2018 (3) TMI 1617 - HC - VAT and Sales Tax

Principles of Natural justice - Ex-parte assessment - Reversal of Input Tax Credit - exempted sale and sale on consignment basis - whether the respondent was correct in resorting to an ex parte assessment when there are documents available on file indicating that the appellant has given explanation to the notices issued by the Enforcement Wing? - Held that - It is true that the appellant has not given any reply subsequent to the pre-assessment notices issued by the respondent. However that would not give a right to the respondent to resort to the process of ex parte assessment in view of the explanation given by the appellant to the Enforcement Wing which is part of records - The respondent exercised the jurisdiction to re-open the assessment only on the basis of the materials collected by the Enforcement Wing. Those materials along with the written objections were forwarded to the respondent. The respondent without looking into the objections took cognizance of the alleged incriminating materials and passed an ex parte assessment. The failure to consider the objections received by the Enforcement Wing and forwarded by them to the respondent would vitiate the assessment orders passed by the respondent. Denial of personal hearing before completing the assessment - rejection on the ground that objection was not given to the pre-assessment notices - Held that - Even if objection was not given still the assessing authority was expected to post the matter for hearing by issuing notice to the assessee. In case the assessee fail to appear it is open to the assessment authority to pass orders on merits - the failure to submit objection to the preassessment notice would not give a right to the Assessment Officer to deny opportunity of personal hearing to the assessee. The appellant is given time till 09 April 2018 to submit a comprehensive reply to the pre-assessment notices issued by the respondent dated 21 October 2013. It is open to the respondent thereafter to post the matter for personal hearing on a particular date - Since the assessment order has already been set aside the respondent is directed to de-seal the premises in question so as to enable the appellant to submit the explanation with documents. Appeal allowed.

Summary

Issues:
1. Availability of alternative remedy for challenging assessment orders.
2. Validity of ex parte assessment.
3. Denial of opportunity of personal hearing to the appellant.

Issue 1 - Availability of alternative remedy for challenging assessment orders:
The appellant, a manufacturer and trader of cotton yarn and waste cotton, had their assessments completed based on returns submitted. Subsequently, incriminating materials were found during an inspection by Enforcement Wing officials, leading to a conclusion that the appellant did not reverse credit on ITC claim for exempted sale and consignment basis. The Enforcement Wing issued notices for the appellant to show cause, and the respondent completed the assessment ex parte after the appellant's explanation. The single Judge dismissed the writ petitions citing the availability of an alternative remedy. The core question was whether the respondent was justified in resorting to ex parte assessment despite the appellant's explanations to the Enforcement Wing.

Issue 2 - Validity of ex parte assessment:
The respondent initiated action based on the Enforcement Wing's report and incriminating documents but overlooked the appellant's explanations. The appellant had submitted objections to the notices, which were not considered before the ex parte assessment was passed. The failure to consider the objections and explanations vitiated the assessment orders. The respondent's denial of a personal hearing solely based on the lack of objections to pre-assessment notices was deemed improper. The Assessment Officer was expected to provide a hearing opportunity even without specific objections, as observed in relevant case law.

Issue 3 - Denial of opportunity of personal hearing to the appellant:
Upon highlighting the legal infirmity in the assessment procedure, the Assessment Officer agreed to withdraw the assessment order and reconsider the matter after providing a reasonable opportunity to the appellant. The appellant was granted time to respond to the pre-assessment notices and assured a personal hearing opportunity. The court directed the premises to be de-sealed and accounts to be de-frozen for the appellant to submit explanations and documents.

In conclusion, the intra court appeals were allowed, and the assessment orders were recalled for fresh consideration by the respondent. The appellant was given a chance to provide a comprehensive reply and attend a personal hearing, emphasizing the importance of due process and fair opportunity in tax assessments.