Kmv Projects Limited vs. The Commercial Tax Officer (Main)

Facts

The petitioner, K.M.V. Projects Limited, a construction company, was registered under the Tamil Nadu Value Added Taxes (TNVAT) Act, 2006, for its works contract business in Tamil Nadu. For the financial year 2012-13, the petitioner reported a total turnover of Rs. 29,94,70,827/- and paid taxes on the value addition of materials. The petitioner claimed deduction for labour charges under Section 8 of the TNVAT Rules. The respondent initially assessed the petitioner under Section 22(2) of the TNVAT Act. Subsequently, a revisional notice was issued on 05.10.2016, proposing to disallow a portion of the labour charge exemption. The petitioner responded with a detailed reply on 11.04.2017. The impugned order, dated 28.08.2017, was passed by the respondent, which the petitioner claims was not served due to a change in address and closure of its branch in Pudukkottai following the introduction of GST. An arrear reminder was later sent to the petitioner's registered office in Hyderabad.

Held

The Court held that the impugned order dated 28.08.2017 was passed in violation of the principles of natural justice, as the petitioner was not afforded an opportunity of personal hearing. Both the petitioner's counsel and the respondent's counsel acknowledged this failure. Consequently, the Court found the impugned order to be unsustainable. The Court set aside the impugned proceedings and remanded the matter back to the respondent for fresh consideration. The respondent was directed to afford an opportunity of hearing to the petitioner and pass a fresh order within a period of four months from the date of receipt of a copy of this order. The ratio decidendi is that any order passed by an authority without providing a reasonable opportunity of hearing to the affected party is liable to be quashed on the grounds of violation of natural justice.

Key Issues

1. Whether the impugned order dated 28.08.2017, passed by the respondent, is liable to be quashed for violating the principles of natural justice by failing to afford the petitioner an opportunity of personal hearing, as contemplated under Section 27 of the TNVAT Act? Petitioner's contention: The petitioner argued that the impugned order was passed without providing an opportunity for personal hearing, which is a violation of natural justice. They also contended that the revisional notice was based on an AG audit objection, which is merely informational and cannot be the sole basis for invoking Section 27 of the TNVAT Act. Furthermore, the petitioner claimed the order was not served due to their branch closure and relocation to Thanjavur following GST implementation. Respondent's contention: The learned Government Advocate fairly submitted that an opportunity of personal hearing was not given to the petitioner and therefore, the matter may be remanded back to the respondent for passing a fresh order.