M/S. Agathyaz Traders vs. The State Tax Officer

Facts

M/s.Agathyaz Traders (the petitioner), a timber and wooden products trader, filed writ petitions challenging assessment orders for the years 2017-18, 2018-19, and 2019-20, passed by the State Tax Officer (the respondent). The petitioner's business closed in 2021. The respondent conducted an inspection, seized all the petitioner's documents, and submitted a report to the Assessing Officer. Based on this report, a show cause notice was issued on 02.07.2020. The petitioner replied on 22.09.2020, highlighting that they were forced to reply within three days, were denied access to the seized documents to prepare their defense, and alleged the assessment was based on the inspection report without independent application of mind. The petitioner argued they could not submit a proper explanation without their documents.

Held

The Court held that the respondents violated the principles of natural justice by not granting an effective opportunity to the petitioner. The Court noted that the respondent seized all the petitioner's documents during the inspection and subsequently expected the petitioner to make submissions without access to these crucial documents. The petitioner had specifically requested to refer to the documents, but the respondents neither supplied copies nor allowed the petitioner to view them. This action was deemed to be demanding the impossible, as established in the cited case of *G.Thangavel Nadar*. Consequently, the impugned assessment orders were quashed. The respondent was directed to supply all relevant documents relied upon and to allow the petitioner to produce documents they wished to rely on, after which fresh orders should be passed. To mitigate potential revenue loss, the petitioner was directed to pay Rs. 2 Lakhs for each assessment order within three months. The Court found that the respondent had not independently applied their mind, relying on the inspection report, which is unsustainable in law.

Key Issues

1. Whether the assessment orders are vitiated by a violation of the principles of natural justice, specifically concerning the denial of an effective opportunity to the petitioner to defend themselves, given that their documents were seized by the respondent? (Question of mixed law and fact, turning on principles of natural justice and procedural fairness under GST law). Petitioner's Arguments: - The respondent illegally forced the petitioner to submit a reply within three days, disregarding GST council relaxations. - The respondent failed to provide access to or copies of the relied-upon documents, preventing the petitioner from contesting the evidence. - The assessment was passed based on the inspection report without independent application of mind by the Assessing Officer, relying on the principle from *Madras Granites (P) Ltd. vs Commercial Tax Officer*. - The respondent demanded the impossible by asking for a reply without returning seized documents, citing *G.Thangavel Nadar Vs. The Deputy Commercial Tax Officer*. Respondent's Arguments: - The petitioner did not respond to any notice properly. - The petitioner was granted multiple opportunities to respond on 03.09.2020, 07.09.2020, 16.09.2020, and 22.09.2020. - Since the petitioner failed to respond, the respondent had no option but to pass the assessment orders. - The petitioner has a statutory remedy of appeal, and filing writ petitions without exhausting this remedy is improper.