Crust And Crumb Food Ingredients P LTD vs. The Assistant Commissioner Of State Tax

Facts

The petitioner, M/s. Crust and Crumb Food Ingredients Pvt Ltd, challenged an assessment order (Ext.P6) passed by the Assistant Commissioner of State Tax under Section 25 of the Kerala Value Added Tax (KVAT) Act, 2003. The petitioner contended that the sales reflected in the order were export sales, which are not subject to tax under the Act. The petitioner had submitted a reply (Ext.P4) with supporting documents like bank realization reports and invoices on March 16, 2019. However, the assessment order was passed on March 21, 2019, without affording the petitioner an opportunity to further substantiate its case. The order stated that the petitioner failed to produce the corresponding shipping bill for export and Bank Realisation Certificate (BRC) to prove export and receipt of payment, thus disallowing the claim for exemption.

Held

The Court held that the reasoning in the assessment order (Ext.P6) was too brief and did not adequately synthesize with the petitioner's reply (Ext.P5). The Court found that the first respondent did not provide sufficient details or advert to the petitioner's reply, which claimed exemption for export sales. The Court emphasized the need for fairness and for putting the petitioner on notice or giving them a personal hearing before deciding on taxability, especially when the petitioner claimed exemption. Since the first respondent's reasoning was inadequate and did not provide a proper opportunity to the petitioner, the Court set aside Ext.P6. The matter was remitted back to the first respondent. The petitioner was directed to appear on April 22, 2019, with additional documents and a reply. The first respondent was directed to provide an opportunity of hearing and complete the assessment by May 15, 2019. The ratio decidendi is that a best judgment assessment order must be reasoned and afford a reasonable opportunity to the assessee, particularly when a claim for exemption is made and supported by initial documentation.

Key Issues

1. Whether the assessment order passed by the Assistant Commissioner of State Tax, without affording a proper opportunity to the petitioner to substantiate its claim of export sales exemption, is sustainable under Section 25 of the KVAT Act, 2003? Petitioner's Arguments: The petitioner argued that the transactions in question were export sales and therefore exempt from tax under the KVAT Act. They further contended that the assessment order (Ext.P6) was passed hastily, on March 21, 2019, just five days after receiving their reply (Ext.P4) on March 16, 2019. This did not provide sufficient opportunity for the petitioner to present further documents or arguments to prove that the tax liability did not arise. The petitioner claimed that the first respondent's finding was too brief and did not adequately consider their reply. Respondent's Arguments: The learned Government Pleader, referring to written instructions, contended that the first respondent had issued notice, received the reply, considered it, and passed a best judgment assessment order within his jurisdiction. It was argued that the petitioner should have been more diligent in submitting their reply. The respondent also pointed out that the petitioner has a statutory remedy of appeal, where they can file additional documents.