Anil Kumar vs State of Gujarat

Akil Abdul Hamid Kureshi, J.—The petitioner has challenged communication dated October 8, 2013 issued by the Deputy Secretary (Tax), Government of Gujarat, under which, the petitioner''s application for remission of tax and further liabilities u/s 41 of the Gujarat Value Added Tax Act, 2003 ("the V.A.T. Act", for short) came to be rejected. Brief facts are that the petitioner was based in Rajasthan and was engaged in industrial and commercial construction activities. He applied for and was awarded a tender issued by the Western Railway, Ahmedabad, for construction of minor bridge. For execution of such work, the petitioner started purchasing goods from the registered dealers in the State of Gujarat. As per his own say, with awarding of this contract, his business in Gujarat gradually increased and he shifted his base from Rajasthan to Gujarat in April 2008. All along, however, the petitioner never applied for and was therefore obviously not granted any registration under the V.A.T. Act. Admittedly, if the petitioner wanted to take the credit of the V.A.T. paid goods from the sellers, such registration was required. As a consequence of the petitioner''s failure to obtain the registration, he was unable to get the credit. To assess the petitioner''s liability for V.A.T., proceedings were initiated and we are informed that the Assistant Commissioner confirmed total tax demand of Rs. 41,81,169 and permitted deduction of Rs. 6,68,242, which was the tax deducted by the Western Railway at source. The Assistant Commissioner imposed penalty equal to the amount of tax and also demanded interest of Rs. 15,29,085. The order of the Assistant Commissioner is under challenge before the Gujarat Value Added Tax Tribunal. At that stage, the petitioner applied to the State Government under application dated February 4, 2010 and requested for remission of the tax and penalty u/s 41(1) of the Act.

On this application, the State Government passed impugned order dated October 8, 2013. In such order, it was conveyed to the petitioner that under the V.A.T. Act, any dealer who is liable to pay tax is required to obtain registration. The petitioner had not obtained registration for the period for which he had asked for remission, his application therefore is rejected.

The learned counsel for the petitioner assailed the said order contending that there is no requirement u/s 41(1) of the V.A.T. Act that a dealer must be registered before his request for remission can be accepted. He submitted that the petitioner had made detailed grounds why remission should be granted. The State rejected such application without hearing the petitioner. He relied on a decision of the Supreme Court in case of Sahara India (Firm), Lucknow Vs. Commissioner of Income Tax, Central-I and Another, to contend that even though section 41(1) of the V.A.T. Act does not specifically provide for hearing, the same must be read into it.

We do not find any illegality in the order passed by the State Government which is challenged before us. Admitted facts are that the petitioner though was required to get registered under the V.A.T. Act since he was regularly involved in the purchase of goods for the purpose of execution of his works contract, he did not obtain such registration. The only ground made out before us for not obtaining such registration is the bona fide error on his part. The Western Railway had deducted tax at source which gave an impression to the petitioner that now he is not required to obtain registration, since tax is already deducted. The explanation of the petitioner begs the question. Deduction of tax at source has no relevance to the requirement of registration by a dealer under the V.A.T. Act. It is a statutory requirement and mere explanation that he was under bona fide impression that no such registration was necessary would not be sufficient.

Section 41(1) of the V.A.T. Act permits the State Government, subject to such conditions as it may impose, remit by an order either generally or specially, the whole or any part of the tax, penalty or interest payable in respect of any period by any dealer or a class of dealers of any specified class of sales or purchase. However, for exercise of power under sub-section (1), what is essential is that the Government should think fit that it is necessary to do so in the public interest, in case of double taxation or to redress an inequitable situation or for sufficient and reasonable cause. In the present case, all that the petitioner offered by way of explanation for his non-registration was a bona fide error which was even otherwise not acceptable. If under such circumstances, the Government did not find it appropriate to exercise power u/s 41(1) of the Act, we do not see any scope for interference.

The contention that there was a breach of natural justice also cannot be accepted. It was not a case where the Government without putting the petitioner to notice passed an order which resulted into adverse civil consequences. It was a case where the petitioner made a representation which was not accepted by the Government. The insistence on personal hearing also has no legal base. It is well-settled that requirement of hearing as a part of natural justice does not in all cases include a right to personal hearing. In the result, writ petition is dismissed.