L.MOHAPATRA, J & B.P.RAY, J.
W.P.(C). No.6567 OF 2010 ( Decided on 08 04. 2010.)
M/S. SPONGE UDYOT PVT. LTD. ……….petitioner
-V-
THE ASST.COMMISSIONER OF SALES TAX, ………..Opp.Party
ROUTKELA-II CIRCLE, ROURKELA.
ORISSA VALUE ADDED TAX ACT, 2004 (ACT NO. 4 OF 2005 ) – SEC.30.
For Petitioner – M/s. A.K.Parija, P.P.Mohanty, S.P.Sarangi,
B.C.Mohanty & P.K.Dash.
For Opp.Party – Shri Rudra Prasad Kar,
Standing Counsel (Commercial Taxes).
L.MOHAPATRA, J. The petitioner, a Private Limited Company questions the legality
of the order in Annexure-2 passed by the opposite party suspending its registration
certificate as a dealer.
2. The petitioner-Company has its factory at Jiabahal, Kalinga, in the district of
Sundargarh and has registered itself under the Orissa Value Added Tax Act (OVAT). It
carries on business of manufacturing and deals with pig iron, sponge iron, steel, alloy
steel, iron ore, all Ferro and metals and also carries on different business connected
thereto. On 25.3.2010, a notice was issued to the petitioner under Rule 32(2) of OVAT
Rules, 2005 requiring the petitioner to produce evidence, record/documents on the
allegation that it has knowingly furnished incomplete/incorrect information in the return
furnished for the tax period/periods and failed to pay tax, interest and penalty due under
the Act for the said period. The other allegation is that the petitioner conducted business
in such manner that there is reasonable apprehension of evasion of tax or attempt to
evade tax. Though this notice was given in Annexure-1, copy of the order in Annexure-2
suspending the registration certificate was not enclosed. After submitting application for
supply of copy of the order of suspension, the same was supplied on 5.4.2010 whereas
the order in Annexure-1 was passed on 25.3.2010. After obtaining a copy of the said
order, this writ application has been filed challenging the legality of the same solely on
the ground that prior to issue of the said order the petitioner had not been given an
opportunity to show cause.
3. Shri A.K. Parija, the learned Senior Counsel appearing for the petitioner relied on a
decision of this Court in the case of M/s. Ramkumar Jaigopal v. Assistant
Commissioner of Sales Tax, Sambalpur, reported in 2007 (I) OLR 534 and another
decision of this Court in the case of Sidhartha Engineering Pvt. Ltd. v. Assistant
Commissioner of Sales Tax and another, reported in 1999, Vol.115, Sales Tax
Cases, page-478 to support the above contention.
4. The learned Standing Counsel for Commercial Tax Department opposed the petition
on the ground that under the OVAT Act, prior to passing of an order of suspension,
there is no requirement of issue notice to show cause and the petitioner can apply for
restoration of the registration under the Act. Shri Kar, the learned counsel for the
Department further submitted that considering the allegation against the petitioner,
suspension of the registration became absolutely necessary in order to stop the
business. Keeping such eventuality in mind, the legislators never thought of issuance of
a notice to show cause prior to suspension of the registration. So far as the two
decisions cited by the learned Senior Counsel for the petitioner is concerned, Shri Kar,
the learned counsel appearing for the Department tried to distinguish both the decisions
on facts.
5. Admittedly before issuance of the order of suspension, the petitioner had not been
served with any notice to show cause. Admittedly there is no provision in the Act or the
Rules for service of a notice to show cause before an order of suspension is passed.
Under these circumstances, the Court is called upon to decide as to whether a notice in
the present case is required to be served on the petitioner to show cause before the
order of suspension was passed or not. In the case of M/s. Ramkumar Jaigopal v.
Assistant Commissioner of Sales Tax, Sambalpur, the challenge was in relation to
cancellation of registration certificate. The petitioner therein was a registered dealer
under the Sales Tax authorities for more than 58 years and without giving an
opportunity of hearing, the registration certificate was cancelled. The Court not only
dealt with Section 31 of the Act dealing with cancellation of certificate of registration but
also Section 30 of the Act which dealing with suspension of registration certificate. In
paragraph-8 of the judgment relying on an earlier decision of the Hon’ble Supreme
Court in the case of Smt. Maneka Gandhi v. Union of India and another, reported in
AIR 1978 SC 597, the Court made the following observation:
” xxx xxx xxx xxx
It must be kept in mind that the power of suspension/cancellation of
registration certificate of a dealer, clearly imposes civil consequence and in this
respect law is well settled in the case of Smt. Maneka Gandhi v. Union of India
and another reported in AIR 1978 SC 597 wherein, the Apex Court has held
that the rule of natural justice is embodied in every Statute and even where there
is no specific provision for the same and when an administrative action involves
civil consequence, the doctrine of natural justice must be held to be applicable.”
6. As is evident from reading of the judgment though the case related to cancellation
of registration certificate, the Court not only considered the question of cancellation of
registration certificate but also suspension thereof and came to hold that the power of
suspension/cancellation of registration certificate of a dealer clearly imposes civil
consequence and therefore, even where there is no specific provision to follow the
principles of natural justice, when an administrative action involves civil consequence,
the doctrine of natural justice must be held to be applicable.
In the case of Sidhartha Engineering Pvt. Ltd. v. Assistant Commissioner of Sales
Tax and another, in paragraph-8 of the judgment, the Court held that natural justice is
an inseparable ingredient of fairness and reasonableness. Observance of the principles
is the pragmatic requirement of fair play in action. The rules of natural justice operate as
implied mandatory procedural requirement and non-observance whereof invalidates the
action.
Reference may also be made to some other decisions in this connection. In the
case of Sahara India (Firm) v. Commissioner of Income-Tax and another, reported
in (2008) 300 ITR 403 (SC) referring to large number of earlier decisions including the
case of Maneka Gandhi (Mrs.) v. Union of India (supra), the Hon’ble Supreme Court
came to a conclusion that even an administrative order or decision in matters involving
civil consequences has to be made consistently with the rules of natural justice. The
concept of natural justice is invariably read into administrative actions involving civil
consequences, unless the statute conferring the power excludes its application by
express language. A similar view was expressed by this Court in the case of M/s. Iron
Exchange India Ltd. V. State of Orissa and others, reported in 1995 (I) OLR 402.
The Court held in the aforesaid decision that principle of natural justice must be read
into unoccupied interstices of the statute unless there is a clear mandate to the contrary.
Such power is inherent in every Tribunal, judicial or quasi-judicial character and the
purpose is to avoid miscarriage of justice. In the case of Basanta Kumar Sahoo v.
The State of Orissa and others, reported in 1990 (II) OLR 408 while dealing with the
case under the Urban Land (Ceiling and Regulation) Act, 1976, the Court held that
where valuable right is sought to be taken away, an opportunity of hearing though not
specifically provided in the Act, is desirable to be given. In the case of Kanak Cement
Pvt. Ltd. V. Sales Tax Officer, Assessment Unit, Rajgangpur, reported in (1997)
Vol.105 Sales Tax Cases 112, the Court observed that it is a fundamental requirement
of the principles of natural justice that if any person is likely to be affected by the use of
any material collected by the Revenue, those are to be brought to his notice, and
disclosed to him. The requirement of natural justice is to disclose by way of
confrontation the materials collected and proposed to be used against a dealer.
Admitted in the Act and the Rules, though there is no provision for affording an
opportunity of hearing before an order of suspension is passed, the said principle of
natural justice has also not been expressly excluded.
7. On reading of above judgments, it is clear that even in respect of suspension of
registration certificate, civil consequence follows and therefore, observance of principle
of natural justice is a necessity. We are, therefore, of the view that even though the
statute is silent about issuance of a notice to show cause prior to passing of an order of
suspension under Section 30 of the Act, when such order of suspension results in civil
consequences, the principles of natural justice should be followed. We are, therefore, of
the view that the order of suspension of registration certificate is liable to be quashed
even though it is open for the petitioner under the Act to seek for restoration of the
same.
8. Another submission was made by the learned counsel appearing for the
Department that if the order of suspension is quashed, the petitioner is likely to get
involved in such activities for which his registration had been put under suspension. In
order to avoid such a situation, we dispose of this writ application with the following
direction:
The order of suspension in Annexure-2 is quashed and it will be open for the
Department to proceed under Section 30 of the Act after giving an opportunity of hearing
to the petitioner to meet the allegations contained in Annexure-1. In the event, such
action is taken by the Department, till an order is passed under Section 30 of the Act, the
petitioner shall be permitted to run its business subject to the condition that the same
shall be done under the supervision of an Officer of the opposite party-Department and
every day transaction shall be intimated to the Department through the Officer who may
be deputed to supervise the same.
Writ petition allowed.