Natural justice breach vitiates refund rejection where new grounds are raised without hearing; matter remanded for fresh adjudication.

Rejection of a refund claim without notice or hearing was held to breach natural justice, and the defect was compounded when the appellate authority relied on a new ground not taken by the original authority without giving the assessee an opportunity to respond. The proceedings were therefore set aside, and the matter was remanded for de novo adjudication. The substantive question on inclusion of the amortised value of tools in the assessable value of motor vehicle components was left open for fresh consideration by the original authority after hearing the assessee.

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Issues: Whether the refund claim could be sustained where the original authority rejected it without notice or hearing and the appellate authority introduced an additional ground without giving the assessee an opportunity to meet it, and whether the matter required remand for fresh adjudication.

Analysis: The refund claim had been disposed of without observance of the principles of natural justice. The lower appellate authority also relied on a ground not taken by the original authority, namely, that the benefit of the exemption notification was unavailable because the tools were developed at the buyer's cost and that the claim was barred for want of a declaration under Rule 173B. Since the assessee had no notice or opportunity to meet that basis of rejection, the proceedings were vitiated. The substantive controversy regarding inclusion of the amortized value of the tools in the assessable value of the motor vehicle components was left for fresh consideration by the original authority.

Conclusion: The rejection of the refund claim could not be sustained and the matter had to be remanded for de novo adjudication in accordance with law and natural justice.

Final Conclusion: The impugned orders were set aside and the refund dispute was sent back for fresh decision on the correct issues after giving the assessee an opportunity of hearing.

Ratio Decidendi: An adjudication that rejects a claim without notice or hearing, or rests on an additional ground introduced without affording the affected party an opportunity to respond, is vitiated for breach of natural justice and must be set aside for fresh adjudication.

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