M/S. Parag Vinimay Private Limited vs. The State Tax Officer (GST) And 2 Others

Held

The Court allowed the Writ Petition, setting aside the assessment order dated March 23, 2020, passed by the 1st respondent. The Court found a violation of the principles of natural justice because the petitioner was not given an opportunity to defend itself before the assessment order was passed. This was due to the improper service of the show cause notice and the assessment order, as electronic service was not a permissible mode under Rule 64 of the Telangana State VAT Rules, 2005. The Court directed the 1st respondent to serve a proper show cause notice on the petitioner, indicating the turnover and proposed tax for the period 2015-16. The petitioner was granted six weeks from the receipt of the show cause notice to file objections. The 1st respondent was also directed to provide a personal hearing to the petitioner and then pass a reasoned order. The issue regarding the correct tax rate under Section 8(2) of the CST Act, 1956, was not expressly decided on merits but was implicitly left open for determination after proper assessment proceedings.

Facts

The petitioner, M/s. Parag Vinimay Private Limited, challenged an assessment order dated March 23, 2020, passed by the State Tax Officer (GST) under the Central Sales Tax Act, 1956, for the period 2015-16. The petitioner contended that no proper show cause notice was served before the assessment order was passed. While the respondent claimed electronic notices were issued, the petitioner argued that electronic service was not permitted under Rule 64 of the Telangana State VAT Rules, 2005, which mandates service in person or by registered post. The petitioner also stated that the assessment order itself was not served, and they only received an arrears notice. No personal hearing was afforded.

Key Issues

1. Whether the service of show cause notices and the assessment order by electronic means, as claimed by the respondent, is a valid mode of service under Rule 64 of the Telangana State VAT Rules, 2005, and thus complies with the principles of natural justice, particularly in relation to Section 8(2) of the CST Act, 1956? Petitioner's arguments: The petitioner argued that Rule 64 of the Telangana State VAT Rules, 2005, prescribes service of notices only in person or by registered post with acknowledgment due, and does not permit electronic service. Therefore, the notices and the assessment order were not validly served, violating principles of natural justice. They also contended that the tax rate of 14.5% levied on interstate sales of iron and steel scrap was incorrect, and the maximum rate should be 5% as per Section 8(2) of the CST Act, 1956. Respondents' arguments: The Special Standing Counsel for Commercial Taxes did not dispute that the show cause notice and the assessment order were not served as prescribed under Rule 64 of the said Rules. They conceded that assessment orders were set aside in similar situations by the Court.