Gujarat High Court Quashes VAT Tribunal Order, Cites Violation of Natural Justice

Tribunal's Failure to Address Key Grounds Raised by Appellant Leads to Restoration of Second Appeal

In a significant development, the Gujarat High Court has quashed an order passed by the Gujarat Value Added Tax Tribunal, citing a breach of natural justice principles. The case, involving Vithlani Exports, a proprietary concern engaged in agricultural trading, revolved around the Tribunal's failure to address crucial grounds raised by the appellant in their second appeal.

The Division Bench, comprising Justices Bhargav D. Karia and Pranav Trivedi, delivered the judgment on October 16, 2025, in response to a writ petition filed under Article 226 of the Constitution of India. The petitioner, represented by Advocate Mr. Apurva Mehta, challenged the Tribunal's decision dated January 29, 2025, which had rejected a rectification application without addressing specific grounds related to non-service of mandatory statutory notice and the levy of penalty under the Value Added Tax Act (VAT Act) and the Central State Tax Act (CST Act).

The controversy originated from an assessment order for the financial year 2009-10, wherein additional dues amounting to Rs. 16,92,165 were raised, along with interest and penalty due to disallowance of Input Tax Credit. Despite paying the pre-deposit tax amount, the petitioner’s appeal was rejected, prompting the filing of a second appeal with the Tribunal.

In its judgment, the High Court emphasized the Tribunal’s obligation to address all grounds raised by the appellant, underscoring the importance of the Audi Alteram Partem principle, which mandates a fair hearing and unbiased decision-making. The court found that the Tribunal's failure to consider the appellant's grounds amounted to a denial of fair hearing and necessitated the quashing of its order.

The High Court has restored the second appeal and remanded the matter back to the Tribunal, instructing it to consider all issues raised by the petitioner and pass a fresh order following the due procedure of law. The Tribunal has been directed to complete this exercise within twelve weeks from the receipt of the court’s order.

This judgment reiterates the judiciary’s commitment to ensuring adherence to natural justice principles, especially in quasi-judicial proceedings. The decision serves as a reminder to tribunals and adjudicating authorities to thoroughly address all aspects raised in appeals to uphold the fairness and integrity of legal processes.

Bottom Line:

Tribunal obligated to address all grounds raised by the appellant, including non-service of mandatory statutory notice and levy of penalty under VAT Act and CST Act, before passing any order - Failure to do so amounts to denial of fair hearing and violates the principle of Audi Alteram Partem.

Statutory provision(s): Article 226 of the Constitution of India, 1950; Value Added Tax Act, 2003 Sections 34(12), 73, 78, and 79

Vithlani Exports v. State of Gujarat, (Gujarat)(DB) : Law Finder Doc Id # 2796047