Poljo Agents And Distributors vs. The State Of Kerala

Facts

M/s. Poljo Agents and Distributors, a dealer registered under the Kerala Value Added Tax Act, 2003, filed a writ petition challenging an assessment order (Ext.P3) dated April 29, 2019, passed by the Assistant Commissioner of State Tax (Assessment). The assessment order, passed under Section 25(1) of the Act, determined the petitioner's tax liability at Rs. 43,63,416/-. The challenge stemmed from a notice dated February 12, 2019, alleging transportation of goods without proper or genuine documents, contrary to Section 47(2) of the Act. The petitioner had filed an interim reply on March 20, 2019, denying the allegations and subsequently, on March 22, 2019 (Ext.P2), requested the summoning of books of accounts and invoices from dealers and suppliers to verify the bona fides of the goods movement. This request was admittedly not considered by the assessing authority before passing the impugned order.

Held

The Court held that the assessment order (Ext.P3) was unsustainable as it violated the principles of natural justice. The Court found a serious flaw in the procedure adopted by the second respondent, noting that the petitioner ought to have been given an opportunity of being heard. Crucially, the Court emphasized that the request made by the petitioner on March 22, 2019 (Ext.P2) should have at least been considered and a view expressed by the second respondent before proceeding to determine the tax liability. The Court reasoned that statutory authorities exercising powers under the Act are expected to act fairly, reasonably, and in accordance with the law. The fairness of procedure is tested on a case-to-case basis by considering undisputed facts. The Court set aside Ext.P3 and remitted the matter back to the second respondent. The petitioner was directed to appear on August 7, 2019, with supporting documents, and the second respondent was directed to consider and dispose of Ext.P2 expeditiously and in accordance with law.

Key Issues

1. Whether the assessment order dated April 29, 2019 (Ext.P3), passed under Section 25(1) of the Kerala Value Added Tax Act, 2003, is vitiated for non-compliance with the requirements of Section 25 of the Act and principles of natural justice? Petitioner's contentions: The petitioner argued that the assessment order (Ext.P3) was illegal, arbitrary, and beyond the jurisdiction of the second respondent. They contended that the order did not conform to the requirements of Section 25 of the Act. Specifically, the petitioner asserted that the second respondent ought to have provided an opportunity of hearing before passing Ext.P3. Furthermore, the petitioner claimed that their request made on March 22, 2019 (Ext.P2) to summon books of accounts and invoices from dealers and suppliers, to prove the bona fides of the goods movement, was not considered. This denial of a valuable opportunity to prove their case rendered the order unsustainable. The petitioner also argued that the second respondent assumed the allegations in the show cause notice as ipse dixit. Revenue's contentions: The judgment records no specific arguments from the revenue.