2013 (5) TMI 113 - HC - VAT and Sales Tax

Reasoned order - natural justice - Classification Revenue contended that thermoplastic road marking material is chargeable to the tax @ 12.5% as it is unclassified material under Schedule V of the UP VAT - Claim of the revisionist that it is classifiable under Schedule II- Part A at Entry No.29 of Act payable @ 4% VAT. Held that - Reasons substitute subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the inscrutable face of the sphinx , it can be its silence, render it virtually impossible for the Courts to perform their appellate function or exercise the power of judicial review in adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system, reasons at least sufficient to indicate an application of mind to the later before Court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made. - matter remanded back.

Summary

Issues: Interpretation of classification under U.P. VAT Act for Thermoplastic Road Marking Material, validity of Tribunal's decision, requirement of reasoned order.

Analysis:

The judgment involves the interpretation of the classification of Thermoplastic Road Marking Material under the U.P. VAT Act. The revisionists contended that the material should be taxed at 4% as a chemical product, citing a previous judgment by a different Tribunal. However, the Tribunal in the present case held that the material falls under the category of paints and should be taxed at 12.5%. The revisionists argued that the Tribunal's decision was contrary to law as it did not provide reasons for disagreeing with the previous judgment. The court noted that a reasoned order is essential for transparency and understanding the decision-making process.

The court referred to precedents set by the Bombay High Court, emphasizing the importance of giving reasons in judicial decisions. It highlighted that failing to provide reasons amounts to a denial of justice, as reasons serve as a live link between the decision-maker's mind and the conclusion reached. The court stressed that reasons substitute subjectivity with objectivity and are crucial for judicial review and appellate functions. Therefore, the court found the Tribunal's decision lacking in reasoning, leading to the setting aside of the order and remanding the matters back to the Tribunal for a fresh decision in accordance with the law.

In conclusion, the judgment focused on the necessity of a reasoned order in administrative and judicial decisions. It reiterated the significance of providing reasons to ensure transparency, fairness, and the ability for parties to understand the basis of decisions. The court's decision to set aside the Tribunal's order and remand the matters for a fresh decision underscored the importance of adherence to legal principles and procedural fairness in tax classification disputes.