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PATNA HIGH COURT
V.Ramaswami and Raj Kishore Prasad JJ.
Hardutt Mull Jute Mills
Versus
State Of Bihar
Miscellaneous Judicial Case No. 414 of 1953 ; 415 of 1953 ;
Decided On : JULY 06, 1956
SALES TAX - Assessment - Estimate of gross turnover - Based on Inspector's report - Without disclosing report or material particulars to assessee - Legality - Principle of natural justice - Violation.
Fact of the Case:
The assessee failed to file a return or produce account books for the relevant periods. The Sales Tax Officer made an assessment under Sec.13(4) of the statute to the best of his judgment, relying on an Inspector's report. The assessee challenged the assessment, arguing that the Sales Tax Officer did not show him the report or disclose its material particulars before making the assessment, violating the principle of natural justice.
Finding of the Court:
The court held that there was no violation of the principle of natural justice in the circumstances of the case. The assessee had an opportunity to challenge the Inspector's report and produce evidence to rebut its allegations at the appellate and revisional stages of the administrative process. The court distinguished the Supreme Court decision in Dhakeswari Cotton Mills Ltd. V/s. Commr. of Income-tax, West Bengal, where the assessment was held invalid due to the Tribunal's refusal to consider rebutting evidence offered by the assessee.
Issues: Whether the assessment of sales tax upon the assessee is vitiated because the Sales Tax Officer did not show to the assessee the report of the inspector or because the Sales Tax Officer did not disclose to the assessee the material particulars of the Inspectors report before making assessment for the period in question?
Ratio Decidendi: The principle of natural justice is not violated if the party adversely affected is given sufficient opportunity to know the case he has to meet and to answer that case at some stage and not at all the stages of the administrative proceeding. The assessee had the opportunity to challenge the Inspector's report and produce evidence to rebut its allegations at the appellate and revisional stages of the administrative process.
Final Decision: The court answered the question referred to by the Board of Revenue in favor of the State of Bihar and against the assessee. The assessment of sales tax upon the assessee for both the periods was held to be legally valid.
Ramaswami, J.
1. In Misc. Judicial Case No. 414 of 1953, the assessee has a jute mill at Katihar in the district of Purnea where he carries on business in jute and jute products and cotton cloth. The assessee has also got a jute purchasing centre at Forbesganj in the same district where he carries on business of purchasing and selling Jute as well as textile. For the period 1-4-1948 to 31-3-1949, the assessee did not produce any return showing the gross turnover.
A notice under Sec.13, Sub-section (4), Bihar Sales Tax Act was served upon the assessee, calling upon him to produce his accounts for the period in question. More than a dozen adjournments were granted but the assessee failed to produce the account books. Thereupon the Sales Tax Officer proceeded to make an assessment under Sec.13(4) of the statute to the best of his judgment. The order of the Sales Tax Officer is dated 22-1-1950.
The Sales Tax Officer determined the taxable turnover at Rs. 1,02,31,200.00 and the sales tax was computed at Rs. 1,91,835/-, The assessee took the matter in appeal to the Commissioner of Sales Tax, but the appeal was dismissed. The assessee then moved the Board of Revenue and filed an application in revision, but this application was also dismissed by the Board of Revenue. At the instance of the assessee the Board of Revenue has stated the following question of law for the opinion of the High Court under Sec.25(1), Bihar Sales Tax Act: "Is it legal or permissible for a Sales Tax Officer to base his estimate on the report of an Inspector of the Department, without giving a copy of the same, when asked for, to the assessee, or without giving any Information about the material particulars of the report and without hearing the assessee on the same."
2. In Misc. Judicial Case No. 415 of 1953 the material facts are of similar character. The assessment is for the period 1-7-1947 to 31-3-1948, and the date of the assessment order of the Sales Tax Officer is 23-11-1949. The Sales Tax Officer determined the taxable turnover at Rs. 74,97,000 and the sales tax payable at Rs. 1,17,140/10/-. In this case also the assessee took the matter in appeal to the Commissioner of Bhagalpur Division, but the appeal was dismissed. The assessee preferred an application to the Board of Revenue in revision, but that application also was dismissed by the Board of Revenue. At the instance of the assessee the Board of Revenue has stated a case for the opinion of the High Court on the following question of law:
"Is it legal or permissible for a Sales Tax Officer to base his estimate on the report of an Inspector of the Department, without giving a copy of the same, when asked for, to the assessee, or without giving any information about the material particulars of the report and without hearing the assessee on the same."
3. After having heard counsel for the parties we consider that the questions referred to by the Board of Revenue in these cases have not been properly framed. In our opinion the questions should be framed in the following manner so as to bring out the real controversy between the parties:
"Whether in the circumstances of the case the assessment of sales tax upon the assessee is vitiated because the Sales Tax Officer did not show to the assessee the report of the inspector or because the Sales Tax Officer did not disclose to the assessee the material particulars of the Inspectors report before making assessment for the period in question?"
4. On behalf of the assessee Mr. Baldeva Sahay put forward the argument that the assessment of sales tax made by the Sales Tax Officer was illegal since the report of the Inspector was not shown to the assessee or, at any rate, the, substance of the Inspectors report was not disclosed to the assessee before the Sales Tax Officer proceeded to make the assessment. The argument of the learned counsel is based upon the circumstance that in the assessment order the Sales Tax Officer relied mainly upon the Inspectors r
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