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TMI Blog2012 (12) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... tra vires the basic structure of the Constitution of India, and (ii) the demands of Rs. 63,803/- and Rs. 2,49,58,334/- against the respective petitioners. Notices of the petitions were issued. Though the petitions were also accompanied with applications for interim relief but on the statement of the counsel for the respondent that the petitioners could file objections under Section 74 of the Act before the Objection Hearing Authority and that till the said objections are decided there would be no recovery, the said applications were disposed of giving liberty to the petitioners to avail the remedy of preferring objections. Counter affidavit was filed in W.P.(C) No.10932/2009 to which rejoinder was filed by the petitioner and Rule issued on 21st May, 2010. W.P.(C) No.7030/2010 was also similarly admitted for hearing and listed along with the earlier writ petition. 2. W.P.(C) No.4236/2012 was filed as a Public Interest Litigation averring that thousands of registered dealers had in June, 2012 been served with notices under Section 32 of default assessment of tax and interest and of assessment of penalty under Section 33 on account of non-reconciliation of details of purchase/sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Act except by the making of an assessment for the amount. 31 Self-assessment (1) Where a return is furnished by a person as required under section 26 or section 27 of this Act which contains the prescribed information and complies with the requirements of this Act and the rules - (a) the Commissioner is taken to have made, on the day on which the return is furnished, an assessment of the tax payable of the amount specified in the return; (b) the return is deemed to be a notice of the assessment and to be under the hand of the Commissioner; and (c) the notice referred to in clause (b) is deemed to have been served on the person on the day on which the Commissioner is deemed to have made the assessment. (2) No assessment shall arise under sub-section (1) of this section, if the Commissioner has already made an assessment of tax in respect of the same tax period under another section of this Act. 32 Default assessment of tax payable (1) If any person - (a) has not furnished returns required under this Act by the prescribed date; or (b) has furnished incomplete or incorrect returns; or (c) has furnished a return which does not comply with the requirements of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de an assessment of tax for the tax period, whichever is the earlier: PROVIDED that where the Commissioner has reason to believe that tax was not paid by reason of concealment, omission or failure to disclose fully material particulars on the part of the person, the said period shall stand extended to six years. (2) Notwithstanding sub-section (1) of this section, the Commissioner may make an assessment of tax within one year after the date of any decision of the Appellate Tribunal or court where the assessment is required to be made in consequence of, or to give effect to, the decision of the Appellate Tribunal or court which requires the re-assessment of the person. 35 Collection of assessed tax and penalties (1) Subject to sub-sections (2) and (4) of this section, where an amount of tax or penalty has been assessed under sections 32 or 33 of this Act, the Commissioner may not proceed to enforce payment of the amount assessed until two months after the date of service of the notice of assessment. (2) Where a person has made an objection to an assessment or part of an assessment in the manner provided in section 74 of this Act, the Commissioner may not enforce the paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power under the said sections to other Value Added Tax authorities. (2) A person who is aggrieved by the failure of the Commissioner to reach a decision or issue any assessment or order, or undertake any other procedure under this Act, within six months after a request in writing was served by the person, may make an objection against such failure. (3) An objection shall be in writing in the prescribed form and shall state fully and in detail the grounds upon which the objection is made. (4) The objection shall be made - (a) in the case of an objection made under sub-section (1) of this section, within two months of the date of service of the assessment, or order or decision, as the case may be,; or (b) in the case of an objection made under sub-section (2) of this section, no sooner than six months and no later than eight months after the written request was served by the person: PROVIDED that where the Commissioner is satisfied that the person was prevented for sufficient cause from lodging the objection within the time specified, he may accept an objection within a further period of two months. (5) The Commissioner shall conduct its proceedings by an examination of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee and not only of tax but also penalties, to the best of his judgment and to demand the same -the procedure prescribed therein is contrary to the principles of natural justice and cannot be upheld/sustained. It is argued that five thousand odd demands were raised merely because of non-reconciliation of the accounts of the selling and the purchasing dealers even though none of the assessees were in default and which reconciliation had been effected on the assessees preferring objections under Section 74 and pointing out the defects in reconciliation reducing the demand raised from Rs. 265 crores to Rs. 6.5 crores. It is argued that had the VATO, prior to the default assessment and penalty assessment under Sections 32 & 33, given opportunity of hearing/explanation to the assessees, the explanation which was furnished during objections under Section 74 would have been furnished and the huge demands and penalties would not have been raised; b. that the remedy of preferring objections against a demand under Sections 32 and 33 is not available owing to the first proviso to Section 74 (1) i.e. the same being not available against non-appealable orders as defined in Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulted in the VATO assuming the claims of the assessees to be unsubstantiated and which demands disappeared upon the assessees satisfying the VATO of the reductions claimed being properly matched and the mismatch in dates being responsible, for the VATO forming an opinion of the returns filed by the assessees being inaccurate. Attention is invited to the Circular No.1 of 2007/2008 dated 14th May, 2007 enumerating the Guidelines for framing and issuance of statutory orders/notices under the Act and on the basis whereof it is contended that the Department itself has experienced difficulties on account of non-speaking orders passed by VATOs; o. from the Order No.F.2(7)/DVAT/LSC/DOT & T/200607/1658-1666 dated 22nd December, 2006 it is shown that there is a difference between the Assessing Authority under Sections 32 and 33 and the Objection Hearing Authority under Section 74; p. that under the erstwhile Delhi Sales Tax Act, 1975 two appeals were provided i.e. the first one to the Prescribed Authority and the second to the Tribunal; now the first appeal has been substituted by objections aforesaid; q. that the petitioners are not seeking to challenge the provisions of the Act or the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to 7th Edition of Blacks's Law Dictionary defining 'opportunity to be heard' as a chance to appear in a Court or other Tribunal and present evidence and argument before being deprived of a right by Governmental Authority. 8. Reliance in this regard is placed on:- (i). Commissioner of Income-Tax Vs. Kelvinator of India Ltd. (2002) 256 ITR 1 (Delhi); (ii). The Board of High School and Intermediate Education, U.P. Vs. Kumari Chittra Srivastava AIR 1970 SC 1039; (iii). H.L. Trehan Vs. Union of India AIR 1989 SC 568; (iv). J.T. (India) Exports Vs. Union of India 94 (2001) DLT 301; (v). C.B. Gautam Vs. Union of India (1993) 199 ITR 530 (SC); (vi). Sahara India (Firm) Vs. Commissioner of Income Tax, Central-I (2008) 300 ITR 403 (SC); (vii). Salem Steel Industries Vs. Union of India 2002 (141) ELT 12 (Mad.); (viii). W.P.(C) No.2659/2012 titled Court on its own Motion Vs. Commissioner of Income Tax decided on 31st August, 2012 of this Court; (ix). K.I. Shephard V. Union of India (1987) 4 SCC 431; (x). Kesar Enterprises Ltd. Vs. State of Uttar Pradesh (2011) 13 SCC 733; (xi). Assistant Commissioner, Commercial Tax Department, Works Contract & Leasing, Kota Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e language of the notices under Sections 32 and 33. K. that it is only an order on the objections under Section 74 which results in a final order. L. that if hearing were to be given at the stage of Sections 32 and 33, the same would make the objections under Section 74 otiose; that legislature having chosen the model as enshrined in the Act and when the same is not causing any prejudice to the assessee, there is no reason to tinker therewith. M. that the concept of 'best judgment' is necessarily of judgment without hearing and the nomenclature of „best judgment‟ itself rules out any hearing. N. alternatively, the reasons which Sections 32 and 33 required to be given in support of the orders thereunder are a substitute for hearing. Reliance in this regard is placed on paras 10 and 11 of Haryana Warehousing Corporation Vs. Ram Avtar (1996) 2 SCC 98. 10. The counsels for the petitioners in rejoinder have contended that the objections are not heard by the VATO but by a senior officer; that the reasons cannot be a substitute for hearing. Reliance in this regard is placed on C.B. Gautam case and on M/s Shukla & Brothers supra. They reiterate that default assessments/pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sophisticated full-fledged hearing or it may be a hearing which is very brief and minimal; it may be a hearing prior to the decision or it may even be a post-decisional remedial hearing; the audi alteram partem rule is sufficiently flexible to permit modifications and variations to suit the exigencies of myriad kinds of situations which may arise. 15. The juristic policy enacted with clarity in the DVAT Act is of unilateral assessment first at the hands of the assessee and if the Assessing Officer is not satisfied therewith, then at the hands of the Assessing Officer. The Assessing Officer, of course while doing his unilateral assessment has the benefit of the assessment done by the assessee as well as any other material which may be available, and has to make the assessment to the best of his judgment. Only if the assessee remains dissatisfied with such unilateral assessment done by the Assessing Officer does the stage of „bilateral assessment‟ in the form of objections under Section 74 comes into play and which undoubtedly provides for an opportunity of hearing as is being demanded by the petitioners. 16. The expression "to the best of his judgment" was in State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to and change with exigencies of situations - they must be confined within their limits and cannot be allowed to run wild - while interpreting legal provisions, a court of law cannot be unmindful of the hard realities of life; the approach of the Court in dealing with such cases should be pragmatic rather than pedantic, realistic rather than doctrinaire, functional rather than formal and practical rather than precedential. 20. Prof. de Smith, the renowned author of "Judicial Review" (3rd Edition), was in Swadeshi Cotton Mills v. Union of India (1981) 1 SCC 664 quoted (with approval) as opining that statutory provision for an administrative appeal or even full judicial review on merits are sufficient to negative the existence of any implied duty to hear before the original decision is made; that the said approach is acceptable where the original decision does not cause serious detriment to the person affected. In the same judgment, it was enunciated that where a statute does not, in terms, exclude the rule of prior hearing but contemplates a post-decisional hearing amounting to a full review of the original order on merits, then such a statute would be construed as excluding the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash Chandra Ahuja (2008) 9 SCC 31, the test of prejudice was applied and it was held that if there is no prejudice, an action cannot be set aside merely on the ground that no hearing was afforded before taking a decision by the authority. 23. To our mind the scheme aforesaid of the Act does not cause any prejudice whatsoever to the assessee. Inspite of our repeated calling, the counsels for the petitioners failed to substantiate the prejudice if any which the assessees suffer in having the opportunity if any required of hearing, at the stage of objections and not at the stage of assessment under Sections 32 & 33. Though the argument, of the assessee if not complies with demands under Sections 32 and 33 acquiring the status of a defaulter was raised in response thereto, but the counsels were unable to support it with any provision of law. On the contrary a reading of Section 74(1) and Section 35 clearly shows that the liability for payment of the disputed demand under a best judgment assessment under Sections 32 & 33 arises only on the conclusion of objections and which as aforesaid is after the decision on objections and not prior thereto. That being the position, the question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ament has done in the lengthy process of legislation is unfair and that one should rather assume that what has been done is fair, until the contrary is shown. It was yet further held that where the person affected can be heard at a later stage and can then put forward all the objections he could have preferred if he had been heard on the making of the assessment, it by no means follows that he suffers an injustice in not being heard on the making of the order. Fairness was held to be not requiring plurality of hearings and it was observed that if there were too much elaboration of procedural safeguards, nothing would be done simply, quickly and cheaply. 27. Recently in Smt. Rasila S. Mehta Vs. Custodian, Nariman Bhavan, Mumbai (2011) 6 SCC 220 also the Supreme Court held that the fact that a statute does not provide for a pre-decisional hearing is not contrary to the rules of natural justice because the decision does not ipso facto takes away any right and the post-decisional hearing satisfies the principles of natural justice. 28. We are however unable to concur with the contention of the senior counsel for the respondents that the assessment at the stage of Sections 32 and 33 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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