2019 (8) TMI 742 - HC - VAT and Sales Tax

Order of the tribunal dismissing the appeal - Imposition of Trade Tax - Annual Maintenance Contract service - tax on value of the goods used in replacement under warranty and AMC - principles of natural justice - HELD THAT - Providing of reasons in orders is of essence in judicial proceedings. Every litigant who approaches the Court with a prayer is entitled to know the reasons for acceptance or rejection of such request. Either of the parties to the lis has a right of appeal and therefore it is essential for them to know the considered opinion of the Court to make the remedy of appeal meaningful. It is the reasoning which ultimately culminates into final decision which may be subject to examination of the appellate or other higher Courts. It is not only desirable but in view of the consistent position of law mandatory for the Court to pass orders while recording reasons in support thereof however brief they may be. Brevity in reasoning cannot be understood in legal parlance as absence of reasons. It is a settled canon of legal jurisprudence that the Courts are vested with discretionary powers but such powers are to be exercised judiciously equitably and in consonance with the settled principles of law. Whether or not such judicial discretion has been exercised in accordance with the accepted norms can only be reflected by the reasons recorded in the order impugned before the higher Court. Often it is said that absence of reasoning may ipso facto indicate whimsical exercise of judicial discretion - The Court cannot lose sight of the fact that a losing litigant has a cause to plead and a right to challenge the order if it is adverse to him. Opinion of the Court alone can explain the cause which led to passing of the final order. Whether an argument was rejected validly or otherwise reasoning of the order alone can show. To evaluate the submissions is obligation of the Court and to know the reasons for rejection of its contention is a legitimate expectation on the part of the litigant. The court should provide its own grounds and reasons for rejecting claim/prayer of a party whether at the very threshold i.e. at admission stage or after regular hearing howsoever concise they may be - In the case in hand no reasons whatsoever have been recorded by the Tribunal and the matter has been decided in cryptic manner by recording only that it had agreed with the reasons given by the Joint Commissioner (Appeals) such an order cannot be sustained in law. The matter is remanded to the Tribunal for re-consideration after affording opportunity of hearing to the parties concerned - revision allowed by way of remand.

Summary

Issues Involved:
1. Imposition of Trade Tax on the value of goods used in replacement under warranty and Annual Maintenance Contract (AMC).
2. Lack of recorded reasons by the Trade Tax Tribunal in its judgment.

Issue-wise Detailed Analysis:

1. Imposition of Trade Tax on the Value of Goods Used in Replacement under Warranty and AMC:

The revisionist, a dealer in computers and computer accessories, challenged the orders of the Trade Tax Tribunal dated 21.05.2007 and 08.12.2005. The controversy arose when the Assessing Authority imposed Trade Tax on the amount of ?42,00,000, which represented the value of goods used in replacements under warranty and AMC for the assessment years 1998-99 and 2000-01. The Assessing Authority taxed the turnover on spare parts used during the execution of the AMC.

The revisionist argued that defective or worn-out parts were replaced at their discretion without charging any amount for the same, and the replaced parts became the property of the revisionist. Despite this, the Joint Commissioner (Appeal)-3, Trade Tax, Lucknow, dismissed the appeals against the assessment orders. Subsequently, the second appeals filed by the revisionist were also dismissed by the Trade Tax Tribunal.

2. Lack of Recorded Reasons by the Trade Tax Tribunal:

The High Court observed that the Tribunal dismissed the appeals by merely stating its agreement with the Joint Commissioner (Appeal), without providing any reasons or findings. The court emphasized that appellate authorities are duty-bound to consider all aspects of the matter, appreciate the factual matrix, apply relevant laws, and record reasons for their conclusions. An order without valid reasons cannot be sustained, as it violates the principles of natural justice.

The court cited several Supreme Court judgments, including *The Secretary & Curator, Victoria Memorial v. Howrah Ganatantrik Nagrik Samity and ors.*, which highlighted the importance of recording reasons in judicial orders. The absence of reasons renders an order indefensible and unsustainable, particularly when subject to further challenge before a higher forum. The court reiterated that recording reasons ensures transparency, fairness, and proper application of mind, which are essential attributes of judicial decision-making.

The High Court held that the Tribunal’s failure to provide reasons indicated a lack of application of mind, making the order unsustainable. It remanded the matter to the Tribunal for reconsideration, directing it to afford an opportunity of hearing to the parties and to pass a reasoned and speaking order within three months from the date of receiving a certified copy of the High Court's order.

Conclusion:

The High Court disposed of the revision by setting aside the Tribunal’s orders due to the lack of recorded reasons and remanded the matter for reconsideration with specific directions to ensure compliance with the principles of natural justice.