1971 (2) TMI 89 - HC - VAT and Sales Tax

Summary

Issues:
Violation of principles of natural justice and error apparent in the order impugned.

Detailed Analysis:
The petitioner, engaged in the rice business, was assessed for sales tax under the Madras General Sales Tax Act for the years 1961-62, 1962-63, and 1963-64. The assessments were reopened based on information provided by a dismissed employee, Guruswami, who was convicted of misappropriation. The petitioner was not given a fair opportunity to cross-examine Guruswami, despite requesting it. The assessing authority proceeded with reassessment without allowing proper cross-examination, leading to the impugned order. The petitioner contended that the order should be struck down due to a violation of natural justice and apparent errors.

The court emphasized that principles of natural justice apply broadly, even in taxation matters. It stated that authorities reopening assessments must ensure the basis for reassessment is justifiable and acceptable. In this case, the informer, Guruswami, was a dismissed employee with legal issues, making his information questionable. The petitioner consistently sought to cross-examine Guruswami to disprove the relevance of incriminating slips attributed to his business. Despite Guruswami's unavailability, the court held that the petitioner was denied a real opportunity to challenge the basis of reassessment, violating natural justice principles.

The court found an apparent error in the impugned order as it heavily relied on Guruswami's untested statement and slips. The petitioner's claim that the slips did not relate to his business was not adequately addressed through cross-examination. The court stressed that justice must not only be done but also appear to be done. Therefore, it concluded that the reliance on Guruswami's unverified information was unjustified, indicating an error in the order.

As a result of the violation of natural justice principles and the apparent errors in the order, the court made the rule nisi absolute in all three writ petitions, allowing them. No costs were awarded, and the department was given the option to pursue the matter lawfully, ensuring compliance with natural justice principles in the future, such as by producing Guruswami for cross-examination or meeting the test of reasonableness.