Tax liability must be determined through annual assessment, with disclosure of adverse material and a fair hearing.

Under the Bengal Finance (Sales Tax) Act, 1941, tax liability could not be fixed by a separate proceeding under the charging provision outside the assessment machinery; it had to be determined in assessment after giving the assessee a reasonable hearing. The Act treated assessment as annual, so a consolidated assessment covering multiple years was not permissible unless expressly authorised by statute. Reliance on undisclosed adverse material without an effective opportunity to rebut it offended natural justice and supported an inference of mala fides, rendering the liability-fixing orders and assessment invalid.

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Issues: (i) Whether proceedings under section 4(2) of the Bengal Finance (Sales Tax) Act, 1941 could be initiated independently for fixation of liability to pay tax; (ii) whether a consolidated assessment for several assessment years was permissible under the Act; (iii) whether the assessment orders were vitiated for reliance on undisclosed material without opportunity of rebuttal and for mala fides.

Issue (i): Whether proceedings under section 4(2) of the Bengal Finance (Sales Tax) Act, 1941 could be initiated independently for fixation of liability to pay tax.

Analysis: The charging provision created liability, but the statutory scheme did not authorise a separate proceeding under section 4(2) for determining the date of liability independently of assessment. Liability could be worked out only in the course of assessment under section 11(2), after giving a reasonable opportunity of hearing. An order purporting to fix liability dehors the assessment machinery was not supported by the Act.

Conclusion: The proceedings and orders purporting to fix liability under section 4(2) were without jurisdiction and invalid.

Issue (ii): Whether a consolidated assessment for several assessment years was permissible under the Act.

Analysis: The scheme of the Bengal Finance (Sales Tax) Act, 1941 treats assessment as annual. The Act did not contemplate one composite assessment covering multiple years, even if such a course was requested by the dealer's representative. A concession could not confer jurisdiction where the statute did not permit such a consolidated order.

Conclusion: The consolidated assessment for several years was contrary to the Act and could not stand.

Issue (iii): Whether the assessment orders were vitiated for reliance on undisclosed material without opportunity of rebuttal and for mala fides.

Analysis: The assessing authority relied on confidential information and adverse materials without disclosing them to the assessee or giving an effective chance to meet them. In the circumstances, the conduct was found to be arbitrary and high-handed, attracting the principles of natural justice and supporting an inference of mala fides.

Conclusion: The impugned orders were vitiated as being contrary to natural justice and tainted by mala fides.

Final Conclusion: The tax liability-fixing orders and the resulting assessment order were quashed, and the writ petition succeeded.

Ratio Decidendi: Under the Bengal Finance (Sales Tax) Act, 1941, liability to tax cannot be determined by a separate order under the charging section outside the assessment process, assessments are annual unless the statute expressly provides otherwise, and reliance on undisclosed adverse material without hearing the assessee violates natural justice.

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