M/S.Ppg Asian Paints Limited vs. Asst. Commissioner Of State Tax

Facts

The petitioner, M/s. PPG Asian Paints Limited, challenged an assessment order (Ext.P4) passed by the Assistant Commissioner of State Tax under Section 25(1) of the Kerala Value Added Tax Act. The petitioner had submitted a reply to a notice (Ext.P1) and requested to provide records, explaining that their business of selling paints for home decor was distinct from the business of Asian Paints selling paints for cars. They also sought reasons for rejection of their books. Crucially, the petitioner informed the authority (Ext.P3) about extensive property and record loss due to unprecedented floods in Kochi in 2018, requesting time to produce corroborative evidence or documents from dealers, as original records were lost. The authority rejected this request and passed the assessment order (Ext.P4), stating that flood damage in 2018 was not a reason to escape assessment and granted only five days to produce documents.

Held

The Court held that the assessment order (Ext.P4) was arbitrary and violative of the principles of natural justice. The reasoning was that either taken independently or considered together with the limited five days' time granted to the petitioner, the order suffered from these defects. The Court found that the petitioner's explanation regarding the loss of records due to the 2018 floods, coupled with the short period allowed to procure alternative documentation, amounted to a denial of a reasonable opportunity to be heard. Therefore, the Court set aside Ext.P4 and restored the matter to the file of the first respondent for fresh consideration and disposal in accordance with the law. The Court directed the petitioner to appear before the first respondent on 16.09.2019 with the records the respondent intends to rely upon, and the assessment was to be completed on or before 15.10.2019.

Key Issues

1. Whether the assessment order (Ext.P4) passed under Section 25(1) of the Kerala Value Added Tax Act is arbitrary and violative of the principles of natural justice, considering the petitioner's submission regarding loss of records due to floods and the limited time granted for producing alternative evidence? Petitioner's arguments: The petitioner contended that the assessment order was arbitrary and illegal, violating principles of natural justice. They argued that the destruction of account books due to the 2018 floods made it an upheaval task to retrieve records from dealers within the stipulated five days. This limited timeframe constituted an arbitrary exercise of discretion and a denial of a reasonable opportunity to present their case. Respondents' arguments: The respondent (State) argued, through the counter affidavit, that sufficient time had been granted. However, the Court noted that the legality of an order is tested by its contents, not by secondary information or explanations in a counter affidavit.