1998 (2) TMI 550 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the petitioner-club is covered by the doctrine of "mutuality" making the club immune from the Bihar Finance Act, 1981 and Bihar Sales Tax Rules, 1983?
2. What will be the effect of rejecting the application filed by the Deputy Commissioner, Commercial Taxes, without following the principle of natural justice?

Analysis:

Issue 1:
The petition was filed by M/s. Ranchi Club Limited and its Honorary Secretary seeking a declaration that they are not liable under the Bihar Finance Act, 1981 and Bihar Sales Tax Rules, 1983 as they are not engaged in the business of sale and are not considered dealers. The club argued that its activities do not constitute "sale" as defined under the Act. They applied for cancellation of their dealership and refund of taxes paid in the past, claiming to operate on the principle of "mutuality." The respondent-State contended that the club is a dealer and its activities fall within the definition of "sale" under the Act. The High Court noted the need for a detailed investigation into the club's operations to determine if the doctrine of "mutuality" applies. The court emphasized the importance of affording the petitioner a fair hearing before reaching a conclusion on this issue.

Issue 2:
The Deputy Commissioner, Commercial Taxes, rejected the club's application without providing an opportunity to be heard, violating the principle of natural justice, audi alteram partem. The court found that the order was passed ex parte and quashed it on the grounds of procedural fairness. The court emphasized that no one should be condemned without being heard and directed the authority to rehear the matter, allowing the petitioner to present arguments on the applicability of the "mutuality" doctrine. The court instructed the authority to issue a speaking order within three months, considering all relevant aspects of the case.

In conclusion, the High Court remanded the case to the Deputy Commissioner for a fresh hearing, emphasizing the importance of procedural fairness and the need for a thorough examination of the club's operations in relation to the doctrine of "mutuality." The court highlighted the significance of affording the petitioner a fair opportunity to present their case and directed the authority to decide the matter expeditiously while considering all relevant arguments presented by the petitioner.