TMI Blog2012 (12) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... under Sections 32 and 33 is not to be enforced. Though undoubtedly the third proviso to Section 74(1) has now given a power to the Objection Hearing Authority to direct the disputed tax or penalty or any part thereof also to be deposited but the very fact that the second proviso as well as Section 35(2) have also been retained along therewith on the statute book is indicative of the invocation of the third proviso being only if the circumstances so demand and not in the usual course. Moreover the order if any under the third proviso to Section 74 (1) is to be after giving an opportunity of hearing to the dealer. The contention of the petitioners that the third proviso to Section 74(1) is being invoked as a matter of routine is not only without any specific pleading and particulars but even otherwise does not constitute a ground for us to interfere with the scheme once the legislative policy is plain and clear. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout adequate opportunity to the dealer / assessee, as ultra vires the basic structure of the Constitution of India, and (ii) the demands of ₹ 63,803/- and ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or penalty or other amount in the nature of tax, interest or penalty due under this 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 inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e person furnished a return under section 26 or sub-section (1) of section 28 of this Act; or (b) the date on which the Commissioner made 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n amended. PROVIDED ALSO that no objection shall be made to the Commissioner against an order made under section 84 or section 85 of this Act if the Commissioner has not delegated his 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ault of filing the return but also when the return though filed is incomplete or incorrect or does not comply with any other requirements or if the VATO is not satisfied therewith , without granting any opportunity of hearing 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 ₹ 265 crores to ₹ 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; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e form of objections; n. that the large number of best judgment assessment orders, which resulted in the filing of the petition, were owing to a mismatch in dates of entry into the computer system of the transactions by the seller and the buyer and which resulted 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 74(1) and requiring the objector to deposit amounts which are not due, as a pre-condition for entertaining the objections. 7. Reference is made to the VAT Acts of other States which are all stated to be providing an opportunity of hearing before assessment. Reference is also made 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teething problems being faced at the initial stages of implementation; that no steps for recovery in pursuance thereto were taken and as the initial difficulties are being solved, within a period of 15 days, the demand thereunder of ₹ 265 crores stands reduced to ₹ 6.5 crores. J. that the Department is open to changing the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntessence of reasonableness. 14. The Constitution Bench of the Supreme Court, in Maneka Gandhi Vs. Union of India (1978) 1 SCC 248 which is considered as the Bible on the principles of natural justice, has held that what opportunity may be regarded as reasonable would necessarily depend on the practical necessities of the situation; it may be a 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, it was observed that though it may involve hardship but hearing post-suspension suffices. Even in Ajit Kumar Nag Vs. General Manager (PJ), Indian Oil Corporation Ltd., Haldia (2005) 7 SCC 764 it was held that the principles of natural justice are not rigid or immutable and hence they cannot be imprisoned in a straitjacket - they must yield 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 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scheme once the legislative policy is plain and clear. Moreover a law has to be adjudged for its constitutionality by the generality of cases it covers, not by the freaks and exceptions it martyrs (Krishna Iyer, J in R.S. Joshi, Sales Tax Officer, Gujarat Vs. Ajit Mills Ltd. (1977) 4 SCC 98). 22. In Haryana Financial Corporation Vs. Kailash 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that before the Courts exercise unusual power of supplementing the procedure laid down in legislation, it must be clear that the statutory procedure is insufficient to achieve justice and that to require additional steps would not frustrate the apparent purpose of the legislation. It was further held that one should not start by assuming that what Parliament 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the respondents that the same is not statutory and cannot change the statute, to incorporate in Sections 32 and 33, a provision for hearing which is excluded therefrom. Executive instructions cannot run contrary to statutory provisions or whittle down their effect (State of Madhya Pradesh Vs. G.S Dall Flour Mills 1992 Supp. (1) SCC 150). Such instructions which have no statutory force, do not give rise to any legal right in favour of the aggrieved party and cannot be enforced in a Court of law against the administration (The Chief Commercial Manager, South Central Railway Vs. G. Ratnam (2007) 8 SCC 212). This was recently reiterated in The Joint Action Committee of Airlines Pilots Associations of India Vs. The Director General of Civil Aviation (2011) 5 SCC 435. 31. The fact that the post decisional hearing in the present case is not with a closed mind is apparent from the contention of the petitioners themselves that the demand of ₹ 265 crores already stands reduced to ₹ 6.5 crores and may be still further reduced on completion of objections hearing. 32. Once the legislative scheme is not found to be in contravention of the Constitution of India ..... X X X X Extracts X X X X X X X X Extracts X X X X
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