Gujarat High Court Remands Tax Assessment Matter To State VAT Tribunal Citing Non-Consideration Of Grounds In Second Appeal

The Gujarat High Court remanded back a matter to the Gujarat Value Added Tax Tribunal on assessment of tax, after noting that the tribunal did not consider the grounds raised by the petitioner proprietor before passing orders.

A division bench of Justice Bhargav Karia and Justice Pranav Trivedi noted that the tribunal did not deal with the grounds raised by the petitioner in its second appeal. It said:

"It is not in dispute that specific ground of non-service of mandatory statutory notice has been raised by the petitioner and the same was part of the Misc. Application. The question of levy of penalty under Section 34(12) of the VAT Act read with Section 9(2) of the CST Act were also raised by the petitioner in Second Appeal...Having gone through the judgment and order passed by the Tribunal in Misc. Application, it is not in dispute that the grounds raised by the petitioner in Second Appeal are not considered by the Tribunal"

"It is a fundamental proposition of law that the other side should be heard and all the issues should be considered before any order is passed. The maxim of Audi Alteram Partem is broad enough to include the rule against bias since a fair hearing is must for it to be unbiased hearing. In the instant case, the fact is not in dispute that the grounds raised by the petitioner were not considered before passing the impugned order," the court added. 

The court was hearing a plea by Vithlani Exports seeking quashing a January 29 order of the Gujarat Value Added Tax Tribunal rejecting the petitioner's miscellaneous application and seeking restoration of its second appeal before the tribunal.

The petitioner a proprietary concern is carrying on the business of trading in agricultural products and is registered as a dealer under the Value Added Tax Act and the  Central State Tax Act.

The petitioner filed all the periodic as well as annual self-assessment returns for the period under consideration. It is the case of the petitioner that the respondent authority passed Assessment Order for Financial year 2009-10 on 31.03.2014 under Section 34(2) VAT Act read with Section 9(2) CST Act raising additional dues of Rs.16,92,165 along with interest of Rs.6,18,459 and penalty of Rs.2,14,741.

The dues were raised due to disallowance of the Input Tax Credit in the Assessment Order passed under the VAT Act. Being aggrieved by the Assessment Order, the petitioner challenged it before the learned appellate authority under.

It is the case of the petitioner that the entire amount of tax of Rs.8,58,964 towards pre-deposit was paid on 21.05.2015. 

On  21.03.2018, the appellate authority rejected the appeal and confirmed the Assessment Order. The petitioner filed a Second Appeal raising various grounds such as–non-service of mandatory statutory notice in Form 6B, levy of penalty under Section 34(1) of the VAT Act read with Section 9(2) of the CST Act etc.

The Tribunal in its 20.09.2024 order partly allowed the Second Appeal, allowing the Input Tax Credit of Rs.4,973 and confirmed the disallowance of remaining Input Tax Credit of Rs.11,26,733.

Aggrieved of the non-consideration of its grounds in the Second Appeal, the petitioner filed a rectification application.

The Tribunal vide judgment and order dated 29.01.2025 rejected the rectification application on the ground that Second Appeal was decided on merits after hearing the parties and therefore, the Tribunal's judgment was appealable order under Section 78 VAT Act.

Against this the petitioner approached the high court. 

Before the division bench the petitioner argued that the Tribunal  failed to deal with the additional grounds which are raised by the petitioner in the Second Appeal on non-service of mandatory statutory notice in Form 6B, levy of penalty under Section 34(1) of the VAT Act read with Section 9(2) of the CST Act. 

The counsel appearing for the State did not  controvert the submission made by the petitioner and categorically accepted that the grounds raised by the petitioner in the Second Appeal are not dealt with by the Tribunal and as such, the Court may pass appropriate order.

The bench thus quashed the Tribunal's order which partly allowed the petitioner's second appeal and the order rejecting the petitioner's rectification appeal. 

"Considering the facts of the case, the petition succeeds and is accordingly allowed. The impugned judgment and order dated 2901.2025 passed by the Tribunal in Misc. Application No. 37 of 2024 is quashed and set aside and the Second Appeal no. 439 of 2018 is restored to its file.

The court remanded the matter back for consideration of all the grounds raised by the petitioner, and directed passing of fresh order within 12 weeks after following due procedure of law

The petition was allowed.

Case title: VITHLANI EXPORTS v/s  STATE OF GUJARAT & ORS.

R/SPECIAL CIVIL APPLICATION NO. 9536 of 2025

Counsel for petitioner: Advocate Apurva N Mehta 

Counsel for State: Assistant Government Pleader Shrunjal Shah

Click Here To Read/Download Order

Citation : 2025 LiveLaw (Guj) 181