ITC Limited vs. The State Of Tripura And Ors

Held

The Court held that the assessment order dated 26.02.2021 was passed in breach of the principles of natural justice. The Court found that the petitioner's averments regarding the non-conduct of the final hearing on 23.11.2020 and the lack of subsequent communication were not adequately rebutted by the respondents. The Court noted the absence of evidence for the service of notices after 23.11.2020 and found it improbable that the petitioner would abandon the proceedings. The Court also criticized the department's insistence on physical hearings during the peak of the COVID-19 pandemic, highlighting the availability of virtual hearings in other judicial forums. The Court reasoned that a company with its head office outside the state should not be forced to travel, risking infection. Consequently, the assessment order was set aside, and the assessment proceedings were revived. The rectification order, being consequential, also did not survive. The Court directed a fresh hearing to be conducted virtually on 8th November 2021, with the assessment to be framed afresh by 28th February 2022. All contentions of the petitioner were kept open. The issue of the legality of the rectification order was not independently examined as the assessment order was quashed.

Facts

The petitioner, ITC Limited, challenged an order dated 26.02.2021 by the Superintendent of Taxes, Agartala, demanding Rs. 1,18,79,583/- for unpaid taxes, interest, and penalty for the assessment year 2015-16 under the Tripura Value Added Tax Act. The petitioner also challenged an order dated 23.03.2021 rejecting their application for rectification. The primary grounds for challenge were breaches of natural justice. The petitioner contended that the assessment order was passed without completing the hearing, that "office value" used to determine undisclosed sales was gathered behind their back, that documents were ignored, and that a request for virtual hearing due to COVID-19 was denied. The respondents argued that the petitioner failed to appear on the scheduled date, and subsequent notices were sent, but the petitioner did not participate. They also stated that "office value" was derived from transportation permits readily available to the petitioner and that virtual hearings were not envisaged by the rules.

Key Issues

1. Whether the assessment order dated 26.02.2021 was passed in breach of the principles of natural justice due to an inadequate opportunity of hearing for the petitioner, as per Section 74 of the Tripura Value Added Tax Act (TVAT Act)? - Petitioner's argument: The final hearing scheduled for 23.11.2020 was not conducted, and no further communication was received before the assessment order was passed. Information regarding "office value" was used without being shared. Documents were ignored, and a request for virtual hearing due to COVID-19 was denied. The petitioner relied on the principles of natural justice. - Revenue's argument: The petitioner failed to appear on 23.11.2020, and subsequent notices were sent. The "office value" was derived from transportation permits available to the petitioner. Virtual hearings were not provided for under the TVAT Act rules, and the Assessing Officer lacked the facility. The petitioner should pursue the statutory appeal remedy. 2. Whether the order dated 23.03.2021 rejecting the petitioner's application for rectification under Section 74 of the TVAT Act was valid, given the alleged breaches in the assessment proceedings? - Petitioner's argument: The rectification application was rejected despite strong grounds, and its validity is linked to the flawed assessment order. - Revenue's argument: Not explicitly recorded, but implicitly, the rectification order is valid if the assessment order is upheld.