M/S.High Energy Batteries vs. The Assistant Commissioner

Held

The Court held that the order passed by the respondent dated 04.07.2013 was vitiated due to a violation of the principles of natural justice. The petitioner's primary grievance was the denial of a personal hearing, which they contended was necessary to clarify doubts regarding entries in their annual reports and financial statements, especially in light of complex factual disputes. The Court noted the petitioner's reliance on the proviso to Section 27(2) of the TNVAT Act and the decision in SRC Projects Private Limited, which emphasized the importance of personal hearings in complex matters to ensure a reasonable opportunity to show cause. Consequently, the Court found merit in the petitioner's submission that the impugned order, passed without affording a personal hearing, was unsustainable. The Court decided to set aside the impugned order and remit the matter back to the respondent for fresh consideration. The respondent was directed to afford an opportunity of hearing to the petitioner, allowing them to explain the entries with the help of their auditor, and to pass appropriate orders within six weeks. No issue was expressly left undecided.

Facts

M/s. High Energy Batteries (India) Ltd. (the petitioner/appellant) is a manufacturer of batteries, including for the Ministry of Defence. The respondent, The Assistant Commissioner (CT), issued notices for revision of assessment for tax periods 2007-08, 2008-09, 2009-10, and 2010-11, alleging that the petitioner had wrongly availed Input Tax Credit (ITC) on capital goods, as per Section 19(5)(c) of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act), due to inter-state sales to the Ministry of Defence. The respondent also alleged sales suppression. The petitioner submitted written objections, which it contended were not properly understood. The petitioner's primary grievance was the denial of a personal hearing to clarify doubts regarding entries in its financial statements and annual reports. The respondent passed an order dated 04.07.2013 demanding tax and interest. The petitioner filed writ petitions challenging this order. An interim order was granted on condition of depositing Rs. 30,00,000, which was later modified in writ appeals to Rs. 15,00,000, and this modified amount was deposited.

Key Issues

1. Whether the order passed by the respondent demanding tax and interest is vitiated due to the denial of a personal hearing to the petitioner, thereby violating the principles of natural justice, as contended by the petitioner under Section 27(2) of the TNVAT Act? Petitioner's Arguments: The petitioner argued that the respondent failed to properly understand its objections and audited financial statements. The core grievance was that the respondent ought to have provided a personal hearing to clarify doubts and explain entries, especially given the complexity of factual disputes. The petitioner relied on the proviso to Section 27(2) of the TNVAT Act, which mandates a reasonable opportunity to show cause against an order. They also cited the Division Bench judgment in SRC Projects Private Limited v. Commissioner of Commercial Taxes, Chennai and Another, which held that in cases involving complex factual disputes, a personal hearing is encompassed within the concept of 'reasonable opportunity to show-cause'. Therefore, the order passed without a personal hearing is bad in law. Revenue's Arguments: The judgment does not record any specific arguments made by the respondent.