2023 (9) TMI 1626 - HC - VAT / Sales Tax

Violation of principles of natural justice - primary challenge to the SCN is on the ground of the same being an un-reason and non-speaking SCN - HELD THAT - A bare perusal of the reply that the petitioners have submitted would go to show that they had submitted their detailed reply to the show cause notices raising various contentions and objections in respect of the proceedings initiated and the issuance of the show cause notice but the impugned order is totally silent on these aspects nor is there any reference of those contentions and objections which have been raised by the petitioner in their reply to the show cause notice. So far as the issue of an order to be a reasoned order so also an order to be a speaking order is by now a well settled position of law where reasons are considered to be the essence of order. The authorities concerned are not expected to act in a mechanical manner. In the case of KRANTI ASSOCIATES PVT. LTD. VERSUS MASOOD AHMED KHAN 2010 (9) TMI 886 - SUPREME COURT the Hon ble Supreme Court held It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. There are no hesitation in reaching the conclusion that the impugned order is an un-reason and non-speaking order. The same being without there being any discussion of any of the contentions and objections raised in replies to the show cause notice issued. The impugned order therefore to the aforesaid extent only on the technical ground of the same being and un-reason and non-speaking order deserves to be and is accordingly set aside/quashed. The matter stands remanded back to the 1st respondent for passing of fresh speaking order on due consideration of the contentions and objections that the petitioner had raised in the reply to the show cause notice. Conclusion - The necessity for orders to be reasoned and speaking ensuring that authorities demonstrate due application of mind and avoid arbitrariness. Petition allowed by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

• Whether the impugned order issued under the Telangana Value Added Tax, 2005 is a reasoned and speaking order.
• Whether the lack of consideration of the petitioner's contentions and objections in the impugned order renders it arbitrary and legally unsustainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether the impugned order is a reasoned and speaking order.

• Relevant legal framework and precedents: The requirement for orders to be reasoned and speaking is a well-established legal principle. The judgment references the Supreme Court's decision in Kranti Associates (P) Limited vs. Masood Ahmed Khan, which emphasizes the necessity for quasi-judicial authorities to record reasons in support of their conclusions.
• Court's interpretation and reasoning: The court noted that the impugned order merely reproduces the contents of the show cause notice without addressing the petitioner's contentions and objections. The absence of reasons in the order suggests a lack of application of mind by the authority.
• Key evidence and findings: The court found that the impugned order did not reflect any consideration of the detailed reply submitted by the petitioner, which raised various contentions and objections.
• Application of law to facts: The court applied the principles from the cited precedents, concluding that the impugned order failed to meet the requirement of being a reasoned and speaking order.
• Treatment of competing arguments: The respondents attempted to justify the order, but the court found no evidence of the petitioner's contentions being considered.
• Conclusions: The court concluded that the impugned order is an un-reason and non-speaking order, warranting its quashing and remand for a fresh decision.

Issue 2: Whether the lack of consideration of the petitioner's contentions renders the order arbitrary and legally unsustainable.

• Relevant legal framework and precedents: The court referenced the Supreme Court's decisions in East Coast Railway vs. Mahadev Appa Rao and Assistant Commissioner, Commercial Tax Department, Works Contract and Leasing, Kota vs. Shukla and Brothers, which highlight the importance of recording reasons to avoid arbitrariness.
• Court's interpretation and reasoning: The court emphasized that the absence of reasons in the impugned order indicates arbitrariness, as it fails to demonstrate the authority's application of mind.
• Key evidence and findings: The court observed that the impugned order did not address the petitioner's detailed replies and objections, leading to a conclusion of arbitrariness.
• Application of law to facts: By applying the legal principles, the court determined that the order's lack of reasoning rendered it legally unsustainable.
• Treatment of competing arguments: The court found the respondent's justification insufficient to counter the lack of reasoning in the order.
• Conclusions: The court concluded that the impugned order is arbitrary and legally unsustainable, necessitating its quashing and remand for reconsideration.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "We do not have any hesitation in reaching the conclusion that the impugned order is an un-reason and non-speaking order."
• Core principles established: The necessity for orders to be reasoned and speaking, ensuring that authorities demonstrate due application of mind and avoid arbitrariness.
• Final determinations on each issue: The court quashed the impugned order and remanded the matter to the first respondent for passing a fresh speaking order, considering the petitioner's contentions and objections.

The judgment underscores the importance of reasoned decision-making in quasi-judicial and administrative orders, reinforcing the principles of fairness and transparency in the justice system.