1988 (11) TMI 338 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of assessment under section 12(4) of the Orissa Sales Tax Act.
2. Influence of pre-assessment scrutiny report on the assessment.
3. Adherence to principles of natural justice.
4. Competence of the Commissioner of Sales Tax to issue administrative instructions.
5. Availability of alternative remedies.

Detailed Analysis:

1. Validity of assessment under section 12(4) of the Orissa Sales Tax Act:
The petitioner, a dealer in consumer goods, challenged the assessment for the year 1987-88 under section 12(4) of the Act. The assessment was based on a fraud report concerning credit purchases by another dealer, Manoranjan Dogra. The assessing officer disbelieved the dealer's accounts and enhanced the gross turnover by Rs. 12,00,000, resulting in a tax demand of Rs. 83,452. The dealer contended that the assessment was arbitrary and influenced by the Assistant Commissioner's pre-assessment scrutiny report.

2. Influence of pre-assessment scrutiny report on the assessment:
The dealer argued that the assessing officer did not exercise independent judgment and was influenced by the Assistant Commissioner's pre-assessment scrutiny report, which suggested enhancing the gross turnover by Rs. 12,00,000. The court noted that the similarity in the enhancement amount led to the belief that the assessing officer followed the Assistant Commissioner's suggestion without independent evaluation, thus compromising the quasi-judicial nature of the assessment.

3. Adherence to principles of natural justice:
The court emphasized the importance of impartiality and fairness in quasi-judicial proceedings. It cited Supreme Court judgments, including Mahadayal Premchandra v. Commercial Tax Officer, Calcutta, and Orient Paper Mills Ltd. v. Union of India, which held that quasi-judicial authorities must exercise independent judgment and not be influenced by superior officers. The court found that the Assistant Commissioner's active involvement in suggesting the enhancement amount undermined the principles of natural justice and the confidence of the dealer in the fairness of the assessment process.

4. Competence of the Commissioner of Sales Tax to issue administrative instructions:
The court acknowledged that under section 3-A of the Act, the Commissioner of Sales Tax is competent to issue administrative instructions for the guidance of subordinate officers. However, it clarified that such guidance should not interfere with the quasi-judicial functions of the assessing officers. The court found nothing objectionable in the Commissioner's circular for pre-assessment scrutiny but emphasized that the Assistant Commissioner should not suggest specific enhancements or grounds for rejection of accounts.

5. Availability of alternative remedies:
The opposite parties argued that the petitioner should have availed the remedy of appeal as per the Act. The court recognized the availability of an efficacious remedy by way of appeal but decided to intervene due to the apparent arbitrariness of the assessment influenced by the pre-assessment scrutiny report. The court's intervention aimed to provide general guidance to the sales tax authorities to ensure fairness in assessment proceedings.

Conclusion:
The writ petition was allowed, and the assessment orders (annexures 3-A, 3-B, 3-C, and 3-D) were quashed. The court remanded the proceeding to the Sales Tax Officer for reassessment in accordance with the law, directing the petitioner to appear before the officer on 14th November 1988. The judgment underscored the importance of independent judgment in quasi-judicial functions and adherence to natural justice principles.