Case Law Details
Vaduvambikai Enterprises Vs State Tax Officer (Madras High Court)
In a significant ruling, the Madras High Court addressed the procedural lapses in the case of Vaduvambikai Enterprises versus the State Tax Officer. The court emphasized the importance of offering a personal hearing under Section 75(4) of the GST Act before issuing an adverse order.
The case centers around an order issued on December 30, 2023, which Vaduvambikai Enterprises challenged on the grounds of not being granted a personal hearing. Vaduvambikai Enterprises, a partnership firm initially represented by Mr. T. Logeswaran, argued that the order violated their right to a fair hearing under Section 75(4) of the GST Act.
Background of the Case
Vaduvambikai Enterprises is a registered entity under the Tamil Nadu Value Added Tax Act, 2006, engaged in works contracts where tax is deducted at source. The firm claimed entitlement to transition the deducted TDS into the GST regime as input tax credit (ITC). The dispute arose over a tax proposal amounting to Rs. 6,65,396, which the petitioner argued could be justified if given a chance to present their case.
Procedural Lapse
The firm’s counsel pointed out that while an initial show cause notice dated December 5, 2022, mentioned a personal hearing, a subsequent notice on September 20, 2023, did not. The final order issued in December 2023 failed to provide evidence of a personal hearing, violating Section 75(4) of the GST Act, which mandates a hearing when an adverse order is proposed.
Court’s Decision
The Madras High Court set aside the impugned order, highlighting the procedural requirement of a personal hearing. The court remanded the matter for reconsideration, allowing Vaduvambikai Enterprises to respond to the show cause notice within fifteen days. The tax authorities were instructed to provide a personal hearing and issue a fresh order within three months of receiving the petitioner’s reply.
Conclusion
The Madras High Court’s ruling in the case of Vaduvambikai Enterprises versus the State Tax Officer reinforces the criticality of procedural fairness in tax administration. By remanding the order for reconsideration due to the absence of a personal hearing, the court ensured that taxpayers’ rights are protected and that tax authorities adhere to the mandates of the GST Act. This judgment serves as a reminder of the judiciary’s role in upholding due process and fairness in administrative actions.
This detailed article provides an in-depth look into the procedural aspects and the significance of the Madras High Court’s decision, offering clarity on the application of Section 75(4) of the GST Act and its implications for taxpayers and tax authorities alike.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order in original dated 30.12.2023 is assailed on the ground that a personal hearing was not offered.
2. The petitioner is a partnership firm, which was originally represented by the Managing Partner, Mr. T. Logeswaran. After the writ petition was filed, it is submitted that Mr. T. Logeswaran passed away and that the partnership firm is now being managed by his wife and mother. Since the impugned order was issued without hearing the petitioner and without offering a personal hearing, leaned counsel for the petitioner submits that interference with such order is required. On the merits, learned counsel submits that the petitioner was a registered person under the Tamil Nadu Value Added Tax Act, 2006. As a contractor engaged in works contracts, he submits that tax was deducted at source while making payments to the petitioner and that the petitioner is entitled to transition such TDS into the GST regime and take credit for the same. By referring to the impugned order, learned counsel submits that the tax proposal pertains to a sum of Rs.6,65,396/-, corresponding to the TDS portion which the petitioner is entitled to claim as input tax credit (ITC). If provided an opportunity to contest the tax demand on merits, he submits that the petitioner would be in a position to justify dropping the tax proposal.
3. Learned counsel for the petitioner has placed on record a show cause notice dated 05.12.2022, which refers to a personal hearing being offered to the petitioner. However, a subsequent show cause was issued on 20.09.2023 in respect of the same tax proposal. This show cause notice does not refer to a personal hearing. The impugned order was issued in December 2023 after the show cause notice dated 20.09.2023. On examining the impugned order, there is no reference to a personal hearing being offered. Under sub-section 4 of Section 75 of applicable GST enactments, a personal hearing is mandatory either if requested for or if an order adverse to the tax payer is proposed to be issued. This case falls within the latter category.
4. For reasons set out above, the impugned order dated 30.12.2023 is set aside and the matter is remanded for reconsideration. The petitioner is permitted to submit a reply to the show cause notice dated 05.12.2022 within fifteen days from the date of receipt of a copy of this order. Upon receipt thereof, the respondent is directed to provide a reasonable opportunity, including a personal hearing, and thereafter issue a fresh order within a period of three months from the date of receipt of the petitioner’s reply.
5. W.P.No.12874 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.14037 and 14038 of 2024 are closed.
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