BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED : 25/08/2009 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM W.P.(MD).Nos.2574 to 2575 of 2009 and M.P.(MD).Nos.1 & 2 of 2009 M/s.Shelters India, rep.by its partner A.A.Nathan, No.41, Perumal Kovil Street, Vilupuram. ... Petitioner in both W.Ps Vs 1.The Special Committee, O/o, Commissioner of Commercial Taxes, Ezlilagam, Chepauk, Chennai. 2.The Assistant Commissioner (CT), Tallakulam Circle, Madurai. ... Respondents in both W.Ps W.P(MD).Nos.2574 & 2575 of 2009 Petitions filed under Article 226 of the Constitution of India praying for the issuance of a Writ of Certiorari to call for the records in SCP.Nos.8 and 9 of 2009 (M3/46126 & 46127 /2008), dated 20.02.2009 respectively, on the file of the first respondent and quash the same. !For Petitioners ... Mr.S.Karunakar ^For Respondents ... Mr.Pala.Ramasamy Spl.Govt.Pleader *****
:COMMON ORDER
By consent of both parties, both Writ Petitions are taken up
together for final disposal.
2. Since the issues involved in both the Writ Petitions are
identical, they are taken up together and disposed of by a common order.
3. The facts leading to the case are as follows:-
3.a. The prayer in both the Writ Petitions are to quash the orders passed
by the Special Committee constituted under the provisions of Section 16(D) of
the Tamil Nadu General Sales Tax Act, 1959, dated 20.02.2009.
3.b. It is seen from the affidavits that orders of assessment came to be
passed, on 25.06.2007, against the petitioner calculating the total tax payable
for the assessment years 2000-2001 at Rs.4,05,400/- and for the assessment year
2001-2002 at 1,73,770/-. The orders of assessment came to be passed, after the
petitioner submitted their objections. However, the petitioner did not choose
to file an appeal against the order of assessment under the provisions of the
Act. The petitioner, however, filed an application under Section 16(D) of the
TNGST Act, on 10.10.2008, requesting the Special Committee to set aside the
orders of the Assessment for the afore-said two assessment years. In the
petition filed before the Special Committee, the petitioner has stated due to
unforeseen problems, they were not able to file a reply to the notice and
requested that adverse interference need not be drawn. The petitioner placed
the following facts before the Committee, which are usefully as hereunder:-
“It is submitted that the turn over has been determined based on the
inspection report of the Enforcement Wing Officers who inspected the place of
business on 26.05.2004 and recovery of certain records on issue of D7.
The residential flats named as Unicorn Monor situate at above address was
originally intended for Commercial sale of profit. The partnership firm
shelters India never took off. No transaction was effected. The business by
name “Shelters India” died as a concept.
The same was promoted as a family business by the family members. But as
there was no selling trend because of the location, or some reasons which is not
in our comprehension and all the amounts that were invested by them was arranged
by way of loan only. As the interest for the loan were going on increasing,
they had to surrender a portion of the property to Sri.Mohammed Ali from whom we
had taken money.
For the remaining portion, in order to escape from the escalating interest
on loan and as all over family members were having employment carrying monthly
salary, all the portions were sold to the family members by way of raising
housing loan from the various banks and the funds realised by the said means was
utilised to settle loan.”
4. On the above factual averments, the petitioner stated that
there was no commercial transaction involved in the construction of sale of
various flats and hence, there is no incidence of commercial tax. Further, it
was stated that the Assessing Authority has levied penalty under Section
12(3)(b) of the Act and such penalty could be levied only in the case of any
concealment turnover with an intention to evade payment of tax. Therefore, it
is seen that the legal issue which was raised before the Committee was as to
whether there is any incidence of commercial transaction involved in the present
case and whether there is intention to evade tax.
5. Further, it is stated by the petitioner that they could not
effect the pre-deposit of 25% to file an appeal and therefore, they could not
avail the remedies under the Act. The learned counsel for the petitioner would
submit that the Committee did not take into consideration the relevant factual
details which had been raised to show that the provisions of the Act and Rules
are not attracted and that itself would amount to violations of principles of
natural justice.
Heard the learned counsel for the petitioner and the learned counsel
for the respondents.
6. The learned counsel for the petitioner in support of his
contention placed reliance upon an order passed by this Court in W.P.Nos.34709
to 34712 of 2007, wherein this Court disposed of the said Writ Petition and
remanded the matter to the respondents for fresh consideration on merits and in
accordance with law.
7. Per contra, The learned Special Government Pleader appearing
for the respondents would contend that the impugned orders do not call for
interference, more particularly, considering the scope of Section 16(D) of the
Act. He would submit that power under the said Section cannot be constituted to
substitute the appellate power under the statute and the circumstances
warranting invoking of such power is very limited and the committee had found
that there has been no violation of principles of natural justice and rightly,
rejected the petitioner’s case. In such circumstances, the order cannot be
assailed by way of these present Writ Petitions. Added that, he points out that
D-7 records have been unearthed from the assessee premises by the Enforcement
Wing Officers.
8. In reply, the learned counsel for the petitioner would submit
that the Assessing Officer has stated that the entire D-7 records which have
been seized, have already been accounted for.
I have carefully considered the submissions made by either parties
and perused the materials available on record.
9. Before going into the factual matrix of the matter, it is
relevant to extract Section 16(D)(2) of the Act for the purpose of deciding this
case.
“16.D.1…….
(2) Notwithstanding anything contained in this Act, the Special Committee may,
of its own motion or on application, call for and examine the records of the
assessing authority in respect of any proceeding or order under sub-section (2)
or (3) of Section 12 or sub-section (1) or (2) of Section 16, if such proceeding
or order is passed in violation of the provisions of the Act or rules made
thereunder or without following the principles of natural justice, set aside the
said proceeding or order and direct the assessing authority to make a fresh
assessment and pass fresh proceeding or order in such manner as may be directed.
Provided that such proceeding or order against which any appeal or writ is
pending shall not be entertained under this sub-section.”
10. In terms of the said power, the Committee may on its own motion
or its application examine the records of the Assessing Officer in respect of
any order under Section 12 (2) or (3) or Section 16(1) or (2), if such
proceedings or order is passed.
(a) In violation of the provisions of the Act and the Rules made thereunder.
(b) made without following the principles of natural justice.
and if it is found that on violation of the two conditions as mentioned above,
the Committee has powers to direct the Assessing Authority to make fresh
assessment and pass fresh proceeding or order in such manner as may be directed.
11. Therefore, the Committee while considering the petition under
Section 16(D) of the Act has to examine as to whether there is a violation of
the provisions of the Act or Rules and that the order of the assessment
authority has been passed without following the principles of natural justice.
12. As could be seen in the impugned orders, the Committee had rendered
a finding, that on perusal of the files, it revealed that sufficient opportunity
had been given to dealer to file objection and there is no violation of
principles of natural justice and Act and Rules.
13. In my opinion, such a finding without reasons itself would be in
violation of the principles of natural justice. In the case of Muhurjee’s case
reported in S.N. Mukherjee v. Union of India, (1990) 4 SCC 594, the Hon’ble
Supreme Court held in paragraph Nos:35,38 and 39, are as follows:-
“35. Reasons, when recorded by an administrative authority in an order
passed by it while exercising quasi-judicial functions, would no doubt
facilitate the exercise of its jurisdiction by the appellate or supervisory
authority. But the other considerations, referred to above, which have also
weighed with this Court in holding that an administrative authority must record
reasons for its decision, are of no less significance. These considerations show
that the recording of reasons by an administrative authority serves a salutary
purpose, namely, it excludes chances of arbitrariness and ensures a degree of
fairness in the process of decision-making. The said purpose would apply equally
to all decisions and its application cannot be confined to decisions which are
subject to appeal, revision or judicial review. In our opinion, therefore, the
requirement that reasons be recorded should govern the decisions of an
administrative authority exercising quasi-judicial functions irrespective of the
fact whether the decision is subject to appeal, revision or judicial review. It
may, however, be added that it is not required that the reasons should be as
elaborate as in the decision of a court of law. The extent and nature of the
reasons would depend on particular facts and circumstances. What is necessary is
that the reasons are clear and explicit so as to indicate that the authority has
given due consideration to the points in controversy. The need for recording of
reasons is greater in a case where the order is passed at the original stage.
The appellate or revisional authority, if it affirms such an order, need not
give separate reasons if the appellate or revisional authority agrees with the
reasons contained in the order under challenge.
…..
38. The object underlying the rules of natural justice “is to prevent
miscarriage of justice” and secure “fair play in action”. As pointed out earlier
the requirement about recording of reasons for its decision by an administrative
authority exercising quasi-judicial functions achieves this object by excluding
chances of arbitrariness and ensuring a degree of fairness in the process of
decision-making. Keeping in view the expanding horizon of the principles of
natural justice, we are of the opinion, that the requirement to record reason
can be regarded as one of the principles of natural justice which govern
exercise of power by administrative authorities. The rules of natural justice
are not embodied rules. The extent of their application depends upon the
particular statutory framework whereunder jurisdiction has been conferred on the
administrative authority. With regard to the exercise of a particular power by
an administrative authority including exercise of judicial or quasi-judicial
functions the legislature, while conferring the said power, may feel that it
would not be in the larger public interest that the reasons for the order passed
by the administrative authority be recorded in the order and be communicated to
the aggrieved party and it may dispense with such a requirement. It may do so by
making an express provision to that effect as those contained in the
Administrative Procedure Act, 1946 of U.S.A. and the Administrative Decisions
(Judicial Review) Act, 1977 of Australia whereby the orders passed by certain
specified authorities are excluded from the ambit of the enactment. Such an
exclusion can also arise by necessary implication from the nature of the subject
matter, the scheme and the provisions of the enactment. The public interest
underlying such a provision would outweigh the salutary purpose served by the
requirement to record the reasons. The said requirement cannot, therefore, be
insisted upon in such a case.
40. For the reasons aforesaid, it must be concluded that except in cases where
the requirement has been dispensed with expressly or by necessary implication,
an administrative authority exercising judicial or quasi-judicial functions is
required to record the reasons for its decision.”
14. Therefore, the necessity to record reasons has been well settled by
the various decisions of the Hon’ble Supreme Court as well as in the decisions
cited above. That apart, a specific ground has been raised in the objection that
there is no incidence of commercial tax and the question of levy of penalty also
will not arise, as there is no intention to suppress the fact. This, in my view,
is a question has to be considered as to whether that there has been a violation
of the provisions of the Act and Rules.
15. In that view of the matter, I deem it appropriate to set aside
the impugned orders and remand the matter for fresh consideration to the first
respondent, who shall take into consideration the facts and question of law
raised by the petitioner in the petition and pass appropriate orders on merits
and in accordance with law at the earliest. It is also placed on record that the
petitioner has already deposited 25% of the total tax amount in respect of the
two assessment years in question.
With the above observations and directions, both Writ Petitions are
disposed of. Consequently, connected M.Ps are closed. No costs.
ssm
To
1.The Special Committee,
O/o, Commissioner of Commercial Taxes,
Ezlilagam, Chepauk,
Chennai.
2.The Assistant Commissioner (CT),
Tallakulam Circle,
Madurai.