TMI Blog2024 (1) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... o distinction between the quasi-judicial function and an administrative function inasmuch as the aim of both is to arrive at a just decision and to prevent miscarriage of justice. In STATE OF ORISSA VERSUS DR. (MISS) BINAPANI DEI ORS. [ 1967 (2) TMI 96 - SUPREME COURT] , the Supreme Court observed that even an administrative order or decision in matters involving civil consequences have to be made consistently with the rules of natural justice. The purpose of the rules of natural justice is to prevent miscarriage of justice, the rules should be made applicable to administrative enquiries also. On examination of contention of learned Senior Advocate appearing for the petitioner and taking note of concession made by the learned Senior Standing Counsel defending the order of the AAAR, it is found that the Order dated 27.07.2021, which is sought to be set aside invoking extraordinary jurisdiction under Article 226/227 of the Constitution of India for want of confrontation, as one of the facets of the principles of natural justice, does not transpire that the AAAR has disclosed the material contained in the report submitted by the Superintendent of CGST Central Excise, Sambalp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority for Advance Ruling ( AAR , for brevity) constituted under Section 96 vide Order No. 06/Odisha- AAR/2020-21 dated 09.03.2021 in consideration of the Application filed under Section 97 of the GST Act has been set aside in the appeal preferred by the Jurisdictional Officer and held that the items sold by the applicant-M/s. Pioneer Bakers will attract the GST tariff rate as individual items . 1.1. It is alleged that the Appellate Order has been passed in gross violation of the established position of law and suffers from procedural irregularities warranting interference being in violation of principles of natural justice. FACTS AS NARRATED BY THE PETITIONER: 2. The Petitioner-firm is operating its outlets under the name of GO-COOL since 1997. It has established itself as a brand in the field of bakery items, especially in cakes. It has several outlets operating in the State of Odisha and it offers a wide range of goods and services in the aforementioned outlets. 2.1. Principal business of the petitioner is making and selling of bakery products, viz., cakes, artisan cakes, pastries, pizza, patties, sandwich, burgers, handmade chocolates, cookies, bevera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different varieties of chocolates ask for special packaging in different shaped containers, which is also a form of service provided by the petitioner. The chocolates prepared in the workshop are also used in the preparation of brownies, smoothies, shakes and other beverages, etc. prepared in the outlets itself and the customer is normally served with various dishes of hot chocolates in the premises. 2.7. The customer has also the option to choose a suitable beverage from a whole lot of options or to ask for a custom drink (non-alcoholic), which is prepared instantly in the outlets on demand. Different customers have different tastes and as per their demand various drinks are prepared in the outlets. 2.8. The facilities provided in the outlets coupled with the ambience make it a perfect place for customer to celebrate birthday, anniversary or any other event of the like and accordingly, sometimes the customer also demand for special arrangements in the premises to celebrate special moments. While the petitioner is indulged in preparation and supply of varieties of items from pizza base to creams for cakes in the outlets or from the workshop, some of the items, like balloons, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply defined under Section 2 (30) of the CGST Act, 2017 and Section 2 (30) of the OGST Act, 2017 wherein the Principal supply of goods consists of bakery items, chocolates while the supply of services include the supply of air conditioned place to sit and to celebrate birthday. Ans : The answer is in the Negative . Q.(c) Whether the sale of handmade chocolates which are manufactured in the workshop of the Applicant and are utilised for the purpose of providing other services such as shakes, brownies and are also retailed by packing in different containers as per the choice of the customer will be covered under the under the restaurant services? Ans : Yes, answer is in the affirmative. Q.(d) What is the nature and rate of tax applicable to the following items supplied from the premises of the bakery shop of the Applicant (i) Items such as Birth caps, knife, decorative items which are bundled along with the cakes and are utilised by the Customers in the premises of the outlets. Ans : Replied at para 4.5 4.6 as above. (ii) Items such as Birthday caps, knife, decorative items which are bundled along with the cakes and are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... items to the customer for taking the food in the premises is done to very few customers. Therefore, the establishment running by the applicant M/s. Pioneer Bakers cannot be considered as Restaurant. The concerned Officer, Deputy Commissioner, CT GST, Odisha also put forth their submissions on the similar grounds. The Concerned Officer submitted that, in the instant case it is a bakery outlets where ready to each (sic. eat) items are sold and mere facility is provided to take it from the shop. The applicant has only prepared birthday cakes, as per order for take out service and they do not prepare birthday cakes immediately from the customers order. Those who want to take within the premises, they merely supply the readily available cakes. They do not serve food to the Customer table in most cases, sold the items from the counter. Therefore, the applicant should not be considered as Restaurant Services. 4.1. It has further been observed by the AAAR as follows: We examined the submission made by the applicant. We have also gone through the above verification put forth by the Jurisdictional Officer and the Concerned Officer. 4.2. And, thereafter, it has been conclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ete cooked meals give the essential character to a restaurant service, in case of bakery, selling only baked items on take away basis gives the essential character to a bakery. Further, in case of restaurant, full and complete meals are cooked and served and the kitchen is situated in the premises of the restaurant itself, because the essential character of a restaurant is serving hot cooked full meals. However, in case of bakery the existence of kitchen in the same premises is not essential. It is also not a requirement for the bakery to serve baked items in the same premises. The main purpose of bakery is only to sell its baked items rather than serving them to customers in its premises. 7. Refuting such contention of the opposite parties the petitioner filed rejoinder affidavit on 08.08.2022 by making statement that the petitioner does run restaurant business and the food is being served to each and every customer in the restaurant. Having accepted that the petitioner serves food to its customer, the opposite parties contradicted by stating that serving a few items does not make a place restaurant , but the opponents have not given any reason for such assertion. 7.1. St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould come to light that the AAAR proceeded on the basis of untested material forming part of the report and verification put forth by the Jurisdictional Officer and the Concerned Officer . 9.2. Sri Jagabandhu Sahoo, learned Senior Advocate vehemently argued that as the contents of the report formed the basis for varying with the opinion of the AAR in the appeal, the petitioner on 03.08.2021 made an application for supply of copy of said report. Since copy of the report was not supplied to the petitioner, reminders were submitted on 12.08.2021 and 31.08.2021. By way of Letter C.No.IV(023)/AAR/ Pioneer/SBP-I/2021/1457, dated 03.09.2021, the Assistant Commissioner, GST and Central Excise, Sambalpur-I Division denied to supply copy of the report. The text of said letter reads as follows: Please refer to your Letter Ref. NIL dated 12.08.2021 on the above mentioned subject. In this context, it is to intimate that the sought enquiry report cannot be provided to you, as the undersigned is also a party in the instant case and on the basis of the same sought enquiry report carried out by the JRO, GST and Central Excise, Sambalpur-I Range, Sambalpur, the undersigned has filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaway only. *** F. Commercial 1. Haats and Markets including fish markets shall be decentralized and allowed to operate with minimum 30 feet distance from shop to shop. The shopkeepers and the buyers shall mandatorily abide by the Covid safety protocols like social distancing, use of mask. The local authorities shall demarcate areas for this purpose. Any violation of COVID-19 protocols will attract closure/sealing/cancellation of license of the concerned shops. 2. Malls shall operate with reduced number of customers. The mall Owner shall ensure that persons entering malls are thoroughly screened for temperature, correct use of masks and physical distancing. No food court shall be open for seat- in dining. Only take away shall be allowed. No one shall be allowed to take/consume food in the mall premises. It shall be the responsibility of the owner/ management of the mall to ensure that there is no overcrowding at any point of time within the shops and common areas. 3. It shall be the responsibility of all shop owners/shopkeepers and market associations to ensure that all their staff put on mask during the entire period of their stay in the shop premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f all Covid-19 protocols. Any deviation/non-compliance shall entail criminal action and penalty as per law and may make such unit liable for sealing/closure and suspension/ cancellation of trade license and levy of penalty. *** K. Penal provisions Any person violating these measures will be liable to be proceeded against in accordance with the provisions of Section 51 to 60 of the Disaster Management Act, 2005, the Epidemic Diseases Act, 1897 and Regulations issued thereunder besides legal action under Section 188 of the IPC and other legal provisions as applicable. 9.6. Taking cue from aforesaid guidelines the learned Senior Counsel appearing for the petitioner submitted that when such was the restriction in the State of Odisha at the relevant period, the petitioner has been doing the business only on take away basis in obedience of such prohibitory orders of the Government. This itself cannot be the basis to de-classify its business from the category of restaurant services . The general nature of transactions carried on by the petitioner could not be judged on the foundation of situational disadvantage prevailing during April, 2021. As the inspection repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST, the AAAR laid much stress on dictionary meaning, which is impermissible in law. It is trite that where no definition is provided in the statute itself, as in this case, for ascertaining the correct meaning of a fiscal entry reference to a dictionary is not always safe. The correct guide, it appears in such a case, is the context and the trade meaning. In this connection reference may be made to the observations in CST Vrs. S.N. Brothers, Kanpur, (1973) 3 SCC 496 = AIR 1973 SC 78. 9.9. Sri Jagabandhu Sahoo, learned Senior Advocate, therefore, contended that had there been proper opportunity afforded to the petitioner by confronting the adverse report, which was relied on by the AAAR to vary with the finding and the ruling of the AAR, it could have put forth its explanation in better perspective. Faced with such situation, the Senior Counsel has suggested for according opportunity to proffer explanation before the AAAR so as to enable the petitioner to have its say with regard to the report collected behind its back. 10. Per contra, though Sri Radheyshyam Chimanka, learned Senior Standing Counsel for the opposite party Nos. 2 to 6 made valiant attempt to justify the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... function and an administrative function inasmuch as the aim of both is to arrive at a just decision and to prevent miscarriage of justice. 12.2. The case of Smt. Maneka Gandhi Vrs. Union of India, reported in (1978) 1 SCC 248 , is noteworthy for reference as embodiment of principles of natural justice. The following has been laid down therein: 9. We may commence the discussion of this question with a few general observations to emphasise the increasing importance of natural justice in the field of administrative law. Natural justice is a great humanising principle intended to invest law with fairness and to secure justice and over the years it has grown into a widely pervasive rule affecting large areas of administrative action. Lord Morris of Borth-y-Gest spoke of this rule in eloquent terms in his address before the Bentham Club: We can, I think, take pride in what has been done in recent periods and particularly in the field of administrative law by invoking and by applying these principles which we broadly classify under the designation of natural justice. Many testing problems as to their application yet re-remain to be solved. But I affirm that the area of admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecretary of State or Home Affairs, (1969) 2 Ch D 149 = (1969) 1 All ER 904- where a public officer has power to deprive a person of his liberty or his property, the general principle is that it has not to be done without his being given an opportunity of being heard and of making representations on his own behalf . The same rule also prevails in other Commonwealth countries like Canada, Australia and New Zealand. It has even gained access to the United Nations (vide American Journal of International Law, Vol. 67, p. 479). Magarry, J., describes natural justice as a distillate of due process of law (vide Fontaine Vrs. Chastarton, (1968) 112 Solicitor General 690). It is the quintessence of the process of justice inspired and guided by fair-play in action . If we look at the speeches of the various Law Lords in Wiseman case, 1971 AC 297 (1969) 3 All ER 275 it will be seen that each one of them asked the question whether in the particular circumstances of the case, the Tribunal acted unfairly so that it could be said that their procedure did not match with what justice demanded , or, was the procedure adopted by the Tribunal in all the circumstances unfair? The test adopted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the facts of the case. This view was reiterated and re-affirmed in a subsequent decision of this Court in D.F.O., South Kheri Vrs. Ram Sanehi Singh, (1971) 3 SCC 864 = AIR 1973 SC 205. The law must, therefore, now be taken to be well settled that even in an administrative proceeding, which involves civil consequences, the doctrine of natural justice must be held to be applicable. 12.4. In the case of Biecco Lawrie Limited Vrs. State of West Bengal, reported in (2009) 10 SCC 32, it has been held as follows: Principle of natural justice is attracted whenever a person suffers a civil consequence or a prejudice is caused to him by an administrative action. In other words principle of natural justice is attracted where there is some right which is likely to be affected by any act of the administration including a legitimate expectation. [ See: Ashoka Smokeless Coal India (P) Ltd. Vrs. Union of India, (2007) 2 SCC 640 ]. The procedure to be followed is not a matter of secondary importance and in the broadest sense natural justice simply indicates the sense of what is right and wrong [ Voinet Vrs. Barrett (1885) 55 LJQB 39] and even in its technical sense it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to guarantee that any law or State action violating them will be struck down. The principles of natural justice, however, apply not only to legislation and State action but also where any tribunal, authority or body of men, not coming within the definition of State in Article 12, is charged with the duty of deciding a matter. In such a case, the principles of natural justice require that it must decide such matter fairly and impartially. 96. The rule of natural justice with which we are concerned in these appeals and writ petitions, namely, the audi alteram partem rule, in its fullest amplitude means that a person against whom an order to his prejudice may be passed should be informed of the allegations and charges against him, be given an opportunity of submitting his explanation thereto, have the right to know the evidence, both oral or documentary, by which the matter is proposed to be decided against him, and to inspect the documents which are relied upon for the purpose of being used against him, to have the witnesses who are to give evidence against him examined in his presence and have the right to cross examine them, and to lead his own evidence, both oral and doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of natural justice, such statutory silence is taken to imply compliance with the principles of natural justice . The implication of natural justice being presumptive it may be excluded by express words of statute or by necessary intendment. Where the conflict is between the public interest and the private interest, the presumption must necessarily be weak and may, therefore, be readily displaced. *** 45. Thus, ordinarily, Courts interpret statutory provisions in sync with the aforesaid principles of natural justice on a premise that no statutory authority would violate the fundamental rights enshrined in the Constitution. When it comes to authorities that are expected to discharge judicial and quasi-judicial functions, the rule of audi alteram partem applies with equal force. Reasonableness infuses lifeblood in procedural matters, be it elements of the notice, the contents of the notice, the scope of inquiry, the material available or an adequate opportunity to rebut such material. All of this is to avoid miscarriage of justice at any stage. This is of course fluid and subject to adapting to the demands of a situation in the given facts of a case. 12.7. On perusal of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re known to the assessee and after he is given a chance to rebut the same. *** 12. In Kishinchand Chellaram Vrs. Commissioner of Income-tax, Bombay City-II, (1980) 125 ITR 713, the Hon ble Supreme Court held that it was true that proceedings under the income-tax law were not governed by the strict rules of evidence, and, therefore, it might be said that even without calling the manager of the bank in evidence to prove the letter dated February 18, 1955, it could be taken into account as evidence. But before the Income- tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross-examine the manager of the bank with reference to the statements made by him. 13. In Delhi Transport Corporation Vrs. D.T.C. Mazdoor Congress, 1991 Supp (1) SCC 600, the Hon ble Supreme Court held as follows: *** It is now well-settled that the audi alteram partem rule which in essence, enforces the equality clause in article 14 of the Constitution is applicable not only to quasi-judicial orders but to administrative orders affecting prejudicially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied with the materials intended to be used against him in the assessment proceeding for rebuttal and the dealer s explanation with regard to those materials is bound to be considered by the assessing officer in the assessment order either accepting or rejecting the same. 13.1. It may be of significance to refer to the following observations made by this Court in Ram Chandra Maikap Vrs. State of Odisha, 1972 (2) CWR 1913: It is well settled that rules of natural justice are not embodied rules. The requirements of natural justice would vary according to the facts and circumstances of each case. In a Full Bench decision of this Court in ILR 1972 Cuttack 469 = 38 (1972) CLT 349 = AIR 1972 Ori 224 (Pramila Dei Vrs. Secretary, Board of Secondary Education, Orissa, Cuttack), the requirements of natural justice have been indicated. To a case of this type the following in our opinion would be applicable: (1) The assesse has to be informed about the materials against him together with a statement of the allegations on which they were based; (2) He should be given a reasonable opportunity of stating his own case; (3) If the assessee demands that the witne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Ltd. Vrs. State of Odisha, 77 (1994) CLT 248 , observed that: 5. So far as examination of the Sales-tax Officer, Intelligence is concerned, we find no reason to accept the prayer. It is seen from the records that the assessing officer has himself indicated by letter dated 09.09.1993, that due and proper opportunity is being granted to the assessee, and the materials on which the Revenue places reliance shall be brought to the notice of the assessee, before its utilisation. It is trite law that where a material is sought to be utilised against an assessee, adequate opportunity has to be granted to it to rebut the same before the material can be utilised against the assessee. For that purpose it is open to the assessee to make prayer for summoning a person who has nexus with the material sought to be utilised, so that the witness can throw light on the materials. For example, if a third party s accounts is sought to be utilised the assessee can pray the Sales-tax Officer to issue summon to the party whose accounts are sought to be relied upon. Denial to accept the prayer would amount to violation of the principles of natural justice. The person whose accounts are sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry to put the assessee in possession of full particulars of the case it is expected to meet and should further give it sufficient opportunity to meet the case. Such opportunity would also include the acceptance of a prayer to summon a person whose statements/ documents/ accounts are sought to be relied upon. If the prayer is not accepted the use of concerned material would be contrary to law. 7. Rules of natural justice do require that normally speaking if the previous statement of a person is intended to be used as evidence against a party, it must be made available to the party against whom it is intended to be used, and such party must be given a fair opportunity to explain the same or comment on it. If a party makes a request to be allowed to cross- examine the person who made the statement for the purpose of meeting the statement or with a view to commenting thereon, such a request, except on exceptional or special cases, be denied without violating the principles of natural justice. The assessing authority has to objectively satisfy that the case comes within the exceptional or special cases category. As observed by the Apex Court in State of Kerala Vrs. K.T. Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -State sale basing on which Tribunal reached its conclusion was set aside and matter was remanded for fresh disposal. 13.7. In Raghubar Mandal Harihar Mandal Vrs. State of Bihar, (1957) 8 STC 770 (SC) = (1958) 1 SCR 37 = (1957) INSC 52, it has been succinctly discussed as follows: The decision of the Lahore High Court in Seth Gurmukh Singh Vrs. Commissioner of Income-tax, Punjab, (1944) 12 ITR 393 was specifically approved by this Court in Dhakeswari Cotton Mills case, (1955) 1 SCR 941 . The rules laid down in that decision were these: (1) While proceeding under sub-section (3) of Section 23 of the Income-tax Act, the Income-tax Officer is not bound to rely on such evidence produced by the assessee as he considers to be false; (2) if he proposes to make an estimate in disregard of the evidence, oral or documentary, led by the assessee, he should in fairness disclose to the assessee the material on which he is going to found that estimate; (3) he is not however debarred from relying on private- sources of information, which sources he may not disclose to the assessee at all; and (4) in case he proposes to use against the assessee the result of any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of contention of learned Senior Advocate appearing for the petitioner and taking note of concession made by the learned Senior Standing Counsel defending the order of the AAAR, it is found that the Order dated 27.07.2021, which is sought to be set aside invoking extraordinary jurisdiction under Article 226/227 of the Constitution of India for want of confrontation, as one of the facets of the principles of natural justice, does not transpire that the AAAR has disclosed the material contained in the report submitted by the Superintendent of CGST Central Excise, Sambalpur-I Range to the Assistant Commissioner, CGST Central Excise, Sambalpur-I Division vide Letter dated 27.04.2021, to the petitioner. Therefore, it is safe to say that the petitioner had been deprived of reasonable and fair opportunity to submit its explanation. CONCLUSION DECISION: 14. Perusal of Letter dated 11.10.2021 communicated to the petitioner by the Superintendent of CGST Central Excise, Sambalpur-I Range in connection with application under the Right to Information Act, wherein the Factual Report prepared on 27.04.2021 after verification of activity of the petitioner-business and furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of hearing on query of this Court. 14.3. Regard can be had to Circular bearing No. 164/20/2021-GST [CBIC-190354/207/2021-TO (TRU-11)-CBEC], dated 06.10.2021 issued by Government of India, Ministry of Finance, Department of Revenue (Tax Research Unit) wherein clarification has been issued with respect to restaurant service . The AAAR had no occasion to deal with such clarification as the same was not existing on 27.07.2021, i.e., the date of passing appellate order. 14.4. It may also be pertinent to take cognizance of Notifications No. 18491-FIN-CT1-TAX-0002/2020 [SRO 138/2020], dated 22.06.2020 along with No. 13898-FIN- CT1-TAX-0002/2020 [SRO 129/2021], dated 07.05.2021 issued by the Government of Odisha in Finance Department in exercise of powers conferred under Section 168A of the Odisha Goods and Services Tax Act, 2017, as inserted by virtue of the Odisha Goods and Services Tax (Amendment) Act, 2020, taking into view spread of pandemic COVID-19. It is apparent from such notifications that actions could not be completed or complied with due to force majeure the statutory period of limitation for taking action has been extended. With such notifications in force, Order d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard Section 101 of the GST Act, which deals with Orders of Appellate Authority , in sub-section (1) mandates that the Appellate Authority may, after giving the parties to the appeal or reference an opportunity of being heard, pass such order as it thinks fit, confirming or modifying the ruling appealed against or referred to . Therefore, any conclusion arrived without reference to reliable, cogent and admissible evidence cannot be termed to be a decision arrived on facts. Even the language of the Section 101 of the GST Act employing the expression as it thinks fit , must necessarily be understood that the exercise of such power must be rational. 15.2. Interpreting the expression as it thinks fit in the case of Babulal Nagar Vrs. Shree Synthetics Ltd., AIR 1984 SC 1164 = 1984 Supp SCC 128 , it has been observed as follows: The main part of Section 61 (sic 66) [of the M.P. Industrial Relations Act, 1960] clearly spells out the jurisdiction of the Industrial Court to pass any order in reference to the case brought before it as it thinks fit. The expression as it thinks fit confers a very wide jurisdiction enabling it to take an entirely different view on the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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