Mukand Singh And Sons v. Presiding Officer, Sales Tax Tribunal, Haryana And Others

G.S Singhvi, J.:— This is a petition to quash the orders, annexures P5 to P7, passed respectively by the Deputy Excise and Taxation Commissioner-cum-Assessing Authority, Jagadhari, the Joint Excise and Taxation Commissioner (Appeals), Ambala and the Sales Tax Tribunal, Haryana.

2. The petitioner is a dealer registered under the Haryana General Sales Tax Act, 1973 (for short, “the Act”). The Assessing Authority, before whom the petitioner filed its returns for the year 1989-90, issued notice in form ST-25 and held enquiry into the various facets of the business of the assessee. It also secured some information from the Executive Engineer, Delhi Development Authority. After hearing the petitioner, the Assessing Authority held that the assessee was liable to pay Rs. 11 and Rs. 7,87,522 under the Act of 1973 and the Central Sales Tax Act, 1956, respectively. The Joint Excise and Taxation Commissioner (Appeals), Ambala and the Sales Tax Tribunal-II, Haryana, expressed their concurrence with the findings and the conclusions recorded by the Assessing Authority and dismissed the appeals filed by the petitioner. Although the petitioner has challenged the impugned orders on several grounds, in our opinion, it is not necessary to deal with all those grounds because in our opinion the impugned orders are liable to be quashed only on the ground of violation of the principles of natural justice.

3. The argument of Shri Dogra, learned counsel for the petitioner, is that the order passed by the Assessing Authority is contrary to the principles of natural justice, inasmuch as, the said authority did not give reasonable opportunity of hearing to the petitioner. Elaborating his argument, Shri Dogra submitted that the Assessing Authority did not summon the person who is said to have given information to the Assessing Authority regarding the supply of goods from Yamuna Nagar nor did the Assessing Authority consider the evidence produced by the petitioner in support of its plea that the goods have been supplied from Arunachal Pradesh. Learned counsel argued that the Assessing Authority gravely erred in relying on the letter written by the Executive Engineer, Delhi Development Authority regarding the alleged sale made by the assessee to the Delhi Development Authority because the genuineness of the information supplied by the Executive Engineer could not be tested by cross-examining the person who wrote letter dated March 3, 1992 to the Assessing Authority. Shri Dogra further argued that the documentary evidence produced by the petitioner to prove that the goods have been manufactured outside the State of Haryana and were supplied to the Delhi Development Authority from outside the State of Haryana has been completely ignored by the Assessing Authority, the Appellate Authority and the Tribunal and on this count alone the impugned orders should be nullified with a direction to the Assessing Authority to give reasonable opportunity of hearing to the petitioner. On the other hand, Shri Jaswant Singh argued that the information supplied by a public authority like the Delhi Development Authority could legitimately be taken into consideration by the Assessing Authority, particularly, when the copies of the documents were furnished to the petitioner.

4. We have thoughtfully considered the rival contentions and have perused the record of the writ petition as well as the record produced by Shri Jaswant Singh at the time of hearing. A careful reading of the order, annexure P5, shows that during the course of assessment, the Deputy Excise and Taxation Commissioner, Jagadhari sought some information from the Executive Engineer, Delhi Development Authority, Store Division No. 2, Janakpuri. In response to the communication sent by the Deputy Excise and Taxation Commissioner, Jagadhari the Executive Engineer concerned is said to have written letter dated December 27, 1991 to the Deputy Excise and Taxation Commissioner enclosing therewith the details of some bills allegedly given to the petitioner for supply of panelled doors and shutters. Subsequently, two more letters dated March 3, 1992 and June 15, 1992 were written by the Executive Engineer to the Deputy Excise and Taxation Commissioner. After receiving the notice from the Assessing Authority, the petitioner submitted a reply and demanded to be confronted with the evidence on the basis of which notice was issued. It also produced photostat copies of some of the documents. A request was also made on behalf of the petitioner to summon the Delhi Development Authority official, who had sent information to the Deputy Excise and Taxation Commissioner with a view to elicit truth from him. This request of the petitioner was rejected even though the Assessing Authority not only issued notice to the petitioner on the basis of the information collected from the office of the Delhi Development Authority but also made them the basis for recording a finding adverse to the petitioner. In our opinion, the Assessing Authority has acted illegally by refusing to accept the request of the petitioner for summoning of the official of the Delhi Development Authority. This action of the Assessing Authority resulted in the violation of the principles of natural justice and, therefore, the order passed by the Assessing Authority is liable to be upset.

5. In Kalra Glue Factory v. Sales Tax Tribunal, [1987] 66 STC 292, their Lordships of the Supreme Court set aside the order of the Sales Tax Tribunal on the ground of violation of the principles of natural justice. The court held:

“Special leave granted. Heard both the sides.

We allow this appeal solely on the ground that the statement of Banke Lal which was not tested by cross-examination was used in order to reach the conclusion that the transaction was an inter-State sale.”

6. In Jhulelal Enterprises v. Sales Tax Officer, [1996] 101 STC 320, a Division Bench of the Madhya Pradesh High Court set aside the proceedings of assessment on the ground of violation of the principles of natural justice. The Division Bench held that the respondents were under an obligation to summon the record of the Krishi Upaj Mandi if the dealer requested it, and also to furnish all the documents which they wanted to utilise against the petitioner. This was in the interest of fair-play as well as to comply with the requirement of section 18 of the Act.

7. The issue deserved to be examined from another angle. Section 28(1) of the Act of 1973 contains the procedure to be followed in the cases in which the Assessing Authority is satisfied that the returns furnished by the dealer are correct and complete. In such cases the Assessing Authority shall assess the amount of tax due from the dealer on the basis of such returns. Section 28(2), (3), (4), (5) and (6) contain the procedure which the Assessing Authority has to follow if it is not satisfied with the returns furnished by the dealer. In terms of these provisions, the Assessing Authority is required to serve a notice upon the dealer calling upon it to attend in person to produce evidence in support of the returns. After hearing the evidence which the dealer may produce and after considering such other evidence which the Assessing Authority may require on a specified point of time, the Assessing Authority has to assess the amount of tax due from the dealer. Under rule 26(1) of the Haryana General Sales Tax Rules, 1975, the dealer can be called upon to produce his books of account and other documents for examination by the Assessing Authority. The dealer can also produce evidence on which he may rely to support its case. The dealer is entitled to file written objections under rule 26(2). Clause (3) of rule 26 empowers the Assessing Authority to make such enquiries as it may deem fit and record a finding thereon. These provisions show that the Assessing Authority is obliged to adopt a procedure consistent with the principles of natural justice. This necessarily implies that the Assessing Authority must disclose every such piece of material which it may have collected at the back Of the assessee and which may be used for framing the assessment. The assessee is also entitled to produce evidence to support the returns filed by him. In cases where the Assessing Authority has collected some information from a third party, then the assessee is entitled to apply for cross-examination of such person for the purpose of eliciting the truth or for proving that the information furnished by such person is not genuine.

8. In the present case, the Assessing Authority rejected the request made by the petitioner for summoning the official of the Delhi Development Authority who furnished information to the Assessing Authority at the back of the assessee although that information has been used by the said authority for passing an order adverse to the rights of the petitioner. In our opinion, the Assessing Authority was not right in declining the request of the petitioner. We, therefore, hold that the order, annexure P5, is contrary to the principles of natural justice. The orders passed by the Joint Excise and Taxation Commissioner (Appeals) and the Sales Tax Tribunal-II are orders of affirmance. Therefore, in view of our finding that the order passed by the Assessing Authority is liable to be nullified on the ground of violation of the principles of natural justice, the orders passed by the Appellate Authority and the Tribunal are also liable to be nullified.

9. For the reasons mentioned above, the writ petition is allowed. Annexures P5 to P7 are quashed. However, the Assessing Authority shall be free to pass a fresh orders after giving reasonable opportunity of hearing to the petitioner.

10. Writ petition allowed.