Natural justice in exemption certificate cancellation: unlawful withdrawal vitiates the consequential assessment and supports writ relief.

Cancellation of an exemption certificate under rule 25 requires objective satisfaction and, even without express wording, an opportunity of hearing is implicit before an existing statutory benefit is withdrawn. A cancellation made without notice is therefore invalid. An assessment under section 21 founded on that unlawful cancellation cannot stand, and the existence of an alternative appellate remedy does not bar writ relief where no appeal lies against the cancellation order itself and the assessment rests on an error of law apparent on the record. The consequential assessment was quashed.

---

---

Issues: (i) Whether cancellation of the exemption certificate under rule 25 could stand when it was made without giving the dealer an opportunity of being heard. (ii) Whether the assessment under section 21, based on such cancellation, was valid and whether the existence of an appellate remedy barred the writ petition.

Issue (i): Whether cancellation of the exemption certificate under rule 25 could stand when it was made without giving the dealer an opportunity of being heard.

Analysis: Rule 19 conferred a right to an exemption certificate when the prescribed requirements were satisfied, and rule 22 made the certificate operative for the assessment year. Rule 25 permitted cancellation only on the Assistant Commissioner being satisfied that the dealer had contravened the relevant rules, which required an objective determination. In such a situation, even though the rules did not expressly provide for notice, the hearing of the dealer was implicit because an order cancelling an existing statutory benefit on objective grounds could not be made behind the dealer's back.

Conclusion: The cancellation of the exemption certificate was invalid for breach of the requirement of hearing and was illegal.

Issue (ii): Whether the assessment under section 21, based on such cancellation, was valid and whether the existence of an appellate remedy barred the writ petition.

Analysis: The assessment under section 21 proceeded after the unlawful cancellation of the exemption certificate and therefore rested on an infirm foundation. The alternative remedy argument was rejected because no appeal lay against the cancellation order under rule 25, so the legality of that order could not be effectively tested in an appeal against assessment; moreover, the writ petition had already remained pending for a long time. The assessment was therefore affected by an error of law apparent on the face of the record.

Conclusion: The assessment order under section 21 was quashed and the writ petition was allowed.

Final Conclusion: The statutory cancellation of the exemption certificate was set aside in substance, and the consequential assessment based on that cancellation did not survive.

Ratio Decidendi: When a statute requires objective satisfaction for cancelling an existing statutory benefit, compliance with natural justice is implicit, and any consequential assessment founded on an unlawful cancellation is liable to be quashed.

---