to do so and the subsequent passing of the assessment orders without proper document verification were deemed improper.

5. Applicability of Deemed Assessment under Section 22(2) of the TNVAT Act:
The court discussed the provisions of Section 22(2) of the TNVAT Act, which allows for deemed assessment if returns are filed with the prescribed documents and proof of tax payment. However, it was noted that the petitioner did not produce all necessary documents, leading to the contention that the assessment was not complete. The court held that the assessment orders should be set aside and remanded for fresh consideration with proper adherence to the principles of natural justice.

6. Conditions for Pre-Deposit for Filing Appeals:
Although the court set aside the assessment orders, it directed the petitioner to deposit 10% of the tax amount as a pre-condition for reviving the orders of assessment, considering the substantial tax demand and the need to safeguard revenue interests.

Conclusion:
The court quashed the assessment orders dated 28.02.2014 for the assessment years 2009-2010, 2010-2011, and 2011-2012, and remanded the matter back to the first respondent for fresh consideration. The first respondent was directed to afford an opportunity of personal hearing to the petitioner and to scrutinize the documents submitted. The petitioner was also directed to deposit 10% of the tax amount within eight weeks as a pre-condition for reviving the assessment orders.