2016 (6) TMI 303 - HC - VAT and Sales Tax

Commitment of forgery with an intent to defraud the exchequer - Order passed without affording opportunity of being heard and by relying on the report of relevant tax officer - Violation of principles of natural justice - Held that - it is evident that the adjudicating authority perceived the petitioning assessee to have committed forgery and having indulged in fraudulent conduct. Once any person sitting in judgment over a matter or a party comes to such a conclusion, it is difficult to expect a balanced assessment from such authority. There is no doubt that the entire process of adjudication in this case has been vitiated by the reliance on the report obtained by the adjudicating authority behind the back of the petitioning assessee and without further reference to the petitioning assessee. For the abject breach of the principles of natural justice evident from the order impugned dated January 27, 2016, such order is set aside. The alternative remedy in this case was not necessary to be invoked since the prejudice complained of in this extraordinary jurisdiction was capable of being addressed herein. - Petition allowed by way of remand

Summary

Issues: Violation of principles of natural justice in adjudication process

The judgment delivered by the High Court addressed the issue of a palpable violation of the principles of natural justice in the adjudication process. The petitioners raised concerns regarding the adjudicating authority's reliance on a report from the State Sales Tax authorities without providing the petitioning assessee an opportunity to respond. The Union argued that all relevant information was already before the authority and no prejudice was caused to the petitioning assessee. However, the Court noted that the reliance on the report without giving the petitioning assessee a chance to explain led to a flawed conclusion of forgery and fraudulent conduct against the assessee. The Court emphasized the importance of balanced assessment and set aside the impugned order due to the breach of natural justice principles.

Detailed Analysis:

The judgment highlighted the petitioners' complaint about the adjudicating authority's violation of natural justice principles by relying on a report from the State Sales Tax authorities without affording the petitioning assessee an opportunity to respond. The Court noted that the authority's reliance on the report led to a conclusion of forgery and fraudulent conduct against the assessee without considering the assessee's perspective. The Union contended that since the information was already available to the authority, no prejudice was caused to the assessee. However, the Court emphasized that a unilateral reliance on a report without hearing the other side's response could taint the adjudication process.

The Court further analyzed the adjudicating authority's perception of forgery and fraudulent conduct by the petitioning assessee based on the report from the sales tax officer. The authority's conclusion without seeking the assessee's explanation was deemed a breach of natural justice principles. The Court highlighted the importance of affording the petitioning assessee a fair opportunity to present their side before reaching a definitive conclusion. The judgment underscored that a balanced assessment requires hearing both parties involved in the adjudication process.

In conclusion, the High Court set aside the impugned order due to the abject breach of natural justice principles. The Court emphasized that the adjudicating authority should conduct a fresh adjudication on the demand without being influenced by the previous flawed order. The judgment directed the authority to provide the petitioning assessee with a due opportunity of hearing and complete the adjudication within six months. The Court's decision aimed to rectify the procedural irregularities and ensure a fair and unbiased adjudication process for the petitioning assessee.