1972 (9) TMI 109 - SC - VAT and Sales Tax

Whether notice issued under section 12(8) of the Orissa Sales Tax Act, 1947 (Act 14 of 1947) should be quashed on the ground that it does not mention the reasons for the issue of the notice? Held that - Appeal allowed. As the details of the material which led to the initiation of proceedings under section 12(8) of the Act had been recorded in the relevant case file. The said file, it would appear from the affidavit of Shri Mohanty, was kept available for reference by the High Court at the time of hearing. No reference, it would seem, was however made to that file because the High Court did not feel the necessity of doing so.

Issues Involved:
1. Legality of the notice issued under section 12(8) of the Orissa Sales Tax Act.
2. Jurisdiction of the Sales Tax Officer in issuing the notice.
3. Compliance with principles of natural justice.
4. Requirement of stating reasons in the notice.
5. Validity of the combined notice for reassessment and penalty.

Issue-wise Detailed Analysis:

1. Legality of the notice issued under section 12(8) of the Orissa Sales Tax Act:
The petitioner challenged the legality of the notice dated 31st March 1967, issued under section 12(8) of the Orissa Sales Tax Act for alleged escaped assessment for the year 1963-64. The petitioner argued that the notice was illegal as it did not indicate any reason for its issuance, thus violating statutory requirements and principles of natural justice. The Sales Tax Officer defended the notice, stating it was based on positive materials and that the petitioner was aware of the basis for the proceedings due to the seizure of documents.

2. Jurisdiction of the Sales Tax Officer in issuing the notice:
The petitioner contended that the Sales Tax Officer had no jurisdiction to issue the notice under section 12(8) as it was a "roving enquiry" without any specified reason. The High Court agreed with the petitioner, referencing the case of B. Patnaik Mines (P.) Ltd. v. N.K. Mohanty, where a similar notice was deemed to be a charge-sheet without a charge, thus invalid and beyond jurisdiction. The Supreme Court, however, held that the Sales Tax Officer had jurisdiction if there was a reason to believe that the turnover had escaped assessment, even if the notice did not explicitly state the reason.

3. Compliance with principles of natural justice:
The petitioner argued that the notice violated principles of natural justice as it did not provide reasons, thus preventing the petitioner from adequately defending against the reassessment. The High Court supported this view, stating that natural justice demands that the notice must mention the reason for the alleged escaped assessment. The Supreme Court, however, concluded that while the reasons need not be stated in the notice, the dealer must be given an opportunity to respond to the material used against them during the reassessment proceedings.

4. Requirement of stating reasons in the notice:
The High Court quashed the notice on the ground that it did not mention the reasons for its issuance, aligning with its earlier decision in B. Patnaik Mines (P.) Ltd. The Supreme Court disagreed, stating that the statute did not require the reasons to be included in the notice. The Court emphasized that the existence of a reason for the belief that the turnover had escaped assessment was sufficient, and the reasons could be recorded separately by the Sales Tax Officer.

5. Validity of the combined notice for reassessment and penalty:
The petitioner did not explicitly challenge the combined notice for reassessment and penalty in the writ petition before the High Court. The Supreme Court noted that this issue was not raised earlier and thus did not express an opinion on its validity. However, it was indicated that the question of penalty would only arise at the time of reassessment, and the dealer must be given an opportunity to show cause against the penalty.

Conclusion:
The Supreme Court allowed the appeals, setting aside the High Court's judgment and dismissing the writ petitions. The Court held that the notice under section 12(8) need not state the reasons for its issuance, provided the Sales Tax Officer had a reason to believe that the turnover had escaped assessment. The Court also emphasized the need for the dealer to be given an opportunity to respond to the material used against them during reassessment proceedings. The parties were directed to bear their own costs.

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