Gauhati High Court
M/S. New Tech Steel And Alloys Pvt. ... vs The State Of Assam And 2 Ors on 26 February, 2021
Page No.# 1/19
GAHC010129752017
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : WP(C)/3056/2017
M/S. NEW TECH STEEL and ALLOYS PVT. LTD.
A PVT LTD. COMPANY WITHIN THE MEANING OF THE COMPANIES ACT
1956, AND HAVING ITS REGISTERED OFFICE SITUATED AT N H 39, NEAR
CRPF GROUP CENTRE, KHATKHATI, ASSAM IN THE DIST- OF KARBI-
ANGLONG REPR. BY SRI SURESH SHARMA, ONE OF THE DIRECTORS OF
THE COMPANY
VERSUS
THE STATE OF ASSAM and 2 ORS.
REPR. BY THE COMMISSIONER AND SECRETARY TO THE DEPT OF
FINANCE, GOVT OF ASSAM, DISPUR, GUWAHATI- 781006, DIST-
KAMRUPM, ASSAM
2:THE COMMISSIONER OF TAXES
ASSAM
KAR BHAWAN
DISPUR
GUWAHATI- 781006
ASSAM
3:THE DEPUTY COMMISSIONER OF TAXES
NAGAON ZONE
NAGAON
ASSA
Advocate for the Petitioner : MS.N GOGOI
Advocate for the Respondent :
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BEFORE
HONOURABLE MR. JUSTICE SOUMITRA SAIKIA
JUDGMENT & ORDER(CAV)
Date : 26-02-2021
1. WP(C)/3056/2017 has been filed by the petitioner-company assailing the
assessment order dated 20-07-2013 passed by the respondent no. 3 assessing that the
petitioner to be liable to pay the taxes assessed and interest of Rs. 10,01,015/-
(Rupees Ten Lakhs One Thousand Fifteen) only as Tax due, interest payable Rs.
4,43,719/- (Rupees Four Lakhs Forty Three Thousand Seven Hundred Nineteen),
penalty of Rs. 5,00,000/- (Rupees Five Lakh) only under section 90 and Rs. 1,00,000/-
(Rupees One Lakh) and only under section 62(3) of the AVAT Act 2003 for the
assessment year 2010-11 and the Demand Notice dated 30.07.2013 issued seeking to
recover the amounts assessed.
WP(C)/3333/2017 has also been filed by the petitioner-company assailing the
assessment order dated 20-07-2013 passed by the respondent no. 3 under section
9(2) of the Central Sales Tax Act, 1956 read with section 37 of the Assam Value Added
Tax Act, 2003 in respect of quarterly turn over/return filed by the petitioner showing an
amount of Rs. 3,52,41,153/- (Rupees Three Crore Fifty Two Lakhs Forty One Thousand
One Hundred Fifty Three only) whereby an amount of Rs. 6,31,016/- (Rupees Six
Lahks Thirty One Thousand Sixteen only) was assessed as tax due and interest
payable. The demand Notice dated 30-07-2013 raising a demand of Rs. Rs. 6,31,016/-
(Rupees Six Lahks Thirty One Thousand Sixteen only) pursuant to the said assessment
order passed by the respondent no. 3 has also been assailed by the petitioner.
Since both the writ petitions were filed by the same petitioner being aggrieved
by the same respondent authority namely, respondent no. 3 and since the grounds of
challenge in both the writ petitions are common namely, violation of Principles of
Natural Justice because of non-issuance of proper Notice by the respondent
Department prior to completion of assessments order, both the writ petitions were
taken up for hearing together and are disposed of by a common order.
2. By notification dated 12-05-2009 the Government of Assam announced the
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Industrial and Investment Policy of Assam, 2008 (hereinafter referred to as the Policy
of 2008) granting exemption from payment of sales tax to New Industrial Units set up
on or after 01.10.2008 and also existing industrial units undertaking expansion,
modernization and diversification. The exemption was granted for a period of 7(seven)
years. The period of validity of the said Policy was for a period of 5(five) years w.e.f.
01.10.2008 to 30.09.2013. In order to give effect to the Policy of 2008, a Scheme,
namely, the Assam Industries (Tax Remission) Scheme, 2009 (hereinafter referred to
as the Scheme of 2009) was published vide Notification No. FTX.66/2009/2 dated
03.11.2009.
3. Being bolstered by the exemptions announced in the Industrial Policy of Assam,
2008 by the Government of Assam, the petitioner-company established its factory at
N.H.39, near CRPF Group Centre, Khatkhati, Assam in the district of Karbi Anglong for
manufacturing of MS Ingots and TMT Bars.
4. The petitioner-company being a new unit with State of Assam, applied for and
was granted an Eligibility Certificate as well as a Certificate of Entitlement for claiming
incentives and exemptions under the Policy of 2008 and the Scheme of 2009
respectively. The Eligibility Certificate and the Certificate of Entitlement was granted to
the petitioner on 26.08.2013 and 25.10.2013 respectively.
5. For the assessment year 2010-11, the petitioner submitted its annual returns. It
is contended that the returns filed were duly accompanied by the audited balance
sheet for the assessment year 2010-11. It is contended that the petitioner's case was
selected for Audit Assessments by the Department. Pursuant to the Notice received
from the Department, the petitioner informed the Department that it was granted the
Eligibility Certificate and the Certificate of Entitlement under the Policy of 2008 and the
Scheme of 2009 respectively. However, since the same was not handed over to the
petitioner-Company by the concerned Government Officials/Department the petitioner
verbally sought for time to produce the same. According to the petitioner, without
granting adequate opportunity to the petitioner to submit the necessary documents,
namely, the Eligibility Certificate and the Certificate of Entitlement, the respondent No.
3 proceeded with the assessment and thereafter passed the impugned order dated
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20.07.2013 and raised the demand of Rs. 10,01,015/- (Rupees Ten Lakhs One
Thousand Fifteen) only as Tax due, interest payable Rs. 4,43,719/- (Rupees Four Lakhs
Forty Three Thousand Seven Hundred Nineteen), penalty of Rs. 5,00,000/- (Rupees
Five Lakh) only under section 90 and Rs. 1,00,000/- (Rupees One Lakh) and only
under section 62(3) of the AVAT Act 2003 vide Demand Notice dated 30.07.2013.
Being aggrieved the petitioner has assailed the order of the assessment and Demand
Notice by way of WP(C)/3056/2017.
The petitioner also submitted quarterly returns under Central Sales Tax Act
showing a turnover of Rs. 3,52,41,153/- (Rupees Three Crore Fifty Two Lakhs Forty
One Thousand One Hundred Fifty Three only). However, the respondent no. 3 by the
impugned assessment order dated 20-07-2013 summarily assessed tax due and
interest payable without the benefit of concessional rates of taxes claimed by the
petitioner. Being aggrieved the action of the Department has been assailed by
WP(C)/3333/2017.
6. The learned counsel for the petitioner contends that the Department acted in an
arbitrary manner, inasmuch as, the respondent finance and taxation Department was a
constituent of the State Level Committee constituted by the Government to consider
and grant of Eligibility Certificate and the Certificate Entitlement under the Policy of
2008 and the Scheme of 2009 respectively. It is the contention of the petitioner that
the Finance and Taxation Department being a constituent of the State Level Committee
was well aware that the petitioner-Company had been granted the Eligibility Certificate
and the Certificate of Entitlement. As such, the impugned order dated 20.07.2013 and
the consequential demand raised vide Demand Notice dated 30.07.2013 ought not to
have been passed by the Department that too without affording adequate opportunity
to the petitioner to present the copies of the Eligibility Certificate and the Certificate of
Entitlement is arbitrary. Such high handedness of the respondent authority is illegal
and contrary to the provisions of the AVAT Act, 2003, the Policy of 2008 and the
Scheme of 2009 and, therefore, the same should be interfered with, set aside and
quashed.
7. The further case of the petitioner is that although a Notice dated 21.04.2012 was
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issued under the provisions of Section 36 of the AVAT Act, however, the impugned
order was passed under Section 37 of the AVAT Act, 2003. As no Notice as required
under section 37 of the AVAT Act 2003 and/or under the provisions of Central Excise
Act, was served upon the petitioner adequate opportunity was denied to the petitioner
to represent its case before the departmental authority before impugned order was
passed. As such the same being in violation of the Principles of Natural Justice, the
impugned order and the consequently demands raised is bad in law and therefore the
same should be set aside and quashed. In support of the contentions raised, the
learned counsel for the petitioner has relied upon the following judgments:-
(i) 1995 (99) STC 501 Gau - Superwhite Industries -Vs- State of Assam
and Ors.
(ii) 1990 78 STC 393 Gau - Dwijendra Kumar Bhattacharjee -vs-
Superintendent of Taxes.
(iii) MANU/JH/0352/2018 - Shiva Stone Chips -Vs- State of Jharkhand
and Ors.
(iv) Manu/SC/0314/2017 - Larsen & Toubro Ltd. -Vs- State of
Jharkhand and Ors.
8. The Department contested the case by filing an affidavit in WP(C) No.
3056/2017. The departmental counsel craved leave of this Court to rely upon the same
for the purposes the connected writ petition being WP(C) No. 3333/2017 also. The
Department in their affidavit submitted that in spite of notices being issued by the
Department there was no compliance by the petitioner in respect of the statutory
requirements. The Department contended that the Eligibility Certificate dated
26.08.2013 was issued only after the assessment order dated 20.07.2013 was passed.
Therefore, in the absence of compliance of the notice to appear by the petitioner-
Company and the fulfilment of the statutory requirements, there was no option left to
the Department but to proceed with the assessments which were completed vide order
dated 20.07.2013. The Department contended that there was complete non-
cooperation from the petitioner in spite of Notices being issued and opportunities being
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granted by the Department. According to the Department, the petitioner also did not
exercise the option of offering the Bank Guarantee for exercising the
Exemption/Remission before the issuance of the Eligibility Certificate and the
Certificate of Entitlement which is the mandatory requirement as per the Scheme of
2009. The Department, accordingly, submits that there being an alternative and
efficacious statutory remedy of appeal being available to the petitioner under the
statute, Writ Court may not interfere with the Assessment Order passed in the facts of
the present case.
9. The learned standing counsel representing the Department of Finance and
Taxation in support of his contentions that the petitioner having been issued notices in
respect of the assessments proposed to be made under section 36 of the AVAT Act,
2003 cannot complain of violation of Principle of Natural Justice and in support of his
contentions relies upon the Judgment of the Supreme Court in the case of Dharampal
Satyapal Limited -Vs- Deputy Commissioner of Central Excise, Guwahati and Ors .
reported in (2015) 8 SCC 519.
10. I have heard the learned counsels for the parties and have also perused the
pleadings available on record. The primary grievance of the petitioner is that the
petitioner had applied for and was granted Eligibility Certificate dated 26-08-2013 by
the Assam Industrial Development Corporation under which the petitioner was entitled
for claiming incentives under the Industrial Policy of Assam 2008 and for claiming
exemption of tax under the Assam Industries (Tax Exemption) Scheme 2009. The
incentives approved are 'VAT Exemption' with effect from 12-07-2010 to 11-07-2017
(07 years) subject to maximum of 100% of fixed capital investment i.e. Rs
9,89,04,734/- (Rupees Nine Crore Eighty Nine Lakhs four Thousand Seven Hundred
Thirty Four) only and power subsidy with effect from 12-07-2010 to 11-07-2015 for
five (five) years. The petitioner was also granted entitlement certificate dated 25-10-
2013 by the Commissioner of Taxes whereby the petitioner was entitled for exemption
of Rs 9,89,04,734/- (Rupees Nine Crore Eighty Nine Lakhs four Thousand Seven
Hundred Thirty Four) only from the period with effect from 12-07-2010 to 11-07-2017
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in respect of the finished products namely, 'M/s Ingots and TMT Bars'. It is the pleaded
case of the petitioner that annual returns dated 10-04-2012 for the Assessment year
2010-11 were duly filed before the authorities. In the said returns refund of taxes paid
to the extent of Rs. 12,76,901/- (Rupees twelve lakh seventy six thousand nine
hundred one) only was also claimed by the petitioner.
11. The petitioner's case was selected for Audit Assessment under section 36 of the
Assam Value Added Tax Act, 2003 and Notice dated 21-04-2012 was duly issued by the
respondents department directing the petitioner to appear before the authorities and
to produce books of accounts and other evidences in support of the return filed.
Subsequently, on 16-11-2012 another notice was issued directing the petitioner to
appear before the authorities. According to the petitioner its authorised representative
duly appeared before the authority and verbally submitted that it had been granted
exemption under the Industrial Policy and also under the Scheme of 2009, however,
the necessary certificates have not yet been received from the issuing authority and
therefore further time be granted to the petitioner to produce the exemption
certificates. The department thereafter issued Notices for imposition of penalty as
there was no compliance of the petitioner in respect of its statutory compliance and in
respect of which earlier Notices were issued. Thereafter, vide order dated 20-07-2013
impugned in the present proceeding, the department summarily completed the
assessments pending against the petitioner under section 37 of the AVAT Act, 2003.
For the assessment year 2010-11, the department raised a demand of Rs. 10,01,015/-
(Rupees Ten Lakhs One Thousand Fifteen) only as Tax due, interest payable Rs.
4,43,719/- (Rs. Four Lakhs Forty Three Thousand Seven Hundred Nineteen), penalty of
Rs. 5,00,000/- (Rupees Five Lakh) only under section 90 and Rs. 1,00,000/- (Rupees
One Lakh) and only under section 62(3) of the AVAT Act 2003 for the assessment year
2010-11. The demand of Taxes and Penalty was raised in terms of the assessments
completed by the demand notice dated 30-07-2013. Accordingly the said assessment
order dated 20-07-2013 and demand notice dated 30-07-2013 have been assailed in
the present proceeding. Pursuant to the issuance of the impugned order dated 20-07-
2013, the petitioner by communication dated 28-01-2014 represented before the
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respected authority requesting for passing an order for reassessment of their tax
liability, which however, had remained un-disposed.
The petitioner also filed returns under Central Sales Tax 1956. Both the cases
were pending before the same authority and were taken up for hearing on the same
dates. Although Notices dated 21-04-2012 and 16-11-2012 were issued by the
Department in respect of the assessments under AVAT Act, since both the proceedings
were taken up by the same authority and against the same petitioner, no separate
Notice was issued in respect of Assessments under Central Sales Tax.
12. The short case projected by the petitioner is that the assessments completed by
the department under section 37 of the AVAT Act, 2003 is hit by the Principle of
violation of Natural Justice inasmuch as, the Notice contemplated under section 37
prior to completion of the Best Judgment' assessment by the Assessing Authority was
not issued. The petitioner therefore submits that the impugned order dated 20-07-
2013 along with the demand Notice dated 30-07-2013 be set aside and quashed. It is
however seen from the pleadings that the only ground the petitioner has taken to
assail the correctness of the impugned order and demand raised by the department is
the violation of Principles of Natural Justice. It is also seen that the petitioner has not
assailed audit assessment made under section 36 of the AVAT Act. It is also not denied
by the writ petitioner notices as contemplated under section 36 had been issued by the
department and duly received by them. The contention of the petitioner that they had
appeared before the authority and verbally requested them to await for the Eligibility
and Entitlement Certificates yet to be received by the petitioner at the relevant point of
time and thereafter, proceed with the assessments, is disputed by the department.
13. Under the circumstances, in respect of the non-issuance of Notice by the
department as required under section 37 of the before the proceeding 'Best Judgment
Assessment', the petitioner has not been able to demonstrate as to how it has been
prejudiced by the non-issuance of Notice under section 37 to render entire proceedings
illegal, inasmuch as, the petitioner admitted to the receipt of Notice under section 36
as well as show causes prior to issuance of penalty. As such, it is not denied by the
petitioner that it was not aware of the Audit Assessments pending before the
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department. As it is seen from the pleadings that the petitioner has received Eligibility
Certificate on 26-08-2013 and entitlement certificate on 25-10-2013, i.e. well after the
impugned order being passed in any event the petitioner could not have submitted the
said certificate prior to passing of the impugned order. As such, non issuance of Notice
contemplated under section 37 of the AVAT Act, 2003 in the facts of the present case
did not cause the petitioner any prejudice to render on that count alone, the impugned
order declared to be illegal as the petitioner was served notice under section 36 at an
earlier point of time.
14. It is also seen from the pleadings that there is no challenge to the impugned
order on any other grounds other than violation of Principle of Natural Justice. While
there is no quarrel with the proposition that the Principle of Natural Justice is required
to adhered to, however, the party claiming to be affected by any violation of such
principle must necessarily demonstrate the prejudice caused to it by non-issuance of
any such notice. In the facts of the present case, the petitioner was well aware that
audit assessment for the relevant assessment year is being proceeded with by the
department however, in view of the alleged non-cooperation from the petitioner in
respect of furnishing of necessary books of accounts/evidences, which is reflected in
the recital of the impugned order, the department closed the assessments by resorting
to "Best Judgment" assessment under section 37 of the AVAT Act. It is also seen from
the provisions of the AVAT Act, 2003 that there is a limitation statutorily provided
under section 39 of the Act in respect of Assessments required to be made. Under
section 39 of the Act, it is provided that no assessments under the forgoing provisions
of the Act shall be made after expiry of five (5) years from the end of which the
assessment relates. The Taxation Authorities designated under the provisions of the
AVAT Act, are required to statutorily perform their duties prescribed. When the Officer
of the department undertakes assessment proceedings, the assessment will have to be
completed within the time limit specified. When the petitioner's case was selected for
audit assessment and Notices for the same were duly served upon the petitioner, if the
petitioner fails to appear and cooperate with the department or resiles from the
commitment earlier made to appear before the authorities and support its returns filed
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by proper evidence/books of account etc., the Departmental Authorities are required to
proceed in terms of the mandate of the Act. From the pleadings it is seen that for the
non-cooperation of the petitioner and/or failure of the petitioner as per its commitment
to appear before the authority and furnish necessary evidences/books of accounts, the
department proceeded to complete the assessment as per ' Best Judgment' of the
assessing officer, in terms of section 37. Under such circumstances, as discussed
above, the non issuance of prior Notice before completing the assessment under
section 37 cannot be treated to be sufficient alone to interfere with the orders and
demands Notices impugned in the absence of manifest prejudice shown to have been
suffered by the petitioner more particularly, when it is the petitioner's pleaded case
that the concerned exemption certificate and the certificate of entitlement was
received by the petitioner well after the assessment orders passed.
15. It is also seen that there are adequate efficacious remedy available under AVAT
Act, 2003 to address the grievances of the petitioner-Company without taking recourse
to the remedies provided under Article 226. Although, alternative remedy is not an
absolute bar, keeping in view that the petitioner had failed to respond the statutory
notices and also as the writ petition seeking quashment of the impugned orders was
filed after 3(three) years without justifying the delay, this Court is not persuaded to
entertain the prayers made and the reliefs sought for by the writ petitioner under
present circumstances.
16. At this stage the judgments relied upon by the learned counsel for the petitioner
need to be referred to. The learned counsel for the petitioner referred to the judgment
of Superwhite Industries (Supra) to support the contention that question of exemption
which required to be decided first before taking up assessment. There is no quarrel
with the proposition, however in the facts of the present case it is seen from the
pleadings that prior to the order of assessment being passed which is impugned in the
writ petition i.e. WP(C)/2007/2013, the exemption certificates were admittedly not
received by the writ petitioner. Therefore, it cannot be said that the question of
exemption could have been decided prior to assessment order being passed inasmuch
as, it was the duty of the petitioner to respond to the Notice issued by the Department
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and adequately address upon the question of exemptions granted to it before the
Departmental Authorities. From the facts pleaded as it is seen that as the petitioner did
respond to the Notice received, the Audit Assessment were completed by the
Department by taking recourse to 'Best Judgment Assessment' under section 37 of the
Act.
17. In the case of Dwijendra Kumar Bhattacharjee vs- Superintendent of Taxes , this
Court held that opportunity given to the assessing to be heard must be real and
reasonable. This Court in the said case held that when the assessee seeks sometime
stating difficulties, his prayer should be considered judiciously. As it might not be
possible for assessee to submit such evidences instantaneously or at short notice. This
Court held that such prayer cannot be summarily rejected without considering the
ground given by the assessee because the Assessing Officer is hard pressed for time
and has to complete the assessment by a specific date or for administrative
exgigencics.
8. In the present proceedings, time as prayed for was duly granted by the
petitioner, and which is not disputed by the petitioner. The petitioner also does not
dispute the receipt of Notices issued by the Department, in the process of the
assessment conducted. However, the petitioner was not able to furnish any such
petition or application preferred before the Department Authorities which had been
rejected summarily without considering the prayer of the petitioner. Accordingly,
although I respectfully concur with the ratio laid down, however in the facts of the
present case, this Judgment will not be applicable.
19. The judgment of the Hon'ble High Court of Jharkhand in the case of Shiva
Stone Chips vs- The State of Jarkhand and Ors. is relied upon by the petitioner to
support the contention that quasi judicial authorities are also required to follow the
settled Principle of Natural Justice. The Hon'ble High Court of Jharkhand in the said
case of Shiva Stone Chips vs- The State of Jarkhand and Ors. referred to by the
petitioner, also holds that quasi judicial authorities are required to record reasons and
to provide opportunity of hearing, the principle of which although not disputed, the
same however, is not applicable in the facts of the present case.
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20. The petitioner has also relied upon the judgment of the Apex Court in the case
of Larsen & Toubro Ltd. Vs State of Jharkhand and Ors . reported in (2017) 13 SCC 780
in support of his contention raised in the writ petition. In the said judgment, the issue
involved is the meaning that can be ascribed to the term 'information' in respect of the
powers granted under statutes to Department authorities to reopening of assessment.
The Apex Court held as under-
'27. There are a catena of judgments of this Court holding that
assessment proceedings can be reopened if the audit objection points
out the factual information already available in the records and that it
was overlooked or not taken into consideration. Similarly, if audit points
out some information or facts available outside the record or any
arithmetical mistake, assessment can be reopened.'
However, in the facts of the present proceedings this judgment will not come to
the aid of the petitioner. As discussed above, the entire challenge in the present
proceeding is to the impugned order dated 20-07-2013 passed by the Assessing
Officer under section 37 of the AVAT Act, 2003 solely on the ground of violation of the
Principles of Natural Justice. No other grounds have been urged to assail the
correctness of the impugned order passed. Nor is the Audit Assessment Proceedings
initiated by the Department under challenge. The case projected by the petitioner is
not where assessments completed were sought to be responded, rather the Audit
Assessments initiated were completed by resorting to "Best Judgment" assessment.
The assessment order has been assailed on the ground of the same being violative of
the Principles of Natural Justice as the "Best Judgement" assessment were completed
by non-issuance of prior Notice to the petitioner.
21. The learned state counsel has pressed into service the judgment of the Apex
Court rendered in the case of Dharampal Satyapal Limited -vs- Deputy Commissioner
of Central Excise, Gauahti and Ors . reported in (2015) 8 SCC 519. The Apex Court in
the said judgment examined the applicability of the Principle of Natural Justice as well
as requirement of procedural fairness in respect of opportunity of being heard to be
given by the decision making authority. The Apex Court examined the various
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judgements enunciating the Principles of Natural Justice and while upholding the
requirement of following the Principles of Natural Justice/audi alteram partem to be
adhered to by judicial as well as quasi-judicial authorities, the Apex Court however,
held that there are instances and cases were non-grant of hearing or violation of a
Facet of Natural Justice would not ipso-facto lead to the conclusion always that the
order complained of is null and void. The Apex Court held that the validity of such
order will have to be decided on the touchtone of 'prejudice' caused to the
complainant therein. The Apex Court however held that it is only the Courts who are
empowered to consider whether any purpose would be served in remanding the case
keeping in mind whether any prejudiced is caused to the person against whom the
action to be taken. The relevant paragraphs are extracted below:
"38. But that is not the end of the matter. While the law on the
principle of audi alteram partem has progressed in the manner
mentioned above, at the same time, the courts have also repeatedly
remarked that the principles of natural justice are very flexible
principles. They cannot be applied in any straitjacket formula. It all
depends upon the kind of functions performed and to the extent to
which a person is likely to be affected. For this reason, certain
exceptions to the aforesaid principles have been invoked under certain
circumstances. For example, the courts have held that it would be
sufficient to allow a person to make a representation and oral hearing
may not be necessary in all cases, though in some matters, depending
upon the nature of the case, not only full-fledged oral hearing but
even cross-examination of witnesses is treated as a necessary
concomitant of the principles of natural justice. Likewise, in service
matters relating to major punishment by way of disciplinary action, the
requirement is very strict and full-fledged opportunity is envisaged
under the statutory rules as well. On the other hand, in those cases
where there is an admission of charge, even when no such formal
inquiry is held, the punishment based on such admission is upheld. It
is for this reason, in certain circumstances, even post-decisional
hearing is held to be permissible. Further, the courts have held that
under certain circumstances principles of natural justice may even be
excluded by reason of diverse factors like time, place, the
apprehended danger and so on.
39. We are not concerned with these aspects in the present case as
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the issue relates to giving of notice before taking action. While
emphasising that the principles of natural justice cannot be applied in
straitjacket formula, the aforesaid instances are given. We have
highlighted the jurisprudential basis of adhering to the principles of
natural justice which are grounded on the doctrine of procedural
fairness, accuracy of outcome leading to general social goals, etc.
Nevertheless, there may be situations wherein for some reason--
perhaps because the evidence against the individual is thought to be
utterly compelling--it is felt that a fair hearing "would make no
difference"--meaning that a hearing would not change the ultimate
conclusion reached by the decision-maker--then no legal duty to
supply a hearing arises. Such an approach was endorsed by Lord
Wilberforce in Malloch v. Aberdeen Corpn. [(1971) 1 WLR 1578 :
(1971) 2 All ER 1278 (HL)] , who said that: (WLR p. 1595 : All ER p.
1294)
"... A breach of procedure ... cannot give [rise to] a remedy in the
courts, unless behind it there is something of substance which has
been lost by the failure. The court does not act in vain."
Relying on these comments, Brandon L.J. opined
in Cinnamond v. British Airports Authority [(1980) 1 WLR 582 : (1980)
2 All ER 368 (CA)] that: (WLR p. 593 : All ER p. 377)
"... no one can complain of not being given an opportunity to make
representations if such an opportunity would have availed him
nothing."
In such situations, fair procedures appear to serve no purpose since
the "right" result can be secured without according such treatment to
the individual.
40. In this behalf, we need to notice one other exception which has
been carved out to the aforesaid principle by the courts. Even if it is
found by the court that there is a violation of principles of natural
justice, the courts have held that it may not be necessary to strike
down the action and refer the matter back to the authorities to take
fresh decision after complying with the procedural requirement in
those cases where non-grant of hearing has not caused any prejudice
to the person against whom the action is taken. Therefore, every
violation of a facet of natural justice may not lead to the conclusion
that the order passed is always null and void. The validity of the order
has to be decided on the touchstone of "prejudice". The ultimate test
is always the same viz. the test of prejudice or the test of fair hearing.
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44. At the same time, it cannot be denied that as far as courts are
concerned, they are empowered to consider as to whether any
purpose would be served in remanding the case keeping in mind
whether any prejudice is caused to the person against whom the
action is taken. This was so clarified in ECIL [(1993) 4 SCC 727 : 1993
SCC (L&S) 1184 : (1993) 25 ATC 704] itself in the following words:
(SCC p. 758, para 31)
"31. Hence, in all cases where the enquiry officer's report is not
furnished to the delinquent employee in the disciplinary proceedings,
the courts and tribunals should cause the copy of the report to be
furnished to the aggrieved employee if he has not already secured it
before coming to the court/tribunal and given the employee an
opportunity to show how his or her case was prejudiced because of
the non-supply of the report. If after hearing the parties, the
court/tribunal comes to the conclusion that the non-supply of the
report would have made no difference to the ultimate findings and the
punishment given, the court/tribunal should not interfere with the
order of punishment. The court/tribunal should not mechanically set
aside the order of punishment on the ground that the report was not
furnished as is regrettably being done at present. The courts should
avoid resorting to short cuts. Since it is the courts/tribunals which will
apply their judicial mind to the question and give their reasons for
setting aside or not setting aside the order of punishment, (and not
any internal appellate or revisional authority), there would be neither a
breach of the principles of natural justice nor a denial of the
reasonable opportunity. It is only if the court/tribunal finds that the
furnishing of the report would have made a difference to the result in
the case that it should set aside the order of punishment."
22. The issue regarding the invalidation of an order solely on the ground of non
adherence to the Principles of Natural Justice has again recently come up for
consideration before the Apex Court in the case of State of U.P -vs- Sudhir Kr Singh
and Ors reported in (2020) SCC Online SC 847. The Apex Court while considering
various judgments has summarised the Principles regarding adherence to the doctrine
of Natural Justice as under:
"39. An analysis of the aforesaid judgments thus reveals:
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(1) Natural justice is a flexible tool in the hands of the judiciary to reach
out in fit cases to remedy injustice. The breach of the audi alteram
partem rule cannot by itself, without more, lead to the conclusion that
prejudice is thereby caused.
(2) Where procedural and/or substantive provisions of law embody the
principles of natural justice, their infraction per se does not lead to
invalidity of the orders passed. Here again, prejudice must be caused
to the litigant, except in the case of a mandatory provision of law
which is conceived not only in individual interest, but also in public
interest.
(3) No prejudice is caused to the person complaining of the breach of
natural justice where such person does not dispute the case against
him or it. This can happen by reason of estoppel, acquiescence, waiver
and by way of non-challenge or non-denial or admission of facts, in
cases in which the Court finds on facts that no real prejudice can
therefore be said to have been caused to the person complaining of
the breach of natural justice.
(4) In cases where facts can be stated to be admitted or indisputable, and
only one conclusion is possible, the Court does not pass futile orders
of setting aside or remand when there is, in fact, no prejudice caused.
This conclusion must be drawn by the Court on an appraisal of the
facts of a case, and not by the authority who denies natural justice to
a person.
(5) The "prejudice" exception must be more than a mere apprehension or
even a reasonable suspicion of a litigant. It should exist as a matter of
fact, or be based upon a definite inference of likelihood of prejudice
flowing from the non-observance of natural justice."
23. From the above discussion, what can be summarised is that where procedural
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or substantive provision of law provide for issuance of prior Notice, their infraction
ipso-facto does not always lead to the invalidity of the order passed unless prejudice
caused to the litigant is shown except in cases where public interest is involved. The
prejudice caused to the litigant should not be a mere apprehension or even a
reasonable suspicion apprehend. It should exist as a matter of fact and/or based upon
a definite inference of likelihood of prejudice flowing from the non-observance of
Natural Justice. When this principle laid down by the Apex Court are applied to the
facts of the present proceedings, it is seen that the petitioner does not dispute the
issuance of and receipt of Notices by the Department in respect of Audit Assessments
which had commenced.
24. There is also no dispute that under the scheme of AVAT Act 2003, under any of
the conditions mentioned under section 37, the Departmental Authority may proceed
for completing the assessment as per its 'Best Judgement'. The Certificate of
Exemption dated 26-08-2013 and Certificate of Entitlement dated 25.10.2013 were not
available with the petitioner during the continuance of assessment proceeding. This
fact is also not disputed by the petitioner. It is also not disputed that the petitioner did
not file any petition/application citing appropriate reasons for deferring the assessment
proceeding. Consequently, the Certificate of Exemption and Certificate of Entitlement
were not available before the assessing authority during the said proceedings.
Therefore, although the Notice contemplated under section 37 was not served upon
the petitioner as contended, in the facts of the present case, no prejudice is seen to
have been caused to the petitioner inspite of prior Notice not being issued requiring
interference of the impugned assessment order dated 20-07-2013 passed by the
Assessing Officer only on the ground of violating/non-adherence of the Principles of
Natural Justice.
25. Be that as it may, it is seen that pursuant to the impugned order dated
20.07.2003 and Demand Notice dated 30.07.2003 raised was passed, the petitioner
filed a representation before the respondent Department dated 28.01.2014 requesting
for re-assessment of their tax liability for the assessment year 2010-11. In the said
representation, the petitioner stated that the Eligibility Certificate and the Certificate of
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Entitlement were not issued from the respective department prior to passing of the
impugned assessment order and consequently the same could not be produced before
the respondent Department prior to the impugned order of assessment being passed.
The petitioner-Company represented that the said certificates have since been received
and, therefore, the prayer for re-assessment has been made.
26. Upon perusal of the provisions of the AVAT Act, 2003, it is seen that under
Section 83, there is a power of rectification under section 83 of the AVAT Act 2003, any
authority including Appellate /Revisional Authority or the Appellate Tribunal may on an
application or otherwise at any time within three (3) years from the date of any order
passed by it, rectify any error apparent on the face of the record. It is also seen from
the record that this Court by order dated 24-05-2017 while directing the respondent
Department to obtain required instruction, by way of an interim order directed that no
coercive against shall be taken against the petitioner on the basis of the order dated
20-07-2003 (Annexure-X) of the writ petition passed by the respondent no. 3.
Consequently, by virtue of the interim order, Tax & Penalty demanded by the
Department has not been realised from the petitioner. Keeping in view the fact that
there is no dispute at the Bar that the petitioner for the relevant period of time was
issued Eligibility Certificate and Certificate of Entitlement, and the same, if produced
before the Department, could have been adequately taken note of during the audit
assessment proceedings, this Court is of the view that ends of justice will be met, if
the matter is remanded back to the department. The department will adequately
address the grievances of the petitioner in terms of the representation dated 28-01-
2014 filed before the Department and which is presently pending before the
Department as fairly submitted by the department counsel. The Department will pass
appropriate orders theeon as may be permitted under the provisions of AVAT Act
including section 83, read with the Rules as well as per the provisions of the Policy of
2008 and the Scheme of 2009.
27. The entire exercise will be completed within a period of 4(four) weeks from
today. Till such orders are passed by the Department as indicated above and duly
communicated to the petitioner, the interim order passed on 24.05.2017 directing no
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coercive action to be taken in terms of the impugned order dated 20.07.2013 will be
continued.
28. The writ petition stands disposed of in the above terms. No cost.
JUDGE
Comparing Assistant
