M/S Kool Home Builders vs. State Of Kerala

Facts

The petitioner, M/s Kool Home Builders, challenged a notice (Ext.P2) and an order (Ext.P7) issued by the Assistant Commissioner (Works Contract), State Goods and Service Tax Department. The challenge was specifically confined to Ext.P7, an order dated January 15, 2019, which determined the petitioner's tax liability at Rs. 66,19,866/-. The petitioner, a dealer registered under the Kerala Value Added Tax Act, 2003, was issued a notice under Section 25(1) of the Act for the assessment year 2012-13, alleging suppression of inter-State purchases and issues related to sub-contract expenses. The petitioner requested details from KVATIS to reconcile discrepancies and denied any suppression. After receiving the details, the petitioner submitted a reply (Ext.P5) along with copies of Form 20H and requested a personal hearing. However, the impugned order (Ext.P7) was passed without granting this hearing.

Held

The Court held that Ext.P7 order dated January 15, 2019, is vitiated by a breach of the principles of natural justice. The Court found that the petitioner had repeatedly requested an opportunity of hearing in Ext.P3 and Ext.P5, particularly to reconcile disputed details concerning sub-contract execution and Form 20H. The Court noted that it was not disputed that the petitioner was entitled to an opportunity of hearing, and the respondents' contention that the opportunity provided through Ext.P2 and the receipt of a reply was sufficient was rejected. The Court emphasized that procedural fairness should not be decided on an abstract application of requirements but by examining if the party's rights were adversely affected due to an omission by the respondent. In this case, the denial of a further opportunity after providing the details sought by the petitioner (Ext.P4) and the recording of adverse findings on Form 20H without a hearing vitiated the entire assessment exercise. Therefore, Ext.P7 was set aside, and the matter was remitted to the second respondent for fresh consideration and disposal in accordance with the law, with specific directions for hearing and completion of assessment.

Key Issues

1. Whether Ext.P7 order dated January 15, 2019, passed by the Assistant Commissioner (Works Contract), is illegal and violative of the principles of natural justice, specifically concerning the denial of an opportunity of hearing to the petitioner? Petitioner's arguments: The petitioner contended that Ext.P7 is illegal and arbitrary as it was passed without affording them an opportunity of hearing, despite their specific requests in Ext.P3 and Ext.P5. They argued that the second respondent failed to consider the details provided in Ext.P5, including Form 20H, and made adverse findings without proper adjudication. The petitioner asserted that the levy and demand of tax are contrary to Article 265 of the Constitution of India. They relied on the principle that procedural fairness must be observed, especially when a decision substantially affects a party's rights. Respondent's arguments: The State contended that the writ petition is not maintainable. They argued that the principles of natural justice were not violated, as an opportunity was provided through Ext.P2, and a reply was received. The Government Pleader argued that the Court should not discharge the function of an appellate authority by examining the merits of the findings on Form 20H. They asserted that the petitioner should avail the statutory remedy of appeal against Ext.P7.