1973 (6) TMI 47 - HC - VAT and Sales Tax

Court rules improper fixation of tax liability without assessment, quashes subsequent orders

The court ruled in favor of the petitioner, finding that the fixation of tax liability without assessment was improper, violating principles of natural ... - Issues Involved:1. Fixation of tax liability without assessment.2. Violation of principles of natural justice.3. Jurisdiction of the Commercial Tax Officer.4. Nature of the order (administrative vs. quasi-judicial).5. Validity of ex parte assessment.6. Quashing of subsequent orders and certificate proceedings.Issue-Wise Detailed Analysis:1. Fixation of Tax Liability Without Assessment:The petitioner challenged the order dated 31st July, 1967, which fixed his liability to pay tax from 16th July, 1966, arguing that there is no provision under the Central Sales Tax Act, 1956 (Central Act) or the Bengal Finance (Sales Tax) Act, 1941 (Bengal Act) for such fixation except in a proceeding for assessment. The court examined the relevant provisions, noting that liability to pay tax is created by the charging section (Section 6 of the Central Act and Section 4 of the Bengal Act) and does not depend upon an assessment. The assessment process provides the machinery to quantify and enforce the liability. The Commercial Tax Officer has no power to fix or determine liability independent of an assessment proceeding.2. Violation of Principles of Natural Justice:The petitioner argued that the order was made without giving any opportunity of hearing, violating the principles of natural justice. The court agreed, emphasizing that even if the order was administrative, it required a fair hearing due to its impact on civil rights. The court referenced the Supreme Court's decision in A.K. Kraipak and Others v. Union of India, which highlighted the diminishing distinction between administrative and quasi-judicial powers, necessitating a judicial approach for fair decisions.3. Jurisdiction of the Commercial Tax Officer:The court found that the Commercial Tax Officer lacked jurisdiction to determine liability independently of an assessment proceeding. The order dated 31st July, 1967, fixing liability was made without any jurisdiction, as neither the Central Act nor the Bengal Act envisages such a proceeding.4. Nature of the Order (Administrative vs. Quasi-Judicial):The respondents contended that the order was administrative and did not require a hearing. However, the court determined that the order was quasi-judicial due to its impact on civil rights and the necessity of an objective assessment of facts. The court cited various legal precedents to support this view, emphasizing the requirement to act justly and fairly in administrative decisions affecting citizens' rights.5. Validity of Ex Parte Assessment:The ex parte assessment dated 4th October, 1967, was based on the earlier order fixing liability. Since the order dated 31st July, 1967, was made without jurisdiction and violated natural justice principles, the subsequent ex parte assessment was also invalid. The court noted that no separate argument was advanced to support the assessment order.6. Quashing of Subsequent Orders and Certificate Proceedings:Given the invalidity of the initial order fixing liability and the ex parte assessment, the court quashed the subsequent orders, including the order dated 10th January, 1968, made by the Assistant Commissioner of Commercial Taxes. The certificate proceedings under the Public Demands Recovery Act were also quashed. The court issued a writ of mandamus, commanding the respondents to forbear from giving effect to the quashed orders and certificate.Conclusion:The petition was allowed, and the orders dated 31st July, 1967, 4th October, 1967, and 10th January, 1968, were quashed. The respondents were directed to proceed with the assessment in accordance with the law, ensuring compliance with the principles of natural justice.