Bombay High Court Quashes Review Order Which Disallowed Deductions, Being Contra To Natural Justice

The Bombay High Court has quashed the review order against Kalpataru Power Transmission, disallowing works-contract deductions beyond Show Cause Notice (SCN).The bench of Justice G. S. Kulkarni and Justice Jitendra Jain has observed that the review order is in patent breach of the principles of natural justice and that, without jurisdiction, the petition deserved to be entertained.The petitioner/assessee executed two projects of electricity distribution lines for Maharashtra State Electricity Distribution Company Limited (MSEDCL). The assessee claimed the deduction.The department issued a show cause notice to review the assessment order on the ground that a deduction under Rule 58 on profit from the supply of labour and services has been wrongly allowed.The assessee replied to the notice and reiterated its detailed submissions made on earlier occasions. The assessee stated that the assessing officer verified the facts in the course of the assessment proceedings and allowed the deduction.The department passed an order in review under Section 25 of the MVAT Act, rejecting the submissions made by the assessee. The department in the order held that since the assessee has failed to submit the correct amount of deduction of profit, they are not eligible to get the deductions provided under Rule 58(1)(a) to (h). Therefore, the assessee will be allowed to claim deduction only as per Table under Rule 58(1) of the MVAT Rules.The assessee contended that the jurisdiction of the department to pass the review order was contrary to the principles of natural justice, and therefore, even though an alternative remedy is provided under the MVAT Act, the petition is maintainable under Article 226 of the Constitution of India.The department contended that the conditions laid down in the proviso to Rule 58 before applying the rates prescribed in the table under Rule 58 have been considered. Therefore, it cannot be said that the jurisdictional conditions were not satisfied before the application of the rates prescribed in the Table under Rule 58(1) of the MVAT Rules. The department has correctly invoked the jurisdiction to pass an order under Section 25 of the MVAT Act.The court ruled that It is a settled position in law that if the action of an authority is wholly without jurisdiction or contrary to the principles of natural justice, a writ petition would be required to be maintainable, and the Petitioners should not be relegated to an alternative remedy. The assessee’s challenge to the review was clearly on the ground that the principles of natural justice are violated in as much as the same is passed without satisfying the pre-condition required for exercising the power of review under Section 25 of the MVAT Act and under Rule 58(1) of the MVAT Rules.Case Title: Kalpataru Power Transmission Ltd. Versus State Of MaharashtraCase No.: Writ Petition No.4505 Of 2022Date: 03/08/2023Counsel For Appellant: Nikita BadhekaCounsel For Respondent: Dushant KumarClick Here To Read The Order

Bombay High Court Quashes Review Order Which Disallowed Deductions, Being Contra To Natural Justice

Mariya Paliwala

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