Tvl.Sri Amman Agencies vs. The Commissioner Of Commercial Taxes

Held

The Court held that no personal hearing was granted to the petitioner in the present case. Considering the submissions of both the petitioner and the respondent, the Court set aside the impugned assessment orders dated 16.06.2017 passed by the second respondent for the periods 2014-15 and 2015-16. The matter was remanded back to the second respondent to pass fresh orders. The fresh orders are to be passed by following the procedure contemplated under Government Circular No.5 of 2021, issued by the first respondent, dated 24.02.2021. The Court directed that appropriate orders should be passed within a period of four months from the date of receipt of a copy of this order. The ratio decidendi is that principles of natural justice, including the opportunity of personal hearing, must be followed by quasi-judicial authorities before passing adverse orders, especially when penalties are involved, and that subsequent government circulars providing procedural guidelines should be adhered to.

Facts

The petitioner, Tvl.Sri Amman Agencies, challenged orders dated 16.06.2017 passed by the Assistant Commissioner (CT)(FAC), Palani, for the tax periods 2014-15 and 2015-16. The petitioner, dealing in masala powder, had filed returns and paid taxes after adjusting Input Tax Credit (ITC). The impugned orders were passed after the Assistant Commissioner issued a notice on 27.02.2017, alleging that some end sellers had not reported sales, proposing to reverse ITC of Rs.3,41,020/- and Rs.7,62,553/-, levy tax on estimated sales, and impose penalty under Section 27(4) of the TNVAT Act. The petitioner's grievance was that the orders were passed without providing an opportunity for personal hearing, despite requests for time to file objections and for copies of documents.

Key Issues

1. Whether the impugned assessment orders passed by the second respondent are liable to be quashed for non-application of mind and for failure to provide an opportunity of personal hearing, as mandated under Section 27 of the TNVAT Act, thereby violating principles of natural justice? 2. Whether the second respondent, as a quasi-judicial authority, was justified in relying solely on a web report without providing the petitioner with necessary documents and an opportunity to respond, thus contravening the principles of natural justice? Petitioner's Arguments: The petitioner argued that the impugned orders were passed with total non-application of mind and that the second respondent, as a quasi-judicial authority, should not have relied solely on a web report. They contended that providing an opportunity for personal hearing is mandatory before levying penalty under Section 27 of the TNVAT Act. The petitioner relied on the High Court's order in W.P.No.105 of 2016 and the judgment in G.V.Cotton Mills (P) Ltd. case. Respondents' Arguments: The respondents submitted that discrepancies were found upon scrutiny of returns and cross-verification of sales annexures, leading to the notice dated 27.02.2017. They stated that time for objections was granted, but the petitioner did not file any. They also claimed the petitioner did not request documents and that all information was accessible via intranet. They argued that the burden of proof for ITC lies with the dealer under Section 17(2) of the TNVAT Act, and the petitioner failed to prove genuine transactions. Regarding personal hearing, they stated it was not offered as it was not requested. However, the Special Government Pleader conceded that the impugned orders may be set aside and remanded as per a new Government Circular.